0:'fasab federal accounting standards advisory board fasab handbook of federal accounting standards and other pronouncements, as amended as of june',
1:'30, 2021 sffac 19 sffas 159 interpretations 110 technical bulletins technical releases 119 staff implementation guidance contents foreword preamble to',
2:'statements of federal financial accountingconcepts statement of federal financial accountingconcepts statement of federal financialaccounting concepts 1: objectives of federal financial',
3:'reporting statement of federal financialaccounting concepts 2: entity and display statement of federal financialaccounting concepts 3: management’s discussion andanalysis statement',
4:'of federal financialaccounting concepts 4: intendedaudience and qualitative characteristics for the consolidated financial report of the united states government statement',
5:'of federal financialaccounting concepts 5: definitions of elements and basic recognition criteria for accrualbasis financial statements statement of federal financialaccounting',
6:'concepts 6: distinguishing basic information, required supplementary information, and otheraccompanying information statement of federal financialaccounting concepts 7: measurement of the',
7:'elements ofaccrualbasis financial statements in periodsafter initial recording statementoffederalfinancialaccountingconcepts8:federal financial reporting statement of federal financialaccounting concepts 9: materiality:amending statement of',
8:'federal financial accounting concepts sffac 1, objectives of federal financial reporting,and sffac 3, managements discussion andanalysis page i table of',
9:'contents fasab handbook, version 20 06/21 table of contents statement of federal financial accountingstandards statement of federal financialaccounting standards 1:',
10:'accounting for selectedassets and liabilities statement of federal financialaccounting standards 2: accounting for direct loans and loan guarantees statement of',
11:'federal financialaccounting standards 3: accounting for inventory and related property statement of federal financialaccounting standards 4: managerial costaccounting standards and',
12:'concepts statement of federal financialaccounting standards 5: accounting for liabilities of the federal government statement of federal financialaccounting standards 6:',
13:'accounting for property, plant, and equipment statement of federal financialaccounting standards 7: accounting for revenue and other financing sources and',
14:'concepts for reconciling budgetary and financial accounting statement of federal financialaccounting standards 8: supplementary stewardship reporting statement of federal financialaccounting',
15:'standards 9: deferralof theeffective dateofmanagerialcostaccounting standards for the federal government in sffas no. 4 statement of federal financialaccounting standards 10:',
16:'accounting for internal use software statement of federal financialaccounting standards 11: amendments toaccounting for property, plant, and equipment definitional changes',
17:'amending sffas 6 and sffas 8accountingfor property, plant, andequipment and supplementary stewardship reporting rescinded statement of federal financialaccounting standards 12:',
18:'recognition of contingent liabilitiesarising from litigation: anamendment of sffas 5,accounting for liabilities of the federal government statement of federal financialaccounting',
19:'standards 13: deferral of paragraph 65.2—material revenuerelated transactions disclosures statement of federal financialaccounting standards 14: amendmentsto deferredmaintenancereportingamending sffas 6,accountingforproperty,plant andequipment',
20:'and sffas 8, supplementary stewardship reporting rescinded statement of federal financialaccounting standards 15: page ii table of contents fasab handbook,',
21:'version 20 06/21 table of contents management’s discussions andanalysis statement of federal financialaccounting standards 16: amendments toaccounting for property, plant,',
22:'and equipment— measurement and reporting for multiuse heritageassets:amending sffas 6 and sffas 8 accounting for property, plant, and equipment and',
23:'supplementary stewardship reporting rescinded statement of federal financialaccounting standards 17: accounting for social insurance statement of federal financialaccounting standards 18:',
24:'amendmentstoaccounting standardsfordirect loansand loan guarantees in statement of federal financial accounting standards no. 2 statement of federal financialaccounting standards 19:',
25:'technicalamendments toaccounting standards for direct loans and loan guarantees in statement of federal financialaccounting standards no. 2 statement of federal',
26:'financialaccounting standards 20: elimination of certain disclosures related to tax revenue transactionsbytheinternalrevenueservice,customs,and others,amending sffas 7,accounting for revenue and other financing',
27:'sources statement of federal financialaccounting standards 21: reporting corrections of errors and changes inaccounting principles,amendmentofsffas7,accountingforrevenue and other financing sources statement',
28:'of federal financialaccounting standards 22: changeincertainrequirementsforreconcilingobligations and net cost of operations,amendment of sffas 7, accounting for revenue and other financing',
29:'sources rescinded statement of federal financialaccounting standards 23: eliminating the category national defense property, plant, and equipment statement of federal',
30:'financialaccounting standards 24: selected standardsfortheconsolidatedfinancialreport of the united states government statement of federal financialaccounting standards 25: reclassification of stewardship responsibilities',
31:'and eliminating the current servicesassessment statement of federal financialaccounting standards 26: presentation of significantassumptionsforthestatement of page iii table of contents',
32:'fasab handbook, version 20 06/21 table of contents social insurance:amending sffas 25 statement of federal financialaccounting standards 27: identifying and',
33:'reporting funds from dedicated collections statement of federal financialaccounting standards 28: deferral of the effective date of reclassification of the',
34:'statement of social insurance:amending sffas 25 and 26 statement of federal financialaccounting standards 29: heritageassets and stewardship land statement of',
35:'federal financialaccounting standards 30: interentity cost implementation:amending sffas 4, managerial costaccounting standards and concepts rescinded statement of federal financialaccounting standards',
36:'31: accounting for fiduciaryactivities statement of federal financialaccounting standards 32: consolidated financial report of the united states government requirements: implementing',
37:'statement of federal financialaccounting concepts 4 “intended audience and qualitative characteristics for the consolidated financial report of the united states',
38:'government” statement of federal financialaccounting standards 33: pensions, other retirement benefits, and other postemployment benefits: reporting the gains and losses',
39:'fromchangesinassumptionsandselectingdiscount rates and valuation dates statement of federal financialaccounting standards 34: the hierarchy of generallyacceptedaccounting principles, including theapplication of standards',
40:'issued by the financialaccounting standards board statement of federal financialaccounting standards 35: estimatingthehistoricalcostofgeneralproperty,plant,and equipment:amending statements of federal financial accounting standards',
41:'6 and 23 rescinded statement of federal financialaccounting standards 36: comprehensive longterm projections for the u.s. government statement of federal',
42:'financialaccounting standards 37: social insurance:additional requirements for management’sdiscussion andanalysisand basicfinancial statements statement of federal financialaccounting standards 38: page iv table',
43:'of contents fasab handbook, version 20 06/21 table of contents accounting for federal oil and gas resources statement of federal',
44:'financialaccounting standards 39: subsequentevents:codificationofaccountingandfinancial reporting standardscontainedintheaicpastatements on auditing standards statement of federal financialaccounting standards 40: definitional changes related to deferred',
45:'maintenance and repairs:amending statement of federal financial accounting standards 6,accountingforproperty, plant, and equipment statement of federal financialaccounting standards 41: deferral',
46:'of the effective date of sffas 38,accounting for federal oil and gas resources statement of federal financialaccounting standards 42: deferredmaintenanceandrepairs:amendingstatementsof',
47:'federal financialaccounting standards 6, 14, 29 and 32 statement of federal financialaccounting standards 43: funds from dedicated collections:amending statement of',
48:'federal financialaccounting standards 27, identifying and reporting earmarked funds statement of federal financialaccounting standards 44: accounting for impairment of general',
49:'property, plant,and equipment remaining in use statement of federal financialaccounting standards 45: deferral of thetransition to basicinformation for longterm projections',
50:'rescinded statement of federal financialaccounting standards 46: deferral of thetransition to basicinformation for longterm projections amending sffass 36 and 45',
51:'statement of federal financialaccounting standards 47: reporting entity statement of federal financialaccounting standards 48: opening balances for inventory, operating materials',
52:'and supplies, and stockpile materials statement of federal financialaccounting standards 49: publicprivate partnerships: disclosure requirements statement of federal financialaccounting standards',
53:'50: establishing opening balances for general property, plant, and equipment statement of federal financialaccounting standards 51: insurance programs statement of',
54:'federal financialaccounting standards 52: tax page v table of contents fasab handbook, version 20 06/21 table of contents expenditures statement',
55:'of federal financialaccounting standards 53: budget andaccrual reconciliation statement of federal financialaccounting standards 54: leases:anamendment of sffas 5,accounting for liabilities',
56:'of the federal government and sffas 6, accounting for property, plant, and equipment statement of federal financialaccounting standards 55: amending',
57:'interentity cost provisions statement of federal financialaccounting standards 56: classifiedactivities statement of federal financialaccounting standards 57: omnibusamendments 2019 statement of',
58:'federal financialaccounting standards 58: deferral of the effective date of sffas 54, leases statement of federal financialaccounting standards: 59 accounting',
59:'and reporting of government land interpretations interpretationoffederalfinancialaccountingstandards 1: reporting on indian trust funds in general purpose financialreportsofthedepartmentoftheinteriorandinthe consolidated financial statements',
60:'of the united states government:an interpretation of sffas 7 interpretation of federal financialaccounting standards 2: accounting for treasury judgment fund',
61:'transactions:an interpretation of sffas 4 and sffas 5 interpretation of federal financialaccounting standards 3: measurement date forpension and retirement healthcare',
62:'liabilities rescinded interpretation of federal financialaccounting standards 4: accounting for pension payments in excess of pension expense interpretation of federal',
63:'financialaccounting standards 5: recognition by recipient entities of receivable nonexchange revenue:an interpretation of sffas 7 interpretation of federal financialaccounting standards',
64:'6: accounting for imputed intradepartmental costs: an interpretation of sffas no. 4 rescinded interpretation of federal financialaccounting standards 7: items',
65:'held for remanufacture interpretation of federal financialaccounting standards 8:an page vi table of contents fasab handbook, version 20 06/21 table',
66:'of contents interpretation of statement of federal financialaccounting standards 56, classifiedactivities interpretation of federal financialaccounting standards 9, cleanup cost liabilities',
67:'involving multiple component reporting entities:an interpretation of sffas 5 & sffas 6 interpretation of federal financialaccounting standards 10, clarification of',
68:'nonfederal nonentity fbwt classification sffas 1, paragraph 31:an interpretation of sffas 1 and sffas 31 technical bulletins technical bulletin 20001:',
69:'purpose and scope of fasab technical bulletins and procedures for issuance technical bulletin 20021:assigning to component entities costs and liabilities',
70:'that result from legal claimsagainst the federal government technical bulletin 20022: disclosures required by paragraph 79g of sffas 7 accounting',
71:'for revenue and other financing sources and concepts for reconciling budgetary and financial accounting technical bulletin 20031: certain questions andanswers',
72:'related to the homeland securityact of 2002 technical bulletin 20061: recognition and measurement of asbestosrelated cleanup costs technical bulletin 20091:',
73:'deferral of the effective date of technical bulletin 20061, recognition and measurement of asbestosrelated cleanup costs technical bulletin 20111:accounting for',
74:'federal natural resources other than oil and gas technical bulletin 20112: extended deferral of the effective date of technical bulletin',
75:'20061, recognition and measurement of asbestosrelated cleanup costs technical bulletin 20171: intragovernmental exchange transactions technical bulletin 20172:assigningassets to component reporting',
76:'entities technical bulletin 20201: interpretation of federal financial accounting standards 9, lossallowance for intragovernmental receivables technicalreleases technicalrelease1:auditlegalrepresentationletter guidance page vii',
77:'table of contents fasab handbook, version 20 06/21 table of contents technical release 2: determining probable and reasonably estimable for',
78:'environmental liabilities in the federal government technical release 3: preparing andauditing direct loan and loan guarantee subsidiesunder the federal credit',
79:'reform act rescinded technical release 3 revised:auditing estimates for direct loan and loan guarantee subsidies under the federal credit reformact',
80:'– amendments to technical release no. 3 preparing and auditing direct loan and loan guarantee subsidies under the federal credit',
81:'reform act technical release 4: reporting on nonvalued seized and forfeited property technicalrelease5:implementationguidanceonstatementof federal financialaccounting standards 10:accounting for internal use',
82:'software rescinded technical release 6: preparing estimates for direct loan and loan guarantee subsidiesunder the federal credit reform act–amendmentstotechnicalreleaseno.3preparingand auditing',
83:'direct loan and loan guarantee subsidies under the federal credit reformact technical release 7: clarification of standards relating to the',
84:'nationalaeronautics and spaceadministration’s space exploration equipment technical release 8: clarification of standards relating to interentity costs rescinded technical release 9:',
85:'implementation guide for statement of federalfinancialaccountingstandards29: heritage assets and stewardship land technical release 10: implementation guidance onasbestos cleanup costsassociated with',
86:'facilities and installed equipment technical release 11: implementation guidance on cleanup costsassociated with equipment technical release 12:accrual estimates for grant',
87:'programs technicalrelease13:implementationguideforestimatingthe historical cost of general property, plant, and equipment technical release 14: implementation guidance on the accounting for the',
88:'disposal of general property, plant, and equipment technical release 15: implementation guidance for general property, plant, and equipment costaccumulation, page',
89:'viii table of contents fasab handbook, version 20 06/21 table of contents staff implementationguidances assignment andallocation technical release 16: implementation',
90:'guidance for internal use software technical release 17: conformingamendments to technical releases for sffas 50, establishing opening balances for general',
91:'property, plant, and equipment technical release 18: implementation guidance for establishing opening balances technical release 19: rescission of technical release',
92:'8 staff implementation guidance 23.1: guidance for implementation of sffas 23, eliminating the category national defense property, plant, and equipment:',
93:'classification of items formerly considered national defense pp&e staff implementation guidance 31.1: guidance for implementation of sffas 31, accounting for',
94:'fiduciary activities staff implementationguidance6.1:clarificationof paragraphs 4041 of sffas 6,accounting for property, plant, and equipment, as amended appendices appendixa:topicalindex appendixb:effectivedatesofstatements,interpretations,and technical',
95:'releases appendix c: memorandum of understandingamong the governmentaccountability office, the department of the treasury, and the office of management and',
96:'budget on federal governmentaccounting standards andafederal accounting standardsadvisory board appendixd: otherfederalaccountingandauditing resources appendix e: consolidated glossary appendix f: consolidated list',
97:'ofabbreviations page ix table of contents fasab handbook, version 20 06/21 foreword the fasab handbook of federal accounting standards and',
98:'other pronouncements, as amended “fasab handbook” contains the body of accounting concepts and standards for the u.s. government.1 specifically, the',
99:'fasab handbook incorporates the following documents published through june 30, 2021, with the exception of sffas 59, which was issued',
100:'on july 30, 2021. statements offederalfinancialaccountingconcepts 19, statements offederalfinancialaccountingstandards 159, interpretations 110, technical bulletin 20001 through 20201, technical releases 119,',
101:'and all staff implementation guidance. please note that sffas 59 effective for reporting periods after september 30, 2021 transitions rsi',
102:'presentation requirements, to include gpp&e land and permanent land rights derecognition to disclosure requirements in 2026. as a result, this',
103:'handbook version only incorporates the rsi requirements effective for periods 20222025. fiscal year 2026 disclosure requirements will be updated in',
104:'subsequent handbook versions as appropriate. origins of the documents the concepts, standards, interpretations, technical bulletins, technical releases, and staff implementation',
105:'guidance presented in the fasab handbook were issued in accordance with policies and procedures approved by the department of the',
106:'treasury treasury, the office of management and budget omb, and the governmentaccountability office gao at the time of their issuance.',
107:'these three central agencies, referred to collectively as the “sponsors,” established the federalaccounting standardsadvisory board fasab in 1990. the mission',
108:'of the fasab is to serve the public interest by improving federal financial reporting through issuing federal financial accounting standards',
109:'and providing guidance after considering the needs of external and internal users of federal financial information.2 1versions of the fasab',
110:'handbook issued prior to june 30, 2011, were referred to as pronouncements as amended, statements of federal financial accounting concepts',
111:'and standards 20082010, original pronouncements, statements of federal financial accounting concepts and standards 2007, or volume i, original pronouncements, statements',
112:'of federal federal financial accounting concepts and standards 20042006. 2mission statement, federalaccounting standardsadvisory board. for amoreextensive descriptionof fasab’s role, refer',
113:'to statement of federal financialaccounting concepts no. 1, objectives of federal financial reporting, paras. 2329. page 1 foreword fasab handbook,',
114:'version 20 06/21 concepts statements statementsonconceptsdifferfromstatementsofaccountingstandards. statementsonconcepts are more general than statements on standards and do not contain specific authoritative',
115:'requirements for federal agencies. after approval by the board, concepts statements provide general guidance to the board itself as it',
116:'deliberates on specific issues. they also are useful to the omb in carrying out its statutory responsibilities, and others in',
117:'understanding federal accounting and financial reports. standards using a due process and a consensus building approach, the board promulgates accounting',
118:'standards after considering the financial and budgetary information needs of congress, executive agencies, other users of federal financial information, and',
119:'comments from the public. the memorandum of understanding dated december 3, 2009, is included inappendix c and describes the board’s',
120:'authorities and processes. interpretations interpretations clarify original meaning, add definitions, and provide other guidance for existing sffas. they are narrow',
121:'in scope. fasab will respond to requests for guidance by providing technical assistance, including, in some cases, interpretations. when drafting',
122:'an interpretation the fasab staff submits the request to the board and reviews applicable literature and consults with knowledgeable persons,',
123:'as appropriate. fasab will consider the draft interpretation at an open meeting. proposed interpretations are exposed for public comment for',
124:'at least 30 days. interpretations approved by a majority of the board and not objected to by a board member',
125:'representing a principal within 45 days are published by fasab. technical bulletins technical bulletins provide guidance for applying statements and',
126:'interpretations and resolving issues not directly addressed by them. technical bulletins are used when the nature of an issue does',
127:'not warrant more extensive due process. they are generally in question and answer format. page 2 foreword fasab handbook, version',
128:'20 06/21 technical releases theaccounting andauditing policy committee aapc provides implementation guidance through technical releases that are reviewed and published',
129:'by the fasab. staff implementation guidance the staff provides implementation guidance. such guidance is issued if a majority of the',
130:'board does not object. gaap documents when adopted and issued, these documents become federal accounting standards and implementation guidance. it',
131:'is expected that fasab will continue to issue guidance through the documents described above. as new documents are adopted, the',
132:'fasab handbook will be updated. individual documents issued between updates are available through a variety of sources. purpose of the',
133:'fasab handbook the fasab handbook compiles and codifies the documents produced by the fasab. it is designed to meet the',
134:'needs of users for an authoritative reference to concepts, standards, interpretations, technical bulletins, technical releases, and other issuances. it contains',
135:'extensive crossreferencing and indexing. organization of the fasab handbook this volume presents each concepts statement, standards statement, interpretation, technical bulletin,',
136:'technical release and staff implementation guide as a separate chapter refered to as “statement”. the issue date and effective date',
137:'of each statement are presented first. next, any interpretations, technical bulletins, and technical releases that relate to the statement are',
138:'identified. asummary precedes presentation of each statement. in some cases the statements have been affected by later statements or affect',
139:'earlier statements. references are provided on the title page of each statement to direct the reader to page 3 foreword',
140:'fasab handbook, version 20 06/21 the affected paragraphs and indicate the source and nature of the change. within the text',
141:'of the statements, ellipses alert the reader that provisions have been deleted as a result of other statements. original provisions',
142:'modified or affected by a subsequent statement but not deleted are modified in the text. new provisions added by a',
143:'subsequent statement are inserted in the original statements. when paragraphs are inserted they are numbered with the number of the',
144:'preceding paragraph followed by a capital letter 5a. when footnotes are inserted, they are numbered with number of the previous',
145:'footnote followed by a lower case letter 1a. the reader can review the basis for conclusions of the amending statement',
146:'for the rationale for the change. some statements contain illustrations. these illustrations are general in nature and may not apply',
147:'to specific cases that appear similar but have unique circumstances. for specific cases, the objective should be to arrive at',
148:'the specific answer that applies the body of accounting standards in that specific case. the glossaries originally published with each',
149:'statement have been codified in a single glossary appendix e. the fasab handbook also presents the following appendices: appendixa: topicalindex',
150:'appendix b: effective dates of statements, interpretations, technical bulletins, and technical releases appendix c: memorandum of understanding appendixd: federalaccountingandauditingresources appendix',
151:'e: consolidated glossary appendixf: consolidatedlist ofacronyms materiality the board intends that application of authoritative guidance be limited to items that',
152:'are material. amisstatement, including omission of information, is material if, in light of surrounding facts and circumstances, it could reasonably',
153:'be expected that the judgment of a reasonable user relying on the information would change or be influenced by the',
154:'correction or inclusion of the information. materiality should be evaluated in the context of the specific reporting entity. determiningmaterialityrequiresappropriate andreasonable',
155:'judgment in considering thespecific facts, circumstances, size, and nature of the misstatement. consequently, after quantitative and qualitative factors are considered,',
156:'materialitymayvary by financial statement, line item, or group of line items within an entity. page 4 foreword fasab handbook, version',
157:'20 06/21 the accounting and reporting provisions of the board’s accounting standards need not be applied to information if the',
158:'effect of applying the provisions is immaterial. the determination of whether an item is immaterial requires the exercise of considerable',
159:'judgment,basedonconsiderationofspecificfactsandcircumstances. refertostatementof federal financialaccounting concepts 1, objectives of federal financial reporting, chapter 7, titled materiality, for a detailed discussion of',
160:'the materiality concepts. hierarchy of generallyacceptedaccounting principles the term “generally accepted accounting principles” has a specific meaning for accountants and',
161:'auditors. theaicpacode of professional conduct prohibits members from expressing an opinion or stating affirmatively that financial statements or other financial',
162:'data “present fairly in conformity with generally accepted accounting principles,” if such information contains any departures from accounting principles promulgated',
163:'by a body designated by theaicpacouncil to establish such principles. theaicpacouncil has designated fasab as the body that establishesaccounting principlesfor',
164:'federalentities. see sffas 34 for informationonthegaap hierarchy. copyright this is a work of the u. s. government and is not',
165:'subject to copyright protection in the united states. it may be reproduced and distributed in its entirety without further permission',
166:'from fasab. however, because this work may contain copyrighted images or other material, permission from the copyright holder may be',
167:'necessary if you wish to reproduce this material separately. page 5 foreword fasab handbook, version 20 06/21 preamble to statements',
168:'of federal financial accounting concepts each statement of federal financialaccounting concepts sffac is part of a series of concepts statements',
169:'intended to set forth objectives and fundamentals on which financial accounting and reporting standards will be based. the objectives identify',
170:'the goals and purposes of financial reporting. the fundamentals are the underlying concepts of financial accountingconcepts that guide the selection',
171:'of transactions, events, and circumstances to be accounted for; their recognition and measurement; and the means of summarizing and communicating',
172:'them to interested parties. the federalaccounting standardsadvisory board’s fasab or “the board” conceptual framework enhances the consistency of standards and',
173:'serves the public interest by providing structure and direction to federal financial accounting and reporting. the most direct beneficiariesofthefasabsconceptsstatementsaretheboarditselfandpreparersandauditors of',
174:'federal financial reports. the statements guide the boards development of accounting and reporting standards by providing the board with a',
175:'common foundation and basic reasoning on which to consider the merits of alternatives. knowledge of the objectives and concepts the',
176:'board considers should help users and others who are affected by or interested in federal financial accounting and reporting standards',
177:'to understand better the purposes, content, and qualitative characteristics of information provided by federal financial accounting and reporting. that knowledge',
178:'should enhance the usefulness of, and confidence in, federal financial accounting and reporting. conceptsstatements enhancepreparers’and auditors’understanding of the common foundation',
179:'and reasoning employed in considering alternatives. the gaap hierarchy provides that statements of federal financial accounting standards constitute levelathe highest',
180:'level guidance. statements of federal financial accounting concepts are not gaap. instead, concepts statements constitute other literature and may only',
181:'be relied upon by financial statement preparers and auditors to resolve specific accounting issues in the absence of gaap literature.',
182:'in developing and amending accounting standards, the board looks to concepts statements for guiding principles and also considers relevant existing',
183:'standards and guidance issued by the board and other standard setting bodies. until the board amends existing standards, the board',
184:'expects practice to be governed by the accounting principles embodied in the four levels of the gaap hierarchy. thus, the',
185:'board distinguishes between material presented in concepts which are used to guide board deliberations on future gaap and accounting principles',
186:'presented in standards which constitute current gaap. for federal entities, in the absence of specific authoritative literature applicable to a',
187:'transaction or event, it should be possible to report the event or transaction by selecting an established accounting principle for',
188:'an analogous transaction or event that appears appropriate when applied in a similar manner. in the unusual case where an',
189:'analogy cannot be drawn to established authoritative literature, the gaap hierarchy permits consideration of other literature including concepts statements. consideration',
190:'of individual concepts statements will be helpful page 6 preamble to sffac fasab handbook, version 20 06/21 preamble to sffac',
191:'but often may not provide sufficient guidance in resolving emerging issues. therefore, the board encouragescarefulstudyof the conceptualframeworkandestablished practicein resolvingsuch issues.',
192:'statementsinthisseriesdescribe conceptsand relationsthat willunderliefuture federal financial accounting standards and practices and in due course will serve as a basis for',
193:'evaluating existing standards and practices. with issuance of this statement, the series of concepts statements comprises: sffac 1, objectives of',
194:'federal financial reporting includes the qualitative characteristics of information in financial reports sffac 2, entity and display sffac 3, managements',
195:'discussion and analysis sffac 4, intended audience and qualitative characteristics for the consolidated financial report of the united states government',
196:'sffac 5, elements of accrualbasis financial statements and basic recognition criteria sffac 6, distinguishing basic information, required supplementary information, and',
197:'other accompanying information sffac 7, measurement of the elements of accrualbasis financial statements in periods after initial recording sffac 8,',
198:'federal financial reporting sffac 9, materiality: amending sffac 1, objectives of federal financial reporting, and sffac 3, management’s discussion and',
199:'analysis like otherpronouncementsof thefasab, statementsof federalfinancialaccountingconcepts remain in effect until amended, superseded, or withdrawn by appropriate action under the boards',
200:'rules of procedure. page 7 preamble to sffac fasab handbook, version 20 06/21 statement of federal financialaccounting concepts 1: objectives',
201:'of federal financial reporting status issued september 2, 1993 affects none. affected by sffac 3 affects paragraph 181 by providing',
202:'guidance on md&a. sffac 9, amends paragraph 164 and inserts a chapter titled materiality between the current chapters 6 and',
203:'7. see pages 67 for the preamble to statements of federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.pdf. summary this document is a conceptual',
204:'statement on the objectives of financial reporting by the federal government. it focuses on the uses, user needs, and objectives',
205:'of such reporting. the objectives are designed to guide the board in developing accounting standards to enhance the financial information',
206:'reported by the federal government to 1 demonstrate its accountability, 2 provide useful information, and 3 help internal users of',
207:'financial information improve the government’s management. in addition to guiding the board, the objectives may serve as useful guidance to',
208:'others involved in federal financial reporting. for example, the objectives may be useful in developing accounting policy, designing reports, and',
209:'writing narratives and notes to financial reports. the objectives reflect the federal environment. they also consider manyof the needs expressed',
210:'by current and potential users of federal financial information. they provide a framework for assessing the existing financial reporting systems',
211:'of the federal government and for considering how new accounting standards might help to enhance accountability and decisionmaking in a',
212:'costeffective manner. the four objectives of federal financial reporting are: budgetary integrity—federal financial reporting should assist in fulfilling the government’s',
213:'duty to be publicly accountable for monies raised through taxes and other means and for theirexpenditurein accordancewiththeappropriationslawsthatestablishthegovernment’s budget for a',
214:'particular fiscal year and related laws and regulations. federal financial reporting should provide information that helps the reader to determine',
215:'how budgetary resources have been obtained and used and whether their acquisition and use were in accordance with the legal',
216:'authorization, the status of budgetary resources, and page 1 concepts 1 fasab handbook, version 20 06/21 concepts 1 how information',
217:'on the use of budgetary resources relates to information on the costs of program operations and whether information on the',
218:'status of budgetary resources is consistent with other accounting information on assets and liabilities. operating performance—federalfinancialreportingshouldassist report usersinevaluating the service',
219:'efforts, costs, and accomplishments of the reporting entity; the manner in which these effortsand accomplishmentshave beenfinanced; and themanagementof theentity’s assets',
220:'and liabilities. federal financial reporting should provide information that helps the reader to determine thecostsofprovidingspecificprogramsandactivitiesandthecompositionof,and changes in, these costs; the',
221:'efforts and accomplishments associated with federal programs and the changes over time and in relation to costs; and the efficiency',
222:'and effectiveness of the government’s management of its assets and liabilities. stewardship—federal financial reporting should assist report users in assessing',
223:'the impact on the countryof the government’s operationsand investments for the period and how, as a result, the government’s and',
224:'the nation’s financial condition has changed and may change in the future. federal financial reporting should provide information that helps',
225:'the reader to determine whether the government’s financial position improved or deteriorated over the period, futurebudgetaryresourceswilllikelybesufficienttosustainpublicservicesandto meet obligations as they',
226:'come due, and government operations have contributed to the nation’s current and future wellbeing. systems and control—federal financial reporting should',
227:'assist report users in understanding whether financial management systems and internal accounting and administrative controls are adequate to ensure that',
228:'transactions are executed in accordance with budgetary and financial laws and other requirements, consistent with the purposes authorized, and are',
229:'recorded in accordance with federal accounting standards; assets are properly safeguarded to deter fraud, waste, and abuse; and performance measurement',
230:'information is adequately supported. page 2 concepts 1 fasab handbook, version 20 06/21 concepts 1 table of contents page summary',
231:'1 executive summary 4 federal financial reporting and the role of the federalaccounting standardsadvisory board 9 the federalaccounting and financial',
232:'reporting environment 14 accountability and users’ information needs—the foundation of governmental financial reporting 19 objectives of federal financial reporting 25',
233:'balancing costs and benefits in recommending standards 34 qualitative characteristics of information in financial reports 35 materiality 37 howaccounting supports',
234:'federal financial reporting 39 how financial reporting supports reporting on operating performance 47 appendixa: basis for conclusions 53 appendix b:',
235:'users’ information needsaddressed by federal financial reporting 60 appendix c: selected federal reports prepared on a recurring basis 64 page',
236:'3 concepts 1 fasab handbook, version 20 06/21 concepts 1 executive summary introduction 1. this document is a conceptual statement',
237:'on the objectives of financial reporting by the federal government. it focuses on the uses, user needs, and objectives of',
238:'such reporting. statements on concepts, such as this document, differ from statements of recommended accounting standards. statements on concepts are',
239:'more general than statements of standards and do not contain specific recommendations that would, when issued by the board’s sponsors,',
240:'become authoritative requirements for federal agencies and auditors. 2. instead, statements on concepts, after approval by the board’s sponsors, provide',
241:'general guidance to the board itself as it deliberates on specific issues. they also help others to understand federal accounting',
242:'and financial reports. 3. the objectives are designed to guide the board in developing accounting standards to enhance the financial',
243:'information reported by the federal government to 1 demonstrate its accountability to internal and external users of federal financial reports,',
244:'2 provide useful information to internal and external users of federal financial reports, and 3 help internal users of financial',
245:'information improve the government’s management. 4. the objectives reflect the federal environment. they also reflect many of the needs expressed',
246:'by current and potential users of federal financial information. they provide a frameworkforassessing theexisting financial reportingsystemsofthefederalgovernment and for considering how',
247:'new accounting standards might help to enhance accountability and decisionmaking in a costeffective manner. 5. the fasab notes that many',
248:'information sources other than financial statements help to attain these objectives. the objectives relate to the management and financial reporting',
249:'systems in the federal government in their entirety. 6. listing the objectives does not imply a judgment about the extent',
250:'to which they are now being attained. indeed, it is presumed that the objectives are being met to some degree',
251:'now. however, the federal government does not have an integrated mechanism for reporting within the context of these objectives. the',
252:'fasab will consider where new accounting standards could make a useful and costeffective contribution to improving the extent to which',
253:'these objectives are attained. page 4 concepts 1 fasab handbook, version 20 06/21 concepts 1 7. the department of the',
254:'treasury, the office of management and budget, and the governmentaccountability office expect that, to the extent possible, their reporting requirements',
255:'will be aligned with the board’s objectives and standards. background and rationale 8. the federal government derives its just powers',
256:'from the consent of the governed. it therefore has a special responsibility to report on its actions and the results',
257:'of those actions. these reports must accurately reflect the distinctive nature of the federal government and must provide information useful',
258:'to the citizens, their elected representatives, federal executives, and program managers. providing this information to the public, the news media,',
259:'and elected officials is an essential part of accountability in government.providingthisinformationtoprogrammanagers, executives, andmembersof congress is essential to planning and conducting',
260:'government functions economically, efficiently, and effectively for the benefit of society. 9. financial reporting is not the only source of',
261:'information to support decisionmaking and accountability. neither can financial reporting, by itself, ensure that the government operates as it should.',
262:'financial reporting can, however, make a useful contribution toward fulfilling those goals. 10. the objectives apply to both internal and',
263:'external financial reports. they are intended to improve the relevance, consistency, and quality of accounting and other data available for',
264:'a wide variety of applications. 11. the fasab and its sponsors believe that any statement of objectives of federal financial',
265:'reporting must be based on the needs of those who use the reports. those users include citizens, congress, federal executives,',
266:'and federal program managers. current and potential users of federal financial information want information to help them assess how well',
267:'the government is doing by answering questions regarding such topics as: budgetary integrity: what legal authority was provided for financing',
268:'government activities and for spending the monies? were the financing and spending in accordance with these authorities? operating performance: how',
269:'much do various programs cost, and how were they financed? what outputs and outcomes were achieved? what and where are',
270:'the important assets, and how effectively are they managed? what liabilities arose from operating the program, and how will they',
271:'be liquidated or provided for? stewardship: did the government’s financial condition improve or deteriorate? what provision was made for the',
272:'future? page 5 concepts 1 fasab handbook, version 20 06/21 concepts 1 systemsand control: doesthegovernment havecosteffectivesystemsandcontrols to safeguard its assets?',
273:'is it able to detect likely problems? is it correcting deficiencies when detected? 12. concerns like these define the following',
274:'objectives of federal financial reporting. objectives of federal financial reporting budgetary integrity 13. federal financial reporting should assist in fulfilling',
275:'the government’s duty to be publicly accountable for monies raised through taxes and other means and for their expenditure in',
276:'accordance with the appropriations laws that establish the government’s budget for a particular fiscal year and related laws and regulations.',
277:'federal financial reporting should provide information that helps the reader to determine how budgetary resources have been obtained and used',
278:'and whether their acquisition and use were in accordance with the legal authorization, the status of budgetary resources, and how',
279:'information on the use of budgetary resources relates to information on the costs of programs operations and whether information on',
280:'the status of budgetary resources is consistent with other accounting information on assets and liabilities. operating performance 14. federal financial',
281:'reporting should assist report users in evaluating the service efforts, costs,and accomplishments ofthe reporting entity;1the manner in which these efforts',
282:'and accomplishments have been financed; and the management of the entity’s assets and liabilities. federal financial reporting should provide information',
283:'that helps the reader to determine the costs of providing specific programs and activities and the composition of, and changes',
284:'in, these costs; the efforts and accomplishments associated with federal programs and the changes over time and in relation to',
285:'costs; and 1the fasab has not yet considered criteria for defining, and terminology for describing, federal financial reporting components or',
286:'units. in this document, therefore, the term “entity” is used in a generic way to refer, depending on the context,',
287:'totheu. s.governmentas awhole; toorganizationalcomponent units of the government,such as an agency; and to other kinds of potential reporting units, such',
288:'as programs. page 6 concepts 1 fasab handbook, version 20 06/21 concepts 1 the efficiency and effectiveness of the government’s',
289:'management of its assets and liabilities. stewardship 15. federal financial reporting should assist report users in assessing the impact on',
290:'the country of the government’s operations and investments for the period and how, as a result, the government’s and the',
291:'nation’s financial conditions have changed and may change in the future. 16. federal financial reporting should provide information that helps',
292:'the reader to determine whether the government’s financial position improved or deteriorated over the period, future budgetary resources will likely',
293:'be sufficient to sustain public services and to meet obligations as they come due, and government operations have contributed to',
294:'the nation’s current and future wellbeing. systems and controls 17. federal financial reporting should assist report users in understanding whether',
295:'financial managementsystems andinternal accounting and administrative controls are adequateto ensure that transactions are executed in accordance with budgetary and financial',
296:'laws and other requirements, consistent with the purpose authorized, and are recorded in accordance with federal accounting standards; assets are',
297:'properly safeguarded to deter fraud, waste, and abuse; and performance measurement information is adequately supported. organization of the statement 18.',
298:'the first two chapters of this statement present background information on the board and the federalenvironment. chapter 3 identifies the',
299:'four groups of current and potentialusers offederalfinancialreportsandgivesexamplesofsomeoftheirinformationneeds. chapter 4 states and explains the objectives of federal financial reporting in more',
300:'detail than does this executive summary. 19. chapter 5 explains some limitations of the standardsetting process within the context of',
301:'user needs. chapter 6 discusses the desirable qualitative characteristics of financial page 7 concepts 1 fasab handbook, version 20 06/21',
302:'concepts 1 information. chapter 7 identifies the users, scope, and factors to consider when applying materialityinthe federalenvironment.chapter8 explainshowaccountingsupportsfederal financial reporting.',
303:'chapter 8 explains how financial reporting supports reporting on operating performance. 20. appendixasets forththebasis fortheboard’sconclusions.appendix bpresentsa categorization of user needs',
304:'according to types of information identified by the users rather than according to objectives.appendix c lists some major federal reports',
305:'that are regularly produced. page 8 concepts 1 fasab handbook, version 20 06/21 concepts 1 chapter 1: federal financial reportingand',
306:'the role of the federalaccounting standardsadvisory board 21. financial reporting by the federal government provides information for formulating policy, planning',
307:'actions, evaluating performance, and other purposes. in addition, the processes of preparing and auditing financial reports can enhance the government’s',
308:'overall accountability structure by providing greater assurance that transactionsare recorded and reported accurately, that consistent definitions are used to describe',
309:'the transactions, etc. thus, federal financial reporting helps to fulfill the government’s duty to manage programs economically, efficiently, and effectively',
310:'and to be publicly accountable. 22. financial reporting is supported and made possible by accounting and accounting systems. “financial reporting”',
311:'may be defined as the process of recording, reporting, and interpreting, in termsof money, an entity’sfinancialtransactions and events with economic',
312:'consequences for the entity. reporting in the federal government also deals with nonfinancial information about service efforts and accomplishments of',
313:'the government, i.e., the inputs of resources used by the government, the outputs of goods and services provided by the',
314:'government, the outcomes and impacts of governmental programs, and the relationships among these elements.2 role of the fasab in federalaccountingand',
315:'financial reporting the mission of the fasab is to recommend accounting standards [for the federal government] after considering the financial',
316:'and budgetary information needs of congressional oversight groups, executive agencies, and the needs of other users of federal financial information.3',
317:'23. the fasab and its sponsors believe that any description of federal financial reporting objectives should consider the needs of',
318:'both internal and external report users and the decisions they make. this implies a different role for the fasab than',
319:'for the financial accounting standards board fasb and the governmentalaccounting standards board gasb. the fasb sets financial reporting standards for',
320:'privately owned entities in the united states. the gasb sets financial reporting standards for state and local governments. 2except where',
321:'the context indicates otherwise, the term “government” in this document refers both to the u.s. government as a whole and',
322:'to its component reporting entities, such as agencies and programs. 3from the fasab mission statement, approved by the board and',
323:'by the secretary of thetreasury, the director of omb, and the comptroller general of the united states in 1991. page',
324:'9 concepts 1 fasab handbook, version 20 06/21 concepts 1 24. those boards exist primarily to set standards for general',
325:'purpose financial reporting to external users of financial reports. this is because those users, by definition, have limited ability to',
326:'control the nature of the information made available to them. the fasb and the gasb do not need to weigh',
327:'heavily managers’ information needs because those individuals, by definition, are assumed to have ready access to the information they need',
328:'about the financial transactions and events that affect the financial position, operations, and financial condition of the entities they manage.',
329:'25. the fasab, on the other hand, considers the information needs of both internal and external users. in part, this',
330:'is because the distinction between internal and external users is in many ways less significant for the federal government than',
331:'for other entities. officials who in theory should have ready access to information often find in practice that it is',
332:'not available. factors that contribute to this problem include the size and complexity of the government, the rapid turnover among',
333:'senior political executives compared with the time required to install information systems in large bureaucracies, and the division of authority',
334:'in the federal government. 26. the fasab’s dual concern, with both internal and external reporting, is the result of such',
335:'factors andofthe board’s mandate.the fasab wascreatedto advise omband treasury agents of the president and the gao an agent of the',
336:'congress on accounting standards for federal agencies and programs in order to improve financial reporting practices. 27. the board’s sponsors',
337:'have separate constitutional and statutory authorities for setting accounting policy for the government. the division of powers in the u.s.',
338:'government means that different policymakers with independent authority find it useful to have a mechanism to coordinate their accounting policy',
339:'activities. the board and its public deliberative process also provide a new arena for the participants to deliberate and to',
340:'discover how federal accounting and financial reporting can be improved. 28. just as the traditional distinction between internal and external',
341:'report users is less useful in the federal context, some of the traditional ways of classifying financial reports are less',
342:'relevant. reportscan be intended primarilyfora designated specialpurpose or forgeneral purpose use. in the federal government, as in most entities, internal',
343:'financial reporting is designed for special purposes. internal financial reporting helps managers to plan, conduct, and coordinate their activities and',
344:'to evaluate the economy, efficiency, and effectiveness of their programs. page 10 concepts 1 fasab handbook, version 20 06/21 concepts',
345:'1 29. much external federal financial reporting also is for special purposes, but some is for general purpose use; that',
346:'is, it attempts to meet the common needs of many different users who have limited power to demand information directly.',
347:'these reports are known as general purpose reports.4 limitations of financial reporting 30. the fasb and the gasb focus primarily',
348:'on general purpose financial reporting because that is their mandate and reason for being. even so, those boards recognize that',
349:'general purpose financial reporting is not the only source of financial information about such entities. in many cases, users of',
350:'general purpose financial reports need to consult other sources to satisfy their information needs. this is no less true for',
351:'the federal government. 31. while certain information is provided by general purpose financial reports, other information is better provided by,',
352:'or can be provided only by, financial reporting outside such reports. still other information is provided by nonfinancial reports or',
353:'by financial reports about segments of the national society other than the federal government and its component entities e.g., economic',
354:'reporting. 32. often, to satisfy the information needs of various individuals, it is necessary to combine and report financial and',
355:'nonfinancial information. often, combining information about the government with information about aspects of the national society is necessary to assess',
356:'past or planned governmental actions. for example, information about the number of people gainfully employed after participating in a vocational',
357:'education program would be important both in assessing past governmental expenditures for training and in evaluating plans for similar new',
358:'expenditures. 33. some questions arise with special force regarding the nature of general purpose reports because, by definition, no user',
359:'or potential user is able unilaterally to define the requirements for these reports. the fasab is, by design, well constituted',
360:'to consider the issues involved with such reports. 34. federal accounting also must support special purpose reporting to the congress,',
361:'executives,andothersthatthe fasabrepresents. indeed, most federalfinancialreporting is special purpose reporting.also, the board notes that traditional “general purpose” 4in state and local',
362:'governmental accounting, the term “generalpurpose financial statements gpfs” has a quite specific meaning. standards published by the gasb define in',
363:'detail the form and content of such reports. the term “generalpurpose reports” is used in a more generic sense in',
364:'this document to refer to a variety of federal financial reports. page 11 concepts 1 fasab handbook, version 20 06/21',
365:'concepts 1 financial reports may serve a larger and more useful purpose for a variety of audiences if traditional designs',
366:'forsuchreportsareexpanded toinclude avarietyof reports addressing budgetary integrity, operating performance, stewardship, and control of federal activities. evolutionaryapproach 35. thefasabrecognizesthatdevelopingandimplementingstandardsthatwillcontributeto achieving certain',
367:'objectives may take considerable time. time will be needed to establish informationgathering systems and to gain experience by experimenting with',
368:'alternative approaches. 36. the fasab expects that some of these objectives may best be accomplished through means of reporting outside',
369:'general purpose financial reports. indeed, the fasab recognizes that information sources other than financial reporting, sources over which the fasab',
370:'may have little or no influence,also are important to achieving the goalsimplied by these objectives. 37. in developing specific standards,',
371:'the fasab will consider the needs of financial information users, the usefulness of the information in relation to the cost',
372:'of developing and providing it, and the abilityofaccounting standards to address those needscompared with other information sources. background information on',
373:'federal financial reporting 38. differentpeoplearelikelytotalkaboutverydifferentthingswhenaskedtodescribefederal financial reporting or federal accounting.afew examples will illustrate this point 39. an economist, when asked',
374:'this question, is likely to refer to reports about the national society as a whole.among the most important of such',
375:'financial reports are the national income and productaccountsnipathatmeasure the nation’saggregate expenditureson currently produced output. federal government expenditures, of course, constitute',
376:'a significant fraction of the total expenditures in the economy. the nipas, as a system, emerged in the 1940s and',
377:'were built on work done in the u.s. department of commerce beginning in the 1930s and earlier by private organizations.',
378:'40. the nipas provide a picture of the economic transactions that occur in an accounting period,such asa year.theapproachistoprovide sucha picturethrough',
379:'asetofaccounts that aggregate the accounts belonging to the individual transactors in the economy— workers, businesses, and consumers, among others—whether or',
380:'not formal accounting statements exist explicitly for all of them. page 12 concepts 1 fasab handbook, version 20 06/21 concepts',
381:'1 41. the nipas provide vital information to policymakers and others who are planning future actions and to individuals who',
382:'would like to assess the effects of past actions. the nipas are recognized as an essential part of economic reporting',
383:'by national governments. for this reason, the united nations has developed the system of nationalaccounts sna. the snais a comprehensive,',
384:'integrated, and internationally comparable statistical base for analysis in key policymaking areas, such as economic growth, inflation, and productivity. 42.',
385:'this statement does not deal directly with such accounts of the economic activity of the national society. the focus of',
386:'this statement is on accounting systems and financial reports that deal with the budgetary integrity, operating performance, and stewardship of',
387:'the government as such; that is, of the government as a legal and organizational entity within the national society. however,',
388:'to report on some aspects of the government’s performance and stewardship, economic and other information about the national society isessential.',
389:'thus, the fasabmayconsiderwhethersuch economicinformationshould be included in certain financial reports, such as general purpose financial reports for the u.s. government',
390:'as a whole. 43. afinancial analyst on wall street, when asked about federal financial reporting, is likely tothinkof the “dailytreasurystatement”andthe',
391:'“monthlytreasurystatementofreceipts and outlays of the united states government.” some financial analysts study these treasuryreportsregularlyto assess the effect of cash flowson',
392:'bankreservesand the size of the government’s borrowing requirements. the federal government’s borrowing is viewed as free of default risk because',
393:'of the government’s ability to tax and to create money. the power to tax depends on the government’s willingness to',
394:'tax and the strength of the economy. 44. fromalongertermperspective,itistrue,however,thatborrowers’ expectationsabout such factors as future inflation and the relative value of',
395:'the dollar compared with other currencies can influence the borrowing costs of the united states. those expectations, in turn, may',
396:'be influenced by the deficit reported or projected bythe government, the current inflation rate, and other factors. 45. someone concerned',
397:'with formulating or executing the u.s. budget, when asked about the “federal accountingmodel,” islikelyto thinkof the budgetary accounting system. this',
398:'is the system used to keep track of spending authority at various stages of budget execution from appropriation through apportionment',
399:'and allotment to obligation and eventual outlay. this system is used by congress and the executive branch for such purposes',
400:'as “scoring” the budget and for assessing the economic implications of federal financial activity at an aggregate level. it also',
401:'is used for planning and controlling government operationsat more detailed, disaggregated levels. of course, people involved page 13 concepts 1',
402:'fasab handbook, version 20 06/21 concepts 1 with the budget also are informed by, and rely on, sources of information',
403:'other than the budgetary accounting system, e.g., program evaluation and performance measures. 46. although the fasab does not recommend standards',
404:'for the budget or budget concepts, partofitsmissionistorecommendaccountingprinciplesthat willhelpproviderelevant and reliable financial information to support the budgetary process. furthermore, information about',
405:'budget execution is essential to assessing budgetary integrity. 47. accountants working for the federal government, individuals auditing government programs, or',
406:'students in a governmental accounting course are likely to think first of what are known within the federal government as',
407:'the “proprietary” accounts and the reports prepared, in part, from information in them. these accounts are used to record assets',
408:'and liabilities that are not accounted for in the budgetary accounts. these reports are said to present “financial position” and',
409:'“results of operations” in accordance with some set of accounting standards. the fasab is most directly concerned with these accounts',
410:'and with the reports that are prepared, in large part, with information from them. 48. attention to this and other',
411:'aspects of federal accounting and financial reporting has been greatly increased bythechief financialofficersact of 1990 cfoact. this act mandates improved',
412:'financial management by requiring, among other things, 1 new financial organizations, 2 enhanced systems, and 3 audited financial reporting. however,',
413:'the fasab’s area of concern is not limited to the reports required by the cfoact. chapter 2: the federalaccountingand financial',
414:'reporting environment 49. financial reporting is an important, basic tool in the management and oversight of most organizations. it is',
415:'particularly important for the federal government because of the government’s fundamental nature and responsibilities and because the federal governmentoperateswith fewer',
416:'external restraints than other entities. federal accounting and financial reporting are shaped by, and need to respond to, the unique',
417:'characteristics and environment of the federal government, as discussed below. page 14 concepts 1 fasab handbook, version 20 06/21 concepts',
418:'1 sovereignty 50. the federal government is unique, when compared with any other entity in the country, because it is',
419:'the vehicle through which the citizens of the united states exercise their sovereign power.5 the federal government has the power',
420:'through law, regulation, and taxationto exerciseultimate controlovermanyfacetsof the nationaleconomyand society. all other entities within the nation, both public and private,',
421:'operate within the context of laws, oversight, and accountability established by the national government. the federal governmentis accountable onlyto itscitizens.',
422:'it ispolitically accountable to the electorate, but no higher agency has the power to demand an accounting from the government.',
423:'separation of powers 51. because of their concern about potential abuse of the national government’s power, the founders designed a',
424:'government characterized by the separation of powers. each branch of government—legislative, executive, and judicial—is checked and constrained by the others.',
425:'paradoxically, this same separation of power can obscure responsibility and reduce accountability. the interrelated responsibilities of the legislative and executive',
426:'branches, for example, can make it difficult to assign responsibility for the policies that are adopted. federal system of government',
427:'52. the federal system of government— comprising federal, state, and local levels of government—also makes it difficult to pinpoint accountability',
428:'for many programs. the federal government’s responsibility relative to that of the states has gradually expanded. the federal government has',
429:'undertaken responsibilities in areas such as income redistribution, education, and health care. often, however, the expansion has come without direct',
430:'federal control over related operations. responsibilities and financial resources of the three levels of government have become intermingled. citizens are',
431:'not 5the word “sovereign,” much discussed by legal and political philosophers, is used here in its broad, popular sense to',
432:'imply 1 internally that the people are the ultimate if indirect overseer or authority in the decisionmaking process of a',
433:'democratic state and 2 externally that the state is autonomous or independent.as noted by one authority on the subject, either',
434:'type of sovereignty, internal or external, implies that there is no higher agency. in a more limited sense, sovereignty is',
435:'the power to make or change the law, a power exercised collectively by individuals and institutions operating in a complex',
436:'system of relationships. see “sovereignty,” w. j. stankiewicz, the new encyclopedia britannica, 15th. ed. 1976, vol. 17, pp. 309313. page',
437:'15 concepts 1 fasab handbook, version 20 06/21 concepts 1 clear about who is in charge, where to press for',
438:'performance, and whom they should blame for bad results. responsibility for the common defenseand general welfare 53. the federal government',
439:'is unique in that it has continuing responsibility for the nation’s common defense and general welfare.as a result, the government’s',
440:'financial condition is necessarilyasecondaryconsiderationinmanycases. forexample,thenationwouldenterinto militaryconflicttoprotectitsvital nationalinterestsdespitethefact that doingso wouldworsenanalreadylargedeficit. similarly,thegovernment’sgreatestresourceisonethatit does not own but can tax: the national economy.',
441:'54. further, providing for the nation’s general welfare is a broad responsibility that involves multiple goals. there is no single',
442:'measure of success like “return on investment” or “earnings per share”. goals often are not explicitly defined in quantifiable terms',
443:'and sometimes conflict with each other. relevant measures of performance are usually nonfinancial. for example, many federal loan programs are',
444:'charged with two conflicting goals: 1 to operate as a fiscally prudent lender and 2 to provide highrisk lenders with',
445:'credit. power to tax, borrow,and create money 55. asstated,thefederalgovernmenthasuniqueaccesstofinancialresourcesandfinancing. it has the power to tax, to borrow, and to create',
446:'money. these powers give the government a call on the underlying wealth of the united states—a vast but finite pool',
447:'of resources. 56. there is no constitutional requirement to provide sufficient revenues to fund expenditures of the federal government. there',
448:'is a statutory limit on the amount of u.s. debt. this limit is routinely increased by congress and the president.',
449:'the federal government’s ability to finance its debt has not been constrained by capital market assessments of its creditworthiness. itistrue,however,thatthe',
450:'costofservicingtheu.s. debt nowconstrains the range of feasible fiscal and monetary policies more than was formerly the case. 57. the federal',
451:'government—through the federal reserve—also has the power to create money and to control its supply.6 this ensures that creditors will',
452:'be repaid, at least in nominal terms. when the government’s debt is large, it also provides a temptation to create',
453:'money, as well as inflation. 6the federal reserve board functions as a largely independent entity but is, of course, a',
454:'government agency created by congressional action. page 16 concepts 1 fasab handbook, version 20 06/21 concepts 1 influence of organized',
455:'interests 58. because of the size and nature of government programs, it is difficult for individuals to evaluate or to',
456:'influence policies and actions of the federal government. typically, individuals must organize to exercise influence. small groups whose members are',
457:'significantlyaffected bya common factor or concern can be organized relativelyeasily, but they may find it difficult to wield much influence.',
458:'large groups may be influential, but organizing them is difficult if the members have common but diffuse interests. once organized,',
459:'interest groups tend to perpetuate themselves. 59. as a result, most elected and appointed federal officials, and the groups to',
460:'which they are responsive, have been interested primarily in information about individual government programs, functions, or activities. they have been',
461:'less interested in information about the government as a whole and even less concerned about intermediate levels of reporting, such',
462:'as individual departments. political system versus private markets 60. the federal government is not subject to the discipline of competitive',
463:'markets for private goods,services,and capital. generally,transactionsbetween citizens and the government are notindividual exchanges between willing buyersand willing sellers. taxpayers provide',
464:'resourcesinvoluntarily,based on their consumption, wealth, or income rather than on their desire for particular government services. even when user fees',
465:'are charged, they often are not intended to represent market clearing prices—prices that would, in markets for private goods, balance',
466:'supply and demand. 61. thus, citizens as individuals have little say in selecting the public services they pay for. decisions',
467:'on what public services will be provided are collective decisions made through the political process. politically influential recipients of benefits',
468:'can force less influential nonrecipients to bear the cost of the benefits. 62. further, because most governmental revenues are not',
469:'earned in individual, voluntary, exchange transactions, no private market directly measures the value of output. consequently, the value added to',
470:'society’s wellbeing bygovernment programs cannot be gauged by conventional measures of net income, nor is there much competitive market constraint',
471:'on the quantity or quality of services provided. instead, decisions about the quantity, quality, and value of public services are',
472:'collective decisions made by the political process. page 17 concepts 1 fasab handbook, version 20 06/21 concepts 1 assets 63.',
473:'the government makes significant investments in assets, including public domain assets and large investments intended to produce growth educational programs',
474:'and research and development, for example. 64. in government, as in the private sector, assets are expected to provide benefits',
475:'that outweigh costs. in the private sector, the notion of benefits is relatively straightforward: benefits are measured in terms of',
476:'cash inflows.assets are not acquired unless the value of expected cash flows exceeds acquisition costs. 65. in the government, this',
477:'discipline does not usually exist. expected benefits often are not cash inflows but rather are the services provided by the',
478:'asset. sometimes those services are provided to the government itself e.g., government office buildings or motor pools. more often, the',
479:'services are provided to the public e.g., education and research and development. responsibility to the news media 66. the federal',
480:'government is subjected to, and should encourage, scrutiny by the news media. because of the lack of external restraints and',
481:'because the government’s power ultimately resides in the citizens, it has a special responsibility to citizens and taxpayers to disclose',
482:'its activities. importance of the budget 67. the budget is the most widely recognized and used financial report of the',
483:'federal government. it is a principal surrogate for the missing external restraints discussed above. it is a vehicle for the',
484:'political process to reach agreement on goals and to allocate resources among competing priorities. it provides a system for controlling',
485:'expenditures. and it supplies information necessary for assessing the effect on the economy of the government’s fiscal policies. the role',
486:'of budgeting in financial reporting is discussed further in chapter 7 under “relationship of financial reporting to budgeting.” need for',
487:'special control mechanisms 68. thelackofexternalrestraintsnotedabovecreatesaneedforspecialcontrolmechanisms. some mechanisms exist today. the most important, of course, are the political constraints page 18',
488:'concepts 1 fasab handbook, version 20 06/21 concepts 1 and accountability imposed by regular elections and the separation of powers',
489:'and the other constitutional constraints and accountabilities, such as the federal system and freedom of speech. 69. accounting and financial',
490:'reporting also play a role. budgetary obligation accounting is used to control activities, primarily at the budget account level. audited',
491:'financial reports can provide users with assurance that accounting systems are providing consistent and reliable data. 70. however, the need',
492:'for improvement in financial reporting is widely recognized, as is the fact that financial information alone often is insufficient for',
493:'decisionmaking. for example, financial information on costs often must be combined with nonfinancial information on performance to provide a basis',
494:'for assessing the efficiency and effectiveness of government programs. chapter 3:accountabilityand users’ information needs—the foundation of governmental financial reporting 71.',
495:'it may be said that “accountability” and its corollary, “decision usefulness,” comprise the two fundamental values of governmental accounting and',
496:'financial reporting. they provide the foundation for the objectives of federal financial reporting. because a democratic government should be accountable',
497:'for its integrity, performance, and stewardship, it follows that the government must provide information useful to assess that accountability. similarly,',
498:'because a democratic government is accountable for operating economically, efficiently, and effectively, for the purposes intended by citizens and their',
499:'elected officials, certain other conclusions logically follow. specifically, those who formulate, select, and implement government policies and programs need information',
500:'useful for planning, controlling, and conducting government functions. 72. the assertion of accountability therefore leads to identifying, first, those to',
501:'whom government is accountable and, second, the information needed to maintain and demonstrate that accountability.accordingly, this chapter first discusses the',
502:'concept of accountability, then identifies the four groups of users of federal financial reports. it concludesbyprovidingsomeexamplesoftheinformation needsthat maybe addressed to',
503:'some extent by federal financial reports. page 19 concepts 1 fasab handbook, version 20 06/21 concepts 1 accountability 73. several',
504:'different kinds of accountability can be distinguished, and a given piece of information may be relevant in different ways to',
505:'judgments about accountability. for example, one authority suggests that there are five levels or types of public accountability: level 1',
506:'is policy accountability—selection of policies pursued and rejected value. level 2 is program accountability—establishment and achievement of goals outcomes. level',
507:'3 is performance accountability—efficient operation efficiency and economy. level 4 is process accountability—using adequate processes, procedures, or measures in performing',
508:'the actions called for planning, allocating, and managing. level 5 is probity and legality accountability—spending the funds in accordance with',
509:'approved budget and/or approved items compliance.7 74. inademocracy,appointedofficialsareaccountabletotheirsuperiors,andelectedofficials are accountable to the citizens for each of these kinds of accountability.',
510:'accounting and financial reporting can help elected and appointed officials to maintain and to demonstrate their accountability. the last kind',
511:'of accountability listed, for “probity and legality,” probably is the kind most often associated by the public with accounting. however,',
512:'the accounting profession has long recognized that accounting can and should contribute to achieving and demonstrating several kinds of accountability,',
513:'such as accountability for financial resources; accountability for faithful compliance or adherence to legal requirements and administrative policies; accountability for',
514:'efficiency and economy in operations; and accountability for the results of government programs and activities, as reflected in accomplishments, benefits,',
515:'and effectiveness.8 7j. d. stewart, “the role of information in publicaccountability,” eds. tony hopwood and cyril r. tompkins,issues in public',
516:'sectoraccounting oxford, great britain: philipallan, 1984, pp. 1415, as cited by the gasb in its preliminary views on service efforts',
517:'andaccomplishments reporting dec. 1992. 8report of the committee on concepts ofaccountingapplicable to the public sector,american accounting association 197071, pp. 8081,',
518:'as cited by thegasb in preliminary views on serviceefforts andaccomplishments reporting dec. 1992. page 20 concepts 1 fasab handbook, version',
519:'20 06/21 concepts 1 users of federal financial reports 75. the board believes that users of financial information about the',
520:'federal government can be classified in four major groups: citizens, congress, executives, and program managers. citizens 76. this group includes',
521:'individual citizens without regard to whether they are taxpayers, voters, or service recipients. citizens include the general news media and',
522:'more specialized users,such as trade journals; publicinterest and other advocacygroups; state and local legislators and executives; and analysts from corporations,',
523:'academe, and elsewhere. 77. citizens are interested in many aspects of the federal government. they are concerned about individual programs,',
524:'candidates for office, the services the government provides, and the fiscal responsibility of their elected and appointed representatives. citizens receiveandpayforgovernmentservicesandthereforeareconcernedwiththeoutputsand',
525:'outcomes of those services and the efficiency with which they are provided. citizens are concerned about their families and, in',
526:'particular, with the financial burden their children and grandchildren will inherit.as individuals, citizens typically have limited time and ability to',
527:'analyze reports about their government; they want and rely on assurances that the government is functioning economically, efficiently, and effectively.',
528:'as they are organized andrepresentedbyanalystsworkingforinterestgroupsandthenewsmedia,citizenswant more information about the government’s activities. 78. citizens express their interest in the government by',
529:'discussing issues, by voting, and by writing to their representatives about the quality and quantity of the services they receive.',
530:'in some cases, citizens may decide whether and when to use services and products provided by the government. they may',
531:'contribute to political campaigns, demonstrate support or opposition for individuals responsible for past and proposed government actions, and even run',
532:'for office. congress 79. this group includes elected members of congress and their staffs, including staff of the congressional budget',
533:'office cbo and the gao. congress is concerned with broad policies, priorities, and the programs that implement those priorities. it',
534:'decides what taxes to impose, what funds should be spent, and for what purpose. thus, congress is concerned both with',
535:'how to finance programs and with how they are executed. page 21 concepts 1 fasab handbook, version 20 06/21 concepts',
536:'1 80. congressparticipates—alongwiththeadministration—inthebasicdecisionsthatdescribe the intent of government. such decisions include passing laws in response to public demand, allocating resources among',
537:'competing programs, and establishing policy that affectsvariousaspectsofthecountry’seconomicandsociallife.these decisionsoftenare influenced by assessing costs and benefits and by considering the effect of',
538:'the government’s aggregate financial requirements on the economy. 81. congress also participates in monitoring government programs. it assesses the management',
539:'performance of the executive branch and the efficiency and effectiveness of programs. executives 82. this group includes the president and',
540:'those acting as his agents, i.e., program agency heads and their deputy, under, and assistant agency heads; heads of bureaus,',
541:'administrations, services, and agencies; and the central agency officials in omb and the department of the treasury. 83. executives, like',
542:'congress, are concerned with the government’s goals, objectives, and policies. executives focus on the strategic plans and programs that are',
543:'intended to achieve presidential and congressional goals and to implement their policies. in particular, they pay attention to budgets that,',
544:'from the perspective of each agency, are the source of the resources needed to achieve goals and to implement policies.',
545:'executives are, of course, directly concerned about the management of programs, that is, with the actual delivery of services and',
546:'with the efficiency and effectiveness of the delivery process. 84. executives develop legislative proposals, recommend the necessary level of program',
547:'funding, and formulate financing and revenueraising strategies. they help select the method for delivering services. they determine whether program managers',
548:'have been accountable for the resources entrusted to them and whether programs are operating efficientlyandeffectively.executivesalsoprovideinformationthatwillenablethepresident and congress to monitor programs.',
549:'program managers 85. thisgroupincludes individuals whomanagegovernmentprograms. theirconcerns include operating plans, program operations, and budget execution. 86. programmanagersassistinthedesignofprogramsandorganizethemethodselectedfor delivering services. they',
550:'recommend program budgets based on detailed plans that set forth needs for money, staffing, facilities, and inventory. page 22 concepts',
551:'1 fasab handbook, version 20 06/21 concepts 1 87. program managers establish operating procedures for their programs and manage them',
552:'within the limits of the spending authority granted by congress. they select, supervise, and evaluate personnel. they also make sure',
553:'that program inventory and facilities are acquired economically, maintained adequately, and used efficiently. program managers need to provide information to',
554:'enable executives and congress to monitor the programs. the needs of users of federal financial reports 88. while the financial',
555:'information needs of these groups is more diverse than their membership, those needs can be categorized under four broad headings.',
556:'budgetary integrity 89. all user groups need information about the budget. for citizens, information about budget execution provides assurance that',
557:'their elected and appointed representatives have fulfilled their most basic fiduciary responsibility: to raise and spend money in accordance with',
558:'the law. 90. for the president’s economic team and for congressional budget committees, information is needed on budget aggregates total',
559:'budget authority, total receipts and collections, and total outlays to establish fiscal policy, including governmental financing needs. these officials need',
560:'to know that prioryear “actuals” have been accurately recorded in accordance with the same budgetary principles used to prepare estimates.',
561:'91. toavoidviolations oftheantideficiencyact andtheimpoundmentcontrolact,program managers need information about obligations incurred on their programs. they need periodic information about the status',
562:'of budgetary resources, that is, the extent to which the resources have been used or remain available. they also want',
563:'to know whether budgetary resources are available to be used for other purposes through reprogramming. operating performance 92. citizenswantinformationaboutprogramsthataffectthem. veterans,forexample,wantto',
564:'know about new hospitals, and defense workers want information about contract awards and cancellations. retireesand people planning retirement—and theirrepresentatives in',
565:'congress—want to know that the social securityadministration provides reliable services to the public. page 23 concepts 1 fasab handbook, version',
566:'20 06/21 concepts 1 93. congressandexecutiveswantinformationaboutthecomparativecostsofprogramssuch as the per student cost of the job corps program versus that of other',
567:'job training programs. for comparisons to be valid, costs must be defined and measured alike. 94. of course, information on',
568:'the effectiveness of programs is also needed to make valid comparisons among programs. information is needed about outputs e.g., number',
569:'of students who graduated and outcomes e.g., number of students who got and held jobs for which they were trained.',
570:'95. executives and program managers need to know the cost of performing work reimbursed by other government entities or by',
571:'nonfederal customers. costs, in this case, would measure the resources personnel, material,and equipment used to accomplish the work. 96. congress',
572:'and executives often want cost information that would help to compare alternative courses of action. how much more or less',
573:'would it cost if the census bureau used a new approach to taking the census? how much would be saved',
574:'if anarmydivision were based in the united states rather than in europe? 97. program managers need information on the assets',
575:'and liabilities related to operations. managers of loan programs need information on the quality of their loan portfolios. managers of',
576:'repair depots want information on inventories, such as their value, quantity, location, age, and condition. managers of government facilities need',
577:'to know the facilities’ condition and an estimate of future outlays made necessary by deferring needed maintenance. 98. congressandexecutivesneedinformationaboutthemarketvalueofassetsthatcouldbe sold,',
578:'such as precious metals or other commodities. stewardship 99. citizens, congress, executives, and program managers need information to assess the',
579:'effect of the government’s activities on its financial condition and that of the nation. information is needed about the financial',
580:'outlook for both the short and the long term. 100. information is needed on the government’s exposure and risks associated',
581:'with deposit insurance, pension insurance, and flood insurance. people need to know about likely future expenditures for cleaning up nuclear',
582:'weapons sites and military bases. they want information thatwill help them assessthe likelihood and amount of futureclaimsthat might arise from',
583:'governmentsponsored enterprises. 101. allusersneedinformationon earmarkedrevenues recordedintrustfunds. they wantto know, for example, whether the social security trust funds are likely, in',
584:'the foreseeable page 24 concepts 1 fasab handbook, version 20 06/21 concepts 1 future, to need infusions of new taxes',
585:'to pay benefits. citizens need to know the implications of investing trust fund revenues in government securities. 102. users also',
586:'need trend information on spending on investments in physical and human capital versus spending on consumption. systems and control 103.',
587:'users at all levels need information on internal controls and the adequacy of financial management systems. citizenswantassurancesthat systemsand controlsare in',
588:'place to protect the resources they supply to the government. they want to know that operating procedures and processes provide',
589:'reasonable assurance that those resources are used economically and efficiently for the purposes intended. congress, executives, and program managers need',
590:'to demonstrate to those to whom they are accountable that they have, in fact, protected those resources and used them',
591:'well. users want to know, for example, that agency heads have determined that internal controls are adequate, that basic financial',
592:'statements are auditable, and that highrisk areas have been identified and addressed. 104. the implications of these four broad categories',
593:'of information needs for the objectives of federal financial reporting are discussed in more detail in the next chapter. chapter',
594:'4: objectives of federal financial reporting 105. the federal government derives its just powers from the consent of the governed.',
595:'it therefore has a special responsibility to report on its actions and the results of those actions. these reports must',
596:'accurately reflect the distinctive nature of the federal government and must provide information useful to the people, their elected representatives,',
597:'and federal executives. providing this information to the public, the news media, and elected officials is an essential part of',
598:'accountability in government. providing this information to program managers, executives, and members of congress is essential to planning and conducting',
599:'the government’s functions economically, efficiently, and effectively for the benefit of society. 106. financial reporting is not the only source',
600:'of information to support decisionmaking and accountability. neither can financial reporting, by itself, ensure that the government operates as it',
601:'should. financial reporting can, however, make a useful contribution toward those objectives. page 25 concepts 1 fasab handbook, version 20',
602:'06/21 concepts 1 107. the objectives discussedbelowapplybothtointernalandtoexternalfinancialreports. to some degree, they also apply both to special purpose and to general',
603:'purpose reports. users of general purpose financial reports may have difficulty obtaining relevant informationtoholdthefederalgovernmentaccountableifthegovernmentoperateswithout appropriate reporting objectives and accounting standards.',
604:'the board also intends that these objectives and the ensuing standards will prove widely useful for other purposes, though they',
605:'may not apply to every special report or every item in the accounting system. the objectives are intended to improve',
606:'the relevance, consistency, and quality of accounting and other data available for a wide variety of applications. 108. the board',
607:'expects that its recommendations will be applied to improve information for program management and executive and legislative branch decisionmaking. the',
608:'department of the treasury, omb, and the gao expect that, to the extent possible, their reporting requirements will be aligned',
609:'with the board’s objectives and standards. 109. four major objectives are proposed, around which accounting standards should be organized. these',
610:'objectives are designed to help ensure the accountability of the federal government and to better inform decisions influenced by financial',
611:'information about the government.eachobjective reflectsthefederalenvironment andmeetsmanyof theneeds expressed by current and potential users of federal financial information. together, they provide',
612:'a framework for assessing the existing accountability and financial reporting systems of the federal government and for considering how new',
613:'accounting standards might be able to enhance those systems in a costeffective manner. 110. current and potential users of federal',
614:'financial information want information to help them assess how well the government is doing by answering questions regarding topics like',
615:'those below: budgetary integrity: what legal authority was provided for financing government activities and for spending the monies? were the',
616:'financing and spending in accordance with these authorities? how much was left? operating performance: how much do various programs cost,',
617:'and how were they financed? what outputs and outcomes were achieved? what and where are the important assets, and how',
618:'effectively are they managed? what liabilities arose from operating the program, and how will they be provided for or liquidated?',
619:'stewardship: did the government’s financial condition improve or deteriorate? what provision was made for the future? systemsand control: doesthegovernmenthavecosteffectivesystemsandcontrols to',
620:'safeguard its assets? is it able to detect likely problems? is it correcting deficiencies when detected? page 26 concepts 1',
621:'fasab handbook, version 20 06/21 concepts 1 111. concerns like these define the objectives of federal financial reporting. in the',
622:'following text, objectives and subobjectives are stated in bold italic type. each of the objectives and subobjectives is followed by',
623:'a commentary that explains some of the implications of the objective. budgetary integrity objective 1 112. federal financial reporting should',
624:'assist in fulfilling the government’s duty to be publicly accountable formonies raised through taxes and other means and for their',
625:'expenditure in accordance with the appropriations laws that establish the government’s budget for a particular fiscal year and related laws',
626:'and regulations. 113. thisobjectivearisesgenerallyfromtheresponsibilityofrepresentativegovernmentstobe accountable for the monies that are raised and spent and for compliance with law. more specifically',
627:'it arises from the requirement inarticle i, section 9 of the constitution of the united states that “no money shall',
628:'be drawn from the treasury, but in consequence of appropriations made by law; and a regular statement andaccount of the',
629:'receipts and expenditures of all public money shall be published from time to time.” its focus is the budgetofthe united',
630:'states government, the president’s annual budgetsubmission to the congress, which is the government’s principal financial report, and the laws enacting',
631:'budgetauthorityfora given fiscalyear. the budget oftheunited statesgovernment isthe initial frame of reference within which congress and the president enact the',
632:'laws that require the payment of taxes and provide the authority to obligate and spend money. 114. the focus ofthis',
633:'objectiveis retrospective. thatis,the focus is onrecordingactualdata from budgetexecution againstappropriations made by congressusing existing budgetary standards. thus, it would validate the',
634:'“actual” column shown in the budget of the united states government. it would also provide data that could be shown',
635:'in other reports as a statement of budget execution or a statement of the status of budgetary resources. the data',
636:'also could be displayed in analytical tables showing, for example, the historical pattern of receipts and outlays. 115. certain subobjectives',
637:'arise from the basic objective of budgetary integrity, as discussed below. federal financial reporting should provide information that helps the',
638:'reader to determine: page 27 concepts 1 fasab handbook, version 20 06/21 concepts 1 116. 1a. how budgetary resources have',
639:'been obtained and used and whether their acquisition and use were in accordance with the legal authorization. 117. considering this',
640:'objective in conjunction with the specific information needs identified by the board suggests some examples of information that might help',
641:'meet this objective: government receipts and offsetting collections reported in total and by composition; obligations according to the nature of',
642:'services or items procured; information about the extent of compliance with the budget and laws, and whether money was expended',
643:'as intended by the federal government and its grantees; and valid data on budget authority, obligations, and outlays by program',
644:'and for all appropriation and fund accounts summarized appropriately to fit the intended audience. 118. 1b.the status of budgetary resources.',
645:'examples of information that could help meet this objective include informationaboutthesufficiencyofbudgetauthorityforcoveringcommitmentsandthe status of obligated and unobligated balances of budgetary resources',
646:'and assurances that funds authorized for a given purpose were actually spent for that purpose. 119. 1c.how information on the',
647:'use ofbudgetary resources relates to information on the costs of program operations and whether information on the status of budgetary',
648:'resources is consistent with other accounting information on assets and liabilities. 120. this subobjective arises from the fact that accrualbasis',
649:'measures of the cost of government programs, functions, and activities may differ from the amounts used in the budget for',
650:'a variety of valid reasons. 121. reportsprimarilyintendedtoaddressobjective1anditsfirsttwosubobjectiveswoulduse budgetary measurement. subobjective 1c would use both budgetary and accrual measures because reconciliation',
651:'of the two is implied. the basic accounting unit for this objective would be the budget account, although accounts are',
652:'often aggregated for some reporting purposes. page 28 concepts 1 fasab handbook, version 20 06/21 concepts 1 operating performance objective',
653:'2 122. federal financial reporting should assist report users in evaluating the service efforts, costs, and accomplishments of the reporting',
654:'entity; the manner in which these efforts and accomplishmentshave been financed;and themanagement ofthe entity’s assets and liabilities. 123. thisobjectivearisesfromademocraticgovernment’sdutytobeaccountabletoitscitizens for',
655:'managing resources and providing services economically and efficiently and for effectiveness in attaining planned goals.also, the government should be accountable',
656:'for raising resources efficiently. 124. because government services are not usually provided in exchange for voluntary payments or fees,expenses cannotbe',
657:'matched against revenueto measure “earnings” or “net income” as would be done in business accounting. moreover, directly measuring the value',
658:'added to society’swelfare bygovernment actionsis difficult. nonetheless, expenses can be matched againstthe provision ofservices year by year. the resulting cost',
659:'can then be analyzed in relationship to a variety of measures of the achievement of results. 125. certain subobjectives arise',
660:'from the basic objective of reporting on operating performance, as discussed below. federal financial reporting should provide information that helps',
661:'the reader to determine: 126. 2a.the costs of providing specific programs and activities and the composition of, and changes in,',
662:'these costs. 127. examples of financial information that can help to address this objective include information on the costs of',
663:'programs and activities; cost comparisons with estimates, with similar functions, with targets,9 and over time; and 9“performance targets” specify the',
664:'level of performance that is set as a goal by policy and program officials. targets may be set in terms',
665:'of outputs, outcomes, impacts, cost per unit of output, etc. page 29 concepts 1 fasab handbook, version 20 06/21 concepts',
666:'1 relevant analyses of the composition and behavior of costs, such as full and incremental costs, fixed and variable costs,',
667:'direct and indirect costs, and reimbursable and other costs, where appropriate. 128. 2b. the efforts and accomplishments associated with federal',
668:'programs and the changes over time and in relation to costs. 129. examples of information that can help to address',
669:'this objective include financialandnonfinancialindicatorsofserviceinputs,outputs,andoutcomes,including comparisons with goals; indicators of program efficiency and effectiveness; work load measures and unit costs; and',
670:'totalandmarginalcostsandbenefits,therelationshipofthesetobudgetrequests,and when the benefits will be realized. 130. 2c.the efficiency and effectiveness of the government’s management of its assets and',
671:'liabilities. 131. thissubobjectiveimpliesconcernwiththemanagementofallfederalassetsandliabilities used by or under the control of agencies. users of financial reports focus on the use of',
672:'these resources in program operations, not solely on their financial value. reports intended to address this objective would provide information',
673:'to help users assess the efficiency and effectiveness with which cash is used; loan, loan guarantee, and other receivables programs',
674:'are conducted; inventories of supplies, materials, and similar items are maintained; and forfeited and other tangible assets are handled. 132.',
675:'other examples of information relevant to this objective might include the service life and replacement cost of major systems and',
676:'equipment; backlogs and budgetary impact of delayed maintenance, rehabilitation cost or replacement value of assets; the market value of forfeited',
677:'and other assets, particularly those held for sale; the extent of unpaid expenses; and estimates and ranges of estimates of',
678:'other known liabilities such as leases or deposit and other insurance liabilities and other exposures to loss. 133. further discussion',
679:'of performance measurement and how financial reporting can contribute to reporting on performance is provided in chapter 9. page 30',
680:'concepts 1 fasab handbook, version 20 06/21 concepts 1 stewardship objective 3 134. federal financial reporting should assist report users',
681:'in assessing the impact on thecountryofthegovernment’soperationsand investmentsfortheperiod and how, as a result, the government’s and the nation’s financial condition has',
682:'changed and may change in the future.10 135. this objective is based on the federal government’s responsibility for the general',
683:'welfare of the nation in perpetuity. it focuses not on the provision of specific services but on the requirement that',
684:'the government report the broad outcomes of its actions. certain subobjectives arise from the basic objective of stewardship, as discussed',
685:'below. federal financial reporting should provide information that helps the reader to determine: 136. 3a.whether the government’s financial position improved',
686:'or deteriorated over the period. examples of information relevant to this objective include the amount of assets, liabilities, and net',
687:'assets or net position; an analysis of government debt, its growth, and debt service requirements; changes in the amount and',
688:'service potential of capital assets; and theamountofcontingentliabilitiesandunrecognizedobligationssuchastheprobablecost of deposit insurance. 137. assessing whether the government’s financial position improved or deteriorated',
689:'over the period is important not only because it has financial implications but also because it has social and political',
690:'implications. this is because analysis of why financial positionimproved or deteriorated helps to explain whether financial burdens were passed on',
691:'by currentyear taxpayers to futureyear taxpayers without related benefits. the latter notion is sometimes referred to as “interperiod equity.”11 10the',
692:'concepts of “financial position” and “financial condition” are discussed in chapter 8. 11in paragraph 61 of its first conceptual statement,',
693:'objectives of financial reporting, the gasb noted: “the board believes that interperiod equity is a significant part of accountability and',
694:'is fundamental to public administration. it therefore needs to be considered when establishing financial reporting objectives [for state and local',
695:'governmental entities]. in short, financial reporting should help users assess whether currentyear revenues are sufficient to pay for the services',
696:'provided that year and whether future taxpayers will be required to assume burdens for services previously provided.” gasb’s statement 11,',
697:'measurement focus and basis of accountinggovernmental fund operating statements,adds “conversely,[ameasure of interperiod equity] would showwhether currentyear revenues not only were',
698:'sufficient to pay for currentyear services, but also increased accumulated net resources.” page 31 concepts 1 fasab handbook, version 20',
699:'06/21 concepts 1 138. viewed in this broader context, providing information to meet objective 3 and its subobjectives will help',
700:'to satisfy the needs expressed by financial report users. it will also help to explain the issuance of new debt',
701:'in relation to expenditures for activities with current benefits versus expenditures for investmenttype activities that yield future benefits. 139. 3b.',
702:'whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.',
703:'140. information about the results of past government operations is useful in assessing the stewardship exercised by the government. users',
704:'of financial reports also want help in assessing the likelihood that the government will continue to provide the current level',
705:'of benefits and services to constituent groups, such as farmers, retirees, and the poor. 141. information relevant to this objective',
706:'may include disclosures of financial risks that are likely or reasonably possible from sources such as governmentsponsored enterprises, deposit insurance,',
707:'and disaster relief programs. it could also include information such as the longterm financial implications of the budgetary process, the',
708:'status of trust funds, and backlogs of deferred maintenance. 142. providing information of this kind may require the use of',
709:'reporting mechanisms other than traditional financial statements. for example, special reports may have to be developed to demonstrate whether the',
710:'level of a particular year’s maintenance and rehabilitation expenditures resulted in an improvement or a deterioration of capital assets and',
711:'infrastructure. 143. 3c.whether government operations have contributed to the nation’s current and future wellbeing. 144. objective 3, in general, and',
712:'subobjective 3c, in particular, imply a concern with “financial condition,” as well as “financial position.” financial condition is a broader',
713:'and more forwardlooking concept than that of financial position. reporting on financial condition requires financial and nonfinancial information about the',
714:'national economy and society, aswell as about the government itself. for example, reports intended to help meet this objective might',
715:'address users’ needs for information about investmentsinorexpendituresforresearchanddevelopment,militaryreadiness,and education; changes in the service potential of infrastructure assets; spending for consumption relative',
716:'to investments; opportunities for growthstimulating activities; and the likelihood of future inflation. page 32 concepts 1 fasab handbook, version 20',
717:'06/21 concepts 1 145. indicators of financial position, measured on an accrual basis, are the starting point for reporting on',
718:'financial condition but must be supplemented in a variety of ways. for example, subobjective 3b might imply reporting, among other',
719:'things, a current law budget projection under a range of alternative assumptions. reports intended to achieve subobjective 3c might disclose,',
720:'among other things, the contribution that the government is making to national wealth by financing assets that are not federally',
721:'owned, such as research and development, education and training, and stateowned infrastructure. information on trends in total national wealth and',
722:'income is also important. systemsand control objective 4 146. federal financial reporting should assist report users in understanding whether financial',
723:'management systems and internal accounting and administrative controls are adequate to ensure that transactions are executed in accordance with budgetary',
724:'and financial laws and other requirements, consistent with the purposes authorized, and are recorded in accordance with federal accounting standards;',
725:'assets are properly safeguarded to deter fraud, waste, and abuse; and performance measurement information is adequately supported. 147. this objective',
726:'arises from the three preceding objectives, in conjunction with the fact that accounting supports both effective management and control of',
727:'organizations and the process of reporting useful information. indeed, accounting processes are an integral part of the management control system.',
728:'148. the ability to prepare financial reports that report all transactions, classified in appropriate ways that faithfully represent the underlying',
729:'events, is itself an indication that certain essential controls are in place and operating effectively. the preparation of reliable financial',
730:'reports also helps to ensure that reporting entities have early warning systems to indicate potential problems and take actions to',
731:'correct material weaknesses or problems. 149. sound controls over internal processes are essential both to safeguard assets and to ensure',
732:'economy, efficiency, and effectiveness in many governmental programs. 150. information relevant to this objective helps financial report users to determine',
733:'whether the entity has established reasonable, costeffective programs to safeguard assets, prevent and detect waste and abuse, and reduce errorrates.an',
734:'example of information that would page 33 concepts 1 fasab handbook, version 20 06/21 concepts 1 address this objective is',
735:'management’s assertion about the effectiveness of the internal accounting and operational control system. chapter 5: balancing costsand benefits in recommending',
736:'standards 151. users’ informationneedsdefinefinancialreporting. even so,the process of articulating financial reporting objectives and then recommending accounting standards is not a',
737:'simple progression from canvassing users of federal financial information to recommending standards. this is partly because such users, when asked',
738:'about their information needs, maygiveanswersthat are limited bytheir past needsand experiences. more fundamentally, it is because articulating objectives and recommending',
739:'accounting standards necessarily involve judgments about the costs and benefits of producing more information or of reporting it differently. 152.',
740:'the standardsetting process is further complicated by the fact that any given accounting standard can have many different kinds of',
741:'effects that must be considered. for example, accounting standards can influence the activities of agency accountants and the auditors who',
742:'review reports prepared by those accountants, as well as the decisions of those who read the financial statements. thus, a',
743:'standard may influence which physical assets are under accounting control and the extent of work the auditor does to provide',
744:'assurance about those assets. the accountants’ and auditors’ reports, in turn, may influence various decisionmakers in different ways as they',
745:'select policies regarding the assets and the systems used to control them, decide how to implement the policies, and evaluate',
746:'the results. 153. the standard setter must, to some extent, be aware of these potential effects when considering the costs',
747:'and benefits of any given accounting alternative.as an added complication, the same piece of information may be used in different',
748:'ways for different decisions. inotherwords, there are different kindsof “use.” in some cases, the information may be consciously used in',
749:'welldefined ways; in other cases, it may subtly influence the way people see the world, understand their options, and assess',
750:'their priorities. 154. for example, the size of the deficit may have a very specific meaning with quite explicit implications',
751:'e.g., sequestration under certain rules for scoring the budget. the deficit may also influence the economy because it affects aggregate',
752:'demand and the government’sfinancingrequirementsinavarietyofwaysthateconomistscanonlypartially explain and quantify. finally, the deficit may influence people’s perceptions of their own wellbeing or of',
753:'the nation’s financial condition in more subjective or symbolic ways that can affect both private and collective behavior e.g., willingness',
754:'to undertake various new commitments, to pay more in taxes, or to accept reductions in program benefits. page 34 concepts',
755:'1 fasab handbook, version 20 06/21 concepts 1 155. finally, as noted earlier, accounting and financial reporting cannot satisfy every',
756:'need for information and accountability. for many purposes, other information sources and other techniques to maintain and demonstrate accountability are',
757:'either essential or more cost effective. this constraint pervades any discussion of the objectives of federal financial reporting. chapter 6:',
758:'qualitative characteristics of information in financial reports 156. financial reporting is the means of communicating with those who use financial',
759:'information. for this communication to be effective, information in financial reports must have these basic characteristics: understandability, reliability, relevance, timeliness,',
760:'consistency, and comparability.12 understandability 157. special purpose reports are prepared to meet the needs of specified users. understandabilityisrarelyaprobleminsuchcasesbecause mutualunderstandingof what',
761:'information is needed can generallybe assumed between report preparer and report user. information in general purpose financial reports, however, should',
762:'be expressed as simply as possible. users of general purpose financial reports, including internal users, tend to have different levels',
763:'of knowledge and sophistication about government operations, accounting, and finance. 158. to be publicly accountable, the federal government and its',
764:'component entities should issue generalpurposefinancialreportsthat canbeunderstoodbythosewhomaynot have a detailed knowledge of accounting principles. those reports should include explanations and interpretations',
765:'to help report users understand the information in the proper context. however, general purpose financial reports should not exclude essential',
766:'information merely because it is difficult to understand or because some report users choose not to use it. 159. for',
767:'reports to be understandable to different audiences, different reports may be necessary to provide information relevant to the needs of',
768:'the expected report users, with suitable amounts of detail, explanation, and related narrative. to be fully intelligible, financialinformationingeneralpurposereportsmayneed to bepresentedinrelationtothe',
769:'goals, service efforts, and accomplishments of the reporting entity. 12for the most part, these characteristics are similar to those described',
770:'by the fasb and the gasb. page 35 concepts 1 fasab handbook, version 20 06/21 concepts 1 reliability 160. financial',
771:'reporting should be reliable; that is, the information presented should be verifiable and free from bias and should faithfully represent',
772:'what it purports to represent. to be reliable, financial reporting needs to be comprehensive. nothing material should be omitted from',
773:'the information necessary to represent faithfully the underlying events and conditions, nor should anything be included that would likely cause',
774:'the information to be misleading to the intended report user. reliability does not imply precision or certainty, but reliability is',
775:'affected by the degree of estimation in the measurement process and by uncertainties inherent in what is being measured. financial',
776:'reporting may need to include narrative explanations about the underlying assumptions and uncertaintiesinherent in this process. under certain circumstances, a',
777:'properly explained estimate provides more meaningful information than no estimate at all. relevance 161. relevanceencompassesmanyoftheothercharacteristics. forexample,iftheinformation provided in a financial',
778:'report is not timely or reliable, it is not relevant. information can, however, meet all other characteristics and still not',
779:'be relevant. to be relevant, a logical relationship must exist between the information provided and the purpose for which it',
780:'is needed. information is relevant if it is capable of making a difference in a user’s assessment of aproblem,condition,orevent. relevance',
781:'dependsonthe typesof financial information needed by the various users to make decisions and to assess accountability. timeliness 162. in some',
782:'circumstances, the mere knowledge that a report eventually will be made public can influence behavior in desirable ways, just astheknowledge',
783:'that one’stax return might eventually be audited can influence the behavior of people when they report their income. in other',
784:'circumstances, however, if financial reports are to be useful, they must be issued soon enough to affect decisions. timeliness alone',
785:'does not make information useful, but thepassageoftimeusuallydiminishestheusefulnessthattheinformationotherwisewould have had. in some instances, timeliness may be so essential that it requires',
786:'sacrificing a certain amount of precision or detail; a timely estimate may then be more useful than precise information that',
787:'takes longer to produce. page 36 concepts 1 fasab handbook, version 20 06/21 concepts 1 consistency 163. financial reports should',
788:'be consistent over time; that is, once an accounting principle or reporting method is adopted, it should be used for',
789:'all similar transactions and events unless there is good cause to change. the concept of consistency in financial reporting extends',
790:'to many areas, such as valuation methods, basis of accounting, and determination of the financial reporting entity. if accounting principles',
791:'have changed or if thefinancialreporting entityhaschanged,thenature and reasonforthechange, aswellas the effect of the change, should be disclosed. comparability 164. financial',
792:'reporting should help report users make relevant comparisons among similar federal reporting units, such as comparisons of the costs of',
793:'specific functions or activities. comparability implies that differences among financial reports should be caused by substantive differences in the underlying',
794:'transactions or organizations rather than by the mere selection of different alternatives in accounting procedures or practices. chapter 7: materiality',
795:'164a. areporting entity considers materiality in the application of accounting and reporting requirements. the federalaccounting standardsadvisory board fasab or the',
796:'board intends that information presented in accordance with generally accepted accounting principles gaap12.1 will not contain misstatements, including omissions of',
797:'information, considered material. such omissions include information that is necessary for a reasonable financial report user reasonable user12.2 to understand',
798:'the effect of particular material transactions, events, and conditions on the entitys financial statements, notes to the financial statements, and',
799:'required supplementary information. [footnote] 12.1 such information would include financial statements, notes to the financial statements, and required supplementary information.',
800:'[footnote] 12.2. areasonable financial report user has appropriate knowledge of the federal governments activities and reviews and analyzes the information',
801:'diligently. 164b. amisstatement, including omission of information, is material if, in light of surrounding facts and circumstances, it could reasonably',
802:'be expected that the judgment of a page 37 concepts 1 fasab handbook, version 20 06/21 concepts 1 reasonable user',
803:'relying on the information would change or be influenced by the correction or inclusion of the information. 164c. materiality should',
804:'be evaluated in the context of the specific reporting entity. determining materialityrequiresappropriate and reasonable judgment in considering the specific facts,',
805:'circumstances, size, and nature of the misstatement. consequently, after quantitative and qualitative factors are considered,materiality may vary byfinancial statement, line',
806:'item, or group of line items within an entity. 164d. misstatements should be considered individually and in the aggregate. materiality',
807:'determinations regarding such misstatements should include consideration of both qualitative and quantitative factors. information that is not considered quantitatively material',
808:'may be considered qualitatively material if it can reasonably be expected to change or influence the judgment of a reasonable',
809:'user. qualitative considerations include the public accountability12.3 of the reporting entity; applicable legal and regulatory requirements; the visibility and sensitivity',
810:'of government programs, activities, and functions; as well as other factors that may affect a reasonable users judgment about the',
811:'information. [footnote] 12.3. sffac1, par. 73and74identifydifferentkindsofaccountability. these may be relevant qualitative considerations in determining materiality. 164e. materiality concepts and related',
812:'factors should be considered when making materiality judgments. while specific qualitative and quantitative thresholds for materiality are not provided in',
813:'this statement, illustrative factors are discussed in paragraphs 164c and 164d. 164f. in applying materiality concepts, the specific needs of',
814:'a reasonable user should be considered. in the federal government environment, such needs generally differ from those of the commercial',
815:'entity financial report user. for example, due to the visibility and sensitivityofgovernmentprograms,theneedsof federalgovernment financialreportusers extend to having the ability to',
816:'assess the allocation and use of resources in the federal government. compliance with laws,regulations, contracts, and grant agreementsis also a',
817:'significant consideration of the user.12.4 [footnote] 12.4informationrequiringprotectionfromunauthorized disclosureis referred to as classified national security information. the application of federal financial',
818:'accounting standards needs to support the legal requirements to protect classified national security information. 164g. to emphasize that materiality should',
819:'be considered in applying the accounting standards, the board will place the following notice at the end of each statement',
820:'of federal financial accounting standards sffas: page 38 concepts 1 fasab handbook, version 20 06/21 concepts 1 the provisions of',
821:'this statement need not be applied to information if the effect of applying the provisions is immaterial. [footnote] [footnote]: refer',
822:'to statement of federal financialaccounting concepts 1, objectives of federal financial reporting, chapter 7, titled materiality, for a detailed discussion',
823:'of the materiality concepts. chapter 8: howaccounting supports federal financial reporting 165. this chapter explains the focus of the fasab’s',
824:'concern by showing how accounting supports financial reporting and thus how accounting standards recommended by the fasab can influence federal',
825:'financial reporting. this chapter shows how the fasab’s recommendations can influence a wide variety of financial reports. additionally, it lays',
826:'a foundation for the discussion in chapter 9 of how financial reporting in general, and cost information in particular, contribute',
827:'to performance reporting. in effect, chapter 8 outlines parts of a conceptual framework for federal accounting but is limited to',
828:'those ideas, such as “financial position” and “financial condition,” that will help readers understand the board’s proposed statement of objectives',
829:'for federal financial reporting. financial core data 166. theaccountingprocessbeginswithrecordinginformationabouttransactionsbetweenthe government or one of its component entities and other entities, that',
830:'is, inflows and outflows of resources or promises to provide them. these may involve flows of economic goods, cash, or',
831:'promises. these comprise the “core” data of the accounting discipline. this initial step in the accounting process is depicted at',
832:'the bottom of figure 1, in the box numbered 1. to enhance the usefulness of this core set of data',
833:'about transactions with other entities, accountants make various accruals, classifications, interpretations, etc. page 39 concepts 1 fasab handbook, version 20',
834:'06/21 concepts 1 167. many accounting entries recorded in the accountant’s general ledger data base are such rearrangements of data',
835:'about previously recorded transactions with other entities rather than new transactions involving flows of resources or promises between entities.13 168.',
836:'in the branch of accounting called financial accounting, the most noteworthy interpretations or classifications are those about which data pertain',
837:'to the past and which pertain to the future. in other words, financial accounting is largely concerned with assigning the',
838:'value of past transactions to appropriate time periods. 169. transaction data assigned to a period that has elapsed are said',
839:'to be “recognized” in the statement of operations or income statement, e.g., as an expense or a revenue of that',
840:'period. transaction data pertaining to the future are recognized in the statement of financial position or balance sheet as assets',
841:'and liabilities. 13see william j. schrader, robert e. malcom, and john j. willingham, “apartitioned events view of financial reporting,” accounting',
842:'horizons dec. 1988, p1020. foramoreacademicexplorationoftheideasinvolved, seeyuji ijiri, “theory ofaccounting measurement,” studies in accounting research 10,americanaccountingassociation 1975. page 40 concepts 1',
843:'fasab handbook, version 20 06/21 concepts 1 figure 1: howaccounting contributes to information used by citizens, congress, federal exceutives, and',
844:'program managers information used to assess accountability and performance, to make planning and policy decisions, to allocate resources, to decide',
845:'how to vote, and for other decisions. various special purpose financialreports fromcommittees of congress, agencies, gao, news media, etc. e.g.,',
846:'agency budgetrequests, thebudget of theunited states government financial information specialpurpose reports generalpurpose reports nonfinancial information specialpurpose budgetexecution reports e.g., financialinformation',
847:'required by thecfo act e.g., nonfinancial information required by thecfo act specialpurposenonfinancial information from agencies, newsmedia, etc., e.g., federal managersfinancial',
848:'integrityact reports 3. reporting useful information 2. environmental data e.g., changes in market value or service potential, contingent gains &',
849:'losses, program results 1. entity transaction datae.g., revenues and expenses, inputs and outputs entity statusdata assets & liabilities other entities',
850:'page 41 concepts 1 fasab handbook, version 20 06/21 concepts 1 170. together with the statement of cash flows, the',
851:'income statement or statement of operations or activities and the balance sheet comprise the three “basic” general purpose financial statements',
852:'for privately owned entities. other statements, such as a comparison of actual results with the budget, may be regarded as',
853:'part of the basic statements for governmental entities. 171. attheinitialstageoftheaccountingprocess,theinformationaboutassetsandliabilitiesis merely the result of assigning all or part of the',
854:'value of certain transactions to the future. “assets” and “liabilities” at this stage are not statements about future benefits or',
855:'sacrifices that can be proven or disproven. they are allocations of the cost of past transactions based on assumptions about',
856:'future benefit and sacrifice. 172. this has been a common source of confusion when accountants communicate with nonaccountants, for whom',
857:'the word “asset” typically implies something of value that can be sold or used. much of the evolution of accounting',
858:'under the fasb and the gasb has been to reduce this confusion, to improve communication, and to make financial reports',
859:'more faithfully represent economic reality in terms meaningful to report users. this evolution has involved adding increasing amounts of information',
860:'to the core set of transaction data. that process is discussed later. 173. in other words, the amount of “equity”',
861:'or “net assets” based on the core data in a bookkeeper’s trial balance isnot a direct measure of either the',
862:'market value or the service potential of the entity. in some circumstances, however, net assets can be a meaningful indicator',
863:'of that value or potential. the word “indicator” is used deliberately to avoid the implication of precision that may be',
864:'associated with the word “measure.”14 174. accounting data may be further assigned, allocated, or associated with units of activity or',
865:'production, segments of organizations, etc., within the same time period. these kinds of intraperiod allocations are developed most extensively in',
866:'the branch of accounting called cost or managerial accounting. neither the fasb nor the gasb has devoted much attention to',
867:'this branch of accounting, but the fasab, because of its unique mission, will need to do so. one reason for',
868:'performing cost accounting is to assist in performance measurement. 14the term “measure” is commonly used in accounting literature regarding cost',
869:'and in other literature including the gasb’s regarding performance. this document follows that practice. in a conceptual discussion, however, it',
870:'is important tonotethat “cost,” “performance,” and “financial condition” are all multidimensional concepts. itmay bemore precisetothink interms of multiple indicators that',
871:'provide information about these concepts instead of a singlevalued “measure” of any of them. page 42 concepts 1 fasab handbook,',
872:'version 20 06/21 concepts 1 nonfinancial core data 175. traditionally,financialaccountantsrecordanddescribetransactionsintermsofmoney.at the most detailed level, however, their records usually include information',
873:'about the associatedphysicalinputsandoutputsofgoods,labor,etc. thisnonfinancialinformationis an important part of the data available for reporting and evaluating the economy and efficiency of',
874:'the organization’s performance. budgetary core data 176. in government the data on transactions with other entities include information on the',
875:'budget authority, obligations, outlays, receipts, and offsetting collections for the transactions. this information is maintained in what are called budgetary',
876:'accounts to distinguish them from the “proprietary” accounts that record other information on transactions. the budgetary and proprietary accounts at',
877:'this level are said to be “integrated.” in effect, they maintain information about different stages of a transaction. financial environmental',
878:'dataand the concept of financial position 177. the core set of accounting data is expanded with a variety of what',
879:'may be called “environmental” data to distinguish them from the data that arise from transactions flows of resources or promises',
880:'with other entities. box 2 in figure 1 depicts this step of the accountingandreportingprocess. manyeventswithintheenvironmentof areportingentity may have economic consequences',
881:'for the entity. examples of environmental data that mayberelevantto financial reportingforsome purposesinclude current market prices, net realizable values, changes in',
882:'discount interest rates, and impairment of assets either in terms of market value or in terms of service potential. judgments',
883:'about what environmental data should be added are made by considering the specific information needed for specific purposes. 178. at',
884:'this level of the accounting and financial reporting process, the information reported in the balance sheet transcends bookkeeping. it can',
885:'now represent more of what is known about future economic benefits and sacrifices. to the extent that this is accomplished,',
886:'the balance sheet may be said to represent the “financial position” of the reporting entity. the concept of financial position',
887:'is that of a pointintime snapshot of an entity’s economic resources and the claims on those resources. page 43 concepts',
888:'1 fasab handbook, version 20 06/21 concepts 1 nonfinancial environmental information 179. nonfinancial information about program efforts, accomplishments, and outcomes',
889:'may be collected and associated with the financial environmental data. this information is particularly important for governmentsbecause there isno direct',
890:'analogue to “net income” or “earnings” to gauge the economy, efficiency, and effectiveness or net value of governmental activity. the',
891:'concept of financial condition 180. as more environmental data are added to the core data, a concept that is broader',
892:'and more forwardlooking than “financial position” emerges. that concept is “financial condition.” for the u.s. government, the additional data could',
893:'include financial and nonfinancial information about current conditions and reasonable expectations regarding the national and even the global society. for',
894:'example, the expected implications of environmental degradation; the relative competitiveness and productivity of the u.s. economy; or expected changes in',
895:'the population’s composition in terms of age, gender, longevity,education,health,andincomeallmightaffect judgmentsaboutthegovernment’s financial condition. 181. information about financial condition can be conveyed',
896:'in a variety of schedules, notes, projections, and narrative disclosures. among the most important of these is management’s “discussion and',
897:'analysis” of known trends, demands, commitments, events, and uncertainties. for federal reporting entities, management’s discussion and analysis might address such',
898:'topics as budgetary compliance; internal control systems; capital resources and investments; service efforts, accomplishments, and results of operations; and page',
899:'44 concepts 1 fasab handbook, version 20 06/21 concepts 1 the reasonably possible future impact of known trends, risks, demands,',
900:'commitments, events, or uncertainties that may affect future operations.15 182. increasingly, managers and investors in the private sector are attending',
901:'to other factors that may sometimes be useful indicators of an entity’s financial condition, including such intangible factors as the',
902:'quality of the entity’s information and analysis capabilities, strategic planning, human resource development and management, and constituent satisfaction. similar factors',
903:'may be relevant for many federal reporting entities. kinds of financial information neededand provided 183. the information produced by these',
904:'accounting processes supports the overall reporting process. traditionally, the items of information included in financial statements are classified in various',
905:'“elements” of financial reporting, such as “assets,” “liabilities,” “revenues,” or “expenses.” in future projects, the fasab may consider the definition',
906:'of elements of federal financial reporting. for the purposes of this statement of concepts, however, it is not necessary to',
907:'do so. it is sufficient to note that needed financial information identified by some current and potential users of federal',
908:'financial reports can be classified under six broad headings: information on the sources and uses of budgetary resources, information about',
909:'operations and the related resources, information about the government’s assets, information about the government’s liabilities and financial responsibilities, information that',
910:'addresses concerns with the future, and information that discloses the levels of financial controls. 184. examples and further discussion of',
911:'such information needs are provided in appendix b. 15such a discussion and analysis is required in federal financial reports prepared',
912:'pursuant to the cfoact of 1990. in these reports, the discussion and analysis is referred to as the “overview” section.',
913:'omb bulletin 9203 provides guidance on preparing the overview section. page 45 concepts 1 fasab handbook, version 20 06/21 concepts',
914:'1 how this information flows into financial reports 185. the core and environmental financial information, often supplemented with information from',
915:'other sources, is the basis for a variety of general purpose and special purpose reports. for this reason, figure 1',
916:'culminates with the preparation of useful reports. adirect relationship exists between the accounting and reporting processes both for general purpose',
917:'financial reports and for budget execution reports. the dotted line in figure 1 leading to other kinds of reports emphasizes',
918:'that other kindsof information are often more heavily involved in producing them.accounting contributes to these reports but has less influence',
919:'over the nature, scope, and content of them. appendix c lists selected federal reports that are regularly prepared. relationship of',
920:'financial reporting to budgeting 186. “the budget” is a broad term that may include, among other things, a projection of',
921:'spending authorities and means of financing them for a future period and a report of the actual spending and associated',
922:'financing for a past period. the fasab’s recommendations may influence the reporting of actual budgetary data. 187. the budget of',
923:'the united states government is the most widely recognized and used financial report of the federal government. the budget process',
924:'is the government’s principal mechanism for reaching agreement on goals, for allocating resources among competing uses, and for assessing the',
925:'government’s fiscal effects on economic stability and growth. most attention is paid to these futureoriented roles of the budget. 188.',
926:'budget execution is designed to control and track tax receipts and the use of resources according to the purposes for',
927:'which budget authority was approved. actual receipts, obligations, and outlays are recorded by account, as is the status of budgetary',
928:'resources at the end of each fiscal year. 189. budgetarymeasurementisdesignedtoassistinthecontrolandallocationofresourcesby showing the cash outlays implied by each decision when the',
929:'decision is made. in some cases, the budget now also includes accruals for costs in advance of the required cash',
930:'outlay. budgetary concepts are under continual review. they may be changed by law or, after consultation with the congress, in',
931:'the annual revision of omb circulara11, “preparation and submission of budget estimates.” 190. the board’s authority does not extend to',
932:'recommending budgetary standards or budgetary concepts, but the board is committed to providing reliable accounting page 46 concepts 1 fasab',
933:'handbook, version 20 06/21 concepts 1 informationthatsupportsbudgetplanningandformulation. theboardalsosupportsefforts to ensure the accuracy and reliability of reporting on the budget. 191.',
934:'the board’s own focus is on developing generally accepted accounting standards for reporting on the financial operations, financial position, and',
935:'financial condition of the federal government and its component entities and other useful financial information. this implies a variety of',
936:'measures of costs and other information that complements the information available in the budget. together with budgetary reports, these reports',
937:'will provide a more comprehensive and insightful understanding of the government’s financial position, results of operations, and financial condition than',
938:'either set of reports alone. chapter 9: how financial reporting supports reporting on operating performance 192. thesecondobjectiveanditssubobjectivesconcernreportingonperformance.references to measuring cost',
939:'pervade this objective and its supporting narrative. the topics of cost and performance measurement are related because it is by',
940:'associating cost with activities or “cost objectives” that accounting can make much of its contribution to reporting on performance. 193.',
941:'setting performance targets is a function of management, not of accountants. that is, electedandappointedofficials,including bothprogramand policyofficials, decidewhatthe government will do,',
942:'how much the government will do, and how it will be done. these officials consider the relevant constraints and other',
943:'factors when establishing the performance targets. measuring performance against those goals is an essential part of management. on the other',
944:'hand, measuring cost is an important part of measuring performance, and measuring cost and reporting the results is a function',
945:'of accounting and the financial reporting system. financial reporting standards deal with what information is reported and how it is',
946:'reported, not with the target levels of performance. 194. this chapter first discusses cost measurement in general terms, then outlines',
947:'a framework for reporting on performance to show how cost information can assist in that endeavor. both cost measurement and',
948:'performance measurement are complex subjects. difficult problems arise during attempts to implement the ideas involved. for example, meaningful interpretation may',
949:'require disaggregation of information, or adjustment of targets for differences in client characteristics, for local conditions, and for other factors',
950:'beyond the government’s control. such problems are beyond the scope of this conceptual document.thisstatementdoesnotpurporttopresenta comprehensive discussion of how to measure',
951:'cost or performance. neither does this statement address the problems of page 47 concepts 1 fasab handbook, version 20 06/21',
952:'concepts 1 implementation; it merely shows the relationship between financial reporting and performance reporting in conceptual terms. cost measurement 195.',
953:'asusedinthisstatementofconcepts, “cost” isthemonetaryvalueoftheresourcesused. thus far, the fasab has considered the recognition and measurement of certain assets and liabilities that could',
954:'influence the amount of cost recognized in a given period by a federal reporting entity. for example, the board’s statement',
955:'on accounting for direct loans and loan guarantees implementsaccrualaccounting forthese programs, similarto the accrual budgeting mandated for them by the',
956:'credit reformact of 1990. 196. a“cost objective” is aprogram,afunction,anactivity, anorganizationalsubdivision, a contract, or another work unit for which cost data',
957:'are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects,',
958:'etc. the basic premise of cost accounting has been described by saying that the measurement, assignment, and allocation of costs',
959:'to cost objectives should be based on the beneficial or causal relationship between those costs and the cost objectives. in',
960:'defining the proper measurement, assignment, and allocation of cost for a given purpose, selecting the appropriate accounting method and whether',
961:'to use full costing should be carefully considered. method ofaccounting 197. the accrual basis of accounting generally provides a better',
962:'matching of costs to the production of goods and services, but its use and application for any given purpose must',
963:'be carefully evaluated. full costing 198. fullassignmentofallcostsofaperiod,includinggeneralandadministrativeexpensesand all other indirect costs, is an important basis for measuring cost of service.',
964:'however, full costis notnecessarilytherelevantcostfor making alldecisions. for example, incremental cost is more appropriate for many kinds of decisions, while opportunity',
965:'cost is more appropriate for others. similarly, cost that is controllable at a given management level is moreappropriate formostevaluationsoftheperformanceof those',
966:'managers.accordingly, accounting systems should permit the calculation of the relevant costs needed for a range of decisions, as determined by',
967:'the specific situation, and financial reports should reflect costs suitable to the purpose intended. page 48 concepts 1 fasab handbook,',
968:'version 20 06/21 concepts 1 performance measurement 199. performance reporting is broader than financial reporting, but good financial reporting is',
969:'essential to support performance reporting. the gasb has identified three broad categories of measures for reporting on performance of state',
970:'and local governmental entities: those that measure service efforts, those that measure service accomplishments, and those that relate efforts to',
971:'accomplishments.although some performance measures may not be clearly assignable to one of these categories, the categories are helpful for understanding',
972:'how and where financial reporting can contribute to performance reporting by providing relevant financial information. 200. toclarifythisrelationship,thefasabmaywishtochangeorexpandpartsofthefollowing discussion in future',
973:'projects.at this time, however, the fasab believes this basic framework is appropriate for the limited purpose of explaining how financial',
974:'reporting can contribute to performance reporting.16 measures of efforts 201. effortsaretheamountoffinancialandnonfinancialresourcesintermsofmoney,material, and so forth that are put into a program',
975:'or a process. measures of service efforts also include ratios that compare financial resources with other measures that may indicate',
976:'potential demand for services, such as the number of potential service recipients. 202. financial information includes financial measures of resources',
977:'used. they include the cost of salaries, employee benefits, materials and supplies, contract services, equipment, etc., used in providing a',
978:'service. the fasab’s exposure draft ed on accounting for inventory and related property is an example of how the fasab’s',
979:'recommendations could affect information reported on resources used. 203. nonfinancial information includes the following: number of personnel: because personnel are',
980:'a major resource for many federal agencies and programs, indicators that measure the number of fulltime equivalent employees or employeehours',
981:'used in providing a service often provide a significant measure of resources used. other measures: these may include the amount',
982:'of equipment such as number of vehicles or other capital assets used in providing a service. because some federal 16the',
983:'following discussion is based largely on the gasb’s preliminary views on service efforts and accomplishments reporting, december, 1992. page 49',
984:'concepts 1 fasab handbook, version 20 06/21 concepts 1 programs use large amountsof capital assets, measures of the use of',
985:'such assets can be important indicators of resources used. measures ofaccomplishments 204. measures of accomplishments report what was provided and',
986:'achieved with the resources used. there are two types of measures of accomplishments—outputs and outcomes. outputs measure the quantity of',
987:'services provided. outcomes measure the results of providing those outputs. for some kinds of programs, financial information can provide measures',
988:'of accomplishments. for example, for some government businesstype activities, just as for profitseeking businesses, the revenue earned can be used',
989:'as an indicator of accomplishments. in most government programs, however, the important indicatorsofaccomplishmentsare based on nonfinancial information, asdiscussed below. 205.',
990:'outputs, which can be measured in these ways: quantity of service provided: these indicators measure the physical quantity of a',
991:'service provided. quantity of a service provided that meets a certain quality requirement: these indicators measure the physical quantity of',
992:'a service provided that meets a specified criterion or a set of criteria. quality requirements can also be defined and',
993:'measured regarding inputs. 206. outcomes, for which indicators measure accomplishments or results that occur at least partially because of the',
994:'service efforts. some authorities use terms like “impact,” “effect,” or “results” to distinguish the change in outcomes specifically caused by',
995:'the governmental activityfromthe totalchange inoutcomesthat can be causedbymanyfactors. thoughit is not always feasible, in theory performance evaluation should focus on',
996:'results or effects in the sense of impacts, i.e., on the differences between program outcomes and the outcomes that would',
997:'have occurred in the absence of the program. results also include measures of public perceptions of outcomes. 207. outcome measures',
998:'are particularly useful when presented as comparisons with previous years, established targets, goals and objectives, generally accepted norms and standards',
999:'in the sense of “targets”, other parts of the entity, or other comparable entities. 208. sometimes, the secondary and/or unintended',
1000:'effects of a service on the service recipients, community, or nation can be identified and may warrant reporting. page 50',
1001:'concepts 1 fasab handbook, version 20 06/21 concepts 1 measures that relate efforts toaccomplishments 209. for profitseeking entities and for',
1002:'some businesstype government programs, the amount of net income can be thought of as a single indicator that relates organizational',
1003:'efforts to accomplishments. for most government activities, however, relating efforts with accomplishments in a meaningful manner is more complex. two',
1004:'types of such indicators are discussed below. efficiencymeasuresthatrelateeffortstooutputsofservices:theseindicatorsmeasure the financial resources used or the cost in dollars, employeehours, or equipment',
1005:'per unit of output. they provide information about the production of an output at a given level of resource use',
1006:'and demonstrate an entity’s relative efficiency when compared with previous results, established goals and objectives, generally accepted norms or targets,',
1007:'or results achieved by similar entities. effectiveness or costoutcome measures that relate efforts to the outcomes or results of services:',
1008:'these measures report the cost per unit of outcome or result. they relate costs and results to help managers, executives,',
1009:'congress, and citizens assess the value of the services provided by an entity. 210. as is evident, financial or cost',
1010:'information is an important component of both types of measures that attempt to relate efforts to accomplishments. limitations of performance',
1011:'measurement 211. performance measurement is an essential part of good management, and performance reporting is an essential part of government',
1012:'accountability. important limitations and difficulties associated with performance measurement and reporting should be noted, although they cannot be fully explored',
1013:'in a brief outline of the subject such as this. for example,performance usually cannot be fullydescribed bya single measure, indicatorsof',
1014:'service efforts and accomplishments do not, by themselves, indicate why performance is at the level reported, and reporting quantifiable indicators',
1015:'can sometimes have unintended consequences. 212. for these and other reasons, the three categories of performance measures generally need to',
1016:'beaccompanied bysuitableexplanatoryinformation. indeed, narrative information is an essential part of reporting on performance. explanatory information includes both quantitative and narrative',
1017:'information to help report users understand reported measures, assess the reporting entity’s performance, and evaluate the significance of underlying factors',
1018:'that may have affected the reported performance. as noted, the reporting entity may be the federal government as a whole',
1019:'or any of its component reporting entities. explanatory information can include, for example, information about factors substantially page 51 concepts',
1020:'1 fasab handbook, version 20 06/21 concepts 1 outside the entity’s control, as well as information about factors over which',
1021:'the entity has significant control. page 52 concepts 1 fasab handbook, version 20 06/21 concepts 1 appendixa: basis for conclusions',
1022:'this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section directing',
1023:'the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are updated',
1024:'for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for',
1025:'conclusions of the amending statement for the rationale for each amendment. introduction 213. this appendix summarizes some of the considerations',
1026:'that were deemed significant by members of the board in reaching the conclusions in this statement. it includes reasons for',
1027:'accepting certain approaches and for rejecting others. individual board members gave greater weight to some factors than to others. 214.',
1028:'the board used several methods to arrive at the knowledge base and conclusions that shape this statement. its staff conducted',
1029:'focus group discussions, interviewed users and preparers of financial information, and performed other research. 215. based on this work, the',
1030:'board published an exposure draft on january 8, 1993, as called for by the board’s rules of procedure. fortysix letters',
1031:'were received in response. the board also held a public hearing on the exposure draft onapril 2122, 1993, at which',
1032:'it received valuable comments. 216. the board wishes to thank everyone who participated in the process. relationship between financial reportingand',
1033:'the budget 217. the board considered whether it should modify the exposure draft’s discussion of the relationship between financial reporting',
1034:'and the budget. several respondents commented on this subject, but often in different ways. some alluded to budgetary and proprietary',
1035:'or “accrual” or “financial” accounting in a context that implied each should be on a different basisbutreportedinanintegratedfashion.otherssuggestedthatusingthe samebasis for reporting',
1036:'and for budgeting was essential to achieve the objectives stated for federal financial reporting. 218. many recommendations have been made',
1037:'over the years that information on expenditures be arranged to permit better perception of the relationship between the expenditures and',
1038:'page 53 concepts 1 fasab handbook, version 20 06/21 concepts 1 national policy objectives. some of those recommendations have related',
1039:'to the budget. some have called for an “accrualbasis” budget. those who would like to change the organization and/or the',
1040:'basis of the budget, e.g., to more of a “program” organization or to more of an “accrual” basis, might regard',
1041:'financial reporting from a program perspective and/or on an accrual basis as a valuable first step before considering restructuring the',
1042:'budget. 219. others may have fundamentally different views. for example, some believe there is merit in maintaining a distinction between',
1043:'accrual accounting and budgeting, except to the extent that those involved in preparing and approving the budget elect to use',
1044:'an accrual convention, as in the credit reformact of l990. these persons believe that the budgetary basis of measurement should,',
1045:'in principle, sometimes be different from the accrual basis. they infer this from the different purposes of budgeting and financial',
1046:'reporting. 220. the board concluded that there was no reason to change the discussion of this topic in this statement,',
1047:'because the board has no jurisdiction regarding the budget. stateand local governmentsand other nonfederal entities 221. some respondents expressed concern',
1048:'about the potential impact of federal accounting standards on state and local governmental accounting. these respondents would like to minimize',
1049:'the cost of compliance with federal requirements. to the extent possible, they would like to avoid the need to reporton',
1050:'a basis different from that specified bythe gasb. presumably their comments dealt with general purpose reporting because grantees must now',
1051:'prepare various special purpose reports pursuant to the requirements of granting agencies, omb, the singleauditact, etc. 222. the fasab has',
1052:'no intent to recommend standards for general purpose external financial reporting by nonfederal entities. the fasab’s mission is to consider',
1053:'and recommend accounting principles for the federal government. the fasab’s work, therefore, will have no direct effect on nonfederal entities.',
1054:'it is true, however, that the fasab’s recommendations could eventually result in increased demand for information from recipients of federal',
1055:'funds. this could happen when such information was necessary for federal reporting entities to achieve the stated objectives of federal',
1056:'financial reporting. such requirements would be “special purpose” reporting requirements, from the perspective of grant and contract recipients. 223. these',
1057:'requirements most likely would be imposed by program officials in contracts and grant agreements with the recipients of the federal',
1058:'funds. the board acknowledges that the federal government has a responsibility to consider the cost imposed on nonfederal page 54',
1059:'concepts 1 fasab handbook, version 20 06/21 concepts 1 entitieswhenmaking decisionstoimpose suchrequirements.at the sametime, benefitsto all entities and to all',
1060:'citizens involved also must be considered. reporting on performanceand using nonfinancial information 224. most respondents who addressed reporting on performance',
1061:'supported the exposure draft, but some thought the language was too encompassing. the board concluded that their concern was stimulated',
1062:'in part by the wording of the first three objectives in the exposure draft. each began with the phrase “federal',
1063:'financial reporting should assist ” however, each of these objectives subsequently included a phrase “federal financial reporting should enable the',
1064:'reader to determine ” that perhaps implied more than the board intended. 225. accordingly, the board substituted the phrase “provide',
1065:'information that helps the reader ” for “enable ” the board also made certain other changes recommended by some respondents.',
1066:'in particular, the statement now uses the phrase “performance target” to refer to desired levels of performance defined by elected',
1067:'and appointed officials. this term is used instead of “performance standard” to avoid possible confusion with “financial reporting standards,” which',
1068:'deal with what information is to be reported in designated reports and with how it is reported. 226. the statement',
1069:'also makes it clear that performance targets should be set by program and policy officials working together. financial officials have',
1070:'a role to play in this process, especially where financial data are involved. that role is based on their expertise',
1071:'in cost measurement and their responsibility to ensure the integrity of the data. 227. one authority on public administration has',
1072:'explained the relationship in this way: government accountants are responsible in part for capturing, reporting, and analyzing actual financial information',
1073:'important for both policy making and management. policy analysts and budget professionals deal primarily with what should occur and accountants',
1074:'deal primarily with capturing and recording what did occur. in addition, government accountants have auditors reviewing their work professionally to',
1075:'further ensure the integrity of the accounting process.17 228. the board believes that accounting supports financial reporting and that, in',
1076:'the government, financial reporting goes hand in hand with accountability and performance 17thomas d. lynch, “president’s column,” aspatimes, vol. 16,',
1077:'no. 6 june 1, 1993, p. 5. page 55 concepts 1 fasab handbook, version 20 06/21 concepts 1 evaluation. financial',
1078:'accounting and financial reporting have a special role in assuring compliance with financerelated requirements for transactions. this is most directly',
1079:'relevant to objectives 1 and 4. 229. financial reporting, however, also provides useful information about costs, assets, and liabilities. this',
1080:'information is especially relevant to objectives 2 and 3. routine reporting of outputs, outcomes, and their costs is an important',
1081:'part of a performance monitoring system.assessmentsofimpactsalso referredto aseffects, orresultsspecificallycaused by governmental action are more likely to be performed in lessfrequent',
1082:'program evaluations and special studies. those studies draw upon the output, outcome, and cost information that is or should be',
1083:'more frequently published. 230. federalaccountingandfinancialreportingexistwithinthecontextofvariouslawsintended to foster accountability and performance evaluation. neither the fasab nor federal financialreporting can independentlyaccomplish the',
1084:'objectives of evaluating performance or assuring accountability, but they can contribute to achieving them. furthermore, to make their essential contribution',
1085:'to these ends, accountants, auditors, and financial managers must understand the overall framework for achieving these objectives. 231. fornongovernmentalentities,competitivemarketsforgoods,services,andcapitalprovide an',
1086:'independent assessment of the economy, efficiency, and effectiveness with which those entities use resources to meet their customers’ needs. there',
1087:'is no similar proof of value for federal output independent of the political process. to report on the results of',
1088:'operations of a governmental entity, nonfinancial information is essential, in conjunction with financial information. 232. inconcept,thisfactcouldimplythatacompletefinancialreportofafederalreportingentity should include indicators of',
1089:'economy, efficiency, and cost effectiveness if the report is to fairly present the entity’s financial position and results of operations.',
1090:'paragraph 164 notes that financialorcost information is an important component of both types of measures that attempt to relate efforts',
1091:'to accomplishments. in practice, the extent to which it is feasible and cost effective to present such information can be',
1092:'decided only after careful study of the specific circumstances. 233. while specific decisions will require further study, the board notes',
1093:'its belief that any attempt to demonstrate accountability beyond probity level 5 and process level 4 requires performance measures.18 the',
1094:'board’s user needs study, its public hearings, and similar sources of information suggest a widespread belief that the federal government',
1095:'needs to make a more systematic attempt to measure and report outputs, outcomes 18levels of accountability are discussed in chapter',
1096:'3. page 56 concepts 1 fasab handbook, version 20 06/21 concepts 1 including impacts, and the costs of producing them.',
1097:'to do this, the board believes, accounting and financial reporting play an essential part throughout the cycle of planning, budgeting,',
1098:'financial management, and evaluation of federal activities. stewardship 234. afewrespondentssaidthatthestewardshipobjectivedescribedintheexposuredraftwas too broad. they felt that information on the effects on',
1099:'the nation of policy decisions was outside the scope of federal financial reporting. the board concluded that this concern— like',
1100:'the preceding one regarding reporting on performancestemmed in part from the wording and structure of the first three objectives in',
1101:'the exposure draft. 235. accordingly, the board substituted the phrase “provide information that helps . . .” for “enable .',
1102:'. .” as noted earlier, federal financial reporting cannot by itself accomplish the objectives of evaluating or assuring stewardship; it',
1103:'can only contribute to those goals. 236. the board notes that the federal government has two levels of stewardship. one',
1104:'is for its own assets and liabilities and its ongoing ability to operate. the other is its constitutional responsibility for',
1105:'the nation’s wealth and wellbeing. it is unique in this respect. if the nation’swealth and wellbeing are deteriorating, the government’s',
1106:'financial condition is, or soon will be, deteriorating also—and vice versa. the financial condition of a sovereign national government and',
1107:'that of the nation itself are inextricably intertwined. some information about the overall context must be provided, therefore, when reporting',
1108:'on the government as a whole, and perhaps when reporting on selected programs. as explained in chapter 1, the fasab',
1109:'does not recommend standards for economic reporting, but it may consider whether such information should be included in certain financial',
1110:'reports. systemsand control 237. most respondents who addressed the fourth objective, originally titled “deterring fraud waste andabuse,” supported the exposure',
1111:'draft, though some suggested that it could be phrased in a more positive fashion. several emphasized the need for this',
1112:'objective and for standards to achieve it, but a few thought that internal control should not be regarded as an',
1113:'element of financial reporting. others suggested that a separate objective on this topic was not necessary because it could be',
1114:'inferred from the other objectives. 238. the boardagreedthattheobjective shouldbestatedin more positiveterms.accordingly, it replaced “deterring fraud, waste, andabuse” with the new',
1115:'heading “systems and control” and made other changesin wording the objective. with regard to thefundamental page 57 concepts 1 fasab',
1116:'handbook, version 20 06/21 concepts 1 point, however, the board continues to believe that systems and control are topics of',
1117:'sufficient importance and relevance to warrant addressing in their own right. 239. the board’s user needs study, public hearings, and',
1118:'other sources of information make abundantly clear that users want assurance that reported information is credible and reliable. they also',
1119:'want to know that reasonable controls are in place to deter fraud, waste, and abuse. independent audit can help provide',
1120:'this assurance, but whether informationisauditedornot,effectivesystemsandcontrolsare essentialtoprovidingsuch assurance in a costeffective way. furthermore, effective systems and controls are essential to achieving',
1121:'the other objectives. 240. perhaps the unique contribution of accountingbased reports for objectives 1 and 4 is the “core” accounting',
1122:'data base on transactions, especially on controlled transactions subject to financerelated restrictions. systems of accounting control are integral parts of',
1123:'this special role for financial reporting. similarly, regarding objective 2 and, to some extent, objective 3, systems and controls are',
1124:'important because direct observation of outcomes and impacts is often infeasible or expensive. in these cases, reliance on accounting and',
1125:'administrative controls to ensure compliance with good practices and processes is often a costeffective surrogate for trying to measure the',
1126:'value added by governmental activities. 241. finally, the fundamental notion of accountability pervades the entire set of objectives. effective systems',
1127:'and controls are essential prerequisites to accountable government. thus, the board regards systems and controls as an integral part of',
1128:'accounting, accountability, and financial reporting. dual focus on internaland external users 242. several respondents mentioned users, but no consensus about',
1129:'a change to the exposure draft was evident. for example, some respondents urged greater emphasis on the information needs of',
1130:'external users or on objectives of general purpose, external financial reporting. others urged greater emphasis on information needs of lowerlevel',
1131:'program managersand employees. these comments are notnecessarily contradictory, nor are the competing perspectives necessarily mutually exclusive. the board continues to',
1132:'believe that it must consider both external and internal users. the board itself is the agent of officials who, in',
1133:'turn, are agents of the public. this organizational fact contributes to the dual focus. 243. also,asnotedinchapter1,thedistinctionbetweeninternalandexternalusersisnotclear for the federal government.',
1134:'except in degree of detail, virtually all federal financial information is of interest to at least some segments of the',
1135:'public. page 58 concepts 1 fasab handbook, version 20 06/21 concepts 1 244. theboardacknowledgesthatthisdualfocuswilloftencreatetheneedtobalancevarious considerations to arrive at an optimal',
1136:'result. for example, as one respondent properly noted, there could be a danger of emphasizing what he termed “comparable consistency”',
1137:'for uniform reporting to users who want comparable information across agencies. he was concerned that this might interfere with “relevant',
1138:'customization” of information systems to meet the unique needs of agencies in response to their specific environments. it is understood',
1139:'that“comparable consistency” ofinformationisneededforsomepurposesand “relevant customization” for others. 245. the board is primarily concerned with the former class of uses and',
1140:'reports, i.e., with ensuring the provision of comparable data where it is relevant and costeffective to do so. individual preparers',
1141:'often are not in a good position to judge the costbenefit ratio of such information governmentwide. they are aware of',
1142:'the costs they incur to produce information, but they often are not aware of the potential benefit of producing that',
1143:'information. neither are they in a position to establish standards that would produce such information. 246. ontheotherhand,thereshouldbelessneedforoutsidersliketheboardoritssponsorsto mandate relevant customization',
1144:'within agencies. presumably each preparer can and will take care of that, provided that resources are available to do so',
1145:'and that there are no bureaucratic impediments. 247. in concept, therefore, there need be no conflict between “comparable consistency” and',
1146:'“relevant customization.” furthermore, in theory, properly designed accounting systems should facilitate both internal and external reporting. in practice, however, because',
1147:'administrative resources for information processing systems are limited and because new systems take time to install, externallyimposed requirements for comparable',
1148:'consistency could compete with addressing internally perceived needs for relevant customization. the board acknowledges this tradeoff. this is just one',
1149:'of many costbenefit factors that the board will need to consider as it addresses each specific issue in subsequent projects.',
1150:'objectives for governmentwideand component entity reports 248. some respondents suggested there should be separate sets of objectives for governmentwide and',
1151:'component entity reports. similarly, it might also be possible to distinguish objectives for reporting by organizational unit components from those',
1152:'for functional or program components.alternatively, one might imagine separate sets of objectivesforreportsto differentaudiences.theboardconcludedthatdifferent reportsare likely to emphasize different objectives but',
1153:'that there is no need to prepare separate statements of objectives. the board will give due consideration to variations in',
1154:'emphasis among the objectives for different types of reports in subsequent statements and projects. page 59 concepts 1 fasab handbook,',
1155:'version 20 06/21 concepts 1 appendix b: users’ information needsaddressed by federal financial reporting 249. this appendix is consistent with',
1156:'chapter 3’s discussion of users’ needs for financial information. itrepresents an intermediate step in the board’s consideration of the financial',
1157:'reporting objectives implied by those needs. the appendix is included to aid the reader in understanding the reporting objectives by',
1158:'providing another perspective on the issues. 250. the financial information needs of the four user groups can be classified into',
1159:'six categories: 1. information on the sources and uses of budgetary resources 2. information about operations and the related resources',
1160:'3. information about the government’s assets 4. information about the government’s liabilities and financial responsibilities 5. information that addresses concerns',
1161:'with the future 6. information that discloses the levels of financial controls 251. in some cases, the specific nature of',
1162:'the information would be basically the same for all four groups of users; only the level of detail would vary.',
1163:'for example, the amount of unobligated budgetary authority available to be obligated would be of interest to program managers wanting',
1164:'to avoid violations of theantideficiencyact and to executives wanting to know the availability of budgetary resources that can be reprogrammed',
1165:'for other purposes.19 252. in other cases, the specific nature of the information would vary, depending on the reporting entity,thereportuserand',
1166:'the use towhichtheinformation wasput. for example, “error rates” could refer to errors in determining the monthly payment an individual was',
1167:'entitled to receive from the government or errors in calculating fees that a company was required to pay the government.',
1168:'19“obligations” has a meaning in federal accounting similar to that of “encumbrances” in state and local governmental accounting; that is,',
1169:'it reflects a reservation of appropriated spending authority that will be used to pay for a specific contract, a purchase',
1170:'order, or another item. page 60 concepts 1 fasab handbook, version 20 06/21 concepts 1 information on the sourcesand uses',
1171:'of budgetary resources 253. the budgetis thestartingpointforthegovernment’sfinances.allusers wanttoknow the makeup of the budget, i.e., the budget authority, the obligations, the',
1172:'outlays, the receipts and offsetting collections, etc. they want to know how the budget was executed and particularly whether it',
1173:'was executed in accordance with the appropriation statutes and other laws affecting the entity’s finances. they want to know the',
1174:'status of the budgetary resources, including the extent of obligated and unobligated budget authority. finally, they want to know the',
1175:'sufficiency of the budget authority for covering future commitments. informationabout operationsand the related resources 254. accompanying the need for information',
1176:'about budgetary resources is a need for information about the operations of the government’s programs. this includes information about the',
1177:'costs of the programs, classified in ways that provide further understanding, such as by program or activity, direct or indirect,',
1178:'fixed and variable, in comparison to estimates,orbyobjecte.g.,personnel.informationthatdisclosesunit,total, andmarginal costs and changes in costs is also useful. 255. cost information reflects',
1179:'the inputs for government services. equally useful is information about the outputs, outcomes, efficiency, and effectiveness of government services, by',
1180:'themselves or in relation to a budget or goals, and any changes. this would include an identification of the periods',
1181:'in which the accomplishments would be realized. such information helps form a basis for voting, funding, and management decisions. informationabout',
1182:'the government’sassets 256. financial statement users want considerable information about the government’s assets. they want to know whether the balances',
1183:'in the trust and revolving funds will be sufficient for fulfilling the fund’spurposes.theywantto knowthe nature and amountsof receivables owed the',
1184:'government and whether the receivables will be paid. they are interested in the size and condition of the inventories and',
1185:'whether they can be used as intended or, if not, how much would be received for their disposition. there is',
1186:'much the users want to know about the government’s physical assets: their value, their expected service life, the replacement costs,',
1187:'and the impact of the maintenance that has been deferred. 257. the government also holds assets as a custodian or',
1188:'only until the assets can be sold. examples are seized or forfeited assets. information about these assets helps to establish',
1189:'page 61 concepts 1 fasab handbook, version 20 06/21 concepts 1 accountability for them and to make decisions about the',
1190:'best time and method for their disposal. informationabout the government’s liabilitiesand financial responsibilities 258. users want to know what the',
1191:'government owes and whether the amounts are short term and preciselydefinable,long term and onlyan estimate, orjust acontingencyrelated to an enterprise',
1192:'or activity that is not a direct and current government responsibility, e.g., governmentsponsored enterprises. this information helps the reader assess',
1193:'the government’sability to continue to operate at itscurrent levels over a period of time and/or whether a tax increase is',
1194:'likely. 259. the changesintheamountsowedfromyeartoyeararealsoimportant. theuseroftenis willing to settle for or may actually prefer ranges rather than point estimates and/or net',
1195:'present values rather than nominal undiscounted amounts. information thataddresses concerns with the future 260. the federal government is responsible for',
1196:'the country’s wellbeing. its financial actions affect that wellbeing, both currently and in the future. thus, users look not just',
1197:'for information to evaluate the condition of the trust funds upon which they rely for future security. they also want',
1198:'information to assess the likelihood of tax increases, service reductions, and changes in the inflation rate. 261. they therefore want',
1199:'information about possible sources of additional financial resources. they want to see the amounts of resources expended on consumption activities',
1200:'in comparison to investment activities, such as research and development. they want information on other growthstimulating activities. on the other',
1201:'hand, they still want to be able to assess where spending can be reduced significantly. 262. finally, they want to',
1202:'know the magnitude of the probable future deficits, the cost burden this will place on taxpayers, and the potential effect',
1203:'that this burden might have on the quality of life. page 62 concepts 1 fasab handbook, version 20 06/21 concepts',
1204:'1 information that discloses the levels of financial controls 263. because the government spends such large amounts of monies, taxpayers',
1205:'and other citizens are naturally concerned that the resources they supply are being protected from fraud, waste, and abuse and',
1206:'that the errors are minimal. they want to know that controls are in place and operating effectively and that problems',
1207:'are being quickly identified and corrected.theyare particularlyconcerned thatidentifiedhighrisksareaddressedandthat adequate funds are devoted to eliminating the risk. 264. this concern is',
1208:'not just with the monies expended directly by the government. it also extends to the monies expended by the individuals',
1209:'and organizations that receive government contracts or grants. page 63 concepts 1 fasab handbook, version 20 06/21 concepts 1 appendix',
1210:'c: selected federal reports prepared ona recurring basis 265. this appendix classifies some wellknown reports according to the categories set',
1211:'forth in figure 1 in chapter 8. reports are classified according to whether they are primarily financial or nonfinancial and',
1212:'whether they have primarily a special or a general purpose. the classification issomewhatsubjective. itisbasedon the general nature or emphasisof the',
1213:'reports. many reports combine information and functions from different categories. 266. all these reports contribute to meeting the board’s reporting',
1214:'objectives for some users. however, many of the specific reports listed—economic reports dealing with the nation as a whole, for',
1215:'example—will be influenced only indirectly, if at all, by the board’s standards. indeed, because they deal with transactors other than',
1216:'the government such as private citizens and corporations, states and local governments, and notforprofit entities, economic reports fit within the',
1217:'context of figure 1 only to the extent that they may provide information to assess the government’s operating performance and',
1218:'stewardship. financial information—special purpose budget of the u.s. government analysis of the president’s budget proposals cbo economic and budget outlook',
1219:'report cbo economic and budget outlook report update cbo midsession review of the budget budgetenforcementactreports:preview, update, andfinalsequestration requestforapportionmentsf 132 report',
1220:'on budget execution sf 133 economic report of the president federal reserve bulletin opmforms1351ad:workyears andpersonnel costsreports prompt payment report financial',
1221:'information—general purpose annual financial statement principal financial statements, including footnotes and combining financial statements if applicable required by the cfoact',
1222:'on revolving funds, trust funds, substantial commercial functions, and pilot federal agencies annual financial reporting by agencies required by treasury',
1223:'sf 220 series page 64 concepts 1 fasab handbook, version 20 06/21 concepts 1 prototype consolidated financial statements of the',
1224:'u.s. theu.s. governmentannualreport andappendix treasury monthly treasury statement of receipts and outlays of the u.s. monthly statement of public debt',
1225:'dailytreasurystatementoncashanddebt nonfinancial information—general purpose annual departmental reports to the president and congress nonfinancialinformationrequiredbythecfoactintheoverview,supplementalinformation, and other portions of the reports nonfinancial',
1226:'information—special purpose reports requiredbythefederalmanagers’ financialintegrityactof1982 page 65 concepts 1 fasab handbook, version 20 06/21 statement of federal financialaccounting concepts 2:',
1227:'entity and display status issued june 6, 1995 affects no other statement. affected by sffas 7, paragraphs 90102, which affect',
1228:'paragraphs 64, 74, 105 of this statement, and addappendix ig. sffas 27, paragraph 38, amends footnote 3. sffas 31, paragraph',
1229:'35, amends paragraphs 84 and 102. sffac 6, paragraphs 6 through 22, amend par. 2, 3, 55, 69, 7274, 7679,',
1230:'81, and 108 as well as footnotes 11, 12, 12a, 14, and 17. sffas 43, paragraph 6 amends footnote 3.',
1231:'sffas 47, paragraphs 90 through 105 amend par 27, 10, 18, 29, 3853, and 78. sffas 53 amends paragraph 105.',
1232:'see pages 67 for the preamble to statements of federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.pdf. summary this concepts statement describes the basis',
1233:'for defining a reporting entity for the general purposefinancial reportingperformedbythe federalgovernment and/orentitiesthereof. for any entity to be a reporting entity',
1234:'it should meet all of the following criteria: there is a management responsible for controlling and deploying resources, producing outputsand',
1235:'outcomes, executing the budget ora portionthereof assuming that the entityis included in the budget, and held accountable for the entity’s',
1236:'performance. the entity’s scope is such that its financial statements would provide a meaningful representation of operations and financial condition.',
1237:'there are likely to be users of the financial statements who are interested in and could use the information in',
1238:'the statementsto helpthemmakeresource allocation andotherdecisions and hold the entity accountable for its deployment and use of resources. this concepts statement',
1239:'also describes the items that should be included in federal financial reports and presents illustrative statements depicting desirable displays of',
1240:'financial information. the items include: management discussion and analysis; balance sheet; statement of net costs; statement of changes in net',
1241:'position; page 1 concepts 2 fasab handbook, version 20 06/21 concepts 2 statement of custodial activities, when appropriate; statement of',
1242:'budgetary resources; statement of program performance measures; accompanying footnotes; required supplemental information pertaining to physical, human, and research and development',
1243:'capital and selected claims on future resources, when appropriate; and other supplemental financial and management information, when appropriate. sffas 7,',
1244:'accounting for revenue and other financing sources, amends the above list to include “statement of financing.” sffas 7 also presents',
1245:'an illustrative statement of financing to amend the displays shown inappendixaof sffac 2. page 2 concepts 2 fasab handbook, version',
1246:'20 06/21 concepts 2 table of contents contents page summary 1 introduction 4 reasons for defining reporting entities 5 structure',
1247:'of the federal government 6 identifying the reporting entities for general purpose financial reporting 9 criteria for including components in',
1248:'a reporting entity 12 other aspects concerning the completeness of the entity 12 need to distinguish between consolidation entities and',
1249:'disclosure entities 13 displaying financial information 14 distinguishing basic information, rsi, and oai 21 recommended content for the recommended displays',
1250:'27 appendix 1a: balance sheet 37 appendix 1b: statement of net costs 39 appendix 1c: statement of changes in net',
1251:'position 40 appendix 1d: statement of custodial activities 41 appendix 1e: statement of budgetary resources 42 appendix 1f: statement of',
1252:'program performance measures 43 appendix 1g: entity and display 44 appendix 2: list of acronyms [seeappendix f: consolidated list of',
1253:'acronyms] page 3 concepts 2 fasab handbook, version 20 06/21 concepts 2 introduction 1. abasic postulate ofaccountingisthataccountinginformationpertainstoentities, i.e., circumscribed legal,',
1254:'administrative, fiduciary, or other organizational structures. another basic postulate is that entities use financial reports to communicate financial and related',
1255:'information about the entity to persons concerned with the entity. 2. the purpose of this statement is to establish concepts',
1256:'regarding what would be encompassed by a federal government entity’s financial report. the statement specifies the types of entities for',
1257:'which there should be financial reports hereinafter called “reporting entities”, establishes an organizational perspective for considering the makeup of each',
1258:'type of reporting entity, identifies types of financial reports for communicating the information for each type of reporting entity, suggests',
1259:'the types of information each type of report would convey, and identifies the process and factors the board may consider',
1260:'in determining whether information should be basic information, required supplementary information rsi, or other accompanying information oai. 3. [paragraph 3',
1261:'was rescinded by sffas 47, reporting entity, paragraph 92. ]1 4. [paragraph 4 was rescinded by sffas 47, reporting entity,',
1262:'paragraph 92.] 5. [paragraph 5 was rescinded by sffas 47, reporting entity, paragraph 92. ]2 6. the concepts, as defined',
1263:'in this statement, are intended primarily for the general purpose financial reporting performed by federal entities. this is the financial',
1264:'reporting that these entities would undertake to help meet the objectives defined in statement of federal financialaccounting concepts sffac no.',
1265:'1, “objectives of federal financial reporting.” these objectives are as follows: budgetary integrity. federal financial reporting should assist in fulfilling',
1266:'the government’s duty to be publicly accountable for monies raised through taxes and other means and for their expenditure in',
1267:'accordance with the appropriations laws that establish the government’s budget for a particular fiscal year and related laws and regulations.',
1268:'operating performance. federal financial reporting should assist report users in evaluating the service efforts, costs, and accomplishments of the reporting',
1269:'entity; the 1[footnote 1 was rescinded by sffas 47, paragraph 92.] 2[footnote 2 was rescinded by sffas 47, paragraph 92.]',
1270:'page 4 concepts 2 fasab handbook, version 20 06/21 concepts 2 manner in which these efforts and accomplishments have been',
1271:'financed; and the management of the entity’s assets and liabilities. stewardship. federal financial reporting should assist report users in assessing',
1272:'the impact on the country of the government’s operations and investments for the period and how, as a result, the',
1273:'government’s and the nation’s financial conditions have changed and may change in the future. systems and control. federal financial reporting',
1274:'should assist report users in understanding whether financial management systems and internal accounting and administrative controls are adequate to ensure',
1275:'proper execution of transactions, safeguard assets, and support performance measurement. 6a. sffac 1 also discusses accountability and users’ information needs',
1276:'as the foundation for the objectives of federal financial reporting. specifically, paragraphs 7172 state “it may be said that ‘accountability’',
1277:'and its corollary, ‘decision usefulness,’ comprise the two fundamental values of governmental accounting and financial reporting. they provide the foundation',
1278:'for the objectives of federal financial reporting. …the assertion of accountability therefore leads to identifying, first, those to whom government',
1279:'is accountable and, second, the information needed to maintain and demonstrate that accountability.” based on the concepts established in sffac',
1280:'1, it is clear that accountability is a fundamental goal of financial reporting to be considered in establishing the boundaries',
1281:'of general purpose federal financial reports. 7. [paragraph 7 was rescinded by sffas 47, reporting entity, paragraph 94.] 8. the',
1282:'entity and display concepts presented in this statement do not preclude the specification of ad hoc or temporary reporting entities',
1283:'to meet special reporting needs of usersof federalagencies’financialinformation. nordotheyprecludea reportingentityfrom preparing special purpose financial reports to meet the specific needs',
1284:'of persons in the reporting entity or in response to requests from persons outside the entity for certain financial information;',
1285:'or from preparing a socalled “popular report,” which provides a simplified, highly readable, easily understandable description of a reporting entity’s',
1286:'finances. these statements would not necessarily purport to be presented in accordance with generally accepted accounting principles. reasons for defining',
1287:'reporting entities 9. the most basic reason for having an explicit understanding of what the reporting entity entails is to',
1288:'ensure that the users of the entity’s financial reports are provided with all the information that is relevant to the',
1289:'reporting entity, subject to cost and time constraints. clearly defining the boundaries of the reporting entity provides the users with',
1290:'a clear page 5 concepts 2 fasab handbook, version 20 06/21 concepts 2 understanding of what the reporting entity encompasses.',
1291:'it helps to establish what information is relevant to the financial statements and what information is not. 10. other reasons',
1292:'for having an explicit understanding of what the reporting entity entails are to: ensureeachreportingentityincludesinformationtosupportaccountabilitybyincluding all relevant organizations—those that are in',
1293:'the budget, owned by the federal government, or controlled by the federal government with risk of loss or expectation of',
1294:'benefit; assist in making comparisons among comparable reporting entities by reducing the possibility of unintended or arbitrary exclusions or inclusions',
1295:'of entities; assist in making comparisons among alternative ways to provide similar services or products; be able to distribute costs',
1296:'properly and fully and to properly attribute the responsibility for assets and liabilities; and facilitate evaluating performance, responsibility, and control,',
1297:'especially where one agency is the provider or recipient of services attributable to or financed by another agency. structure of',
1298:'the federal government 11. thefederalgovernmentisanextremelycomplexorganizationcomposedofmanydifferent components. for accounting and reporting purposes, it may be viewed from at least three perspectives.',
1299:'however, the nature of each type of component and the relationships among the components and perspectives are not always consistent.',
1300:'organization perspective 12. the first type of perspective is the organization perspective. the federal government is composed of organizations that',
1301:'manage resources and are responsible for operations, i.e., delivering services. these include themajor departmentsandindependent agencies, which are generally divided into',
1302:'suborganizations, i.e., smaller organizational units with a wide variety of titles, including bureaus, administrations, agencies, services, and corporations. many of',
1303:'these are further divided into even smaller suborganizations. on the other hand, there are small agencies for which division into',
1304:'smaller units is generally not considered appropriate. page 6 concepts 2 fasab handbook, version 20 06/21 concepts 2 budget perspective',
1305:'13. from another perspective, the government is composed of accounts presented in the budget, hereinafter referred to as budget accounts.',
1306:'budget accounts are composed of expenditure appropriations or fund accounts and receipt including offsetting receipt accounts. the size and scope',
1307:'of these accounts varies according to congressional preference. they can vary from very small accounts, which are useful for constraining',
1308:'management, to very large accounts, which can be used to finance many activities. 14. budget accounts are not the same',
1309:'as treasury accounts. the latter are accounts established in the treasury to, among other purposes, record the appropriations and other',
1310:'budgetaryresourcesprovidedbystatutesandthetransactionsaffectingthoseaccounts. for the most part, budget accounts are aggregations of treasury accounts. also, treasury accounts include deposit accounts as well',
1311:'as budget accounts. 15. nor are budget accounts the same as the uniform ledger accounts established by the u.s. government',
1312:'standard general ledger sgl. sglaccounts record specific homogeneous types of transactions and balances that aggregate to specific classifications on the',
1313:'financial statements. they have been established so that agencies can establish control over their financial transactions and balances, meet the',
1314:'basic financial reporting requirements, and integrate budgetary and financial accounting in the same general ledger. 16. abudgetaccountmaycoincidewithanorganizationoroneor moreofitssuborganizations. other times,',
1315:'several budget accounts need to be aggregated to constitute an organization or suborganization. 17. budget accountsareclassifiedasfederalfunds or trustfunds. anyaccountthatis designated',
1316:'by the laws governing the federal budget as being a trust fund is so classified. federalfundscomprisethe largergroup andincludealltransactionsnot classified bylawas',
1317:'trust funds. three components make up federal funds: the general fund, special funds, and revolving funds. the definition of each',
1318:'of these categories can be found in the omb circular a11 and the gao glossary of terms used in the',
1319:'federal budget process. 18. care must be taken in determining the nature of all trust funds and their relationship to',
1320:'the entity responsible for them. afew trust funds are truly fiduciary in nature. most trust funds included in the budget',
1321:'are not of a fiduciary nature and are used in federal financing in a way that differs from the common',
1322:'understanding of trust funds outside the federal government. in many ways, these trust funds can be similar to revolving or',
1323:'special funds in that their spending is financed by dedicated collections. 19. in customary usage, the term “trust fund” refers',
1324:'to money belonging to one party held “in trust” by another party operating as a fiduciary. the money in a',
1325:'trust fund must be used in page 7 concepts 2 fasab handbook, version 20 06/21 concepts 2 accordance with the',
1326:'trust’s terms, which the trustee cannot unilaterally modify, and is maintained separately and not commingled with the trustee’s own funds.',
1327:'this is not the case for most federal trust funds that are included in the budgetthe fiduciary relationship usually does',
1328:'not exist. the beneficiaries do not own the funds and the terms in the law that created the trust fund',
1329:'can be unilaterally altered by congress. 20. special funds and trust funds, except trust revolving funds, are aggregates of budget',
1330:'accounts. they normally consist of one or more receipt accounts and one or more expenditure accounts. among the trust funds,',
1331:'social insurance programs such as social security and unemployment compensation have the largest amount of funds and federal employee programs',
1332:'such as retirement and health benefits the second largest. together they make up about 90 percent of all trust fund',
1333:'receipts. othertrust fundsinclude excise tax financed programs for highway construction, airports and airway operations, and other public works. like other',
1334:'budget accounts, trust funds are usually the responsibility of a single organization, although sometimes they are the responsibility of more',
1335:'than one organization. 21. budget accounts are also categorized, as mandated by law and defined by omb, into functions and',
1336:'subfunctions that represent national needs of continuing national importance and substantial expenditures of resources. examples of functions are national defense',
1337:'and health. program perspective 22. fromathirdperspective,thegovernmentiscomposedof programs and activities, i.e., the services the organizations provide and the specific lines of',
1338:'work they perform. each program and activity is responsible for producing certain outputs in order to achieve desired outcomes. 23.',
1339:'there is no firm definition for the term “program;” it varies in the eye of the beholder. for example, the',
1340:'highway program could relate to the entire federal highway program, the program to build interstate highways in contrast to city',
1341:'streets, secondary roads, etc., or a program to build a highway between two specific points. moreover, in accordance with the',
1342:'sequesterprovisionsof the balanced budget and emergency deficit controlact of 1985, as amended, the house and senateappropriations subcommittees annually define, in',
1343:'the committee reports, the meaning of “programs, projects, andactivities” as they relate to each of theappropriationsacts. 24. the term “program”',
1344:'is also often used interchangeably with the terms “function” and “subfunction” see paragraph 21. generally, however, theterm “function” would be',
1345:'used onlyfor the functions defined in the budget. otherwise, the term “program” would be used. page 8 concepts 2 fasab',
1346:'handbook, version 20 06/21 concepts 2 intertwining of the perspectives 25. the programs are administered by the organizations and financed',
1347:'by the budget accounts. in a fewinstances,there isa onetoonerelationship among the threeperspectives.asingle budget account finances a single program and organization.',
1348:'thus, the program is carried out only by the single organization and the organization performs only one program. 26. however,',
1349:'most programs are financed by more than one budget account, some of which might not be under the control of',
1350:'the organizational unit administering the program. some programs are even administered by more than one organization. likewise, a single organization',
1351:'or budget account could be responsible for several programs. in some instances, a program could also be considered an organizational',
1352:'unit, e.g., the center for disease control and prevention. 27. furthermore,someofthesupportnecessarytoperformaprogramisfrequentlyprovidedby other organizations and/or financed by other budget accounts. examples',
1353:'are the computer support for a program that is obtained from a central unit within the department, or retirement health',
1354:'costs for a program’s current and former employees. 28. this complex situation is the result of the evolution of federal',
1355:'organizations, programs, and budgetary structures over many years. as federal missions and programs have expanded and changed, new departments have',
1356:'been created, new organizations have been added to existing departments, and new duties have been assigned to existing organizations on',
1357:'the basis of various considerations. similarly, the budget structure has evolved in response to theneedsof thecongress;itscommitteesand subcommittees; andvariousinitiativesbythe president, program',
1358:'managers, and interest groups. identifying the reporting entities for general purpose financial reporting 29. as stated, reporting entities are entities',
1359:'that issue general purpose financial statements to communicate financial and related information about the entity.2.1 for any entity to be',
1360:'a reporting entity, as defined by this statement of federal financialaccounting concepts, it would need to meet all of the',
1361:'following criteria. 2.1theoffice of managementandbudget specifiestheform and content of agencyfinancial statements, pursuant toits authority under the chief financial officersact of',
1362:'1990, as amended title 31, u.s. code, section 3515d through issuance of bulletins and circulars. omb intends to base form',
1363:'and content on the concepts contained in this statement. any uncertainty as to what to consider as a reporting entity',
1364:'would beresolved by omb in consultation with the appropriate congressional committees. page 9 concepts 2 fasab handbook, version 20 06/21',
1365:'concepts 2 thereisamanagementresponsibleforcontrollinganddeployingresources,producing outputs and outcomes, executing the budget or a portion thereof assuming that the entity is included in',
1366:'the budget, and held accountable for the entity’s performance. the entity’s scope is such that its financial statements would provide',
1367:'a meaningful representation of operations and financial condition. there are likely to be users of the financial statements who are',
1368:'interested in and could use the information in the statements to help them make resource allocation and other decisions and',
1369:'hold the entity accountable for its deployment and use of resources. 30. budget accounts, in and of themselves, do not',
1370:'meet the criteria in the preceding paragraph and, therefore, would not be considered a reporting entity for the purposes of',
1371:'issuing general purpose financial statements. also, the size and scope of the budget accounts across all government agencies lack sufficient',
1372:'consistency for them to be universally considered as the reporting entity. similarly, programs generally do not meet the criteria in',
1373:'paragraph 29 and, therefore, would not be a considered a reporting entity that prepares general purpose financial statements. 31. on',
1374:'the other hand, organizations, and particularly larger organizations, meet the criteria in paragraph 29. while the occasional overlap of programs',
1375:'and budget accounts among more than one organizational unit could complicate financial reporting, the association of data with the responsibility',
1376:'centers, revenue centers, profit centers, cost centers, etc. which managers typically use for organizing and operating permit the following: aggregating',
1377:'information for not only the organization and suborganizations, but also for one or more of the programsperformed bythe organization, and',
1378:'one or more of the budget accounts for which the organization is responsible, and the subsequent arraying of the information',
1379:'not only by organization, but also by sub organization, program, and/or budget accounts. 32. this approach to defining the appropriate',
1380:'reporting entities in the federal government supports establishment of accountability in the organizations and suborganizations while still enabling them to',
1381:'provide information pertaining to their programs. 33. although a reporting entity might not control all the budget accounts used to',
1382:'finance one or moreoftheprogramsitadministers, anyrevenuesattributable toorcostsincurredonbehalf of the programs it administers should be associated with that reporting entity. this notion',
1383:'holds true regardless of whether the reporting entity maintains personnel on a payroll. 34. the departments and major independent agencies',
1384:'are organizational units and therefore would be the primary reporting entities. however, in many instances, financial statements that present aggregations',
1385:'of information into suborganization entities, i.e., bureaus, administrations, or agencies, may be more useful than statements that present only page',
1386:'10 concepts 2 fasab handbook, version 20 06/21 concepts 2 aggregations into organizational entities. the former can provide a better',
1387:'understanding of the financial results and status of the many individual suborganizations and programs constituting a department or major independent',
1388:'agency. they can reveal instances where programs are carried out by several suborganizations within the department or major independent agency.',
1389:'35. similar to other budget accounts, trust funds, special funds, and revolving funds are usually administered by a single organization.',
1390:'for financial reporting purposes, the organization would be the reporting entity; the trust fund or revolving fund would be a',
1391:'component of the organization that administers the fund in the same manner that a suborganization or other type of budget',
1392:'account is a component of the organization. this would not preclude separate reporting for the trust fund, special fund, or',
1393:'revolving fund by the managing organization, nor would it preclude disclosure of trust fund, special fund, or revolving fund information',
1394:'within the organization’s report when there is sufficient interest.3 36. likewise, some programs are coterminous, i.e., share the same boundaries,',
1395:'with an organization or suborganization, while other programs—such as student loan programs— are the component for which resources are deployed,',
1396:'are responsible for achieving objectives, and/or are of great interest to outsiders. in both instances, the financial operations and results',
1397:'of the program might warrant highlighting or even separate reporting by the organization or suborganization which manages the program. 37.',
1398:'financial statements for organizationallybased reporting entities may be audited and issued to external parties, unaudited and used for internal management',
1399:'purposes, or, perhaps to bemore relevant and meaningful, combined with financial statementsfromother organizationallybased reporting entities. 38. the ultimate aggregation of',
1400:'organizations is into the federal government which, in reality, is the only independent economic entity. the federal government encompasses all',
1401:'of the resources and responsibilities existing within the component reporting entities. the aggregation includes organizations for which the federal government',
1402:'is accountable as wellasotherorganizationsforwhichthe natureandsignificanceof theirrelationshipwiththe 3for some trust funds, the collection of the revenues is performed by an organizational',
1403:'entity acting in a custodial capacity thatdiffers from theorganizational entity that administers the trust fund. in those instances, the organizational',
1404:'entity that collects the revenues would be responsible for reporting only the collection and subsequent disposition of the funds. the',
1405:'organizational entity responsible for carrying out the programs financed by a trust fund will report all assets, liabilities, revenues, and',
1406:'expense of the fund, notwithstanding the fact that another entity has custodial responsibility for the assets. in the case of',
1407:'multiple responsible entities, if the separate portions of the program can be clearly identified with a responsible component entity, then',
1408:'each component entity should report its portion in accordance with the requirements of sffas 27, identifying and reporting funds from',
1409:'dedicated collections. if separate portions cannot be identified, the component entity with program management responsibility should report the fund. page',
1410:'11 concepts 2 fasab handbook, version 20 06/21 concepts 2 federal government are such that their exclusion would cause the',
1411:'federal governments financial statements to be misleading or incomplete. criteria for including components inareporting entity 39. [paragraph 39 was rescinded',
1412:'by sffas 47, reporting entity, paragraph 99.] 40. [paragraph 40 was rescinded by sffas 47, reporting entity, paragraph 99.] 41.',
1413:'[paragraph 41 was rescinded by sffas 47, reporting entity, paragraph 99.] 42. [paragraph 42 was rescinded by sffas 47, reporting',
1414:'entity, paragraph 99.] 43. [paragraph 43 was rescinded by sffas 47, reporting entity, paragraph 99.] 44. [paragraph 44 was rescinded',
1415:'by sffas 47, reporting entity, paragraph 99.] 45. [paragraph 45 was rescinded by sffas 47, reporting entity, paragraph 99.] 46.',
1416:'[paragraph 46 was rescinded by sffas 47, reporting entity, paragraph 99. ]4 47. [paragraph 47 was rescinded by sffas 47,',
1417:'reporting entity, paragraph 99.] 48. [paragraph 48 was rescinded by sffas 47, reporting entity, paragraph 99.] 49. [paragraph 49 was',
1418:'rescinded by sffas 47, reporting entity, paragraph 99. ]5 50. [paragraph 50 was rescinded by sffas 47, reporting entity, paragraph',
1419:'99.] otheraspects concerning completeness of the component reporting entity 51. identifying the organizations to include in the reporting entity is',
1420:'one aspect of ensuring that the users of a reporting entitys financial reports are provided with all the information 4[footnote',
1421:'4 was rescinded by sffas 47, paragraph 99.] 5[footnote 5 was rescinded by sffas 47, paragraph 99.] page 12 concepts',
1422:'2 fasab handbook, version 20 06/21 concepts 2 relevant to the reporting entity. however, because the only independent economic entity',
1423:'is the entire federal government, financial resources or free services are often provided from one component in the government to',
1424:'another component without a quid pro quo. for example, a portion of the retirement costs of federal employees is reported',
1425:'by the office of personnel management rather than the organizational entities employing the persons. thus, within parameters more appropriately established',
1426:'in accounting standards, it is important to ensure that the reporting entitys financial reports include amounts that are attributable to',
1427:'the reporting entitys activities, even though they are recorded elsewhere. this is particularly important for costs associated with the use',
1428:'of human resources; personnel services are such a major part of most government activities. it is also important for the',
1429:'costs of services provided by other reporting entities, such as computer services provided by another unit. 52. [paragraph 52 was',
1430:'rescinded by sffas 47, reporting entity, paragraph 102. ]6 53. [paragraph 53 was rescinded by sffas 47, reporting entity, paragraph',
1431:'102. ]7 need to distinguish between consolidation entities and disclosure entities 53a.the federal government is a large and complex organization.',
1432:'in order to fulfill public policy objectives, the federal government may use both consolidation entities such as departments and agencies',
1433:'and organizations that are distinct from consolidation entities to fulfill public policy objectives such as financially independent organizations. these distinct',
1434:'organizations are referred to collectively as disclosure entities. 53b. disclosure entities may maintain a separate legal identity, have a governance',
1435:'structure designed to insulate the organization from political influence, and/or be granted relative financial independence. despite disclosure entities relative operational',
1436:'and financial independence, accountability for all organizations owned or controlled by the federal government rests with the congress and/or the',
1437:'president. so, both consolidation entities and disclosure entities should be included in financial reports to provide accountability. 53c. it may',
1438:'be difficult to provide accountability, by meeting financial reporting objectives, through consolidated financial statements because they blur the distinction between',
1439:'6[footnote 6 was rescinded by sffas 47, paragraph 102.] 7[footnote 7 was rescinded by sffas 47, paragraph 102.] page 13',
1440:'concepts 2 fasab handbook, version 20 06/21 concepts 2 consolidation entities and disclosure entities. consolidated financial statements may obscure the',
1441:'fact that resources and resource allocation decisions for disclosure entities are more independent than similar decisions for consolidation entities. while',
1442:'consolidation entities are financed by taxes and other nonexchange revenue and governed by elected officials, disclosure entities often do not',
1443:'rely on taxes and other nonexchange revenue for financing or elected officials for spending authority. for example, a singlecolumn presentation',
1444:'of information for all organizations likely would create a risk of incorrect inferences. such inferences may include the amount of',
1445:'assets and revenues available for consolidation entities to use in general government activities, and the extent to which taxpayers stand',
1446:'ready to liquidate liabilities and meet expenses of disclosure entities. 53d. maintaining a distinction between consolidation entities and disclosure entities',
1447:'may more effectively meet federal financial reporting objectives. such a distinction may be maintained through discrete presentation of information regarding',
1448:'disclosure entities. nonetheless, disclosures are not a substitute for consolidation entities recognizing the financial effects of transactions with disclosure entities.',
1449:'53e. consolidated financial statements for only consolidation entities will facilitate an assessment of the financial position of the federal government',
1450:'and the cost of operations financed by taxes and other nonexchange revenue. consolidation aggregates the individual financial statements of organizations',
1451:'that constitute a reporting entity and results in presentation of information for a single economic entity representing consolidated activities supported',
1452:'by taxes and other nonexchange revenue, resources, and obligations. consolidation entities are considered federal entities and should apply gaap as',
1453:'defined in sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the financial',
1454:'accounting standards board.thefollowing sections discuss display of information in consolidation entity financial reports. displaying financial information 54. financial information is',
1455:'typically provided by or for a reporting entity through financial statements. financial statements represent the principal means of communicating accounting',
1456:'information about an entity’s resources, obligations, revenues, costs, etc. to those outside the entity. however, financial statements, and particularly those',
1457:'prepared for governmental and other notforprofit organizations, may also contain information from sourcesotherthanaccountingrecords.also, management maycommunicateinformation to those outside the entity',
1458:'by means of financial reporting other than financial statements, either because the information is required to be disclosed by statute,',
1459:'regulation, or custom; or because management believes the information would be useful to those outside the entity and discloses it',
1460:'voluntarily. page 14 concepts 2 fasab handbook, version 20 06/21 concepts 2 55a.to enhance confidence in the reliability of information',
1461:'presented in financial statements, the statements are often, but not always audited by inspectors general, independent accounting firms, or the',
1462:'governmentaccountability office. in developing accounting standards, the board considers whether information should be categorized as basic information, required supplementary information',
1463:'rsi, or other accompanying information oai. distinguishing these categories is important because each category is subject to different procedures and',
1464:'reporting requirements under generally accepted government auditing standards gagas. when an auditor is engaged to audit an entitys financial statements,',
1465:'basic information as a whole is subject to testing for fair presentation in conformity with gaap. however, rsi and oai',
1466:'are unaudited, but subject to certain proceduresspecifiedbygagasforrsiandoai,respectively. toassistusersinanalyzing the different types of information within financial reports, these differences must be',
1467:'conveyed and can be accomplished in a variety of ways. the traditional approach is to separate the categories of information.',
1468:'however, the categories may be commingled if the rsi andoaiare clearlylabeledas unaudited ordistinguishedinamanner that informsthe reader of the level of',
1469:'assurance provided. 55b.classification of the information as basic information, rsi, or oai does not constrain the form of presentation. for',
1470:'example, financial statements may be presented as basic financial statements, rsi, or oai. information can be required or encouraged to',
1471:'be in the form of financial statements, narrative, graphs, or tables. to clearly communicate the intended status, the board must',
1472:'specify whether the information is to be considered basic information, rsi, or oai. selecting a category may involve a process',
1473:'which is described in paragraphs 73ato 73g. 56. in the federal government, there are several types of reporting entities organizations,',
1474:'suborganizations, programs, and the government as a whole and several financial reporting objectives budgetary integrity, operating performance, stewardship, and systems',
1475:'and control. each of the reporting objectives can be met to a certain degree by the statements prepared by or',
1476:'for one type of reporting entity and to a greater or lesser degree by the statements prepared by or for',
1477:'the other types of reporting entities. for example, the objective of budgetary integrity can be best met with the program',
1478:'and financing schedules prepared for individual budget accounts. the objective of operating performance can be best met with financial statements',
1479:'from organizations/suborganizations and programs although financial statements at this level can also help readers evaluate the reporting entity’s budgetary integrity.',
1480:'the objective of stewardship can be best met with a financial statement for the entire government. meeting the financial reporting',
1481:'objectives in their totality requires financial statements from all of the types of reporting entities. page 15 concepts 2 fasab',
1482:'handbook, version 20 06/21 concepts 2 stock statements 57. thefinancial reportingobjectivesarealsometwithdifferenttypesoffinancialstatements. a financial statement that presents financial information for an',
1483:'entity as of a particular point in time, however the information is measured, i.e., budgetary, cash, or accrual, is often',
1484:'characterized as a stock statement. an example of a stock statement is a balance sheet. it presents the total balances',
1485:'of assets, liabilities, and net position of an organization as of a specific time. flow statements 58. another type of',
1486:'financial statement provides information on an entity’s flows of revenues, receipts, expenditures, expenses, gains, losses, and/or other changes of the',
1487:'entity’s net resources during a period, however they are measured, i.e., budgetary, cash, or accrual. this type of financial statement',
1488:'is frequently characterized as a flow statement. the traditional flowstatement isa statement of operationsand changesin net positionissued by private sector,',
1489:'profit seeking organizations. it presents the results of an entity’s operations for a reporting period, including the changes in the',
1490:'entity’s net position from the end of the prior reporting period. this type of statement is particularly useful for private',
1491:'sector, profit seeking organizations since their objective is to generate earnings and returns on investment. the statement of operations and',
1492:'changes in net position presents the revenues the entity receives, the expenses incurred to generate the revenues, the amount left',
1493:'for the entity’s owners, and the resulting effect on the owners’ equity. 59. thefederalgovernmentandmostoftheotherreportingentitiesinthefederalgovernment are spending entities whose objective is',
1494:'to provide services, some of which are financed by revenues received from the recipients of the service, and some of',
1495:'which, if not allor most of which, are financed by taxes and other unearned revenues.8 thus, the most useful informationaflowstatementcouldpresent',
1496:'isthetotaland netcostsof theservices,i.e.,how much of the services provided by the entity was financed by the taxpayers. this type of statement,',
1497:'which would be a statement of net costs, would support the achievement of federalfinancialreportingobjective2a. objective2astatesthat “federal financial reporting should provide',
1498:'information that helps the reader to determine the costs of providing specific programs and activities and the composition of, and',
1499:'changes, in these costs.” 8the board is currently developing an exposure draft entitled “revenue and other financing sources” which addresses',
1500:'more fully the types of revenues i.e., exchange versus nonexchange and earned versus unearned revenues discussed here. page 16 concepts',
1501:'2 fasab handbook, version 20 06/21 concepts 2 60. asindicated,revenuesprovidedinexchangefortheservices,i.e.,earnedrevenues,arenot the only manner in which a federal government entity finances',
1502:'the services it provides. other sources of financing are the appropriations received from the congress, and such various nonexchange revenues',
1503:'as fines, donations, and transfers from other agencies. therefore, anotherusefulflowstatement wouldbe a statementofchangesin netposition that presents the manner in which',
1504:'the entity’s net costs were financed and the resulting effect on the entity’s net position. this also would be consistent',
1505:'with federal financial reporting objective 2: “federal financial reporting should assist report users in evaluating. . .the manner in which',
1506:'these efforts and accomplishments have been financed ” 61. the collection of the major sources of funds for the appropriations,',
1507:'e.g., taxes, royalty payments, and fines, is the responsibility of just a few reporting entities, especially the internal revenue service,',
1508:'the customs service, and the minerals management service. these entities are functioning in a custodial capacity and are required to',
1509:'turn the taxes or other monies they collect over to the treasury or other organizations. the results of these entities’',
1510:'custodial activities could be reported in a flow statement that provides an understanding of from whom the taxes or other',
1511:'monies were collected and to whom they were distributed. this would be called a statement of custodial activities. 62. for',
1512:'many reporting entities, and particularly those engaged in reimbursable activities, it is useful to have an understanding of the sources',
1513:'and amounts of cash provided to the entity for operating, investing, and financing purposes and the major purposes for which',
1514:'the cash was used. this type of information can be displayed with a statement of cash flows, in accompanying footnotes,',
1515:'or as supplemental financial and management information. budget statement 63. meeting the first objective of sffac no. 1, “objectives of',
1516:'federal financial reporting,” namely the budgetary integrity objective, necessitates that the reader receive assurance that the amounts obligated or spent',
1517:'did not exceed the available budget authority, obligations and outlays were for the purposes intended in the appropriations and authorizing',
1518:'legislation, other legal requirements pertaining to the account have been met, and the amounts are properly classified and accurately reported.',
1519:'64. this information is provided in other reports, but there needs to be auditor involvement to provide assurance as to',
1520:'the reliability of the information. the assurance as to reliability of the information could be accomplished by including a statement',
1521:'of budgetary resources in the reporting entity’s financial statements, recognizing that the statement will likely be page 17 concepts 2',
1522:'fasab handbook, version 20 06/21 concepts 2 subject to audit. the presentationof data could be for the reporting entityasa whole,',
1523:'for the major suborganization units assuming there is congruity among the major suborganization unitsandthe budget accounts, or forthe aggregationsof the',
1524:'major budget accounts, rather than for the individual budget accounts of the entity or other types of entities. violations of',
1525:'budgetary integrity at the account level occurring during the current year could be disclosed on an exception basis. manyviolationsof budgetaryintegritywouldalsobeviolationsof',
1526:'the antideficiencyact. disclosure in the financial statements notwithstanding, these violations would also have to be reported as required by theact.',
1527:'reconciliation statementbudgetaryand financialaccounting 64a.subobjective 1c of the budgetary integrity objective states that information is needed to help the reader to',
1528:'determine “how information on the use of budgetary resources relates to information on the costs of program operations and whether',
1529:'information on the status of budgetary resources is consistent with other accounting information on assets and liabilities.” thisobjectivearisesbecause accrualbasedexpense measuresused',
1530:'in financial statements differ from the obligation and outlaybased measures used in budgetary reporting. 64b.to satisfy this objective, information is',
1531:'needed about the differences between budgetary and financial i.e., proprietary accounting that arise as a result of the different measures.',
1532:'this could be accomplished through a budget and accrual reconciliation bar that reconciles the net budgetary outlays for a federal',
1533:'entity’s programs and operations to the net cost of operating that entity. the data presented could be for the reporting',
1534:'entity as a whole, forthemajorsuborganizationunits, formajorbudgetaccounts,orforaggregationsof budget accounts, rather than for each individual budget account of the entity. performance measures',
1535:'statement 65. the second objective of federal financial reporting states, in part, that federal financial reportingshouldprovideinformationthathelpsreadersof thefinancialreportsdeterminethe efforts and accomplishments',
1536:'associated with federal programs and the changes over time and in relation to costs. this suggests that a statement of',
1537:'program performance measures,9 i.e., one or more statements presenting service efforts and accomplishments measures for each of a reporting entity’s',
1538:'significant programs, is necessary. 9the board does not consider the statement of program performance measures to be a basic financial',
1539:'statement. page 18 concepts 2 fasab handbook, version 20 06/21 concepts 2 66. the federal government is increasing its interest',
1540:'in measuring and reporting program performance, as evidenced by the enactment of the government performance and results act and increasing',
1541:'emphasis during budget reviews on program performance. moreover, the ability to seek and obtain maximum return from increasingly limited resources',
1542:'can be enhanced by an understanding of the results of the programs for which budget resources have been expended. in',
1543:'the final analysis, the objective of the federal government is to provide services, in contrast to the objective of private',
1544:'sector organizations, which is to earn profits and enhance the return on investment, both of which are monetary objectives. all',
1545:'of these factors suggest that the statement of program performance measures is not only an appropriate statement, but likely to',
1546:'be the most important statement for those persons interested in how a federal entity is using its resources. 67. for',
1547:'a statement of program performance measures prepared by an organizationlevel reporting entity, the outputs and outcomes would be related to',
1548:'the performance of the entity itself and its own programs, e.g., clients vaccinated, illnesses prevented. for the governmentwide report, broader',
1549:'measuresof outcomes and impacts that depended on the joint efforts of several reporting entities would be appropriate, e.g., state of',
1550:'the economy, national security, environment, personal health, social welfare, although some narrower outcome measures might also be included. other information',
1551:'68. financial information is also conveyed with accompanying footnotes, which are an integral part of the financial statements. footnotes typically',
1552:'provide additional disclosures that are necessary to make the financial statements more informative and not misleading. 69. it is also',
1553:'necessary to convey more general information about the reporting entity. this could entail such matters as a brief description of',
1554:'the reporting entity; its missions, goals, and objectives; the programs it provides and the major recipients for the program; its',
1555:'major sources of funding; the manner in which the reporting entity is organized; its personnel resources; highlights of the entity’s',
1556:'accomplishments during the reporting period; selected measures of program performance abstracted from the statement of program performance; problems encountered or',
1557:'targets missed and the reasons why; financial highlights and trends; expected problems and challenges; future targets the entity is setting',
1558:'for itself; and any other information the agency head or cfo considers necessary to fully and fairly provide an understanding',
1559:'of the entity’s financial affairs. this type of information is typically presented in what hascome to be known as a',
1560:'management’sdiscussion and analysis or overview of the reporting entity. 70. the third objective of federal financial reporting is that it',
1561:'“should assist report users in assessingtheimpact onthe countryof the government’soperationsandinvestmentsforthe period and how, as a result, the government’s and the',
1562:'nation’s financial conditions have page 19 concepts 2 fasab handbook, version 20 06/21 concepts 2 changed and may change in',
1563:'the future.10 this objective requires a reporting of information concerning investmentsineducation,training, research, anddevelopment andcertain types of property, plant, and equipment',
1564:'that can affect thenation’sfuture wealth, and to the claims on future budgetary resources resulting from prior decisions and actions. 71.',
1565:'the information pertaining to the aforementioned investments, certain types of property, plant, and equipment,11 and claims on future budgetary resources',
1566:'is maintained in part in the entities’ general ledgers and, in part, external to the general ledgers. some of the',
1567:'informationisrecordedin unitsotherthandollars,e.g.,acres, millionsof square feet. finally, some of the information is not subject to the types of controls present in',
1568:'a system of double entry recordkeeping. accordingly, a more suitable way to fulfill the third reporting objective would be to',
1569:'display the appropriate information as required supplemental information rather than attempting to include it in financial statements.12 72. [rescinded per',
1570:'sffac 6.] 73. the fourth objective, systems and controls, is fulfilled, in part, by the act of preparing the financial',
1571:'statements. other ways the fourth objective could be fulfilled through the audited financial reporting process is by a management assertion',
1572:'that would accompany the financial statements and/or an auditor’s attestation on the financial statements. the management assertion would be an',
1573:'acknowledgment of itsresponsibilityforthe accuracyof the information in the financial statements, the completeness and fairness of the presentation of the information,',
1574:'the accuracy of the information in all material respects, and the reporting of the information in a manner designed to',
1575:'fairly present financial position and results of operations. the assertion could also include a statement regarding the adequacy of the',
1576:'entity’s systems and controls, accompanied by the auditor’s concurrence with the assertion. 10acomplete discussion of the third objective for federal',
1577:'financial reporting, which is called the “stewardship objective,” is contained in paragraphs 134 to 145 of statement of federal financialaccounting',
1578:'concepts no. 1, “objectives of federal financial reporting.” 11[text rescinded per sffac 6.] 12[text rescinded per sffac 6.] page 20',
1579:'concepts 2 fasab handbook, version 20 06/21 concepts 2 distinguishing basic information, rsi, and oai determining required information 73a.selecting a',
1580:'category for communicating information may involve a process that begins with determining what information should be required. required information is',
1581:'information that consists of basic information and rsi. an item of information is a candidate for required information if it',
1582:'is consistent with the objectives of federal financial reporting and meets certain qualitative characteristics and costbenefit considerations. the board developed',
1583:'these factors earlier in the conceptual framework. sffac 1 identifies the reporting objectives paragraphs 112 to 150 and the qualitative',
1584:'characteristics paragraphs 157 to 164. it also discusses cost versus benefit considerations paragraphs 151 to 155. determining basic information versus',
1585:'rsi 73b.information that meets the criteria for required information is a candidate for basic information or rsi. basic information is',
1586:'information which is essential for the financial statements and notes to be presented in conformity with gaap. the fasab standards',
1587:'are the core12.1 of gaap and auditors may be engaged to express an opinion as to whether basic financial statements',
1588:'and notes are presented in conformity with those criteria. 73c.rsi is information that a body that establishes gaap requires to',
1589:'accompany basic information. it may be experimental in nature to permit the communication of information that is relevant and important',
1590:'to the reporting objectives while more experience is gained through resolution of accounting issues.also, the information may be expressed in',
1591:'other than financial measures or may not be subject to reliable estimation. as issues are resolved, the information may be',
1592:'considered basic at some point in the future. 73d.the board specifies what information should be presented as basic information and',
1593:'what information should be presented as rsi. assessing whether required information is a candidate for basic information or rsi may',
1594:'involve the boards consideration of a range of factors which are listed in table 1: factors to consider in distinguishing',
1595:'basic information from rsi on page 107.the factors are not listed in a particular order and some may convey similar',
1596:'ideas. in addition, different board members may assign different weight to each factor. thus, the factors provide a general framework',
1597:'for each board members judgment and are not considered to present a decision tree, hierarchy, or precise algorithm for classifying',
1598:'items. 12.1the first and highest level of the gaap hierarchy comprises standards and interpretations. lower level gaap may not conflict',
1599:'with standards or interpretations. page 21 concepts 2 fasab handbook, version 20 06/21 concepts 2 73e.forexample,membersmayconsidertherelevanceoftheinformationtofairpresentation. if the information has',
1600:'a high relevance to fair presentation, it may be a candidate for basic information communicated by financial statements and notes',
1601:'to the financial statements. the financial statements and notes could not be considered fairly presented if the information is missing',
1602:'or materially misstated. the rationales for some of the other factors that members may consider are: a. use of various',
1603:'types of financial data or financial transaction data. members may deliberate the nature of the data used or the type',
1604:'of system used to process the information. financial data used or data derived from a system for processing financial transactions,',
1605:'may be more likely to be considered basic information. b. level of importance the board wishes to be communicated in',
1606:'the financial report or the auditors report. in addition to the nature of the information, the board may take into',
1607:'account the effect of categorizing an item as basic information or rsi in the financial report and what the auditors',
1608:'report would communicate if the item is missing or materially misstated. by designating an item as basic information rather than',
1609:'rsi, the board can have some bearing on the level of importance conveyed in the financial report and auditors report.',
1610:'in other words, users may pay less attention to items categorized as supplementary in the financial report. conversely, they may',
1611:'be more concerned with the auditors conclusions regarding the fair presentation of the financial statements. hence,themoreimportanttheitem,themorelikelyitwouldbeapartofthe financial statements and notes',
1612:'prepared in conformity with gaap, such thatif the itemis missing or materially misstated, the matter would be conveyed in the',
1613:'auditors report on the fair presentation of the financial statements. c. theextenttowhichtheinformationinterestsawideaudienceratherthanspecialists. if an item of information is of great',
1614:'interest to users, the information may be a candidate for basic information. conversely, if the item is primarily of interest',
1615:'to subject matter specialists, the information may accompany the basic information as rsi. d. extenttowhichtherearenotalternativesourcesofreliableinformation. iforganizations routinely publish an item',
1616:'of information that is scrutinized by independent advisors, it may be more likely to be considered rsi than basic information.',
1617:'e. agreement on criteria that permit comparable and consistent reporting. if there is a lack of specific criteria for measuring',
1618:'an item, preparers may have great discretion in developing their calculations and auditors may lack criteria necessary for the expression',
1619:'of an opinion. the item of information may be a candidate for rsi. f. experience among users, preparers, and auditors',
1620:'with the information. the board may consider the views of expert users, preparers, and auditors in developing measurement criteria for',
1621:'basic information. if the level of experience regarding an item is low, input on page 22 concepts 2 fasab handbook,',
1622:'version 20 06/21 concepts 2 specific criteria may not be available. also, when there is not sufficient experience to develop',
1623:'measurementcriteria, auditorsmayhaveconcernsaboutexpressinganopinion on the information. they may express qualifications or include explanations in their report. categorizing the information as rsi',
1624:'may encourage reporting while more experience is gained and criteria developed. g. benefit/cost ratio of using resources to compile the',
1625:'information as well as ensure accuracy. the board may consider the benefit and cost associated with producing and auditing the',
1626:'item of information. oai 73f. if an item of information doesnot meet the criteria forbasic information or rsi, it becomesa',
1627:'candidate for oai. oai is information that accompanies basic information and rsi, but is not required by a body that',
1628:'establishes gaap. some entities may desire to report information to supplement required information and enhance a users understanding of the',
1629:'entitys operations or financial condition. this may include, but is not limited to, information on delivery times, turnover, and wastage',
1630:'of inventories; expected replacement of physical capital; and delinquency, aging, and default rates for loan portfolios. in addition, entities report',
1631:'information not required by a body that establishes gaap, but required by laws or administrative directives. the laws or administrative',
1632:'directives may require the information to be audited and may require it to accompany basic information and rsi. however, this',
1633:'information is also considered oai. 73g.although the fasab does not require oai to be presented, the fasab may at times',
1634:'encourage voluntary reporting of items to help in the development of information that may enhance overall federal financial reporting. for',
1635:'example, the fasab may consider an item to be relevant to entity operations but, for the moment, does not meet',
1636:'other criteria for required information. page 23 concepts 2 fasab handbook, version 20 06/21 concepts 2 table 1: factors to',
1637:'consider in distinguishing basic information from rsi factors to consider in distinguishing basic information from rsi low implies rsi factor',
1638:'high implies basic relevance to fair presentation connection with elements of financial reporting use of various types of financial data',
1639:'or financial transaction data level of importance the board wishes to be communicated in the financial report significance, relevance, or',
1640:'importance of the item in light of objectives level of importance the board wishes to be communicated in the auditors',
1641:'report relevance to measuring financial condition or changes in financial condition extent to which the information interests a wide audience',
1642:'rather than specialists extent to which there are not alternative sources of reliable information agreement on criteria that permit comparable',
1643:'and consistent reporting experience among users, preparers, and auditors with the information benefit/cost ratio of using resources to compile the',
1644:'information as well as ensure accuracy connection with basic financial statements reliability and/or precision possible reliability and/or precision needed as',
1645:'noted in paragraph 73d, the factors are not listed in a particular order and do not represent a hierarchy of',
1646:'factors. financial reporting foran organizational entity 74. meeting the four objectives of federal financial reporting in the most efficient manner',
1647:'suggests that reporting entities issue a financial report that would include the following: management’s discussion and analysis; statement of financial',
1648:'position commonly referred to as balance sheet; statement of net costs; statement of changes in net position; statement of custodial',
1649:'activities, when appropriate; statement of budgetary resources; budget and accrual reconciliation;12.2 12.2omb will provide guidance regarding details of the display',
1650:'for the budget and accrual reconciliation, including whether it should be presented as a basic financial statement or as a',
1651:'schedule in the notes to the basic financial statements. page 24 concepts 2 fasab handbook, version 20 06/21 concepts 2',
1652:'statement of program performance measures;13 accompanying footnotes; required supplementary information; and other accompanying information. 75. with some organizations, and even',
1653:'suborganizations, the activities of one or more programsorothercomponentsareasimportant tothereadersofthefinancialstatementsas are the activities of the entity as a whole. this would',
1654:'be particularly true for a department composed of many bureaus, administrations, agencies, services, etc., and particularly if their programs are',
1655:'dissimilar. in those instances, consideration should be given to the preferability of reporting the assets, liabilities, revenues, expenses, etc. of',
1656:'both the significant components individually and of the entity in its entirety. hence, larger organizations, and particularly those composed of',
1657:'many bureaus, administrations, agencies, etc., would prepare not only consolidated financial statements for the organizational entity, but also provideinformation pertaining',
1658:'to their individual significant components.14 the information for the individual components could be provided with separate columns in consolidating financial',
1659:'statements15 with the information for the less significant components, and possibly the entity’s management component, aggregated into a single separate',
1660:'column, in separate financial statements for each significant component, or in the accompanying footnotes. the significant components can be suborganizations',
1661:'or programs. if they are suborganizations, information regarding programs should be provided in some manner. 76. furthermore, there are frequently',
1662:'instances when one or more of the suborganizations conduct a very visible or critical activity and there is a high',
1663:'level of public interest, e.g., tax collection activity; maintains large and complex fund flow activity; has earmarked tax activity; or',
1664:'its financial viability is of special concern to the executive branch or the congress, e.g., deposit insurance funds. in those',
1665:'situations, it may be desirable for the sub organization to prepare and issue a separate financial statement that is consistent',
1666:'with the 13the statement of program performance measures is not a basic financial statement. nevertheless, it is an important component',
1667:'of the financial reports. 14such components are similar to responsibility segments as referred to in sffas 4, managerial cost accounting',
1668:'concepts and standards, par. 7881. responsibility segments are used to accumulate costs and outputs for major lines of activity. 15aconsolidatedfinancial',
1669:'statement presentsthetransactionsandbalances for areportingentity’scomponentsin a single column. in arriving at the consolidated amounts, the transactions and balances among the entities',
1670:'are eliminated. a consolidating financial statement presents the information for the reporting entity’s components as well as the consolidated amounts',
1671:'in individual columns. the elimination of the interentity transactions and balances needed to arrive at the consolidated amounts might or',
1672:'might not be presented in a separate column. page 25 concepts 2 fasab handbook, version 20 06/21 concepts 2 concepts',
1673:'presented in this concepts statement.16 in doing so, it would need to identify the parent entity and describe the suborganization’s',
1674:'relationship to the parent. 77. the components of any reporting entity are likely to conduct transactions with other components in',
1675:'the reporting entity, other federal entities, and persons and organizations outside the federal government. likewise, they are likely to have',
1676:'assets due from and liabilities due to other federal components and entities and to nonfederal persons and organizations. in reporting',
1677:'the transactions and balances of a federal reporting entity in its entirety, it is conceptually desirable, although not always practicable,',
1678:'to eliminate the intra entity transactions and balances.17 78. [paragraph 78 was rescinded by sffas 47, reporting entity, paragraph 105.]',
1679:'financial reporting for the entire government 79. in addition to budgetary integrity, operating performance, and systems and control information, readers',
1680:'of the financial statements for the entire government are likely to be concerned primarilywith whether the government has been a',
1681:'proper steward. thiscan best be achieved with the preparation and issuance of the following: management’s discussion and analysis; statement of',
1682:'financial position commonly referred to as balance sheet; statement of net costs; statement of operations and changes in net position;',
1683:'reconciliation of net operating revenue or cost and unified budget surplus or deficit; statement of changes in cash balance from',
1684:'unified budget and other activities; comparison of budgeted and actual use of resources; statement of program performance measures; accompanying footnotes;',
1685:'required supplementary information; and other accompanying information. 80. the readers should be made aware of whether the financial statements for',
1686:'the entire government exclude any significant entities that are included in the budget or include significant entities that are not',
1687:'included in the budget. 16suborganizations required by statute to prepare and issue a separate financial statement would, by definition, also',
1688:'need to do so. 17[rescinded by sffac 6.] page 26 concepts 2 fasab handbook, version 20 06/21 concepts 2 81.',
1689:'[rescinded by sffac 6.] 82. thefinancialstatementsfortheentiregovernmentcouldalsobeusedtoprovideinformation on presidential initiatives or crosscutting programs that is not available in financial statements for',
1690:'individual organizations or programs. 83. because the government is a complete and integral economic entity, in contrast to the departments',
1691:'and major agencies whose components frequently have nothing in common other than belonging to the same department, it would be',
1692:'appropriate that the financial statement for the entire government be a consolidated financial statement. however, it might also be appropriate',
1693:'to display selected information for the components, funds, etc., either within the consolidated financial statement, in accompanying footnotes, and/or as',
1694:'supplemental information. recommended contents for the recommended displays balance sheet 84. the elements most likely to be presented in the',
1695:'balance sheet of a federal suborganization/organization, program, or the entire government would be as follows: fund balancewith treasury.thisrepresentsthe amountinthe entity’saccountswith',
1696:'the u.s. treasury that is available only for the purposes for which the funds were appropriated. it mayalso include balancesheld',
1697:'bythe entityinthe capacityof a banker or agent for others. however, fund balance with treasury fbwt meeting the definitionof fiduciaryfbwtshould not',
1698:'be recognized onthe balance sheet, but should be disclosed in accordance with the provisions of sffas 31, accounting for fiduciary',
1699:'activities. cash and other monetary assets.cash consistsofcoins,papercurrencyand readily negotiable instruments, such as money orders, checks, and bank drafts on hand',
1700:'or in transit for deposit, amounts on demand deposit with banks or other financial institutions, cash held in imprest funds,',
1701:'and foreign currencies. investments. while federal agencies have the authority to invest, they are typically limited to investing in securities',
1702:'issued by the department of the treasury or other federalentities. there could be instances, however,when an agencyownspropertyor securities issued by',
1703:'state or local governments, private corporations, or government sponsored enterprises, primarily for the purpose of obtaining a monetary return. receivables.',
1704:'these are the amounts that the entity claims for payment from others. receivables can result from such activities as the',
1705:'sales of goods or services, the non page 27 concepts 2 fasab handbook, version 20 06/21 concepts 2 payment of',
1706:'taxes, the making of loans or loans assumed from defaults on previously made loan guarantees, the earning of interest, the',
1707:'advance or prepayment of monies, etc. inventories and related properties. inventories consist of tangible personal property held for sale, in',
1708:'the process of production for sale, or to be consumed in the production of goods for sale or in the',
1709:'provision of services for a fee. related properties that could be owned by a federal program, suborganization or organization, or',
1710:'the entire government include operating materials and supplies, stockpile materials, seized property, forfeited property, and goods held under price support',
1711:'and stabilization programs. property, plant, and equipment. property, plant, and equipment pp&e have been defined in the federal government as',
1712:'tangible items owned by the federal government and having anexpected usefullife of greater than two years. some pp&e are held',
1713:'by the federal government but not used to provide a service. they are in themselvesa service. examplesare heritageassetssuch asmonuments and',
1714:'museum collections; the service is the sense of tradition, understanding, and pride visitors receive visiting these sites. information pertaining to',
1715:'these assets would not necessarily be displayed in the balance sheet, but rather as required supplemental information.18 liabilities. these are',
1716:'the amounts the reporting entity owes to others for goods or services received, progress in contract performance, defaulted guarantees, funds',
1717:'held as deposits etc. because no liability can be paid without an enacted appropriation, some liabilities are funded while others',
1718:'are unfunded. also, because the federal government is a sovereign entity, it can abrogate at any time many of its',
1719:'liabilities arising from other than contracts. this does not, however, eliminate the existence of, and therefore the need to report,',
1720:'liabilities incurred by the reporting entity. net position. net position is the residual difference between assets and liabilities. it is',
1721:'generally composed of unexpended appropriations and the cumulative results of operations. included in the former would be appropriations not yet',
1722:'obligated or expended, including undelivered orders. included in the latter would be the amounts accumulated over the years by the',
1723:'entity from its financing sources less its expenses and losses, which would include donated capital and transfers in the net',
1724:'investment of the government in the reporting entity’s assets; and an amount representing the entity’s liabilities for such things as',
1725:'accrued leave, credit reform subsidies, and actuarial liabilities not covered by available budgetary resources. 18the board issued an exposure draft,',
1726:'accounting for property, plant, and equipment pp&e ed, on february 28, 1995 addressing those items of pp&e that would be',
1727:'reported on the balance sheet. the pp&e ed also proposes definitions for categories of pp&e that would not be reported',
1728:'on the balance sheet. in a separate ed, the board will address other means of reporting on the nonbalance sheet',
1729:'categoriespossibly including separate basic financial statements and required supplemental information. page 28 concepts 2 fasab handbook, version 20 06/21 concepts',
1730:'2 85. assets the reporting entity holds and has the authority to use in its operations should be displayed separately',
1731:'from assets the entity holds but does not have the authority to use. likewise, liabilities for which budgetary authority has',
1732:'been received for liquidating the liabilities should be displayed separately from liabilities for which budget authority has not been received',
1733:'even if the authority is expected. assets and liabilities arising from transactions among federal entities should be displayed separately from',
1734:'assets and liabilities arising from transactions with nonfederal entities. statement of net costs 86. themainpurposeofastatementofnetcostsistoprovideanunderstandingofthenetcosts of each organization and each',
1735:'program that the government supports with taxes and other unearned monies. another important purpose for the statement is to provide',
1736:'gross and net cost information that can be related to the amounts of outputs and outcomes for the programs and/or',
1737:'organization. thus the statement of net costs should present the amounts paid, the consumption of other assets, and the incurrence',
1738:'of liabilities as a result of rendering services, delivering or producing goods, or carrying out other operating activities. 87. thecostscanbeclassifiedinareportingentity’sstatementofnetcostsbysuborganization',
1739:'assuming the reporting entity is an organization, by program, or by object class, or any combination thereof. object class, also',
1740:'referred to as a “natural” classification, represents thenatureor typesof goodsorservicesacquiredwithout regardtothe organizationinvolved or the program for which they were used.',
1741:'reporting of the suborganization incurring the costs and/or the purposes for which the costs were incurred generally provides more useful',
1742:'information than reporting on the types of goods or services acquired. 88. the statement of net costs should also present',
1743:'the revenues earned by each program and organization. the manner in which the earned revenues would be presented would depend',
1744:'on the purpose of the program and the reasons why the revenues are present. 89. some programs are established with',
1745:'generation of revenue as a primary consideration or purpose. one example would be when the goods or services provided by',
1746:'the organization are also available from the private sector and not charging a fee for the goods or services would',
1747:'be unfair competition. another example would be when it is deemed appropriate that the persons or organizations receiving the goods',
1748:'or service pay for the goods or services, usually to be able to ascertain the true cost of the activity',
1749:'using the goods or services, e.g., the defense business operations fund, postal service. still another example is when revenues are',
1750:'imposed to limit the unnecessary consumption of the goods or services. in each of these instances, the revenues earned by',
1751:'the programs should be considered a deduction from the total costs of the programs. page 29 concepts 2 fasab handbook,',
1752:'version 20 06/21 concepts 2 90. with other programs, the revenues are generated from administering an inherently governmental service, which',
1753:'means the revenues are not a primary consideration for the program. rather, the revenues are a means to recover all',
1754:'or most of the costs of administering the program, e.g., the securities and exchange commission. in those instances, the revenues',
1755:'should be considered a deduction from the total costs of the organization, not the program. 91. in still other instances,',
1756:'an organization’s revenues can be generated by providing a specific program, but the revenues are not a primary consideration in',
1757:'the conduct of the program; they are incidental to the purpose of the program, e.g., the sale of maps by',
1758:'the geological survey. in those instances, it would be appropriate to consider the earned revenues as a deduction from the',
1759:'incremental costs that need to be incurred in order to provide the goods or services that generate the incidental revenues,',
1760:'to the extent that the incremental costs are measurable and relevant to decision making. otherwise the revenues should be considered',
1761:'a deduction from the program’s or organization’s total costs. 92. earned revenues that are insignificant in amount can be netted',
1762:'into the costs of the programs with the amounts disclosed in accompanying footnotes, if appropriate. 93. an organization or suborganization',
1763:'could receive different types of revenues for different purposes and/or reasons. each of the revenuesand associated costs would be displayed',
1764:'in accordance with the concepts presented in paragraphs 89 through 92. 94. the costs associated with and displayed for each',
1765:'program should reflect costs that can be directly traced to the program, assigned to the program based on cause and',
1766:'effect, or allocated to the program on a reasonable and consistent basis, consistent with the premise that anycostsreportedfora programshouldbe controllable',
1767:'bythe programtoatleast some degree. those costs that are not directly traceable, assignable, or allocable could be considered program or management',
1768:'support costs that are incurred by the reporting organization or another organization to administer the reporting organization’s or program’s activities.',
1769:'for example, in a reporting entity that provides social services, the program costs would be the cash payments and the',
1770:'salary and other costs, e.g., rent, supplies, directly associated with persons providing counseling to the recipients of the cash payments.',
1771:'the organizational support costs would be the costs of the organizational structure required to administer the organization, i.e., not directly',
1772:'attributable to the programs provided by the organization. 95. organizational and program management costs are necessary costs of operating an',
1773:'organizationand programs. not displaying these costsbecauseof a belief that an allocation for these activities would be eliminated or reduced in',
1774:'order to obtain a reduction of the cost of the entire organization or program is illogical. the alternative concept, which',
1775:'is burying the management costs with the program costs, increases the likelihood that the page 30 concepts 2 fasab handbook,',
1776:'version 20 06/21 concepts 2 management activity will be subject to reductions imposed on the program delivery activities. separately identifying',
1777:'the management costs enables the use of resources for these activities to be justified on their own merit. the costs',
1778:'for managing the organization and/or program can therefore be displayed on the face of the financial statements or in accompanying',
1779:'footnotes, particularly when it would assist in evaluating operating performance and is costeffective. disclosure of what the support costs entail',
1780:'would be appropriate. 96. the total costs displayed in a reporting entity’s financial statements should be the same as the',
1781:'total costs recorded by an organization in its cost accounting system. if, for financial reporting purposes, the organization does not',
1782:'allocate organizational management costs among the programs, the total costs displayed for any one program in the entity’s financial statements',
1783:'could be different than the costs recorded for that program in the cost accounting system. 97. other earned revenues would',
1784:'include revenues not attributable to a specific program. 98. costs and revenues arising from transactions with other federal entities should',
1785:'be displayed separately from transactions with nonfederal entities. 99. the decision as to how to display total program costs, earned',
1786:'revenues, net program costs, and organizational and program management costs should be based, in part, on a considerationofwhat the congress,',
1787:'management, andothersmightwant to knowabout the costs of providing an organization’s programs. statement of changes in net position 100. the appropriate',
1788:'elements for a statement of changes in net position would be as follows: net costs display the amount that had',
1789:'to be financed by other than earned revenues. appropriations used represent the amount of budget authority, including transferred budget authority,',
1790:'used by the organization to finance its operations. nonexchange revenues include dedicated taxes, fines, and other revenues the government is',
1791:'able to obtain due to its sovereign powers. donations are moniesandmaterialsgivenbyprivatepersonsandorganizationstothe government without receiving anything in exchange. transfers in are',
1792:'amounts of cash or other capitalized assets received by one government entity from another government entity without reimbursement. transfers out',
1793:'are amounts of cash or other capitalized assets provided by one government entity to another without reimbursement. page 31 concepts',
1794:'2 fasab handbook, version 20 06/21 concepts 2 imputed financing sources are of two types: amounts equal to the costs',
1795:'that have been incurred by the reporting entity but financed by another entity, e.g., retirement costs; and amounts representing costs',
1796:'that are attributable to the reporting entity’s activities but that do not require a direct outofpocket payment, e.g., the interest',
1797:'costs associated with carrying inventory or investing in physical assets.19 prior period adjustments are corrections of prior period results of',
1798:'operations. increase decrease in unexpended appropriations is the change in appropriated capital, including transferred budgetary resources, that does not affect',
1799:'the net cost of operations but does affect net position. net positionbeginning of the period is the total unexpended appropriations',
1800:'and cumulative results of operations held by the entity at the beginning of the reporting period. net positionend of the',
1801:'period results from adding and netting the various amounts associated with the operations of the entity during the reporting period,',
1802:'including the net positionbeginning of the period and any prior period adjustments. the amount will thus equal the total unexpended',
1803:'appropriations and cumulative results of operations held by the entity at the end of the period. statement of custodialactivities 101.',
1804:'aseparate statement of custodial activities would be appropriate for those entities whose primary mission is collecting taxes or other revenues,',
1805:'particularly sovereign revenues that are intended to finance the entire government’s operations, or at least the programs of other entities,',
1806:'rather than their own activities. the revenues should be characterized by those agencies as custodial revenues. the statement should display',
1807:'the sources and amounts of the collections of custodial revenues, any increases or decreases in amounts collectable but not collected,',
1808:'the disposition of the collections through transfers to other entities, the amounts retained by the collecting entity, and any increase',
1809:'or decrease in the amounts to be transferred. 102. custodial collections do not include deposit funds, i.e., amounts held temporarily',
1810:'by the government e.g., bidders’ earnest money or guarantees for performance or amounts held by the government as an agent',
1811:'for others, e.g., state income taxes withheld from federal employees’ salaries that are to be transferred to the states. these',
1812:'types of collections should be reported in accordance withtheprovisions of sffas31, accounting for fiduciary activities. 19theboardplans toundertake a projecton the',
1813:'interest costassociated with investing in operating assets.at this time, no decision has been made on the recognition by individual entities',
1814:'of these types of costs. page 32 concepts 2 fasab handbook, version 20 06/21 concepts 2 103. organizations that collect',
1815:'custodial revenues that are incidental to their primary mission do notneedto report the collectionsand dispositionoftheserevenuesina separatestatement. the disclosureof the sources',
1816:'andamountsof the collectionsand the amounts distributed to others could be disclosed in accompanying footnotes. statement of budgetary resources 104. the',
1817:'appropriate elements for a statement of budgetary resources prepared for a reporting entity would be as follows: budgetaryresourcesmadeavailable is theamountavailabletoenterintoobligations',
1818:'that will result in immediate or future outlays involving federal government funds. the resources should be relevant to the reporting',
1819:'period. the components of budgetary resourceswould include budget authorityi.e., appropriations, borrowing authority, and contract authority and unobligated balances of multiyear',
1820:'and noyear money remaining from prior reporting periods. budgetary resources would also include reimbursements and other income i.e., spending authority',
1821:'from offsetting collections credited to an appropriation or fund account and adjustments e.g., recoveries of prior year obligations. status of',
1822:'budgetary resources displays the disposition of the budgetary resources made available. it consists of the obligations incurred; the unobligated balances',
1823:'of multiyear and noyear budget authority that are available; and the unobligated balances of oneyear and multiyear lapsed budget authority',
1824:'that are not available, but have been carried forward to be used only to record, adjust, or liquidate obligations chargeable',
1825:'to the appropriation. the total amount displayed for status should be equal to the total amount displayed as being made',
1826:'available. outlays are payments to liquidate obligations, net of offsetting collections. obligations are usually liquidated by means of cash payments',
1827:'currency, checks, or electronic funds transfers, but in certain cases obligations are liquidated and outlays recorded even though no cash',
1828:'is disbursed. it would be appropriate, in displaying outlay information, to tie it to the obligations incurred by also displaying',
1829:'the transfers of obligations and the obligated balances at the beginning and end of the period. 105. budgetary resources, obligations,',
1830:'outlays, and receipts are reported in the treasury’s annual report and monthly treasury statement and in the president’s budget, although',
1831:'not all these publications report all these measures. these documents are usually issued prior to the issuance of financial statements',
1832:'prepared in accordance with generally accepted accounting principles applicable to the federal government. in preparing these statements, significant differences should',
1833:'be noted between amounts reported in the former documents and amounts reported in the subsequently prepared financial statements. such differences',
1834:'should be adjusted in the records of the reporting entity and in the related records page 33 concepts 2 fasab',
1835:'handbook, version 20 06/21 concepts 2 maintained by the central agencies, and the correct amounts reported in the financial statements.',
1836:'it would also be desirable to provide a reconciliation for significant differences appearing in the two types of statements. budget',
1837:'andaccrual reconciliation 105a. the purpose of the reconciliation of net costs to outlays is to explain how budgetary resources outlayed',
1838:'during the period relate to the net cost of operations for the reporting entity. this information should be presented in',
1839:'a way that clarifies the relationship between the outlays reported through budgetary accounting and the accrual basis of financial i.e.,',
1840:'proprietary accounting. by explaining this relationship, the reconciliation provides the information necessary to understand how the budgetary outlays finance the',
1841:'net cost of operations and affect the assets and liabilities of the reporting entity. the appropriate elements for the reconciliation',
1842:'are indicated in the following paragraphs. they provide logical groupings of reconciling items that help the reader move from outlays',
1843:'to net cost of operations. 105b. net cost of operations is from the statement of net cost. 105c. components of',
1844:'net cost that are not part of net outlays are most commonly a the result of allocating assets to expenses',
1845:'over more than one reporting period e.g., depreciation and the writedown of assets due to revaluations, b the temporary timing',
1846:'differences between outlays/receipts and the operating expense/revenue during the period, and c costs financed by other entities imputed interentity costs.',
1847:'105d. components of net outlays that are not part of net cost are primarily amounts providedinthecurrentreportingperiodthat fundcosts incurredinprioryearsand amounts incurredfor',
1848:'goodsorservices that have been capitalizedonthe balancesheete.g., plant, property and equipment acquisition and inventory acquisition. 105e. other temporary timing differences reflect',
1849:'special adjustments e.g., prior period adjustments due to correction of errors. 105f. net outlays is the summation of the above',
1850:'amounts and equals the statement of budgetary resources net outlays amount. 105g. the preparershouldpresent materialamounts separatelyin thereconciliationanddiscuss these in the',
1851:'narrative. the use of “other” captions should be minimized and individually material amounts should not be netted to report an',
1852:'immaterial amount. page 34 concepts 2 fasab handbook, version 20 06/21 concepts 2 statement of program performance measures 106. the',
1853:'statement of program performance measures should include measures for each of the major programs the reporting entity operates. the preferred',
1854:'types of measures are 1 output measures, i.e., the quantity of a service or product provided or the percentage of',
1855:'the target group provided the service or product, and that ideally meets a certain quality requirement; and 2 outcome measures,',
1856:'i.e., the accomplishments or results that occurred because of the servicesoroutcomesprovided. outcome measurescould addresseitherthe ultimate program outcome or intermediate outcomes,',
1857:'e.g., accuracy of, timeliness of, or satisfaction withthe servicesprovided. workload,process, and input measuresshouldbein the minority. explanatory information that helps the',
1858:'readers understand the reported measures, assess the entity’s performance, and evaluate the significance of underlying factors that may have affected',
1859:'the reported performance is appropriate. comparative measures from prior years or similar programs and industry standards are also appropriate. they',
1860:'help to provide a better understanding of the level of the reporting entity’s performance.20 107. the measures selected for reporting',
1861:'should relate to the programs’ purposes and goals. it would be particularly useful to include measures previously included in budget',
1862:'documents and other materials released to the public. it would also be useful to base the selection of measures on',
1863:'discussions with budget examiners, congressional staffs, and other users of the entity’s financial statements. 108. the statement of program performance',
1864:'measures should not be cluttered with trivial measures. measures selected should be considered important by decisionmakers and particularly the resource',
1865:'providers that are likely to use the financial statements. also, relevant measures should be reported, without regard to whether they',
1866:'portray positive or negative performance. themostsignificant measuresshould beextracted forhighlightingin the management’s discussion and analysis. 109. other characteristics to consider for',
1867:'reporting program performance measures are as follows: 20the acceptance of a statement of program performance will increase in relation to',
1868:'the users’ perception of the relevance and reliability of the reported information. these perceptions can be enhanced to the extent',
1869:'there are independent assessments of the appropriateness of the measures, the completeness of the data, the actual occurrence of the',
1870:'reported events, and the values assigned to the data. auditors of federal agency financial statements are currently required by an',
1871:'omb bulletin to evaluate the underlying control structure for program performancemeasures includedwiththe financial statements. the extentto which auditors willbe expected',
1872:'to expand the scope of their involvement with program performance measures to include the aforementioned independent assessments would be specified',
1873:'by omb consistent with government audit standards. page 35 concepts 2 fasab handbook, version 20 06/21 concepts 2 completeness. the',
1874:'measures, in the aggregate, should cover all aspects of the reporting entity’s mission. legitimacy. the measures should be accepted as',
1875:'relevant both inside the reporting entity and by the external stakeholders and others, e.g., the central management agencies, congress, interest',
1876:'groups, the public. understandability. the measures should communicate the performance of the entity in a readily understandable manner to any',
1877:'reasonably informed and interested party. comparability.the measures should provide a frame of reference for assessing, and comparing, if appropriate, the',
1878:'performance of the entity and entities with similar programs for both the immediate period and over time. ability to relate',
1879:'to cost. the measures should be such that a cost can be defined for each unit of output, outcome, input,',
1880:'etc. timeliness. the measures should be available to users of the financial statements before they lose their capacity to be',
1881:'of value in assessing accountability and making decisions. the value of timeliness should not preclude the use of important measures',
1882:'for which results are not immediately available. consistency. the measures should be reported consistently from period to period to allow',
1883:'users to have a basis for comparison and to gain an understanding of the measures being used and their meaning',
1884:'recognizing that the measures should be reviewed regularly and modifications made to reflect changing circumstances. reliability. the information should be',
1885:'derived from systems that produce controlled andverifiabledata, althoughat timesit maybenecessarytorelyon secondarysources of data.21 110. since many federal government programs have',
1886:'counterpart programs at the state and local government level, for those programs, it would also be appropriate to consider the',
1887:'measures states and local governments use to report performance. 111. numerical measures are not the only way to report program',
1888:'performance. in some instances, it may be more meaningful and practicable to report performance with other than numerical measures. 112.',
1889:'example formats for displaying the recommended elements are provided in appendix 1. these formats are illustrative and provided solely to',
1890:'help readers of this document better understand the recommended concepts for displaying financial and related information. in 21the public management',
1891:'committee of the organization for economic cooperation and development, which is comprised of the twenty four democratic nations with advanced',
1892:'market economies, has been studying performance management systems. it has concluded, based on the experiences of countries that have implemented',
1893:'such systems, that performance measures should reflect three important characteristics: validity, continuity, and legitimacy. these characteristics, while intended to guide',
1894:'management systems in their totality, rather than simply inclusion in financial statements, have nonetheless been incorporated into the above characteristics.',
1895:'page 36 concepts 2 fasab handbook, version 20 06/21 concepts 2 exposing proposed standards, the board might portray other formats.',
1896:'the ultimate specification of theformand content for financialstatementsforfederal agenciesisdefined by omb. appendix 1a: balance sheet example financial statement formats balance',
1897:'sheet as of september 30, 19x4 assets suborganizationa suborganizationb suborganizationc total fy 19x4 total fy 19x3 entity assets: fund balance',
1898:'with $xxx $xxx $xxx $xxx $xxx treasury cash and other monetary assets xxx xxx xxx xxx xxx investments: intragovernmental xxx',
1899:'xxx xxx xxx with the public xxx xxx xxx xxx xxx receivables: intragovernmental xxx xxx xxx xxx xxx with the',
1900:'public xxx xxx xxx xxx inventoriesandrelated xxx xxx xxx xxx xxx properties physical assets xxx xxx xxx xxx xxx total',
1901:'entity assets xxx xxx xxx xxx xxx nonentity assets: fund balance with xxx xxx xxx xxx xxx treasury cash xxx',
1902:'xxx xxx xxx xxx receivables: intragovernmental xxx xxx xxx xxx xxx with the public xxx xxx xxx xxx xxx total',
1903:'nonentity xxx xxx xxx xxx xxx assets total assets $xxx $xxx $xxx $xxx $xxx page 37 concepts 2 fasab handbook,',
1904:'version 20 06/21 concepts 2 balance sheet as of september 30, 19x4 liabilities and net position suborganizationa suborganizationb suborganizationc total',
1905:'fy 19x4 total fy 19x3 liabilities liabilities covered bybudgetary resources: intragovernmental liabilities: payables $xxx $xxx $xxx $xxx $xxx governmental liabilities:',
1906:'payables xxx xxx xxx xxx xxx total liabilities covered bybudgetary resources xxx xxx xxx xxx xxx liabilities not covered bybudgetary',
1907:'resources: intragovernmental liabilities: payables xxx xxx xxx xxx xxx governmental liabilities: payables xxx xxx xxx xxx xxx amounts held for',
1908:'others xxx xxx xxx xxx total liabilities not covered by budgetary resources xxx xxx xxx xxx xxx total liabilities xxx',
1909:'xxx xxx xxx xxx net position unexpended appropriations xxx xxx xxx xxx xxx cumulative results of operations xxx xxx xxx',
1910:'xxx xxx total net position xxx xxx xxx xxx xxx total liabilities and net position $xxx $xxx $xxx $xxx $xxx',
1911:'note: the above balance sheet format is for an organization composed of three significant suborganizations. an organization deciding to forego',
1912:'presenting the information pertaining to the suborganizations would provide only the information contained in the last two columns. page 38',
1913:'concepts 2 fasab handbook, version 20 06/21 concepts 2 appendix 1b: statement of net costs example financial statement formats statement',
1914:'of net costs for the year ended september 30, 19x4 suborganizationa suborganizationb suborganizationc total fy 19x4 total fy 19x3 costs:',
1915:'program a: intragovernmental $xxx $$ $ xxx $xxx with the public xxx total xxx less earned revenues xxx xxx net',
1916:'program costs xxx xxx xxx program b: with the public xxx xxx xxx xxx less earned revenues xxx xxx xxx',
1917:'xxx net program costs xxx xxx xxx xxx program c: intragovernmental xxx xxx xxx xxx with the public xxx xxx',
1918:'xxx xxx net program costs xxx xxx xxx xxx program d: costs with the public xxx xxx xxx cost not',
1919:'allocated to programs xxx xxx xxx xxx xxx less other earned revenues xxx xxx xxx net cost of operations $xxx',
1920:'$xxx $xxx $xxx $xxx page 39 concepts 2 fasab handbook, version 20 06/21 concepts 2 appendix 1c: statement of changes',
1921:'in net position example financial statement formats statement of changes in net position for the year ended september 30, 19x4',
1922:'suborganizationa suborganizationb suborganizationc total fy 19x4 total fy 19x3 net cost of operations $xxx $xxx $xxx $xxx $xxx financing sources',
1923:'appropriations used xxx xxx xxx xxx xxx taxes nonexchange revenue xxx xxx xxx xxx xxx donations nonexchange revenue xxx xxx',
1924:'xxx xxx imputed financing xxx xxx xxx xxx xxx transfersin xxx xxx xxx xxx transfersout xxx xxx net results of',
1925:'xxx xxx xxx xxx xxx operations prior period xxx xxx xxx xxx adjustments net change in xxx xxx xxx xxx',
1926:'xxx cumulative results of operations increase decrease in unexpended xxx xxx xxx xxx xxx appropriations change in net position xxx',
1927:'xxx xxx xxx xxx net positionbeginning xxx xxx xxx xxx xxx of period net positionend of period $xxx $xxx $xxx',
1928:'$xxx $xxx note: the above statement of changes in net position format is for an organization comprised of three significant',
1929:'suborganizations. an organization deciding to forego presenting the information pertaining to the suborganizations would provide only the information contained in',
1930:'the last two columns. page 40 concepts 2 fasab handbook, version 20 06/21 concepts 2 appendix 1d: statement of custodialactivities',
1931:'example financial statement formats statement of custodialactivities for the year ended september 30, 19x4 fy 19x4 fy 19x3 collections: incometaxes',
1932:'$xxx $xxx estate and gift taxes xxx excise taxes xxx employment taxes xxx penalties and interest xxx total collections xxx',
1933:'xxx refunds and other payments xxx xxx net collections xxx accrual adjustment xxx xxx total revenues collected xxx disposition of',
1934:'revenues collected: transferred to others: department ofthetreasury xxx department of labor xxx environmentalprotectionagency xxx total transfers xxx retained by the',
1935:'entity xxx increase decrease in amounts to be transferred xxx xxx total disposition of revenues collected xxx net custodial collections',
1936:'$000 $000 page 41 concepts 2 fasab handbook, version 20 06/21 concepts 2 appendix 1e: statement of budgetary resources example',
1937:'financial statement formats statement of budgetary resources for the year ended september 30, 19x4 suborganizationa suborganizationb suborganizationc total fy 19x4',
1938:'total fy 19x3 budgetary resources madeavailable: budget authority $xxx $xxx $xxx $xxx $xxx unobligated balances beginning of period xxx xxx',
1939:'xxx xxx xxx reimbursements and other xxx xxx xxx xxx xxx income adjustments xxx xxx xxx xxx xxx total, budgetary',
1940:'resources made available xxx xxx xxx xxx xxx status of budgetary resources: obligations incurred gross xxx xxx xxx xxx xxx',
1941:'unobligated balancesend of period xxx xxx xxx xxx xxx unobligated balancesnot available xxx xxx xxx xxx xxx total, status of',
1942:'budgetary resources xxx xxx xxx xxx xxx outlays obligations incurred, net xxx xxx xxx xxx xxx obligations balance transferred xxx',
1943:'xxx xxx xxx xxx obligations balancebeginning of period xxx xxx xxx xxx xxx less: obligations balanceend of period xxx xxx',
1944:'xxx xxx xxx total, outlays $xxx $xxx $xxx $xxx $xxx page 42 concepts 2 fasab handbook, version 20 06/21 concepts',
1945:'2 appendix 1f: statement of program performance measures example financial statement formats statement of program performance measures22for the year ended',
1946:'september 30, 19x4 fy 19x4 fy 19x3 fy 19x2 suborganization a program performance measure xxx xxx xxx performance measure xxx',
1947:'xxx xxx program performance measure xx% xx% xx% performance measure xxx xxx xxx program performance measure xxx xxx xxx performance',
1948:'measure xx% xx% xx% suborganization b program performance measure xxx xxx xxx performance measure xx% xx% xx% program performance measure',
1949:'xx% xx% xx% performance measure xxx xxx xxx suborganization c program performance measure xxx xxx xxx performance measure xx% xx%',
1950:'xx% note: suborganizations a, b, and c are equivalent to responsibility segments for which cost and financial data are collected.',
1951:'see fasab exposure draft, “managerial costaccounting for federal government”, pages 2630. 22although this example contains only numerical measures, the performance',
1952:'for some programs might be reported with other than numerical measures. page 43 concepts 2 fasab handbook, version 20 06/21',
1953:'concepts 2 appendix 1g: entity and display example financial statement formats – budget and accural reconciliaiton narrative budgetary and financial',
1954:'accounting information differ. budgetary accounting is used for planning and control purposes and relates to both the receipt and use',
1955:'of cash, as well as reporting the federal deficit. financial accounting is intended to provide a picture of the governments',
1956:'financial operations and financial position so it presents information on an accrual basis. the accrual basis includes information about costs',
1957:'arising from the consumption of assets and the incurrence of liabilities. the reconciliation of net outlays, presented on a budgetary',
1958:'basis, and the net cost, presented on an accrual basis, provides an explanation of the relationship between budgetary and financial',
1959:'accounting information. the reconciliation serves not only to identify costs paid for in the past and those that will be',
1960:'paid in the future, but also to assure integrity between budgetary and financial accounting. the analysis below illustrates this reconciliation',
1961:'by listing the key differences between net cost and net outlays. unrealized valuation loss on investment in the reconciliation is',
1962:'related to the write down of security investment due to recent market volatility, which did not result in an outlay',
1963:'but did result in a cost. the large increase of accounts payable compared to last year is because this year’s',
1964:'rent expense has not been paid but was included in the net cost this year and not included in the',
1965:'outlays. the large variance in the transfers in/out without reimbursement between fiscal year fy 201x and fy201x is primarily due',
1966:'to the transfer of program management responsibility from agency 1 to agency 2 as discussed in further detail in note',
1967:'x. in addition, the decrease in imputed financing source is a result of the payment in fy201x for the abc',
1968:'settlement. this is an illustration of what might be presented in the narrative paragraph. it is an example of how',
1969:'to explain the material line items in the reconciliation and describes why some material line items either increase or decrease',
1970:'net cost but do not have the same impact on net outlays. page 44 concepts 2 fasab handbook, version 20',
1971:'06/21 concepts 2 reconciliation example for the year ended september 30, 201x intrawith the total fy governmental public 201x net',
1972:'cost $xxx $xxx $xxx components of net cost thatare not part ofnet outlays: property, plant, and equipment depreciation xxx xxx',
1973:'xxx property, plant, and equipment disposal & xxx xxx xxx revaluation yearend credit reform subsidy reestimates xxx xxx xxx unrealized',
1974:'valuation loss/gain on investments xxx xxx xxx increase/decrease in assets: accounts receivable xxx xxx xxx loans receivable xxx xxx xxx',
1975:'investments xxx xxx xxx other assets xxx xxx xxx increase/decrease in liabilities: accounts payable xxx xxx xxx salaries and benefits',
1976:'xxx xxx xxx insurance and guarantee program liabilities xxx xxx xxx environmental and disposal liabilities xxx xxx xxx other liabilities',
1977:'unfunded leave, unfunded xxx xxx xxx feca,actuarial feca other financing sources: xxx xxx xxx federal employee retirement benefit costs paid',
1978:'xxx xxx xxx by opm and imputed to the agency transfers out in without reimbursement xxx xxx xxx other imputed',
1979:'financing xxx xxx xxx totalcomponents ofnetcost thatare notpartof net outlays xxx xxx xxx componentsofnetoutlays thatarenotpartofnet cost: effect of prior year',
1980:'agencies credit reform xxx xxx xxx subsidy reestimates acquisition of capital assets xxx xxx xxx page 45 concepts 2 fasab',
1981:'handbook, version 20 06/21 concepts 2 intrawith the total fy governmental public 201x acquisition of inventory xxx xxx xxx acquisition',
1982:'of other assets xxx xxx xxx other xxx xxx xxx total components of net outlays that are not part of',
1983:'net cost xxx xxx xxx other temporary timing differences xxx xxx xxx net outlays $xxx $xxx $xxx23 23total net outlays',
1984:'can be linked to the statement of budgetary resources, and equals gross outlays less actual offsetting collections and distributed offsetting',
1985:'receipts. the net outlays for intragovernmental and with the public listed in the format are calculated totals. page 46 concepts',
1986:'2 fasab handbook, version 20 06/21 concepts 2 appendix 2: list ofacronyms see consolidated list ofacronyms in “appendix f: consolidated',
1987:'list ofabbreviations” page 47 concepts 2 fasab handbook, version 20 06/21 statement of federal financialaccounting concepts 3: management’s discussion andanalysis',
1988:'status issued june 8, 1999 affects sffac 1, paragraph 181, by providing guidance on md&a affected by sffas 27, paragraph',
1989:'39, amends paragraph 26 sffac 9, amends paragraph 26 footnote 10 see pages 67 for the preamble to statements of',
1990:'federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.pdf. summary this document describes the concepts on which the board relied in recommending standards for management’s',
1991:'discussion andanalysis md&a to be included in general purpose federal financial reports gpffr.1 concepts statements are not authoritative in the',
1992:'sense that they do not establish standardsor principles. preparersmayfind them useful, but these conceptsare not “prescribed guidelines” forrequired supplementaryinformationasdiscussed insection558ofthe',
1993:'codification of statements on auditing standards published by theamerican institute of certified publicaccountants. no standards or prescribed guidelines for md&aare',
1994:'presented in this statement of concepts. md&ais an important vehicle for 1 communicating managers’ insights about the reporting entity, 2',
1995:'increasing the understandability and usefulness of the gpffr, and 3 providing accessible information about the entityand its operations, service levels,',
1996:'successes, challenges, and future. some federal agencies also refer to md&aas the “overview.” the basic concept that underlies the standards',
1997:'for md&ais: each general purpose federal financial report gpffr should include a section devoted to management’s discussion and analysis md&a.',
1998:'it should address the reporting entity’s performance measures, financial statements, systems and controls, compliance with laws and regulations, and actions',
1999:'taken or planned to address problems. the discussion and analysis of these subjects may be based partly on information contained',
2000:'in reports other than the gpffr. md&aalso should address significant events, conditions, trends and contingencies that may affect future operations.',
2001:'1the term general purpose financial report, abbreviated “gpffr,” is used as a generic term to refer to the report that',
2002:'contains the entity’s financial statements that are prepared pursuant to federal accounting principles. page 1 concepts 3 fasab handbook, version',
2003:'20 06/21 concepts 3 aseparate document titled standards for management’s discussion and analysis presents the standards for md&a. the standards',
2004:'for md&asay that md&ashould address: the entity’s mission and organizational structure; the entity’s performance goals and results; the entity’s financial',
2005:'statements; the entity’s systems, controls, and legal compliance; and the possible future effects on the entity of existing, currentlyknown demands,',
2006:'risks, uncertainties, events, conditions and trends. the discussion and analysis of these subjects may be based on information in other',
2007:'discrete sections of the gpffr or it may be based on reports separate from the gpffr. the standards require md&ato',
2008:'be included in each gpffr as required supplementary information rsi. page 2 concepts 3 fasab handbook, version 20 06/21 concepts',
2009:'3 table of contents contents page summary 1 statement of concepts 4 topics for md&a 12 appendixa: basis for conclusions',
2010:'19 appendix b: glossary [see consolidated glossary inappendix e] 25 page 3 concepts 3 fasab handbook, version 20 06/21 concepts',
2011:'3 statement of concepts basic concept 1. each general purpose federal financial report gpffr, see figure 1 on 7 should',
2012:'include a section devoted to management’s discussion and analysis md&a.1md&ashould address the reporting entity’s program and financial performance measures, financial',
2013:'statements, systems and controls, compliance with laws and regulations, and actions taken or planned to address problems. the discussion and',
2014:'analysisof these subjects may be based partlyon information contained in reports other than the gpffr. md&aalso should address significant events,',
2015:'conditions, trends and contingencies that may affect future operations. discussion and rationale 2. atypicalgpffrisahighlysummarizedprofileofacomplexentity. itisbasedonconditions that exist at the reporting',
2016:'date and events that occurred in the preceding period. it shows what has happened, but it does not explain why',
2017:'it happened or what may reasonably be expected to happen in the future. 3. financial reports have two key roles.',
2018:'one is a feedback role to provide information used for evaluating past decisions, expectations, and trends. another is a predictive',
2019:'role to provide information used for formulating expectations and making decisions about the future. both roles can be enhanced by',
2020:'insights and interpretations from an entity’s management. 4. the managers of an entity have detailed knowledge of the transactions, events,',
2021:'and conditions reflected in the entity’s financial report and of the policies that govern the entity’s operations. the managers also',
2022:'have informed expectations regarding the future based on that knowledge. as a part of their stewardship responsibility, managers should explain',
2023:'the significance of key financial and nonfinancial information shown in the report, the strategies 1the term general purpose federal financial',
2024:'report, abbreviated “gpffr,” is used as a generic term to refer to the report that contains theentity’s financial statements that',
2025:'are prepared and audited pursuant to the cfoact of 1990, as amended. entities may refer to these reports using different',
2026:'terms, such as “annual report,” “accountability report,” “financial management report,” etc. paragraphs 54112 andappendix 1 of statement of federal financialaccounting',
2027:'concepts 2, entity and display, describe and illustrate the contents of the gpffr. for more information on the “accountability report”',
2028:'see paragraph 59 and the glossary. other words defined in the glossary are marked with an asterisk. seealso toward a',
2029:'report to citizens on the state of their nation and the performance of their government: proceedings of the aga task',
2030:'force on a report to citizens on the state of the nation,association of government accountants, 1994. page 4 concepts 3',
2031:'fasab handbook, version 20 06/21 concepts 3 that led tothe resultsreported, and theimplicationsfor future operationsof events that have occurred or',
2032:'are likely to occur. the distinction between “financial” and “nonfinancial” information is arbitrary and often tenuous, but in this context',
2033:'“nonfinancial information” can include information on systems, controls, compliance with laws and regulations, and performance. 5. afederalreportingentity’s gpffr shouldbeunderstandableandusefultoawide audience,',
2034:'not just members of the entity’s management and specialized analysts working for special interest groups, corporations, and other entities affected',
2035:'by the government’s actions. therefore, the reportshouldbeaccompaniedbyaconcise narrative discussionand analysis. even insiders and specialized analysts often need such a discussion',
2036:'and analysis to understand the report. communication with a wide audience may require effective use of colors, graphs, photographs, and',
2037:'charts. reporting understandable, accessible information on the government’s actions and the effects of its actions helps assure accountability and provides',
2038:'a more “level playing field” on which the public interest can best be served. background 6. the securities and exchange',
2039:'commission sec has for many years recognized the importance of such a narrative discussion of the financial statements. to serve',
2040:'the interests of investors and creditors, the sec requires such a narrative discussion and analysis from management of companies under',
2041:'its purview. the sec wants md&ato help readers understand the entity’s financial position and results of operations with the benefit',
2042:'of management’s understanding and perspective. the sec also wants md&ato go beyond the basic financial statements, to include relevant forwardlooking',
2043:'information. research on md&afor companies registered with the sec shows that md&aadds value to the financial statements. forwardlooking information, for',
2044:'example, can be an important contribution.2 7. severalfactors suggestthatmd&amaybeeven more important for federal reporting entities than for those in the',
2045:'private sector and may need to be more extensive in scope. these factors include the complexity of federal operations, the',
2046:'myriad objectives they pursue, and the diversenatureofthegroupsaffectedbyandinterestedinthe government’s activities. fundamentally, the government’s objective is to provide for the common defense',
2047:'and to promote the general welfare, not to earn a profit. therefore, reporting on performance and other matters in a',
2048:'way that is understandable to diverse audiences is 2research on md&ain private sector financial reporting suggests that forwardlooking information in',
2049:'md&a, in particular, is asignificant sourceof addedvaluefor financial analysts. seestephenh. bryan, “incremental information content of requireddisclosures containedinmanagement discussion andanalysis,” the',
2050:'accounting review vol. 72 no. 2, april 1997, pp. 285301. page 5 concepts 3 fasab handbook, version 20 06/21 concepts',
2051:'3 important. forthesereasons,bothsffac1, objectives of federal financial reporting,and sffac 2, entity and display, refer to md&ain concept as part of',
2052:'the general purpose federal financial report. 8. page 7 presents a schematic diagram of a sample gpffr. it is schematic',
2053:'because the information called for by the statements of federal financial accounting standards should be located inthereport in a logical',
2054:'sequence, not necessarilyin the ordershown. md&afor the reporting entity as a whole normally will be located immediately after the agency',
2055:'head’s letter. reporting entities that organize their gpffr by responsibility segment may combine md&aregarding each segment; alternatively, they may have',
2056:'md&afor each responsibility segment located separately in each of the respective subsections of the report. preparers have flexibility to structure',
2057:'their report in the manner most appropriate under the circumstances. this diagram, the entire statement of concepts, and the accompanying',
2058:'standards for md&aare intentionally written in general terms, in light of the evolving practice of performance reporting and accountability reporting',
2059:'in the federal government. the standards for md&adefine in general terms required supplementary information that should accompany financial statements prepared',
2060:'in conformance with federal accounting principles. page 6 concepts 3 fasab handbook, version 20 06/21 concepts 3 figure 1: schematic',
2061:'diagram of a sample general purpose federal financial report agency head’s letter management’s discussion and analysis rsi 1. basic financial',
2062:'statements and notes, with auditor’s report ifaudited other elements of the general purpose federal financial report 2. required3. required4. performance',
2063:'5. other 6. management’ssupplementarysupplementaryinformation accompanyingassertions and stewardshipinformation information reports oninformation rsi oai controls, rssi compliance, and corrective actions under fmfiaand',
2064:'ffmiaorportions ofthese assertions and reports the gpffr is represented by md&aplus columns 16 of the diagram. the agency head’s letter',
2065:'is part of the gpffr by general practice, though it is not required by federal accounting principles. this is not',
2066:'a literal depiction of the organization of a report. information should bepresented in a logicalarrangement. md&awill address majorissuesthatare typically reported',
2067:'in more detail in the discrete sections of the gpffr or in other publicly available reports that the gpffr incorporates',
2068:'by reference. incorporating another report by reference does not, by itself, mean that the separate report is subject to audit.',
2069:'unless law or managerial action requires more extensive audit review or examination of the material incorporated by reference, the fasab',
2070:'expects that the auditor of the financial statements will treat the material incorporated by reference as other accompanying information, although',
2071:'it does not physically accompany the gpffr. omb has authority to provide specific guidance on the auditor’s minimum responsibility regarding',
2072:'this material. omb may, for example, direct auditors to treat the material incorporated by reference as if it were other',
2073:'accompanying information in an auditorsubmitted document. sffac2 paragraphs106111 andappendix1f calls fora “statementofperformance measures” aspartof the gpffr,butfasab has notyet recommended standards',
2074:'forit. other titlesmay be usedfor this sectionof the gpffr. performance indicators included in thegpffrwill eitherbe thoseinthe entity’s annual performancereportunderthegovernment performance',
2075:'and resultsact of 1993 gpraor the resultsact or a subset of them. alternatively,thatreport may be incorporated by reference. until furtherguidance',
2076:'is available,the agency should selectthe indicators to report in consultation with omb. the assertions and report on control called for',
2077:'by the federal managers financial integrityact fmfiaor integrityact would not be stated in full in md&a. they would be reported',
2078:'in a discrete section of the gpffr or incorporated in the gpffr by reference. they are within the scope ofmd&abecause',
2079:'highlyimportant aspects of systems,compliance,and internal controls should bediscussed in md&a. “highly important” in this context may imply a higher threshold',
2080:'than “materiality” for the financial statements. if the report also includes financial statements for component entities bureaus, responsibility segments, etc.,',
2081:'management should use its judgment in organizing the report. the component entities’ financial statements may be discussed in separate sections',
2082:'of the report or as subsections of md&aof the consolidated entity. page 7 concepts 3 fasab handbook, version 20 06/21',
2083:'concepts 3 9. md&ashouldaddress: the entity’s structure, mission, goals, and objectives, with indicators3 of its performance; actions taken or planned',
2084:'to improve performance, when appropriate; the financial statements; systems, internal controls4 and legal compliance, including corrective action taken or planned;',
2085:'and the future effects of existing, currentlyknown demands, risks, uncertainties, events, conditions and trends. md&amay also address the possible future',
2086:'effects of anticipated future demands, events, conditions, trends, etc. that management believes would be important to the reader of the',
2087:'report. 10. md&ashouldaddressthesesubjects evenif,as willbetrue for manyfederal reporting entities, separate documents report much of the information in more detail. information',
2088:'about these subjects is essential to address the objectives of federal financial reporting regarding performance, stewardship, budgetary integrity, and systems',
2089:'and controls. the following paragraphs explain the implications of this. 11. regardingtheentity’smissionandperformance, md&ashouldinform thereader how well the reporting entity is',
2090:'doing. this means that it should tell the reader what the reporting entity and its programs have accomplished, and how',
2091:'well the entity is managing its programs. to do this, md&ashould answer such questions as: what do we need to',
2092:'know to gauge operating success? how do we measure what we accomplished? what do the measurements show? 12. to understand',
2093:'the information on performance, systems, controls, and legal compliance, it typically is necessary to understand something about the reporting entity’s',
2094:'organizational structure, mission, and strategic plan. accordingly, md&ashould concisely inform the reader about these topics. 13. reporting information that helps',
2095:'people assess the performance of the government’s programs and organizations is an important objective of federal financial reporting. for 3this',
2096:'document uses the terms “performance measure” and “performance indicator” synonymously. some people use theterm “performanceindicator” insteadof “performancemeasure” because theperformanceofgovernmentprograms typically',
2097:'involves several factors or dimensions, and many of these dimensions of performance cannot be measured precisely. 4words marked with are',
2098:'defined in the glossary. page 8 concepts 3 fasab handbook, version 20 06/21 concepts 3 governmental entities, in contrast to',
2099:'profitseeking entities, the financial result of governmentaltype activities is rarely an adequate indicator of performance. for a few governmental entities,',
2100:'mainly those that conduct primarily businesstype instead of governmentaltype activities, the financial results of operations may be an important, albeit',
2101:'rarely sufficient, performance indicator. to assess performance, people need additional information on the consequences of the government’s activities. for a',
2102:'competitive, profit seeking entity, the value of its products or services is measured by the amount of money customers are',
2103:'willing voluntarily to pay for them. in such a situation, the traditional income statement reports on both the efforts measured',
2104:'by expenses incurred and the accomplishments measured by revenue earned of the entity. for government, expense reflects efforts, as it',
2105:'does in the private sector, but indicators other than revenue must be used to report on accomplishments. adiscrete section of',
2106:'the gpffr therefore presents indicators of accomplishments such as indicators of outputs and outcomes and other indicatorsof performance. alternatively, the',
2107:'gpffr incorporates performance indicators by reference to a separate report such as theannual performance report required by the resultsact. either',
2108:'way, performance information is an integral part of the gpffr and should be discussed in md&a. management’s discussion and analysis',
2109:'should therefore address the most important facets of performance as well as the financial statements and supplementary information. 14. regardingthefinancial',
2110:'statements,md&ashouldanswer questions suchasthefollowing, to the extent that they are relevant and important for the entity: what is the entity’s financial',
2111:'position? what is its financial condition?5 how did this come about? what were the significant variations:  from prior years?',
2112:' from the budget?6  from performance plans, longterm plans, orother relevant plansin addition to the budget? what is the',
2113:'potential effect of these factors, of changed circumstances, and of expected future trends? in other words, to the extent that',
2114:'it is feasible to project the effects of these factors, willfuture financial position, condition, and results, as reflected in future',
2115:'financial statements, probably be different from this year’s and, if yes, why? any such discussion should acknowledge that the future',
2116:'is unpredictable and will be 5thetraditionalconcepts of “financialposition” and “financialcondition” aretypically applicabletorevolvingfunds, governmentcorporations,andotherreportingentitiesthat are intendedto be selffinancing.theconcepts may be less',
2117:'relevant,or may requiresomequalificationormodification,forother kinds offederalreportingentities. 6management should use its judgment to decide what variances are relevant for md&a. it will',
2118:'not always be essential or appropriate to discuss all variances. page 9 concepts 3 fasab handbook, version 20 06/21 concepts',
2119:'3 influenced by factors outside the reporting entity’s control, including actions by congress. 15. regarding systemsandcontrols,md&ashouldtellthereader whether internal accounting and',
2120:'administrative controls some authorities prefer the term “management controls” are adequate to ensure that: transactions are executed in accordance with',
2121:'budgetary and financial laws and other requirements, consistent with the purposes authorized, and are recorded in accordance with federal accounting',
2122:'standards; assets are properly acquired and used, safeguarded to deter theft, accidental loss or unauthorized disposition, and fraud; and performance',
2123:'measurement information is adequately supported. 16. reporting information that helps people assess the condition of the entity’s management systems and',
2124:'of the relevant internal controls is an important objective of federal financial reporting. the relevant internal controls for this purpose',
2125:'are those that support reporting on financialandoperatingperformanceand reporting on compliancewith applicable laws.7the great diversity of people often with competing interests',
2126:'affected by governmental action, and the fact that governments function within and by means of a framework of laws, mean',
2127:'that more attention to these matters is necessary than in financial reports for profitseeking entities. 17. an entity’s ability to',
2128:'prepare auditable financial statements and other reliable reports for management from the entity’s books and records is a positive signal',
2129:'about the finance related systems and controls of that entity. by themselves, however, the financial statementsof a governmentalentitydo not provideadequateinformation',
2130:'about thestatusof the entity’s management systems and internal controls that support reporting on financial and operating performance and reporting on',
2131:'compliance with applicable laws. for these reasons, thegpffr of a federalreporting entityshould include informationabout systems, internal controls, and legal compliance,',
2132:'in addition to the basic financial statements. this information—like the information on performance—is presented in a discrete section of the',
2133:'gpffr; alternatively it may be incorporated in the gpffr by reference to separate reports such as those required by the',
2134:'integrityact. md&ashould therefore address the most important facets of this information on systems, controls and legal compliance, as well as',
2135:'the financial statements, supplementary information, and performance information. 7internal controls are also relevant to other objectives. for example, controls help',
2136:'management assure efficient and effective use of resources for the purposeintended. they also support preparation of performance reports pursuant to',
2137:'gpra. see, for example, paragraph 40. page 10 concepts 3 fasab handbook, version 20 06/21 concepts 3 relationship to other',
2138:'reports 18. the information in the gpffr about systems, internal controls, and legal compliance column 6 in figure 1 may',
2139:'include the assertions and a summary of the reports on controls, legal compliance, and corrective actions pursuant to the integrityact',
2140:'and the federal financial management improvementact ffmia, or those reports may be incorporated by reference. this information should be presented',
2141:'in conformance with guidelines published by omb. md&a, in turn, should discuss the most important aspects of the information on',
2142:'these topics. referring to separatelyissued reports on systems and controls does not eliminate the need to discuss these topics in',
2143:'md&a.8 19. the performance information column 4 in figure 1 may include the indicators in an entity’s performance report pursuant',
2144:'to the resultsact or a selection of the most important performance indicators. alternatively, a separate performance report may be incorporated',
2145:'by reference. this information should be presented in conformance with guidelines published by omb. md&a, in turn, will discuss the',
2146:'most important aspects of the performance information. reference to a separatelyissued performance report does not eliminate the need to discuss',
2147:'performance in md&a. 20. theperformancereportsrequiredbytheresultsactmaybevoluminous for some agencies. insuchcases,it maynotbedesirable to includeallthisinformationin thegpffr. it is necessary to include at least',
2148:'some information about performance with the financial statements, however, so that people who use the gpffr can understand why the',
2149:'costs reported in the financial statements were incurred and the consequences of doing so. 21. in the same way, the',
2150:'gpffr by itself may not provide a comprehensive report on systems, controls and legal compliance. there may be voluminous reports',
2151:'from management and auditors on these topics. it is necessary to include at least some information about these topics, however,',
2152:'so that users of the gpffr can understand whether the resources on which it reports were properly safeguarded and used',
2153:'for the purposes intended, whether reliable reports can be prepared, and whether the other objectives of internal controls are being',
2154:'met. this information is important both to provide a basis for understanding the financial statementsthemselves and to address the objectives',
2155:'of federal financial reporting. 22. combining information on these topics adds value by putting the information about performance, internal controls,',
2156:'and systems in the context of audited financial statements. for example, the quality of information on the cost of outputs',
2157:'and outcomes of programs is 8notethatthepurpose of thepilotaccountability reports is to eliminate the need for numerous separate reports and to',
2158:'includetheinformationrequired by those reports inasingle report. for example, the integrityact requires an assertion on controls by the agency head. pilot',
2159:'agencies are including this assertion in theaccountability report. page 11 concepts 3 fasab handbook, version 20 06/21 concepts 3 enhanced',
2160:'by linking these indicators to the audited statement of net cost. this is true even though the statementof net costmaybetoo',
2161:'highlyaggregatedto identifyseparatelyallthe programs reported on for the resultsact. similarly, the auditor’s tests of transactions and controls in connection with the',
2162:'audit of the financial statements provide information about the condition of the systems and controls used to safeguard resources and',
2163:'to assure that they are used for the intended purposes, in conformance with law. paragraphs 15 and 4049 say more',
2164:'about the discussion and analysis of systems, controls, and performance. authoritative status ofaccounting concepts 23. this statementoffederalfinancialaccountingconcepts describesideas andgoals to',
2165:'guide the board in its work. concepts are not authoritative in the sense that they do not constitute accounting standards',
2166:'or principles for federal reporting entities. in particular, they are not “prescribed guidelines” for required supplementary information as discussed in',
2167:'section 558 of the codification of statements onauditing standards published by the american institute of certified publicaccountants. topics for md&a',
2168:'24. this section provides specific suggestions for the content of md&a. like the other sections of this document, this material',
2169:'does not constitute accounting standards or principles for federal reporting entities. except to the extent that omb may issue supplementary',
2170:'mandatory guidance regarding the content of md&a, the following items should be read as suggestions to be considered, not as',
2171:'prescriptive rules that must be followed. mission and organizational structure 25. md&ashouldcontainabriefdescriptionofthemissions oftheentity anddescribeits related organizational structure. page 12 concepts',
2172:'3 fasab handbook, version 20 06/21 concepts 3 discussion andanalysis of the financial statements 26. financialresults, positionandcondition9—md&ashouldhelpthosewhoreaditto understand the entity’s',
2173:'financial results and financial position and the entity’s effect on the financial position and condition of the government.10 it should',
2174:'give readers the benefit of management’s understanding of the significance and potential effect from both a shortand a longterm perspective',
2175:'of: the variations discussed in paragraph 14 in terms of major changes in types or amounts of assets, liabilities, costs,',
2176:'revenues, obligations and outlays; particularbalancesandamountsshowninthebasicfinancialstatements,includingthe notes, such as those dealing with funds from dedicated collections, if relevant to important financial',
2177:'management issues and concerns; and the entity’s required supplementary stewardship information because rssi describes economic conditions that cannot be expressed',
2178:'in the basic financial statements. 27. only those variations, balances and amounts, and stewardship matters of potential interest to readers',
2179:'who are not part of agency management should be discussed. not all changes that are material to the gpffr are',
2180:'sufficiently important to be included in md&a. alinebyline analysis of the financial statements is not generally appropriate. instead, md&ashould summarize',
2181:'the most important items, explain the relevant causes and effects, and place them in context. 28. budgetaryintegrity—md&ashouldconcisely explain how budgetary',
2182:'resourceshavebeen obtained and used, instancesin which theiracquisition andusewere not inaccordancewith legal authorization, the status of budgetary resources, and how information',
2183:'on the use of budgetary resourcesrelatesto informationonthe cost of programoperations. md&ashould explain whenmajor supportfor cost of aprogramoractivityisprovidedoutside thereporting entity’s budget',
2184:'and when the entity’s budget supports a program primarily reported by another entity. the discussion should describe major financing arrangements,',
2185:'guarantees, and lines of credit, including those not recognized in the basic financial statements. 29. md&ashouldexplain major changes duringtheperiodto thebudget',
2186:'originally approved, major failures to comply with financerelated laws, and other matters management believes necessary. these could include: 9for many',
2187:'readers program performance information is more important than the financial statements. the order in which topics are discussed in this',
2188:'document does not imply that performance information is of secondary importance. see paragraphs 43 and following. 10materiality of effects to',
2189:'be discussed should be evaluated in the context of the specific reporting entity. page 13 concepts 3 fasab handbook, version',
2190:'20 06/21 concepts 3 unfunded liabilities that may require appropriations; assets that could be sold to augment future budgetary resources;',
2191:'amounts of payments that have not been matched with obligations; anticipated increases in the cost to complete longterm projects in',
2192:'progress that may require additional obligations or appropriations. 30. useofestimates—md&ashould concisely explainthe useofestimates wherethatis important to understand issues discussed in',
2193:'md&a, such as the major risks and uncertaintiesmentionedin paragraph31orthekeyforwardlookinginformationdiscussedinparagraph 32. for example, the future expenses and the long term obligations11',
2194:'associated with major social insurance programs such as social security and medicare should be discussed in md&aof the financial report',
2195:'of the relevant reporting entities. these estimates are inherently imprecise and sensitive to several assumptions. such factors would, therefore, be',
2196:'worthy of discussion in md&a. 31. currentdemands,risks, uncertainties,events, conditions,andtrends—md&ashould describe important existing, currentlyknown demands, risks, uncertainties, events, conditions and trendsboth',
2197:'favorable and unfavorablethat affect the amounts reported in the financial statements and supplementary information. the information called for by this',
2198:'paragraph and paragraph 32 is closely related. preparers should combine the presentation of this information in whatever fashion is appropriate',
2199:'under the circumstances that apply to the reporting entity. 32. future effects of current demands, risks, uncertainties, events, conditions and',
2200:'trends— the discussion of these current factors should go beyond a mere description of existing conditions, such as demographic characteristics,',
2201:'claims, deferred maintenance, commitments12 undertaken, and major unfunded liabilities, to include a discussion of the possible future effect of those',
2202:'factors. this discussion of possible future effect of existing, currentlyknown factors is required pursuant to the standards in standards for',
2203:'management’s discussion and analysis. 33. futureeffects ofanticipatedfutureevents,conditions,andtrends—totheextentfeasible and appropriate, the discussion should also encompass the possible future effects of anticipated',
2204:'future events, conditions, and trends, although this additional information is not required by the standards for md&a.13 for example, md&amight',
2205:'discuss the possible future effect of anticipated trends in the cost of inputs that may significantly affect future 11the term',
2206:'“obligations” is used here in the customary sense, not as it is used in budgetary accounting. 12the term “commitments” is',
2207:'used here in the customary sense, not as it is used in budgetary accounting. 13some projections that could involve consideration',
2208:'of anticipated factors would be presented as required supplementary stewardship information pursuant to the standards exposed for comment in fasab’s',
2209:'exposure draft accounting for social insurance, february, 1998. page 14 concepts 3 fasab handbook, version 20 06/21 concepts 3 output',
2210:'costs. other examples include the future effect of anticipated demographic trends, such asdeclining mortality rates, and the future effectsof potential',
2211:'changesin behavior thatmay be caused bychangesin government programs. such behavioral changes can greatlyaffect the future cost of some governmental programs.',
2212:'for example, such effects can arise if subsidized insurance encourages the people or entities most at risk to participate in',
2213:'insurance programs “adverse selection” or encourages risky behavior “moral hazard”. 34. an anticipated condition such as a prospective demographic trend',
2214:'or potential behavioral change maynot, initself, constitutea contingencyor assumedriskthatmust be recognized, disclosed, or reported pursuant to sffas 5. likewise, it',
2215:'may not be something that must be discussed in md&apursuant to the standards for management’s discussion and analysis. even so,',
2216:'if there is a reasonable prospect of a major effect on the reporting entity due to the anticipated condition, then',
2217:'md&ashould include this information to the extent feasible. 35. whereappropriate,thedescriptionofpossiblefutureeffectsofbothexistingandanticipated factors should include quantitative forecasts or projections. such forecasts or',
2218:'projections can show the implications of existing policies and conditions in light of anticipated or reasonably possible future conditions. for',
2219:'example, for md&aof the governmentwide financial statements, longterm projections of the deficit or surplus may be important indicators of financial',
2220:'condition and sustainability. for insurance programs, this kind of projection—which actuaries sometimes call “dynamic analysis”—would consider possible interactions among current',
2221:'assets, reserves, policies in force, expected future business or populations covered by the insurance, and potential behavioral changes such as',
2222:'adverse selection and moral hazard, if appropriate. some programs are interrelated among themselves and/or with conditions in the private sector.',
2223:'for example, flood insurance programs and disaster assistance programs may be related to such an extent that analysis of programs',
2224:'individually would not provide a good idea of their potential impact on the government. to the extent feasible, projectionsshould consider',
2225:'the potential implicationsof such relationships. 36. the future implications of current or anticipated factors often can better be expressed as',
2226:'a range of possible outcomes and associated probabilities than as a single point estimate. sometimes the implications may best be',
2227:'discussed in nonfinancial as well as financial terms. forwardlooking information can be highly useful, but management should avoid turning this',
2228:'part of md&ainto mere “lobbying” for more budgetary authority. 37. understandingfinancialreporting—md&ashouldmakefederalfinancialstatements understandable to a wide audience, not just to users',
2229:'who are specialized analysts or members of the entity’s management. there may be many potential sources of misunderstanding. management should',
2230:'try to identify those sources of misunderstanding that may be important and deal with them in md&a. some of these',
2231:'are general and pervasive, such as those that may arise in the minds of new users of federal financial statements.',
2232:'new users may have been budgetoriented rather than accrualaccounting page 15 concepts 3 fasab handbook, version 20 06/21 concepts 3',
2233:'oriented, or may be accustomed to seeing financial statements prepared on the basis of privatesectoraccountingstandards.ageneraldiscussion andreferenceto thestatement of financing and',
2234:'the basis of accounting footnote may be sufficient for such users, although more specific treatment may be appropriate where the',
2235:'resulting differences in the reported amounts may be important to the understanding of users. 38. emphasisthatmaybegiveninthefinancialstatementstothecostsofsuborganizationsand programs may require cautionary',
2236:'discussion of the relevance and utility of cost information. when md&aitself discusses the cost of program outcomes, the problems of',
2237:'associating costswith outcomesmayneed to be discussed. in addition, the possible imprecision of cost information should be mentioned when it could',
2238:'be relevant to users’ understanding. similarly, anyaccountleveldiscussion in md&aof variations, balances, and amountsin the basic and stewardship information made in',
2239:'response to paragraphs 26 and 27 may require mention of the imprecision of amounts cited. 39. exceptions and disclaimers in',
2240:'the auditor’s report should be mentioned in md&a, and management should respect the auditor’s professional judgment if management expresses disagreement',
2241:'with auditor’s findings. this does not mean that management must refrain from stating views that differ from the auditor’s; e.g.,',
2242:'different views as to whether a weakness in control is material. there may be other sources of misunderstanding. management should',
2243:'be sensitive to them and guide the user to a better understanding when the problem could significantly affect the conclusions',
2244:'and judgments of substantial numbers of users. discussion andanalysis of systems, controls and legal compliance 40. the schematic diagram of',
2245:'a sample gpffr on page 7 includes a discrete section that reports on the status of the entity’s management systems',
2246:'and internal controls that support 1 preparation of financial statements and performance information in accordance with federalaccounting standards and management’s',
2247:'criteria, respectively, and 2 the entity’s compliance with applicable laws.14 that section also describes material problems revealed 14these responsibilities are',
2248:'defined in numerous laws and administrative requirements,including the federal financial management improvementact, omb circularsa123 anda127,andomb bulletin9808.alawof special importance in this',
2249:'connections is the federal managers’ financial integrityact of 1982 fmfiaor the integrityact. the integrity act requires, in part, that “internal',
2250:'accounting and administrative controls of each executive agency shall be established and shall provide reasonable assurance that i obligations and',
2251:'costs are in compliance with applicable law; ii funds, property, and other assets are safeguarded against waste, loss, unauthorized use,',
2252:'or misappropriation; and iii revenues and expenditures applicable to agency operations are properly recorded and accounted for to permit the',
2253:'preparation of accounts and reliable financial and statistical reports and to maintain accountability over the assets. page 16 concepts 3',
2254:'fasab handbook, version 20 06/21 concepts 3 by audits or otherwise known to management, and the corrective actions taken or',
2255:'planned regarding material problems. 41. where relevant, management should discuss the results of audits of nonfederal entities such as those',
2256:'pursuant to the singleauditact as amended and omb circulara133. md&ashould also discuss actions taken, in progress, or planned to address',
2257:'systemic problems in program design that contributed to the audit findings. where relevant, management should describe the methods used to',
2258:'limit, detect, and recover improper payments; to assure that grantees and other nonfederal recipients of federal funds use the funds',
2259:'as intended; and to assure that federal and nonfederal entities comply with finance related laws and regulations. md&ashould include a',
2260:'concise description of any major problems in these areas and of the corrective action taken or planned. discussion andanalysis of',
2261:'performance 42. performance measurement—the objectives and needs of the federal government are markedly different from the objectives and needs of',
2262:'nongovernmental organizations. this difference extends to the needs of those who use financial statements of governmental organizations. their needs are',
2263:'different in many ways from the needs of investors, which the sec’s requirements address. in particular, reporting on the performance',
2264:'ofgovernmentalprograms, organizations, andactivitiesrequiresinformationthat goesbeyondthe change in net assets and, indeed, beyond financial information. 43. the actual outcomes, accomplishments, or degree',
2265:'to which predetermined objectives are met provide indicators or measures of some aspects of effectiveness.15 md&ashould objectivelydiscusstheentity’sprogramresultsand indicatetheextent towhichitsprograms are',
2266:'achieving their intended objectives.16 efficiency and effectiveness are importantelementsof performance measurement, andmeasuring cost isan integralpart of assessingthe efficiency and effectiveness',
2267:'of programs. relating outputs the quantity of services provided to inputs the cost incurred to provide the services provides an',
2268:'indicator or measure of one aspect of efficiency. information about effectiveness is often combined with cost information to help assess',
2269:'“cost effectiveness.” 15sffac 1, paragraph 206 notes that, to the extent feasible and practical, effectiveness evaluation should focus on program',
2270:'results or effects in the sense of “impacts,” i.e., the difference between what actually occurred and what would have occurred',
2271:'in the absence of the program. assessing impacts of governmental action in this sense typically requires program evaluations or other',
2272:'techniques that transcend annual performance reporting, although these techniques often will avail of information i the annual performance reports. valid',
2273:'and reliable evaluations of program impacts are not feasible for some programs. when they are conducted, they often require several',
2274:'years of data, are expensive, and typically are not performed on an annual basis for a given program. 16paragraphs 106111',
2275:'andappendix 1f of statements of federal financialaccounting concepts 2, entity and display, discuss and illustrate reporting on performance in the',
2276:'gpffr. page 17 concepts 3 fasab handbook, version 20 06/21 concepts 3 44. the entity’s financial performance should be summarized',
2277:'to provide significant indicators of its financial operations for the reporting period. indicators of financial performance are presented in notes',
2278:'and supplementary information as well as on the face of the principal financialstatements, e.g., informationabout management of loansand accountsreceivable. financial',
2279:'performance is only one aspect of performance for governmental entities. financialperformance should be discussedto theextent relevant fortheentity, in awaythat appropriately',
2280:'balances the discussion of financial and nonfinancial performance relevant to the program or other reporting entity. 45. the discussion of',
2281:'performance should relate to major goals and objectives from the agency’s strategic plan and to the indicators reported pursuant to',
2282:'the resultsact. it should explain what key performance indicators say about program performance. the summary discussion of performance in md&ashould:',
2283:'discuss the strategies and resources the agency uses to achieve its performance goals; provide a clear picture of actual and',
2284:'planned performance across the agency; and explain the procedures that management has designed and followed to provide reasonable assurance that',
2285:'the reported performance information is relevant and reliable. 46. the discussion of performance should: include both positive and negative results;',
2286:'present historical and future trends, if relevant see paragraphs 3136 regarding projections of the financial effects of known and anticipated',
2287:'demands, commitments, events, risks, uncertainties or trends for which a material financial effect is reasonably possible; beillustratedwithchartsandgraphs,wheneverhelpful,foreasyidentificationoftrends; explain the significance',
2288:'of the trends; provide comparison of actual results to goals or benchmarks; explain variations from goals and plans; and provide',
2289:'other explanatory information that management believes readers will need to understand the significance of the indicators, the results, and anyvariations',
2290:'from goals or plans. 47. to further enhance the usefulness of the information, agencies should include an explanation of what',
2291:'needs to be done and what they plan to do to improve program performance. 48. understanding performance reporting—important limitations and',
2292:'difficulties associated with performance measurement and reporting should be noted to the extent relevant to the page 18 concepts 3',
2293:'fasab handbook, version 20 06/21 concepts 3 vital performance indicators discussed in md&a. the relevant limitations will vary from program',
2294:'to program, but some common factors that may need to be discussed include the following: performance usually cannot be fully',
2295:'described by a single indicator; indicators of performance do not, by themselves, say why performance is at the level reported;',
2296:'and focusing exclusively on quantifiable indicators can sometimes have unintended consequences. 49. for these and other reasons, performance indicators generally',
2297:'need to be accompanied by suitable explanatory information. explanatory information helps report users understand reportedindicators, assessthe reportingentity’sperformance, andevaluatethe significance of',
2298:'underlying factors that may have affected the reported performance. explanatory information may include, for example, information about factors substantially outside',
2299:'the entity’s control, as well as information about factors over which the entity has significant control. this statement of recommended',
2300:'concepts was adopted unanimously by the eight members of the federal accounting standards advisory board serving on the board in',
2301:'april 1999. appendixa: basis for conclusions this statement may be affected by later statements. the fasab handbook is updated annually',
2302:'and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text of the',
2303:'statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the',
2304:'reader can review the basis for conclusions of the amending statement for the rationale for each amendment. background and project',
2305:'history 50. theboardidentifiedmd&aasatopicfor itsagendashortlyaftertheboard’s inception. the board deferred workonthistopic, however, until it completed recommendationsforaninitial set of basic accounting standards. fasab',
2306:'published an initial exposure draft on md&ain page 19 concepts 3 fasab handbook, version 20 06/21 concepts 3 january, 1997.',
2307:'the board received comment letters on the initial exposure draft from the following sources: federal nonfederal internal external total users,',
2308:'academics and others17 4 4 auditors 7 3 10 preparers and financial managers 16 16 total 23 7 30 51.',
2309:'thebasicrationaleformd&ahasnotchangedsincetheinitialexposuredraft.asaresultof its deliberations after receiving comments on the 1997 exposure draft, however, the board made certain changes. the more significant',
2310:'changes are discussed below. concepts and standards 52. the initial exposure draft was presented as a statement of recommended concepts.',
2311:'the board proposed that it would deal with md&aconceptually, with the understanding that omb would provide authoritative guidance on md&ato',
2312:'implement the concepts. this approach would have been similar to the one used to deal with the topics of entity',
2313:'and display. the board dealt with those topics conceptually in sffac 2. omb then provided authoritative guidance in its bulletin',
2314:'on form and content. the 1997 exposure draft asked respondents whether all or part of its provisions should be issued',
2315:'as recommended standards rather than recommended concepts. responses were mixed; most of those who commented on thisquestion favored concepts, but',
2316:'a significant number expressed the view that standards would be appropriate. 53. theboardconcludedthat,giventheimportanceofmd&aasanintegralpartofthegpffr, it would be appropriate to recommend standards',
2317:'for md&a. at the same time, however, the board concluded that for now this information should be treated as required',
2318:'supplementary information. the board also agreed that no detailed requirements or guidelines for md&a should be incorporated in federal accounting',
2319:'standards at this time beyond those proposed in the subsequent exposure draft discussed below titled standards for management’s discussion and',
2320:'analysis. in other words, the board agreed, a discussion and analysis that addresses the topics listed in the proposed standards',
2321:'should be an essential part of a complete gpffr. at the same time, management should have great discretion about what',
2322:'17this category include representational organizations, retired federal employees, federal employees responding as individuals, and federal contractors, as well as academics',
2323:'and other gpffr users. page 20 concepts 3 fasab handbook, version 20 06/21 concepts 3 to say regarding those topics,',
2324:'subject only to the criteria proposed in the exposure draft standards for management’s discussion and analysis and the pervasive requirement',
2325:'that md&anot be misleading. because of this change, the board decided to expose separately for further comment the proposed new',
2326:'standards and concepts. the exposure drafts were issued in october 1998; responses were requested by january 1999. responses to second',
2327:'exposure draft 54. the board received comment letters on the second exposure draft from the following sources: federal nonfederal internal',
2328:'external total citizens, users, academics and 3 3 others auditors18 3 3 6 preparers and financial managers 11 11 total',
2329:'14 6 20 55. most comments were generally favorable, but comments were mixed regarding some points. afew auditors and preparers',
2330:'expressed some concern about requiring forward looking information as rsi. others expressed support for doing so. after considering these responses,',
2331:'the board agreed to defer the recommended implementation date of the standard by one year and to make minor editorial',
2332:'changes to the standards and concepts that were exposed for comment. incorporation of guidance in omb bulletin 9701 56. this',
2333:'document, like both exposure drafts, integrates some of the guidance in omb bulletin 9701 for preparing the “overview” of the',
2334:'financial report with some of the guidance proposed in fasab’s initial exposure draft for md&a. some portions of the guidance',
2335:'regarding performance measurement in 9701’s discussion of the “overview” have been omitted. as an interim step prior to implementation of',
2336:'the resultsact, omb and many agencies used the overview as a major vehicle for reporting on performance, not just as',
2337:'a summary and analysis. with the full implementation of the resultsact in fy1999, however, 18includes theaicpa’s federalaccounting andauditing subcommittee and',
2338:'the comptroller general’sadvisory council on governmentaudit standards. page 21 concepts 3 fasab handbook, version 20 06/21 concepts 3 it will',
2339:'be appropriate to implement the financial reporting model contemplated in sffac 2. this contemplates a discrete section of the gpffr',
2340:'focused on performance. alternatively, performance information may be incorporated in the gpffr by reference to another report or reports. management’sassertions',
2341:'57. senior management of the reporting unit is responsible for the content of the gpffr, including md&a. consistent with that,',
2342:'the initial exposure draft included the following paragraph: md&ashould includea discrete section with management’sexplicit assertions that it is responsible for',
2343:'maintaining internal accounting and administrative controls that are adequate to ensure that transactions are executed in accordance with budgetary and',
2344:'financial laws and other requirements, consistent with the purposes authorized, and are recorded in accordance with federal accounting standards; assets',
2345:'are properly safeguarded to deter fraud, waste, and abuse; and performance measurement information is adequately supported. [footnote omitted] 58. this',
2346:'paragraph, which was based on the language of objective four in sffac 1, was modified after the first exposure. the',
2347:'board concluded that such assertions should be presented in a separate section of the gpffr, not in md&a. alternatively, management’s',
2348:'assertions about internal control and related information about systems, controls, and compliance may be incorporated in the gpffr by reference',
2349:'to another report or reports. as noted previously, pilot agencies are including these assertions in their accountability reports. fasab expects',
2350:'to consider whether a new statement of standards is needed to assure that federal financial reports adequately address objective four',
2351:'of federal financial reporting, “systems and controls.” as noted in paragraph 41, md&ashould include a description of any major deficiencies',
2352:'in the management systems and internal controls designed to provide reasonable assurance that management responsibilities are satisfactorily carried out. it',
2353:'also should describe the corrective action planned. accountability reports 59. the board notes that the concept and practice of the',
2354:'“accountability report” continue to evolve through the pilot project voluntarily undertaken by several agencies. the board supports this evolution and',
2355:'encourages agencies to participate in the pilot project. the page 22 concepts 3 fasab handbook, version 20 06/21 concepts 3',
2356:'concepts and standards fasab recommends are intended to be applicable to the gpffr of federal entities, whether those reports are',
2357:'prepared pursuant to the chief financial officersact, the government management reformact, or some future law that might establish a statutory',
2358:'basis foraccountability reports. in the event of such future legislation, omb will need to resolve any questions about how to',
2359:'apply existing federal accounting standards in the context of new legislative requirements. incorporation by reference 60. some respondents were disturbed',
2360:'by the notion of providing program performance information through reference. some were concerned that, if readers are merely directed to',
2361:'other reports for this information, the gpffr will become irrelevant. they believe that the gpffr should contain information about program',
2362:'performance, systems, and controls, not only in md&abut also in discrete sections, such as the statement of program performance discussed',
2363:'and illustrated in sffac 2, paragraphs 106111 andappendix 1f. 61. theboardagreesthat,asisstatedinparagraph20, “itisnecessarytoincludeatleastsome information about performance with the financial statements .',
2364:'. . so that people who use the gpffr can understand why the costs reported in the financial statements were',
2365:'incurred and the consequences of doing so.” 62. the board acknowledges that sffac 2 calls for and illustrates a statement',
2366:'of program performance measures. footnote 13 in sffac 2 explains that this statement is not “basic” informationasthat term isused inaudit',
2367:'standards: “thestatement of program performance measures is not a basic financial statement. nevertheless, it is an important component of the',
2368:'financial reports.” the board continues to believe that performance information is a vital, integral part of general purpose financial reporting.',
2369:'it should be noted, however, that sffac 1 and sffac 2 were issued before the performance planning and reporting requirements',
2370:'of gprabecame effective. the resultsact creates an elaborate new planning andreporting environmentthat isstillevolving. some detailsof the reportingmodel that were envisioned',
2371:'conceptually in sffac 2 may accordingly need to be revised slightly. 63. thisstatementofconceptsisintendedtobeconsistentwiththepreviouslystatedgoalsand concepts of the board, while recognizing that',
2372:'some details of how best to achieve those goals in the new context still need to be defined. omb will',
2373:'play a key role in this process; fasabmayalsoprovidefurther guidance infuture projects. fasabagreesthat the gpffr should not addressperformance, systems, andcontrolsonlybymeans of',
2374:'reference to other reports. thestandardsformd&arequirethat md&ado more thanreferto otherdocuments. 64. others expressedconcernthat,ifmd&ais tobe regardedas rsi,auditproblemsmight arise from “incorporation by reference”',
2375:'in md&aof information drawn from other sources page 23 concepts 3 fasab handbook, version 20 06/21 concepts 3 that might',
2376:'not be subject to audit or review as basic or required supplementary information, and for which authoritative guidance had not',
2377:'been provided bya standard setter. the board noted that most of those who commented, including most auditors, did not appear',
2378:'to be greatly concerned about this potential problem. the board concluded, therefore, that any such problemswere not likely to be',
2379:'insurmountable. the board did, however, agree todefer by one year the implementation date of the standard to allow omb and',
2380:'gao time to resolve any audit issues that may arise. page 24 concepts 3 fasab handbook, version 20 06/21 concepts',
2381:'3 appendix b: glossary see consolidated glossary in “appendix e: consolidated glossary.” page 25 concepts 3 fasab handbook, version 20',
2382:'06/21 statement of federal financialaccounting concepts 4: intendedaudience and qualitative characteristics for the consolidated financial report of the united states',
2383:'government status issued january 27, 2003 affects none. affected by none. see pages 67 for the preamble to statements of',
2384:'federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.pdf. summary in this statement of concepts, the federalaccounting standardsadvisory board fasab has identified the intended or',
2385:'primary audience for the consolidated financial report cfr of the us government. fasab also has described the characteristics of the',
2386:'audience and the qualitative characteristicsfasabbelieveswill aid in meetingfinancialreportingobjectivesforthe cfr. the concepts in this document are intended to help the board',
2387:'as it develops accounting standards and the accounting and reporting framework for the federal government. to provide guidance on the',
2388:'cfr, the board reviewed its existing technical guidance on federal financial reporting to discern how to apply that guidance to',
2389:'the cfr. it also researched other pertinent studies, and considered its experience with federal accounting principles and the evolutionof the',
2390:'cfr. the boarddeveloped itsassessment of who should bethe generalprimary audience for the cfr. as a result of that review and',
2391:'assessment, the board has identified five audiences for the cfr: citizens, citizen intermediaries, congress, federal executives, and program managers. however,',
2392:'the board believes that the external user groups, citizens and citizen intermediaries, are the primary audiences for the cfr. the',
2393:'board will rely on qualitative characteristics from sffac 1 in developing accounting standards for the cfr that will effectively meet',
2394:'the needs of the intended audience. these qualitative characteristics include: understandability, reliability, relevance, timeliness, consistency and comparability. while all these',
2395:'characteristics are important, given the intended audience for the cfr, understandability and timeliness are particularly fundamental to the usefulness of',
2396:'the cfr. this concepts statement provides that the cfr should be a “general purpose” report directed to external users citizens',
2397:'and their intermediaries, should address the board’s objectives,1should have highly understandable information, and should be timely. 1statementoffederal financialaccountingconcepts1, objectives of',
2398:'federal financial accounting concepts sffac 1 defines those objectives interms of user needs as 1 budgetary integrity, 2 operating performance,',
2399:'3 stewardship, and 4 systems and control. seeappendixafor a description of these objectives. page 1 concepts 4 fasab handbook, version',
2400:'20 06/21 concepts 4 table of contents contents page summary 1 introduction 3 concepts 4 basis for conclusions 5 appendixa:objectives',
2401:'offederalfinancialreporting 12 appendix b:acronyms 14 page 2 concepts 4 fasab handbook, version 20 06/21 concepts 4 introduction 1. relation of',
2402:'federal accounting concepts and standards to governmentwide consolidated reporting. the federalaccounting standardsadvisory board’s fasab or “theboard”firststatement of federalfinancialaccountingconcepts, sffac1, objectives',
2403:'of federal financial reporting, provides the foundation for generally accepted accounting principles, or gaap, and for the federal accounting and',
2404:'reporting framework. sffac 1 provides that federal accounting and reporting should address four broad objectives: 1 budgetary integrity; 2 operating',
2405:'performance; 3 stewardship; and 4 systems and controls.2 these objectives were developed based on studies of users’ needs done during',
2406:'fasab’s initial years of operation and apply to all entity level reporting including agency, department, bureauorprojectlevel, andthe governmentasawhole. inadditiontoreporting objectives,',
2407:'sffac 1 established qualitative characteristics for information in financial reports see pars. 156 to 164 of sffac 1. 2. because',
2408:'of increased experience with, and interest in the us government’s primary consolidated financial report, the consolidated financial report of the',
2409:'us government cfr, the board has determined that concepts specifically directed to that report would be helpful. such concepts would',
2410:'help guide the board as it develops future standards and changes in its framework for financial accounting and reporting. this',
2411:'document provides concepts related to the primary audience for the cfr and identifies qualitative characteristics for the cfr. the board',
2412:'may decide in the future to address other aspects of the cfr. 3. governmentwide consolidated reporting. the preparer of the',
2413:'cfr, is the united states department of thetreasury. priorto any formalguidelines,treasuryvoluntarilyproduced its first “prototype” governmentwide consolidated financial reports in 1976',
2414:'for fiscal year 1975. the government management reformact of 1994 required the consolidated financial report of the us to be',
2415:'audited. treasury’s1997 annual consolidated financial report was the first cfrto be issuedpursuant totheact and to undergo an audit. since that',
2416:'time, treasury has continued to refine the preparation and presentation of the cfr. 4. currently, the cfr is an extensive,',
2417:'informative document that includes highlights of summarized agency level activity, consolidated financial statements, and some accompanying information whose source is',
2418:'not agency level entity reporting. the cfr includes both financial and nonfinancial information and has been focused on presenting understandable',
2419:'data fora variety of audiences.asa result, the report has grown in size and 2seeappendixafor a full description of these four',
2420:'objectives from sffac 1, objectives of federal financial accounting concepts. page 3 concepts 4 fasab handbook, version 20 06/21 concepts',
2421:'4 complexity. some have questioned whether the cfr istrying to satisfytoo manyaudiences withdifferent needsin oneformat. othersbelieve that the informationtobe presentedwould',
2422:'depend on the needs of users and that identifying the primary users might better focus the cfr. 5. the board',
2423:'determined that it would be beneficial to designate the intended or primary audience3 and qualitative characteristics for the cfr that',
2424:'would be most useful for that audience. concepts:intendedaudience and related qualitative characteristics for the cfr 6. thecfr shouldbea generalpurposestatement of',
2425:'accountabilitytothepublic. ageneral purpose report should be easily understandable to the “average citizen”4 who has a reasonable understanding of federal government',
2426:'activities and is willing to study the information with reasonable diligence.5 moreover, the cfr is a general purpose report that',
2427:'isaggregated fromagencyreportsand tellsuserswhere tofind informationinotherformats, both aggregated and disaggregated, such as individual agency reports, agency websites, and the president’s budget.',
2428:'7. the cfr should generally be directed to five user groups: citizens, citizen intermediaries, congress, federal executives, and program managers.',
2429:'however, citizens and citizen intermediaries should be the audience to whom the cfr is primarily directed. 8. the cfr should',
2430:'provide information that addresses the areas of the board’s objectives as identified in sffac 1: 1 budgetary integrity, 2 operating',
2431:'performance, 3 stewardship, and 4 systems and control. the board does not intend that the cfr should satisfy all of',
2432:'the board’s objectives for all audiences. it earlier provided that each of the reporting objectives could be met to a',
2433:'greater or lesser degree by different statements prepared by different entities. for example, program and financing schedules for individual budget',
2434:'accounts 3 the board acknowledges that this concepts statement addresses only some aspects of cfr reporting. it may address further',
2435:'aspects as more experience is gained in cfr reporting. 4 toward a report to citizens on the state of their',
2436:'nation and the performance of their government: proceedings of the aga task force on a report to citizens on the',
2437:'state of the nation, november 1994, p.12the report did not define “average citizen.” 5 based on the definition of a',
2438:'general user as described in the financialaccounting standards board concepts statement 1. the fasab narrowed the definition to make it',
2439:'specific to the federal government. page 4 concepts 4 fasab handbook, version 20 06/21 concepts 4 could help address budgetary',
2440:'integrity, and financial statements from organizations could help address operating performance.6 9. sffac 1 also provides that information should be',
2441:'reliable, relevant, consistent, comparable, understandable and timely. while all of these characteristics are important for all reports and all users,',
2442:'it is particularly fundamental that the cfr be timely and understandableforcitizensand citizen intermediaries. thecontentand structure of the cfr should be',
2443:'clear and complete to citizens and citizen intermediaries and the cfr should be available on a timely basis. for example,',
2444:'to be timely, the cfr should be issued not less than annually and as close to the end of the',
2445:'fiscal year as is possible.7 basis for conclusions this statement may be affected by later statements. the fasab handbook is',
2446:'updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text',
2447:'of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future',
2448:'changes. the reader can review the basis for conclusions of the amending statement for the rationale for each amendment. intended',
2449:'audience for the consolidated financial report cfr 10. this appendix does not constitute authoritative guidance for those who prepare and',
2450:'audit general purpose federal financial reports. it summarizes important matters that the fasab members considered as they deliberated on this',
2451:'statement. it includes reasons for accepting certain approaches and rejecting others. individual board members gave greater weight to some factors',
2452:'than to others. 11. fasab published the exposure draft, target audience and qualitative characteristics for the consolidated financial report of',
2453:'the united states government, march 19, 2002. there were 12 respondents as described in the table below: 6 statement of',
2454:'federal financialaccounting concepts 2, entity and display, par. 56. 7 the board understands that the preparer’s ability to meet this',
2455:'goal is beyond the board’s purview. guidance on reporting deadlines is provided by the office of management and budget. page',
2456:'5 concepts 4 fasab handbook, version 20 06/21 concepts 4 category federal civilian federal military nonfederal users, academics, and others',
2457:'includes professional organizations 5 preparers and financial managers 6 1 totals 6 1 5 12. in general, respondents agreed with',
2458:'the board’s identification of the primary audience as citizens and citizen intermediaries. other respondent comments are addressed in the discussions',
2459:'that follow. 13. in providing guidance on the cfr, the board primarily relied on its earlier conclusions supporting decisions on',
2460:'sffac 1, objectives of federal financial information. it then filtered into those conclusions its years of experience subsequent to its',
2461:'earlier conceptual work and other pertinent literature that describes user groups of governmentlevel financial information. in particular, the board relied',
2462:'on one of the most extensive studies on user needs for federal government financial information, the joint uscanadian user needs',
2463:'study, federal government reporting study of march 1986. in this study, conducted by the us comptroller general and theauditor general',
2464:'of canada, the researchers identified similar groups of users as those the board had identified in sffac 1 and in',
2465:'this document. 14. the board agreed that, in general, users of federal financial information fall into the four categories identified',
2466:'in sffac 1: citizens, congress, executives, and program managers.8 however, for information at the more highly summarized governmentwide or consolidated',
2467:'level the board divided those four groups identified in sffac 1 into two major groups: external users citizens, and internal',
2468:'users congress, executives, and program managers. 15. the board believes that citizens should be the primary audience for the cfr.',
2469:'this is based on the notion that citizens as compared to the other groups do not have ready access to',
2470:'moredetailed federalfinancial reportson which tomake decisions. moreover, theymaynot have the knowledge or desire to take the time to understand more',
2471:'sophisticated reports, preferring instead to look to a more summarized report for highlights of interest. thus, the board believes that',
2472:'the cfr should not attempt to meet all users needs for all objectives. instead it should focus on meeting the',
2473:'basic needs of citizens for highly summarized information. 8 sffac 1, par. 88104. page 6 concepts 4 fasab handbook, version',
2474:'20 06/21 concepts 4 16. further, for the cfr the board believes that the citizen user group identified in sffac',
2475:'1 has two different sets of needs and therefore should be divided into two groups: citizens and citizen intermediaries. citizen',
2476:'needsare morespecificallytargeted to issuesof general interest and to broad indicators of the overall financial health of the government. on the',
2477:'other hand, citizen intermediaries devote more time to reading, analyzing, and interpreting more detailed information that they then analyze, summarize,',
2478:'and pass on to citizens for further application. for these reasons, the board expanded its original four groups of users',
2479:'to five user groups for the cfr. the group characteristics are summarized in the paragraphs that follow. external users 17.',
2480:'citizens. this group includes individuals outside the government who are interested in information that supports their goals of generating and',
2481:'preserving income and savings, and improving their standard of living.9 citizens are interested in many aspects of the federal government.',
2482:'they are concerned about individual programs, candidates for office, the services the government provides, and the fiscal responsibility of their',
2483:'elected and appointed representatives. citizens receive and pay for government services and therefore are concerned with the outputs and outcomes',
2484:'of those services and the efficiency with which they are provided. citizens are concerned about their families and, in particular,',
2485:'with the financial burden their children and grandchildren will inherit.10 these users are interested in a “comprehensive but concise…report [that',
2486:'would provide] a broad and complete picture of the government’s…many and varied activities and resulting overall financial position.”11 18. citizen',
2487:'intermediaries. this group also includes individuals from outside the government. it includes, among others, individuals such as: the media; public',
2488:'interest and advocacy groups;stateandlocallegislatorsandexecutives;andanalystsfromcorporations,academe and elsewhere. as citizens typically have limited time and ability to analyze reports about their government,',
2489:'they want and rely on assurances that the government is functioning economically, efficiently, andeffectively.12 however,citizens,forthe mostpart,“wouldlookto analysts in the media,',
2490:'financial institutions, policy institutes, etc., to do such analysis for them.”13 citizen intermediaries would analyze and interpret the more detailed',
2491:'information to 9 federal government reporting study: a joint study by the office of the auditor general of canada and',
2492:'the us government accountability office, march 1986, p.10. 10 sffac 1, par. 77. 11 federal government reporting study, p.v. 12',
2493:'sffac 1, paragraph 77. 13 ibid. p.5. page 7 concepts 4 fasab handbook, version 20 06/21 concepts 4 deliver it',
2494:'to citizens. they also would provide more indepth analysis that citizens may not havethedesireor theabilitytoperform. citizenintermediariestypicallyhavemore skill,time and ability to',
2495:'gather and analyze detailed data from alternative sources. 19. intermediaries are interested in all of the major facets of each',
2496:'of the board’s objectives, including individual programs; government services and activities; fiscal responsibility of elected and appointed representatives; program outputs',
2497:'and outcomes; and assurances of governmenteconomy,efficiencyandeffectiveness. intermediaries,therefore,areinterested in a wider array of information on all aspects of budget, program operations,',
2498:'the federal government’s stewardship, and systems and controls. “media and analysts are the most frequent direct users of federal government',
2499:'financial reports, the major source of information about the government for citizens and corporations, and an important source of informationfor',
2500:'legislators.”14 the board believesthatintermediariesmay relyonthecfras a starting point but that they will seek more detailed reports. 20. theboardagrees withtheconclusionofthe federalgovernmentreportingstudy.',
2501:'a significant finding was that “users depend on each other for the communication of financial information about the federal government.',
2502:'legislators generally considered to have a primary role in the use of federal government financial information depend to a considerable',
2503:'extent on the interpretations of information by analysts and the media to provide them with the understanding they need. this',
2504:'also applies to citizens and corporations. thus, needsof analysts andthemediaare considered crucial because, if they are not well served, the',
2505:'understanding of government activities by others will suffer.”15 internal users 21. internal users are those groups inside the federal government',
2506:'who typically have more accesstothe myriad of federalgovernment informationincludingsummarizedand detailed financial, program, budget, cost, and economic reports and analyses for',
2507:'all entities. because they are able to get information on their specific issues of interest, they might benefit from the',
2508:'cfr but are not its primary audience. internal users include congress, federal executives, and program managers. of these three internal',
2509:'users, some have considered congress as the ultimate intermediary between the public and its government. that notwithstanding, congress, as would',
2510:'the other internal users, has access to more specific internal information and reports for conducting its work. thus they are',
2511:'not the main audience of the cfr. however, these users may rely on the cfr with its broad indicators and',
2512:'summarized information as “a reference document to lead to more detailed or 14 ibid. pp.56. 15 ibid. pp. ivv. page',
2513:'8 concepts 4 fasab handbook, version 20 06/21 concepts 4 disaggregated information in specific areas.”16 each internal user has access',
2514:'to detailed, disaggregated information, but relies on summarized data in a more limited capacity as indicators for general governmental financial',
2515:'position and condition. internal users would use the cfr to provide “an overall picture of the financial health of the',
2516:'government that is not available elsewhere…[and provide it with] a general framework to situate [its] own activities.”17 summary 22. based',
2517:'on the above analysis, the board concluded that the cfr would be of general interest to five user groups. however,',
2518:'the board believes that the external user groups representing the general public, that is, citizens and citizen intermediaries, are the',
2519:'primary audiences for the cfr. 23. the board also considered comments from respondents to its exposure draft see paragraph 11.',
2520:'some respondents requested that specific individuals be added to the examples of persons included in the citizen intermediary group. since',
2521:'the board intended that the individuals listed in the group description were typical examples rather than an exhaustive list, it',
2522:'decided not to expand the list of examples. rather it decided to slightly modify the wording of the description of',
2523:'the citizen intermediary group to clarify that the individuals and groups listed are typical examples and not an exhaustive list.',
2524:'qualitative characteristics 24. to be useful, fasab’s sffac 1 provides that information should be reliable, relevant, consistent, comparable, understandable and',
2525:'timely. the fasab considers these characteristics as it deliberates standards applicable to all federal reporting entities, both agency level and',
2526:'the government as a whole. in the federal environment, satisfaction of these characteristics occurs when fasab develops standards for federal',
2527:'reporting. at the cfr level, where the audited agency level data are aggregated, the manner in which the data are',
2528:'presented to the general audience for which the cfr is intended is a fundamental consideration. because federal financial statements differ',
2529:'from commercial financial statementsin concept, form, volume, and complexityand the intended audience for federal financial statements is so all encompassing,',
2530:'the fasab is emphasizing the need for the cfr to be understandable. the board concurs with a study by theassociation',
2531:'of governmentaccountants on government accountability reporting that concluded that, “the problem of reporting to the citizens is not primarily one',
2532:'of inability to develop meaningful 16 ibid. p.8. 17 ibid. p.9. page 9 concepts 4 fasab handbook, version 20 06/21',
2533:'concepts 4 informationorlackof it. rather, theprincipalproblem isthe mannerin which thisinformation is communicated to theamerican citizens.”18 the study suggested that the',
2534:'abundance of detailed financial data published by the government does not give citizens a succinct and comprehensive picture of the',
2535:'government’s activities. 25. to support supplying citizens with a full picture of government activities in an understandable manner, the board',
2536:'concluded that each user group should be able to easily locate the types of information in which it might be',
2537:'interested. for example, if an item is reported, all information related to that item should be reported in one primary',
2538:'location, if feasible.19 if not feasible, the report should provide clear linking language, notes, or other information that would guide',
2539:'the reader to the information on the item or topic that is split among different sectionsof thereport. ultimately, thecfr’scontentandstructureshouldbe clear',
2540:'and complete to users. 26. in addition to the characteristic of understandability to citizens who may not have detailed knowledgeofaccountingprinciplesdiscussedabove,thisconceptsstatement',
2541:'emphasizes the qualitative characteristic of timeliness as being important for the cfr. as noted in sffac 1 par. 162, “if',
2542:'financial reports are to be useful, they must be issued soon enough to affect decisions.” no matter how relevant, reliable,',
2543:'consistent, or comparable information might be, if the intended audience does not understand the information or if the information is',
2544:'not available in a timely manner, the information will not be useful to or used by that audience. 27. the',
2545:'board also considered comments from some respondents who did not believe that the qualitative characteristics of understandability and timeliness should',
2546:'be emphasized at the expense of theother 4 characteristicsrelevance, reliability,consistenceand comparability. the board affirmed that its intent as stated in',
2547:'paragraph 9 of the exposure draft was to acknowledge that all 6 characteristics were important for all reports and users.',
2548:'its focus on the characteristics of understandability and timeliness related to the aggregated nature of the report and the intended',
2549:'audiences. it decided to delete the last two sentences of paragraph 22 of the exposure draft: thus, these two qualitative',
2550:'characteristics understandability and timeliness serve as a foundation for constructing accounting standards for a useful cfr. the board will consider',
2551:'the other qualitative characteristics as standards are developed, considered, and adopted. 18toward a report to citizens on the state of',
2552:'their nation and the performance of their government: proceedings of the aga task force on a report to citizens on',
2553:'the state of the nation, november 1994, p.25. 19 if items to be reported have mixed levels of audit coverage,',
2554:'the level of audit coverage for each item should be clearly identified. the audit standards inau 558 will govern the',
2555:'labeling of the items. page 10 concepts 4 fasab handbook, version 20 06/21 concepts 4 28. the board believes that',
2556:'these two sentences caused some respondents to conclude the other 4 characteristics were not important to the board. general purpose',
2557:'financial reporting 29. since the board considers the cfr a general purpose financial report, it reiterates its discussionfromsffac1, whereit describedthelimitationsoffinancialreporting.',
2558:'itsaidthat “general purpose financial reporting is not the only source of financial information … in many cases, users of general',
2559:'purpose financial reports need to consult other sources to satisfy their information needs…while certain information is provided by general purpose',
2560:'financialreports, otherinformationisbetterprovidedby, orcan beprovidedonlyby,financial reporting outside such reports. still other information is provided by nonfinancial reports or by financial reports',
2561:'about segments of the national society other than the federal government and its component entities e.g., economic reporting.” 20 board',
2562:'approval 30. the board unanimously approved issuing this concepts statement. 20 sffac 1, objectives of federal financial reporting, par. 3031.',
2563:'page 11 concepts 4 fasab handbook, version 20 06/21 concepts 4 appendixa: objectives of federal financial reporting21 31. budgetary integrity.',
2564:'federal financial reporting should assist in fulfilling the government’s duty to be publicly accountable for monies raised through taxes and',
2565:'other means and for their expenditure in accordance with the appropriations laws that establish the government’s budget for a particular',
2566:'fiscal year and related laws and regulations. federal financial reporting should provide information that helps the reader to determine how',
2567:'budgetary resources have been obtained and used and whether their acquisition and use were in accordance with the legal authorization,',
2568:'the status of budgetary resources, and howinformationontheuseofbudgetaryresourcesrelatestoinformationonthecostof programs [and] operations and whether information on the status of budgetary resources is',
2569:'consistent with other accounting information on assets and liabilities. 32. operating performance. federal financial reporting should assist report users in',
2570:'evaluating the service efforts, costs, and accomplishments of the reporting entity; the manner in which these efforts and accomplishments have',
2571:'been financed; and the management of the entity’s assets and liabilities. federal financial reporting should provide information that helps the',
2572:'reader to determine the costs of providing specific programs and activities and the compositions of, and changes in, these costs;',
2573:'the efforts and accomplishments associated with federal programs and the changes over time and in relation to costs; and the',
2574:'efficiency and effectiveness of the government’s management of its assets and liabilities. 33. stewardship.federal financial reporting should assist report usersin',
2575:'assessing the impact on thecountryof thegovernment’soperationsandinvestmentsfortheperiod and how, asa result, the government’s and the nation’s financial conditions have changed and',
2576:'may change in the future. 34. federal financial reporting should provide information that helps the reader to determine whether the',
2577:'government’s financial position improved or deteriorated over the period, 21 from statement of federal financialaccounting concepts 1, sffac 1, objectives',
2578:'of federal financial reporting, par. 1317. page 12 concepts 4 fasab handbook, version 20 06/21 concepts 4 future budgetary resources',
2579:'will likely be sufficient to sustain public services and to meet obligations as they come due, and government operations have',
2580:'contributed to the nation’s current and future wellbeing. 35. systems and controls. federal financial reporting should assist report users in',
2581:'understanding whether financial management systems and internal accounting and administrative controls are adequate to ensure that transactions are executed in',
2582:'accordance with budgetary and financial laws and other requirements, consistent with the purpose authorized, and are recorded in accordance with',
2583:'federal accounting standards; assets are properly safeguarded to deter fraud, waste, and abuse, and performance measurement information is adequately supported.',
2584:'page 13 concepts 4 fasab handbook, version 20 06/21 concepts 4 appendix b:acronyms aicpa – american institute of certified publicaccountants',
2585:'cfr – consolidated financial statement of the us government fasab – federalaccounting standardsadvisory board gaap – generally accepted accounting principles',
2586:'sffac – statement of federal financialaccounting concepts sffas – statement of federal financialaccounting standards page 14 concepts 4 fasab handbook,',
2587:'version 20 06/21 statement of federal financialaccounting concepts 5: definitions of elements and basic recognition criteria foraccrualbasis financial statements status',
2588:'issued affects affected by december 26, 2007 none. none. see pages 67 for the preamble to statement of federal financialaccounting',
2589:'concepts www.fasab.gov/pdffiles/handbookpreamble.pdf. summary objective of this statement elements of financial statements result from an entitys transactions or other events that',
2590:'affect the entity. elements are the “building blocks” of financial statementsthe broad classes of items from which the statements are',
2591:'constructed. this statement defines five elements of accrual basis financial statements of the federal government. items that meet the definitions',
2592:'also are elements of accrualbasis financial statements of the relevant component entity. the elements are defined as follows: an asset',
2593:'is a resource that embodies economic benefits or servicesthat the federal government controls. aliability is a present obligation of the',
2594:'federal government to provide assets or services to another entity at a determinable date, when a specified event occurs, or',
2595:'on demand. net position or its equivalent, net assets, is the arithmetic difference between the total assets andtotalliabilities recognized in',
2596:'the federalgovernmentsor a component entitysbalance sheet. net position may be positive assets greater than liabilities or negative assets less than',
2597:'liabilities. arevenue is an inflow of or other increase in assets,a decrease in liabilities, or a combination of both that',
2598:'results in an increase in the governments net position during the reporting period. an expense is an outflow of or',
2599:'other decrease in assets, an increase in liabilities, or a combination of both that results in a decrease in the',
2600:'governments net position during the reporting period. page 1 concepts 5 fasab handbook, version 20 06/21 concepts 5 this statement',
2601:'establishes two basic recognition criteria that an item must meet to be a candidate for recognition in the body of',
2602:'a financial statement: 1 the item must meet the definition of an element and 2 the item must be measurable,',
2603:'meaning a monetary amount can be determined with reasonable certainty or is reasonably estimable. an item that meets the definition',
2604:'of an element but is not measurable is a candidate for disclosure in the notes to financial statements or as',
2605:'supplementary information. meeting the basicrecognition criteriaisa necessary but not a sufficient condition forrecognition. additional considerations for a recognition decision are',
2606:'measurement of the candidate for recognition and assessmentsof thematerialityand benefit versus cost of the amount measured. measurement entails selection of',
2607:'an appropriate attribute, such as historical cost, fair value, or expected value, andapplication of ameasurement method. measurementmayrequirethe use of estimates',
2608:'or approximations and, for items that meet the definition of an asset or a liability, an assessment of the probability',
2609:'that future inflows or outflows of economic benefits or services will result from the item. this statement includes a discussion',
2610:'of the effects of uncertainty on financial reporting but does not otherwise address the assessment of probabilities or other measurement',
2611:'issues. the board intends to address those considerations for recognition decisions in future pronouncements. in the meantime, this statement does',
2612:'not change existing standards for assessing probabilities or for selecting the appropriate measurement attribute, which the board expects will continue',
2613:'to be based on the reporting objectives, qualitative characteristics, and costbenefit constraints applicable to financial information. reasons for this statement',
2614:'questions have arisen about the usefulness of certain definitions of elements in current standards and their applicability to transactions outside',
2615:'the scope of the defining standard, as well as about the absence of definitions of other important elements, such as',
2616:'assets. the board believes that a concepts statement that defines the elements of federal accrualbasis financial statements and establishes basic',
2617:'criteria for selecting candidates for recognition will be an important part of its conceptual framework. the board believes that this',
2618:'statement will provide more consistent, useful, and enduring guidance to the board and its constituents than establishing definitions and recognition',
2619:'requirements standard by standard. the concepts, definitions, and basic recognition criteria in this statement will provide a common foundation fordistinguishingbetween',
2620:'itemsthatmeet the definitionsof elementsof accrualbasis financialstatementsandthosethat do not, and between itemsthat are candidatesforrecognition in the body of financial statements and',
2621:'those that qualify only for disclosure in the notes or as supplementaryinformation. theboardthereforebelievesthattheguidanceinthisstatementwill enhance the understandability, consistency, and comparability of',
2622:'financial reporting for the page 2 concepts 5 fasab handbook, version 20 06/21 concepts 5 benefit of users, preparers, and',
2623:'auditors of the financial statements as well as the board itself. as a result, the board believes that this statement',
2624:'will contribute to meeting the governments overall financial reporting objectives of demonstrating accountability and providing useful information, as well as',
2625:'the more specific objectives of assisting users in evaluating a reporting entitys operating performance and stewardship. effect on practice the',
2626:'concepts in this statement are consistent with those established in earlier sffacs,1 which are not superseded or modified by this',
2627:'statement. the definitions of elements and basic recognition criteria in this statement also are generally consistent with current practice and',
2628:'do not imply radical change. however, they are expected to guide the boards future deliberations. 1sffac 1, objectives of federal',
2629:'financial reporting; sffac 2, entity and display; sffac 3, managements discussion and analysis; and sffac 4, intended audience and qualitative',
2630:'characteristics for the consolidated financial report of the united states government. page 3 concepts 5 fasab handbook, version 20 06/21',
2631:'concepts 5 table of contents page summary 1 acronyms 5 introduction 6 purpose of this statement 6 elements and recognition',
2632:'6 concepts 7 recognition 7 basic recognition criteria 7 additional considerations for recognition decisions 7 entity concept 8 definitions of',
2633:'elements 10 applicability of existing conditions, including current law 10 assets 10 liabilities 15 net position, revenues, and expenses 18',
2634:'effects of uncertainty 19 appendixa:basis for conclusions 21 appendix b: glossary 37 appendix c:generallyacceptedaccountingprinciples 39 page 4 concepts 5 fasab',
2635:'handbook, version 20 06/21 concepts 5 acronyms acsec accountingstandardsexecutive committee oftheaicpa aicpa americaninstituteofcertifiedpublicaccountants ed exposure draft fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards',
2636:'board gaap generalacceptedaccountingprinciples gasb governmentalaccountingstandards board sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards page 5 concepts 5 fasab handbook, version 20 06/21 concepts',
2637:'5 introduction purpose of this statement 1. this statementoffederalfinancialaccountingconcepts sffac establishesdefinitions and basic recognition criteria2 for elements of accrualbasis financial',
2638:'statements of the federal government and its component entities. the concepts it contains are consistent with the concepts established in',
2639:'earlier sffacs,3 which are not superseded or modified by this statement. the definitions of elements and basic recognition criteria in',
2640:'this statement also are generally consistent with current practice and therefore do not imply a fundamental change. however, they are',
2641:'expected to guide the board’s future deliberations. elements and recognition 2. the term elements refers to broad classes of items,',
2642:'such as assets and liabilities, that comprise the building blocks of financial statements. components of those broad classes, such as',
2643:'cash, investments, and debt instruments, may meet the definitions of elements but are not elements as the term is used',
2644:'in this statement. instead, they are called items or by descriptive names. this statement focuses on the broad classes and',
2645:'their characteristics instead of defining particular assets, liabilities, or other items. notes to financial statements generallyare considered an integralpart of',
2646:'financial statements, but theyare not elements. they serve different functions, including amplifying or complementing information about items reported in the',
2647:'body of financial statements. 3. theelementsofaccrualbasisfinancialstatementsdefinedinthisstatementparagraphs18 through 56 are assets, liabilities, net position, revenues, and expenses. the definitions of assets',
2648:'and liabilities derive from the essential characteristics of those elements. the definitions of net position, revenues, and expensesderive from the',
2649:'definitions of assets and liabilities. 4. the terms recognition and recognize refer to the process of formally recording or incorporating',
2650:'an element into the financial statements of an entity. recognition comprises 2terms defined in the glossary are printed in boldface',
2651:'type the first time they appear in the text. 3sffac 1, objectives of federal financial reporting; sffac 2, entity and',
2652:'display; sffac 3, management’s discussion and analysis; and sffac 4, intended audience and qualitative characteristics for the consolidated financial report',
2653:'of the united states government. page 6 concepts 5 fasab handbook, version 20 06/21 concepts 5 depictionof an element inbothwordsand',
2654:'numbers,with theamount includedin thetotalsof the financial statements. for an asset or liability, recognition involves recording not only acquisition or incurrence',
2655:'of the item but also later changes in it, including changes that result in removal from the financial statements. concepts',
2656:'recognition basic recognition criteria 5. basic recognition criteria are the conditions an item should meet in order to be a',
2657:'candidate for recognition in the financial statements. the basic recognition criteria established in this statement are a the item meetsthe',
2658:'definition of an element of financialstatements andb the item is measurable. as used in this statement, the term measurable means',
2659:'that a monetary amount can be determined with reasonable certainty or is reasonably estimable. 6. the existence or measurability or',
2660:'both of many assets, liabilities, and other elements may not be certain, but this statement does not require certainty. uncertainty',
2661:'and its effects on financial reporting are discussed in paragraphs 57 through 59. conclusions about whether an element exists and',
2662:'is measurable may require judgment based on the available evidence. additional considerations for recognition decisions 7. meeting both of the',
2663:'basic recognition criteria established in paragraph 5 is a necessary but not a sufficient condition for recognition. additional steps are',
2664:'necessary before a recognition decision can be made. for example, a candidate for recognition needs to be measured. measurement of',
2665:'an item entails the selection of an appropriate attribute to be measured, such as historical cost, fair value, or expected',
2666:'value, and application of a measurementmethod. measurementmayrequiretheuseofestimatesandapproximations as well as an assessment, in a manner consistent with the attribute being',
2667:'measured, of the probabilitythat future inflowsor outflowsof economicbenefitsorserviceswill result fromthe item. recognition decisions also incorporate the results of assessments of',
2668:'the materiality and benefit versus cost of recognizing the item measured. thus, it is possible that an item that meets',
2669:'the basic recognition criteria would not be recognized due to measurement, materiality, or costbenefit considerations. page 7 concepts 5 fasab',
2670:'handbook, version 20 06/21 concepts 5 8. this statement establishes the basic recognition criteria for elements but does not address',
2671:'these additional considerations for recognition decisions. the board intends to establish concepts and standards for these additional considerations in future',
2672:'pronouncements. in the meantime, this statement does not change existing standards for measurement or for assessing probabilities. the board expects',
2673:'that the selection of an appropriate measurement attribute in specific circumstances will continue to be based on the reporting objectives,',
2674:'qualitative characteristics, and cost–benefit constraints applicable to financial information. 9. an item that meets the appropriate definition of an element',
2675:'is an asset, liability, revenue, or expense, even if it is not recognized in the accrualbasis financial statements because, for',
2676:'example, it is not measurable or its amount is not material. unrecognized elements are candidates for disclosure in the notes',
2677:'to financial statements or as supplementary information. entity concept 10. all elements defined in this statement are defined in relation',
2678:'to the u.s. government “federalgovernment” or “government”. thatis,anitemthatmeetstherelevantdefinitionis an asset, liability, net position, revenue, or expense of the federal government.',
2679:'an item that meets the basic recognition criteria established in paragraph 5 and the additional considerations for recognition decisions referred',
2680:'to in paragraph 7 is recognized in the consolidated financial statements of the federal government, except when it is eliminated',
2681:'in the consolidation process, as discussed in paragraphs 14 and 15. 11. the federal government is composed of component entities',
2682:'that control, manage, or are otherwise accountable for the government’s assets and may be authorized to incur liabilities. component entities',
2683:'include departments, independent agencies, and government corporations, as well as their agencies, bureaus, offices, administrations, corporations,andotherorganizationalunits. anitemthatmeetsthedefinitionofanelement of the federal',
2684:'government is also an element of a component entity. it is recognized in the component entity’s accrualbasis financial statements provided',
2685:'it meets the basic recognition criteria and the additional considerations for recognition decisions. 12. sometimes a question may arise as',
2686:'to which component entity should report a particular item. typically, a review of the authorizing legislation establishing a government program',
2687:'or activity, the appropriations act funding it, and related federal laws, regulations or other executive issuances clearly identifies one component',
2688:'entity as having a comprehensive relationship to the program or activity. that is, the component entity is responsible and accountable',
2689:'for receiving, controlling, managing, and utilizing government assets or incurring liabilities on behalf of the government in performing operations related',
2690:'to the page 8 concepts 5 fasab handbook, version 20 06/21 concepts 5 program or activity. when a component entity',
2691:'has such a comprehensive relationship, the assets and other elements involved should be reported by that component entity. 13. when',
2692:'no component entity has a comprehensive relationship to a government program or activity, the assets and other elements involved should',
2693:'be reported by the component entity most responsible for managing them. for example, assume that two component entities support a',
2694:'single program to which neither has a comprehensive relationship. if one of the component entities has acquired and has some',
2695:'control over a government asset but the other component entity presently manages and utilizes the asset as part of its',
2696:'routine operations, the second component entity should report the asset. in other circumstances, a component entity’s management responsibilities may be',
2697:'limited to, for example, collecting moniesowedtothefederalgovernmentanddepositingthemintheu.s. treasury. although the component entity hasno authority or responsibilityto retain or use the monies',
2698:'collected, it should report the assets and other elements involved in the collection activity. 14. while items that meet the',
2699:'definition of an element from the perspective of the federal government are assigned to component entities, some items recognized in',
2700:'the accrual basis financial statements of component entities are not recognized in the consolidated financial statements of the federal government',
2701:'because they do not meet definitions of elements from the perspective of the federal government. instead, they are items that',
2702:'would meet element definitions from the component entity perspective and are treated as suchbythecomponententity. forexample,componententitiesmayexchangeservicesfor afeeand recognize the resulting intragovernmental',
2703:'assets, liabilities, and related elements in their financial statements. however, intragovernmental items offset each other when the government is viewed',
2704:'as a whole and are eliminated in preparing the government’s consolidated financial statements. 15. appropriations are another example of items',
2705:'reported in the accrualbasis financial statements of component entities but not in the consolidated financial statements of the federal government.',
2706:'for the component entities, appropriations are inflows of resources againstwhichthe componententitymayincurobligationsinsupport of authorized activities. assuming an appropriation complies with the',
2707:'basic recognition criteria and additional considerations for recognition decisions, a component entity would recognize the appropriation as an increase in',
2708:'assets and revenues and would recognize the use of the appropriation as an increase in expenses and a decrease in',
2709:'fund balance with treasury. however, from the perspective of the government as a whole, an appropriation is not a resource',
2710:'flow to the federal government or from the government to a component entity. rather, it is a budgetary amount that',
2711:'constitutes legal authority for a component entity to incur obligations for specified purposes during specified time periods, and for the',
2712:'u.s. treasurytoliquidatetheresultingobligationsofthecomponententity. theactualliquidation will be from cash and other assets of the u.s. treasury resulting from the inflow of resourcesfromtaxesandotherfinancingsources.',
2713:'therefore,appropriationsrecognizedby page 9 concepts 5 fasab handbook, version 20 06/21 concepts 5 componententitiesareeliminated inthe processof consolidation andarenotreportedinthe consolidated financial statements',
2714:'of the federal government. 16. the definitions of elements may refer to another entity or other entities. for the federal',
2715:'government, these terms describe entities external to the government, such as foreign, state, and local governments, business enterprises, notforprofit organizations,',
2716:'and individuals. foracomponententity,theterms another entity and other entities includeother component entities of the government as well as entities external to',
2717:'the government. definitions of elements applicability of current conditions, including current law 17. assessments of whether an item meets the',
2718:'definition of an asset, liability, revenue, or expense are based on conditions that exist at the reporting date, including current',
2719:'law, because all elements of accrualbasis financial statements are based on transactions or events that already have occurred. therefore, if',
2720:'an item meets or does not meet the definition of an element under the conditions in effect at the reporting',
2721:'date, the power of the government to subsequently change those conditions does not eliminate or create an element at the',
2722:'reporting date. for example, if an item meets the definition of a liability at the reporting date, the power of',
2723:'the government to subsequently change the law so that the item no longer meets the definition does not eliminate the',
2724:'existence of the liability at the reporting date. assets definition of an asset 18. an asset is a resource that',
2725:'embodies economic benefits or services that the federal government controls. 19. the definition of an asset addresses only whether an',
2726:'asset exists. it does not address whether the asset is measurable and, if so, how it should be measured or',
2727:'whether or when it should be recognized in the federal government’s or a component entity’s balance sheet. nor does the',
2728:'definition address whether or when the economic benefits or services embodied in an asset will be used. basic recognition criteria',
2729:'for all elements of accrual basis financial statements are set forth and discussed in paragraphs 5 through 9. those paragraphs',
2730:'also indicate that measurement issues and other considerations for recognition decisions will be addressed in future pronouncements. in addition, paragraph',
2731:'6 acknowledgesthe possibilityof uncertaintyabout whether an item meetsthe definition of an page 10 concepts 5 fasab handbook, version 20 06/21',
2732:'concepts 5 element and the need for judgment based on the available evidence. however, this statement does not establish a',
2733:'threshold to be assumed in applying judgment. 20. the definition of an asset derives from the nature of assets—that is,',
2734:'their essential characteristics. an essential characteristic of an asset is one that is inherent to all assets and, therefore, without',
2735:'it an asset would not exist. paragraphs 21 through 35 highlight and discuss those characteristics. also discussed are certain characteristics',
2736:'that are common to many assets but not to all assets. as such, those characteristics are not essential, but they',
2737:'may provide additional evidence that an asset exists. essential characteristics ofassets 21. the federal government needs financial, economic, human, and',
2738:'other resources to help it achieve its mission. in this context, the term resource means “a useful or valuable possession',
2739:'or quality of a country, organization or person”4or a “means of supplying a want.”5thegovernmenthasnumerousresources. however,thoseresourcesarenotassets unlesstheyhave theessentialcharacteristicsofassetsand, therefore,meet the definition',
2740:'of assets in paragraph 18. 22. to be an asset of the federal government, a resource must possess two characteristics.',
2741:'first,itembodieseconomicbenefitsorservicesthatcanbeusedinthefuture. second,the government controls access to the economic benefits or servicesand, therefore, can obtain them and deny or regulate the',
2742:'access of other entities. 23. to illustrate the distinction between a resource that is an asset and one that is',
2743:'not, the federal government may obtain economic benefits or services from a resource but be unable to deny or regulate',
2744:'the access of other entities to those benefits or services. if so, the resource is not an asset of the',
2745:'federal government. for example, outer space is a natural resource from which the federal government can obtain economic benefits. however,',
2746:'outer space is not an asset of the federal government because the government cannot deny or regulate the access of',
2747:'others. in contrast, natural resources under federal lands qualify as federal government assets because the government can obtain the economic',
2748:'benefits and regulate the access of other entities as provided under federal law. such natural resources are assets of the',
2749:'federal government even if they are not measurable and therefore are not candidates for recognition in the financial statements. 4',
2750:'american heritage dictionary of the english language, fourth edition houghton mifflin company, 2000 5 the concise oxford dictionary oxford, u.k.:',
2751:'oxford university press, 1964. page 11 concepts 5 fasab handbook, version 20 06/21 concepts 5 24. in addition to the',
2752:'two essential characteristics identified in paragraph 22, many resources haveotherfeaturesthathelpidentifythemasassets. forexample,theymaybeacquiredat a cost and owned by the federal government. however,',
2753:'those features are not characteristics of all assets. whereas access to economic benefits or services often is obtained through legal',
2754:'ownership of the underlying item of property,legalrightsto economic benefits or services can be obtained without ownership of the property—for example,',
2755:'under certain lease arrangements. 25. the federal government’s resources often are tangible and exchangeable, and the government often has legally',
2756:'enforceable rights of access to the resulting benefits. but the absence of those features is not sufficient to preclude an',
2757:'item from qualifying as an asset. for example, an intangible resource, such as an easement on property, is an asset',
2758:'if the federal government can benefit from it and regulate or deny the access of other entities. a resource may',
2759:'embody economic benefits even though the federal government cannot exchange it or sell it—for example a machine that continues to',
2760:'provide a needed service even though there is no market for the machine. similarly, the fact that the government’s ability',
2761:'to access or use a resource is not legally enforceable does not mean that the resource is not an asset,',
2762:'if the government nevertheless can obtain the economic benefits or services it embodies and deny or regulate other entities’ access',
2763:'to or use of those economic benefits or services. economic benefits or services 26. acharacteristic possessedbyall assets is theabilitytoprovide economicbenefitsor',
2764:'services. some sourcesuse the terms economic benefits and services or service potential interchangeably. however, as used in this statement, economic',
2765:'benefits may result in inflows of cash, cash equivalents, goods, or services to the federal government, whereas theservicesembodiedinanassetmaybenefitthegovernmentinotherways. forexample, assets',
2766:'such as public parks, museums, and art galleries often provide recreational, educational, and research opportunities to the public at no',
2767:'charge or for a reduced fee or voluntary contribution, thereby assisting the federal government to achieve its objectives and meet',
2768:'its mission to provide public services. 27. theeconomicbenefitsorservicesthatapropertycanprovidecanbedistinguishedfromthe propertyitself,whetheritistangibleorintangible,suchasaright. notallpropertiesembody economic benefits or services and the assumption that a particular',
2769:'type of property will always be an asset is not justified. for example, whereas equipment normally is expected to provide',
2770:'economic benefits or services, sometimes it has become unusable and has no scrap value. if so, it no longer embodies',
2771:'economic benefits or services and does not meet the definition of an asset. page 12 concepts 5 fasab handbook, version',
2772:'20 06/21 concepts 5 28. the economic benefits or services embodied in resources may be shared by the government and',
2773:'another entity through specific arrangements. for example, the government and another entity may enter into a joint venture and share',
2774:'an interest in the resources committed to the joint venture. if so, each party may possess assets comprising its respective',
2775:'share of the benefits or services. similarly, lease agreements unbundle the economic benefits or services embodied in leased property and',
2776:'may, for example, give the lessee the right to hold and use the property and the lessor the right to',
2777:'receive rentals and any residual value. thus, both parties may have assets corresponding to their respective rights. control by the',
2778:'federal government 29. the second essential characteristic of an asset is control, which refers to the ability of the federalgovernment',
2779:'to obtain the economic benefitsor servicesembodiedin aresource and to deny or regulate the access of others. it is possible that',
2780:'the government doesnot actively exercise control. nevertheless, as long as the government currently has the ability to exercise control, the',
2781:'item is an asset of the government. in exercising control of the economic benefits or services, the government may, depending',
2782:'on the nature of the resource, hold the resource; exchange it; use it to obtain cash, cash equivalents, goods, or',
2783:'services; exact a price for other entities’ use of the economic benefits or services; or use it to settle liabilities.',
2784:'many resources are subject to certain legal or other external constraints, such as public land subject to preservation requirements. such',
2785:'restrictions on the use of a resource do not negate the government’s control of the economic benefits or services embodied',
2786:'in the resource. 30. the ability of the federal government to control access to the economic benefits or services embodied',
2787:'in a resource normally stems from legal rights and may be evidenced by title deeds, contractual agreements, possession, or other',
2788:'devices that protect the government’s interests. however,legalenforceabilityofarightisnotaprerequisitetotheestablishmentof control of access to economicbenefits or services, because the government may be able',
2789:'to exercise control in some other way. 31. possession or ownership of a resource normally entails control of access to',
2790:'the economic benefits or services embodied in it, but that is not always the case. whereas control of access is',
2791:'an essential characteristic of an asset, possession or ownership is not. for example, the government may grant another entity, acting',
2792:'as an agent of the government, physical possession of goods for sale and retain the right to receive the proceeds',
2793:'of sale. the goods are assets of the government because it controls access to the economic benefits embodied in the',
2794:'goods. the agent has physical possession of the goods, but they are not the agent’s assets because it does not',
2795:'control access to the economic benefits. also, as discussed in paragraph 27, through a lease arrangement the government may page',
2796:'13 concepts 5 fasab handbook, version 20 06/21 concepts 5 control access to the economic benefits or services embodied in',
2797:'a resource that it does not own. 32. sometimes the federal government cannot control the economic benefits or services that',
2798:'it obtains from a resource because it cannot deny or regulate the access of other entities. in those circumstances, the',
2799:'resource does not meet the definition of an asset of the federal government. public goods are an example. public highways',
2800:'provide economic benefits to the entities that use them. however, they are assets only of the entity that has the',
2801:'capacity to control their use or regulate other entities’accessto them by, for example, the use of tolls or other restrictions.',
2802:'similarly, natural resources, such as air and water do not qualify as assets of the federal government when it has',
2803:'only general access to them along with all other entities, even if the government has incurred costs to help clean',
2804:'the environment. 33. the federal government obtains most of its resources from cash or credit transactions. the government may acquire',
2805:'resources in exchange for other resources or for an obligation to transfer resources or provide services in the future, or',
2806:'resources may result from the exercise of the government’s powers, such as, for example, the imposition of taxes, penalties, fines,and',
2807:'forfeitures. government resourcesalso may result fromeventssuchas accretion and discovery. 34. implicit in the definition and essential characteristics of assets is',
2808:'that the event giving rise to the government’s ability to control access to the economic benefits or services embodied in',
2809:'a resource must have occurred. the government’s intent or ability to acquire a resource in the future does not create',
2810:'an asset. for the resource to qualify as an asset, the government already must have acquired the resource or otherwise',
2811:'obtained access to the economic benefits or services it embodies to the exclusion of other entities. for example, the mere',
2812:'existence of the government’s power to tax is not an asset because, until the government has exercised that power by',
2813:'imposing a tax and has access to benefits by virtue of completion of a taxable event, no event has occurred',
2814:'to generate resources and there are no resulting economic benefits that the government can control and use in providing programs',
2815:'and services. 35. once acquired, a resource that meets the definition of an asset continues to be an asset until',
2816:'the government transfers it to another entity or uses it up, or until some other event or circumstance destroys the',
2817:'economic benefits or services previously embodied in the resource or removes the government’s ability to obtain them and deny or',
2818:'regulate the access of other entities. page 14 concepts 5 fasab handbook, version 20 06/21 concepts 5 liabilities legal framework',
2819:'36. the federal government is governed by and operates within a framework of laws. thus, a federal liability must have',
2820:'its foundation in law. some federal liabilities result from discrete actions of the government that are authorized by law but',
2821:'are not explicitly required by law. examples are liabilities that result from contractual arrangements, including amounts borrowed, amounts owed for',
2822:'purchased goods and services, and liabilities for providing goods or services to entities that have paid for them in advance.',
2823:'other liabilities flow directly from a law and its implementing regulation that specifically require the federal government to provide assets',
2824:'to another entity. examples include formula grants and subsidies,claimsowed under workers’compensation, and amountsowed forenvironmental cleanup. 37. althoughallfederalliabilitieshavetheirfoundationinlaw,someliabilitiesareconstruedfrom the totalityof the',
2825:'conditions and facts of a particular situation, rather than from specificlegal or regulatory requirements. in those circumstances, the government should',
2826:'weigh the totality of the facts of the situation against the definition and essential characteristics of liabilities discussed in paragraphs',
2827:'41 through 48 and make an informed judgment as to whether or when a liability has been incurred. factors that',
2828:'may affect that conclusion include relevant aspects of the legal framework within which the government is constituted, whether the government',
2829:'has an agreement orunderstanding with another entityconcerning the nature and amount of the government’s obligation and the timing of settlement,',
2830:'and decisions or actions in previous situations that are relevant precedents. 38. settlement of a federal liability often is legally',
2831:'enforceable, as is the case, for example, with contracts. however, laws that create or support federal liabilities do not always',
2832:'confer legally enforceable rights on recipient entities. legal enforceability may provide additional evidence that a liability exists, but it is',
2833:'not a prerequisite. definition of a liability 39. aliabilityisa present obligation6ofthefederalgovernmenttoprovideassets or services to another entity at a determinable date,',
2834:'when a specified event occurs, or on demand. 6 the term obligation is used in this statement with its general',
2835:'meaning of a duty or responsibility to act in a certain way. it does not mean that an obligation of',
2836:'budgetary resources is required for a liability to exist in accounting or financialreporting or that aliability inaccountingor financialreportingis required toexist',
2837:'for budgetary resources to be obligated. page 15 concepts 5 fasab handbook, version 20 06/21 concepts 5 40. the definition',
2838:'of a liability addresses only whether a liability exists and not how it should be measured or whether or when',
2839:'it should be recognized. basic recognition criteria for all elements of accrualbasis financial statements are set forth and discussed in',
2840:'paragraphs 5 through 9. those paragraphs also indicate that measurement issues and other considerations for recognition decisions will be addressed',
2841:'in future pronouncements. in addition, paragraph 6 acknowledges the possibility of uncertainty about whether an item meets the definition of',
2842:'an element and the need for judgment based on the available evidence. however, this statement does not establish a threshold',
2843:'to be assumed in applying judgment. essential characteristics of liabilities 41. similar to the definition of an asset, the definition',
2844:'of a liability is derived from the nature of liabilities—that is, the essential characteristics without which a liability would not',
2845:'exist. a liability of the federal government has two essential characteristics, which are discussed in paragraphs42through48. first,aliabilityconstitutesapresentobligationtoprovideassets or services to',
2846:'another entity. second, either a law or an agreement or understanding between the government and another entity identifies conditions or',
2847:'events that will determine when the obligation will be settled. present obligation 42. as the term is used in this',
2848:'statement, an obligation is a duty or responsibility to act in a certain way. to have a present obligation means',
2849:'that the obligation arose as a result of a past transaction or other event and has not yet been settled.',
2850:'thus, a present obligation should be distinguished from a mere expression of future intent, such as the government’s announcementthatitintendstoacquireequipment. apresent',
2851:'obligationis incurredwhen the government takes a specific action or an event occurs that commits or binds the government. 43. to',
2852:'meet the first essential characteristic of a liability, a present obligation must entail the provision of assets cash, cash equivalents,',
2853:'or goods or services to another entity in the future. for example, the government may have received from another entity',
2854:'goods or services that it has agreed to purchase but has not yet paid for, or it may have agreed',
2855:'to provide assets or services to another entity under certain conditions and those conditions have been met. in these situations',
2856:'the government has a present obligation to fulfill its commitments, even if the actual provision of assets or services is',
2857:'not required until a later date. page 16 concepts 5 fasab handbook, version 20 06/21 concepts 5 44. as indicated',
2858:'in the previous paragraph, for a present obligation to qualify as a liability of the federal government, two separate entities',
2859:'must be involved.7separate entities must be involved because the same entitycannot be both the recipient of settlement of a liabilityand',
2860:'the entity with the duty to settle. for example, when the government operates machinery, the government may have an obligation',
2861:'to maintain it. however, the obligation does not qualifyasaliabilityformaintenancebecausethegovernment cannot havealiabilitytoitself. in contrast, if the government contracts for maintenance from',
2862:'another entity, it may have a liability to that other entity for the price of the maintenance services it has',
2863:'received. settlement of the obligation 45. the second essential characteristic of a liability is that either a law or an',
2864:'agreement or understanding between the government and another entity identifies conditions or events that will determine when the obligation will',
2865:'be settled. the timing of settlement often is expressed in contracts and other agreements as a specific or determinable date.',
2866:'however, in some cases the parties agree that settlement will be triggered by a specific event or by the demand',
2867:'of the recipient of the assets or services, the timing of which may be uncertain. if, at the reporting date,',
2868:'the government and the other entity do not have an agreement or understanding concerning settlement and the government is free',
2869:'to decide whether and when to settle its obligation, the obligation does not meet the definition of a liability. 46.',
2870:'in addition to uncertainty as to the timing of settlement, many present obligations involve uncertainty regarding the amount of settlement.',
2871:'for example, the amount required to settle the obligation may be contingent on the occurrence or nonoccurrence of a future',
2872:'event, such as a decline in market prices. the government nevertheless is obligated to fulfill its obligation upon resolution of',
2873:'any contingencies affecting the timing and amount of settlement. uncertainty regarding the amount or timing of settlement is addressed through',
2874:'measurement of the liability. 47. frequently,thefederalgovernmentknowsbeforesettlementisduewhichspecificentitiesor individuals will receive settlement. however, such advance identification of specific recipients is not an',
2875:'essential characteristic of a liability. for example, the government may have a longterm disability agreement with federal employees without knowing',
2876:'the identity of each of the employees who ultimately will qualify for payment. the obligation qualifies as a liability if',
2877:'both of the essential characteristics of a liability are present. 7as indicated in paragraph 16, for a component entity the',
2878:'other entity could be another component entity. when component entities transact with each other, they are external to each other.',
2879:'paragraph 14 explains that some items meet the definitions of elements from a component entity’s perspective but not from the',
2880:'federal government’s perspective. suchitemswouldbereportedintheaccrualbasisfinancialstatementsoftherelevantcomponententities but would be eliminated in consolidation and therefore would not be reported in the consolidated financial',
2881:'statements of the federal government. page 17 concepts 5 fasab handbook, version 20 06/21 concepts 5 48. once incurred, a',
2882:'liability of the federal government continues as a liability until the government settles it or another event or circumstance discharges',
2883:'it or removes the government’s responsibility to settle it. net position, revenues, and expenses 49. whereas the definitions of assets',
2884:'and liabilities derive from the essential characteristics of those items, the definitions of net position, revenues, and expenses derive from',
2885:'the definitions of assets and liabilities. thus, in assessing whether items meet the definitions of net position, revenues, and expenses,',
2886:'reference should be made to the definitions of their underlying assets or liabilities. definition of net position 50. net position',
2887:'or its equivalent, net assets, is the arithmetic difference between the total assets and total liabilities recognized in the federal',
2888:'government’s or a component entity’s balance sheet. net position may be positive assets greater than liabilities or negative assets less',
2889:'than liabilities. 51. entities often subdivide net position in financial reports to provide information about its composition. however, the reported',
2890:'composition and intended interpretation of net position depend on the particular financial reporting model applied and resulting display requirements. as',
2891:'such, a discussion of the meaning of the government’s or a component entity’s reported net position is beyond the scope',
2892:'of this statement. definitions of revenue and expense 52. arevenue isaninflow of or other increaseinassets,adecreasein liabilities, or a combination of',
2893:'both that results in an increase in the government’s net position during the reporting period. 53. an expense is an',
2894:'outflow of or other decrease in assets, an increase in liabilities, or a combination of both that results in a',
2895:'decrease in the government’s net position during the reporting period. 54. common sources of revenues are charges and fees to',
2896:'other entities for goods or services; tax levies and other impositions; and donations. expenses generally result from the provision of',
2897:'cash, cash equivalents, goods, and services to other entities. transactions that are in substance adjustments or completions of previous transactions',
2898:'rather than new transactions involve the same elements as the original transaction. for example, a tax refund is considered a',
2899:'revenue reduction and not an expense, and reimbursement of one agency’s expense by another agency is considered a reduction of',
2900:'an expense, not a page 18 concepts 5 fasab handbook, version 20 06/21 concepts 5 revenue, to the recipient agency',
2901:'and an expense to the reimbursing agency. the definitions of revenue and expense address only whether those elements exist. the',
2902:'definitions do not address how a revenue or expense should be measured or whether or when it should be recognized',
2903:'in the federal government’s or a component entity’s financial statements. basic recognition criteria for all elements of accrualbasis financial statements',
2904:'are set forth and discussed in paragraphs 5 through 9. those paragraphs also indicate that measurement issues and other considerations',
2905:'for recognition decisions will be addressed in future pronouncements. in addition, paragraph 6acknowledgesthepossibilityof uncertaintyabout whether an item meets the definition',
2906:'of an element and the need for judgment based on the available evidence. however, this statement does not establish a',
2907:'threshold to be assumed in applying judgment. 55. existing standards or established practice may indicate that certain increases and decreases',
2908:'in assets should be reported as gains and losses, rather than revenues and expenses. use of the terms gains and',
2909:'losses generally serves to highlight particular features of certain revenues and expenses, such as their unusual or nonrecurring nature8 or',
2910:'their having resulted from peripheral or incidental activities of an entity.9 56. the definitions of revenue and expense in this',
2911:'statement include items that might be reported as gains and losses. gains and losses are considered subsets of revenues and',
2912:'expenses, rather than distinct elements, just as capital assets and financial assets are considered subsets of assets. whether certain kinds',
2913:'of revenues and expenses should be reported as gains and losses and, if so, under what circumstances, is beyond the',
2914:'scope of this statement. effects of uncertainty 57. uncertaintyabouteconomicactivitiesandresultsispervasive. uncertaintyaboutwhethera transaction or other event gives rise to the existence of',
2915:'an element means that judgment often is required as to whether the item possesses the essential characteristics of an element',
2916:'and therefore meets the relevant definition. items that are judged to meet the definition of an element are candidates for',
2917:'recognition provided they are measurable—that is a monetary amount can be determined with reasonable certainty or is reasonably 8 see,',
2918:'for example, statement of federal financialaccounting standards 7, accounting for revenue and other financing sources and concepts for reconciling budgetary',
2919:'and financial accounting, par. 35 fasab, 1996. 9the latter distinction is included in fasb concepts statement 6, elements of financial',
2920:'statements, par. 87 fasb, 1985. page 19 concepts 5 fasab handbook, version 20 06/21 concepts 5 estimable. itemsthat, because of',
2921:'uncertainty, do not meet the basic recognition criteria may be candidates for disclosure. 58. in addition to the basic recognition',
2922:'criteria, decisions whether to recognize or disclose an item take into account considerations that also include uncertainties. these considerations are',
2923:'measurement of an appropriate attribute, which may include an assessment of the probability of future flows of economic benefits or',
2924:'services, and assessments of the materiality of the item and the benefit versus the cost of recognizing it.10 59. uncertainty',
2925:'increases the costs of financial reporting, particularly the costs of recognition and measurement. also, reassessments and restatements may be required',
2926:'if items previouslyreported asexpenses or revenues, or not reported, are later found with benefit of hindsight to have the essential',
2927:'characteristics of assets or liabilities.11 it may be possible to reduce uncertaintybyexertinggreatereffort or spending more money, butitalso maynot be worth',
2928:'the added cost. as discussed in paragraph 6, the exercise of judgment may be necessary, but this statement does not',
2929:'require certainty. 10 as discussed in paragraph 7, measurement issues, probability assessments, and other considerations for recognition decisions beyond the',
2930:'basic recognition criteria are not addressed in this statement. the board intends to address those issues in future pronouncements. in',
2931:'the meantime, existing standards for those issues continue to apply. 11 thisstatement doesnotchange existingstandardsconcerningwhethernewinformationshouldresultinrestatement of previously reported information or should',
2932:'be treated prospectively as a change in estimate. page 20 concepts 5 fasab handbook, version 20 06/21 concepts 5 appendixa:',
2933:'basis for conclusions a1. this appendix summarizes important matters that fasab considered in reaching the conclusionsinthisstatement. itincludesthereasonsforacceptingcertainapproachesand rejecting others. individual',
2934:'members gave greater weight to some factors than to others. this statement may be affected by later statements. the fasab',
2935:'handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within',
2936:'the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to',
2937:'reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale for each',
2938:'amendment. background a2. the fasab developed a core set of accounting standards and initial concepts statements on reporting objectives and',
2939:'entity and display early in its first six years of operation. concepts were developed as initial standards were developed. in',
2940:'2003, the board decided that it should review and add to or modify its concepts statements as needed. the board’s',
2941:'desire to evaluate its concepts after more than twelve years of successful progress is stimulated by a realization that a',
2942:'some critical concepts that have been relied on are not yet included in a concepts statement, b certain aspects of',
2943:'the concepts are not widely understood oraccepted, andcanexpansion ormodification of itsconceptsstatementswill help the board communicate more effectively with the growing',
2944:'community of federal financial report users, preparers, and auditors. a3. as part of its project to review and expand its',
2945:'conceptual framework, the fasab began deliberations on this statement of federal financialaccounting concepts sffac, definitions of elements and basic recognition',
2946:'criteria for accrualbasis financial statements, in october 2003. this statement defines the elements of federal accrualbasis financialstatements and establishes basiccriteria',
2947:'for selecting candidates for recognition in those statements. the board believes that this statement is an important part of its',
2948:'conceptual framework and will provide more consistent, useful, and enduring guidance to the board and its constituents than establishing definitions',
2949:'and recognition requirements standard by standard. a4. part of the reason for this statement is that, for several years, the',
2950:'board has received questions about the usefulness of certain definitions of elements, such as liabilities, in current standards and their',
2951:'applicability to transactions outside the scope of the defining standard, as well as about the absence of definitions of other',
2952:'elements, such as assets. moreover, in certain standards the board requires disclosure or other required reporting of page 21 concepts',
2953:'5 fasab handbook, version 20 06/21 concepts 5 financialand nonfinancial informationthat doesnot meet the definition of anelement andis not directly',
2954:'linked to an element—for example, social insurance cash flows, tax gap, acres of land, and current service assessments. in this',
2955:'statement, the board provides definitions of the elements of accrualbasis financial statements that will inform the board’s deliberations of future',
2956:'standardsaswell as providing guidance to preparers and auditorson issues that are not addressed in current standards. this statement does not',
2957:'change existing standards. however, the board intends to apply the definitions and basic recognition criteria in thisstatement when it deliberatesnew',
2958:'standardsand modificationsof existing standards. a5. theconcepts,definitions,andbasicrecognitioncriteriainthisstatementprovideacommon foundation for distinguishing between items that meet the definitions of elements of accrual basis',
2959:'financial statements and those that do not, and between items that are candidates for recognition in the body of accrualbasis',
2960:'financial statements and those that qualify only for disclosure in the notes or as supplementary information. the board therefore anticipates',
2961:'that the guidance in this statement will enhance the understandability, consistency, and comparability of financial reporting for the benefit of',
2962:'users, preparers, and auditors of the financial statements as well as the board itself. as a result, the board expects',
2963:'this statement to contribute to meeting the government’soverall financial reporting objectivesof demonstrating accountability and providing useful information, as well as',
2964:'the more specific objectives of assisting users in evaluating a reporting entity’s operating performance and stewardship. a6. the board issued',
2965:'an exposure draft ed of this statement in june 2006. the ed was circulated with a request for comments to',
2966:'more than 250 federal and nonfederal individuals and organizations, including financial statement preparers, auditors, and users; statelevel taxpayer organizations; professional',
2967:'associations and journals; and u.s. and overseas standardsetting authorities. the board received 40 comment letters and heard five presentations at',
2968:'a public hearing in september 2006. respondents generally were supportive oftheboard’s proposals. thisappendix includes adiscussionoftheprincipal issues raised and the reasons',
2969:'for the board’s conclusions. definitions of elements in existing fasab pronouncements how does this concepts statementaffect existing definitions in statements',
2970:'of federal financialaccounting standards? a7. the following are definitions of liabilities and revenues included in federal financial accounting standards and',
2971:'a definition of asset included in the explanatory text of a federal financialaccountingstandard.also,theconsolidated glossaryincludesa differentdefinition page 22 concepts 5 fasab',
2972:'handbook, version 20 06/21 concepts 5 of assets and a definition of expense. however, those definitions are not included in',
2973:'any final statement approved by the board. the term asset as used in this document means an item that embodies',
2974:'a probable future economicbenefit that can beobtained or controlled bythe federal government ora reporting entity as a result of past',
2975:'transactions or events. the definition of assets will be considered by the board in the future.—sffas 1,12 basis for conclusions,',
2976:'par. 93 assets: tangible or intangible items owned by the federal government which would have probable economic benefits that can',
2977:'be obtained or controlled by a federal government entity. adapted from financialaccounting standards board, concepts statement no. 6, elements of',
2978:'financial statements [fasb con 6]—consolidated glossary aliability for federal accounting purposes is a probable future outflow or other sacrifice of',
2979:'resources as a result of past transactions or events.—sffas 5,13 par. 19 revenue is an inflow of resources that the',
2980:'government demands, earns, or receives by donation.—sffas 7,14 par. 30 expense—outflows or other using up of assets or incurrences of',
2981:'liabilities or a combination of both during a period from providing goods, rendering services, or carrying out other activities related',
2982:'to an entity’s programs and missions, the benefits from which do not extend beyond the present operating period.15—consolidated glossary a8.',
2983:'conceptsstatementsdonotestablishgenerallyacceptedaccountingprinciplesgaapand cannot amend existing standards, interpretations, technical bulletins or releases, or staff implementation guidance. the gaaphierarchy provides that statements of',
2984:'federal financial accountingstandards constitutelevelathehighestlevelguidance. statements offederal financialaccounting conceptsare not gaap. instead, conceptsstatements constitute “other literature” and may only be relied',
2985:'upon by financial statement preparers and auditors to resolve specific accounting issues in the absence of gaap literature. in developing',
2986:'and amending accounting standards, the board looks to concepts statements for guiding principles and also considersrelevant existing standards and guidance',
2987:'issued by the board 12 statement of federal financialaccounting standards 1, accounting for selected assets and liabilities, 1993. 13 statement',
2988:'of federal financialaccounting standards 5, accounting for liabilities of the federal government, 1995. 14statement of federal financialaccounting standards 7, accounting',
2989:'for revenue and other financing sources and concepts for reconciling budgetary and financial accounting, 1996. 15adapted from fasb con 6.',
2990:'page 23 concepts 5 fasab handbook, version 20 06/21 concepts 5 and other standardsetting bodies. until the board amends existing',
2991:'standards, the board expects practice to be governed by the definitions embodied in the four levels of the gaap hierarchy.',
2992:'thus, the board distinguishes between definitions presented in concepts, which are used to guide board deliberations on future gaap, and',
2993:'definitions presented in standards, which constitute current gaap. a9. for example, sffas 5, accounting for liabilities of the federal government,',
2994:'provides and will continue to provide authoritative general guidance on liability recognition and measurement in the absence of more specific',
2995:'liability standards. sffas 5 provides the general liability definition presented in paragrapha7 and general standards regarding recognition of liabilities in',
2996:'four classes—exchange transactions, nonexchange transactions, governmentrelatedevents, andgovernmentacknowledgedevents. it also providesspecific standards for contingencies; capital leases; federal debt and related interest;',
2997:'pensions, other retirement benefits, and other postemployment benefits; and insurance and guaranteesexcluding loan guarantees. specificstandards regarding liabilitiesalso exist in sffas',
2998:'1, 2 as amended by 18 and 19, 6, and 12. a10.the board’s—and the profession’s—expectation is that standards will continue',
2999:'to be applied until they are amended or rescinded. it is widely recognized that gaap guidance at any point in',
3000:'time may contain provisions that are inconsistent with concepts. because concepts are not gaap and are to be considered only',
3001:'in the absence of gaap, any inconsistency of definitions should not cause a different outcome as the gaap definitions would',
3002:'be applied. a11.the board does not expect specific classes of transactions or other events to qualify or not qualify as',
3003:'elements as a result of this new set of element definitions. however, the definitions are expected to guide the board’s',
3004:'future deliberations, which may lead to future changes in practice through new or amended standards of federal accounting and financial',
3005:'reporting. the board plans to consider how the element definitions should be applied in eachstandardsettingprojectundertaken. projectsmayinclude both newspecificstandards and amendments',
3006:'to existing standards. the board solicits input on its agenda prior to adding new projects. this statement will help respondents',
3007:'contribute input by providing a framework for identifying any inconsistencies in current standards. what general improvements are gained by theadoption',
3008:'ofthis concepts statement? a12.the board believes that the definitions in this concepts statement will better support the board’s future deliberations',
3009:'by providing for the first time: a. internally consistent definitions for all of the elements of accrualbasis financial statements, some',
3010:'of which are not defined in current gaap and all of which have been subject to due process; and page',
3011:'24 concepts 5 fasab handbook, version 20 06/21 concepts 5 b. explanatory text for each definition toassisttheboardin application of thedefinitions.',
3012:'for example, the discussion of essential characteristics is intended to enhance the clarity of the definitions and the consistency of',
3013:'their interpretation and application by the board. a13.in addition, the concepts statement responds to the following general concerns that were',
3014:'raised regarding the prior asset and liability definitions: a. potential confusion concerning the use of “probable” in both definitions. for',
3015:'example, there are various thresholds applied in practice and there is difficulty in establishing at the financial reporting date what',
3016:'future flows will result. b. potential redundancy and confusion about inclusion of the concept of past transactions or events that',
3017:'create assets and liabilities. someviewthisinclusionasredundant becausethe asset or liability exists and thus a past transaction or event must have occurred.',
3018:'some believe the inclusion causes confusion about what assessment is being made: whether the characteristics of an asset or liability',
3019:'exist or whether there wasa qualifying past event. the board believes that the concepts of “resource embodying economic benefits“ asset',
3020:'and “present obligation liability better convey the intended meaning. c. potential confusion concerning the use of the terms “future outflow”',
3021:'and “future economic benefit.” some confusion may exist in the use of the word “future” when an asset is a',
3022:'resource that the government controls today and a liability is a present, not a future, obligation. the board believes that',
3023:'the definitionsinthisconceptsstatement conveya more clear understanding. d. clarification concerning settlement.the board believesthatitisimportanttoclarify,asan essential characteristic, that for a liability to exist',
3024:'at the reporting date, there must be a law or an agreement or understanding concerning settlement. if at the reporting',
3025:'date the government is free to decide whether and when to settle the obligation, the government does not have a',
3026:'liability. approach to defining elements assets and liabilities a14.the board’s approach to defining assets and liabilities is to identify the',
3027:'essential characteristics of those elements—that is, the characteristics that all assets and all liabilities, respectively, possess and without which they',
3028:'would not exist. the definitions of assets and liabilities established in this statement are designed to capture those essential characteristics',
3029:'succinctly. however, the definitions considered without further explanation could be interpreted differently. to enhance the clarity of the definitions and',
3030:'the consistency page 25 concepts 5 fasab handbook, version 20 06/21 concepts 5 of their interpretation and application, the board',
3031:'has included in the statement a discussion of the essential characteristics underlying each definition. the board encourages those who read',
3032:'and apply this statement to consider the definitions and the subsequent discussions of essential characteristics as a “package,” rather than',
3033:'considering the definitions in isolation of further explanation. a15.the principal advantage of the board’s approach to defining assets and liabilities',
3034:'is that it enhances objectivity and consistency in establishing standards and in practice in the absence of guidance at a',
3035:'higher level within the hierarchy. whether an asset or liability results from a particular transaction or other event can be',
3036:'determined objectively and consistently by the board, preparers, and auditors by comparing the item to the definition of an asset',
3037:'or liability and considering whether the item has the essential characteristics of that element. the alternative approach whereby the board',
3038:'decides standard by standard what activities result in assets or liabilities may result in a lack of objectivity and inconsistent',
3039:'treatment of similar transactions or other events.alarge majority of the respondents to the ed agreed with the board’s approach to',
3040:'defining assets and liabilities. net position, revenues and expenses a16.the board has concluded that the elements net position, revenues, and',
3041:'expenses are not independentofassetsandliabilitiesanddonothavetheirownessentialcharacteristics. net position is total assets less total liabilities. revenues and expenses are changes in assets and/or',
3042:'liabilities during a reporting period that result in a change in net position. thus, the definitions of all three elements',
3043:'are dependent on the definitions of assets and liabilities. a17.some people believe that a conclusion that the definitions of revenues',
3044:'and expenses derive from the definitions of assets and liabilities indicates that assets and liabilities are more important than revenues',
3045:'and expenses. they believe that, by extension, a “stocks” statement, such as a statement of financial position or balance sheet,',
3046:'will be considered the principal statement in a financial report and a “flows” statement, such as an activities statement or',
3047:'statement of net cost, will be secondary in importance. many of those with these views disagree with the perceived primacy',
3048:'of “stocks” statements and believe that “flows” statements are either equally important or more important in government financial reporting. a18.the',
3049:'board disagreesthat the derivationof the definitionsofrevenuesandexpensesfromthe definitions of assets and liabilities accords more importance to a statement of financial positionorbalancesheetthantoanactivitiesstatement.',
3050:'eachtypeofstatementhasitsown purposes. conceptually, they are equally important. however, the relative importance that users give to one type of statement versus',
3051:'the other may vary depending on the decisions that users wish to make in particular circumstances and, therefore, on the',
3052:'information they are seeking. the two types of statements are related. they articulate, just as revenues and page 26 concepts',
3053:'5 fasab handbook, version 20 06/21 concepts 5 expenses articulate with assets and liabilities. assets and liabilities represent realworld phenomena,',
3054:'such as cash, equipment, and debt, and can be defined by the characteristics that all assets and liabilities, respectively, share.',
3055:'revenues and expenses do not have characteristics that are independent of assets and liabilities. rather, they are accounting and financial',
3056:'reporting constructs that measure and report the effects of activities during a reporting period on the amounts of assets and',
3057:'liabilities at the beginning of the period. withoutassetsandliabilities,revenuesandexpensesdonotexist. theycannotbedefined without reference to assets and liabilities or similar concepts such as',
3058:'“resources” and “obligations.” alarge majority of the respondents to the ed agreed with the board’s approach to defining net position,',
3059:'revenues, and expenses. the board notes that its view of the relationship between revenues and expenses and the definitions of',
3060:'assets and liabilities is shared by most other major standard setters in the united states and overseas, including those that',
3061:'promulgate standards for the public sector as well as the business sector. definitions, recognition, and measurement a19.theboard’sapproachinthisstatementalsoseparatesthepath torecognitionon thefaceof financial',
3062:'statements into three components: meeting the definition of an element, meeting recognition criteria, and measurement of the item to be',
3063:'recognized. although the components may be addressed simultaneously in practice, the board believes that a conceptual distinction is useful. it',
3064:'clarifies that an item that meets the definition of, for example, an asset isanasset, even if it doesnot meet the',
3065:'criteriaforrecognition in thebody of the financialstatements, or it isnotmaterial, orit isnot costbeneficial to report theitemin the financial statements or notes',
3066:'or as supplementary information. the item remains an asset until it is disposed of or no longer meets the definition',
3067:'of an asset. a20.the recognition criteria established in this statement “basic recognition criteria,” as discussed laterinclude a conclusion asto whether',
3068:'the asset ismeasurable, meaning that a monetary amount can be determined with reasonable certainty or is reasonably estimable. the basic',
3069:'recognition criteria do not include requirements for the actual measurement of an element. measurement includes selecting an appropriate attribute historical',
3070:'cost, fair value, expected value, or some other attribute and quantifying it monetarily using an appropriate measurement method, which may',
3071:'include an assessment of the probability of future flows of economic benefits or services. recognition decisions also include consideration of',
3072:'the materiality of the amount measured and the costbenefit of reporting it. the scope of this statement includes definitions of',
3073:'elementsand the establishment of basic recognition criteria, but it does not include measurement requirements. the board intends to address measurement',
3074:'issues in a separate pronouncement. page 27 concepts 5 fasab handbook, version 20 06/21 concepts 5 modifications to the exposure',
3075:'draft probability assessments and thresholds a21.the board had numerous discussions about the role of probability assessments in determining whether an',
3076:'item meets the definition of an element and/or is measurable for financial reporting purposes. the board’s decision in the ed',
3077:'was that judgment might be required in determining whether an item meets the definition of an element and is recognizable',
3078:'in the body of financial statements. however, an assessment of probabilities was not included as a mandatory component of determining',
3079:'compliance with the definition ofanelementorbasicrecognitioncriteria,althoughsuchanassessmentwasnotprecluded. rather, an assessment of probabilities should be made, if appropriate, when measuring the item to',
3080:'be recognized. a22.threeboardmemberspresentedanalternativeview. these members wereconcerned that, by not requiring probability assessments, the ed implied that items with a low',
3081:'probabilityof meeting thedefinitionof an element orofmeetingtherecognitioncriteriacould be recognized in the financial statements. in their view, the board should specifically state',
3082:'that an assessment of probabilities should be made as part of determining whether an item meets the definition of an',
3083:'element. similarly, the probability that an item is measurable should be assessed when considering whether a candidate for recognition is',
3084:'measurable. also, the board should acknowledge that there exists a threshold at both the definition and the recognition stageswhere theprobabilityofmeeting',
3085:'thedefinition andrecognitioncriteria is so low that an item should be considered not to meet the definition of an element or',
3086:'the recognition criteria. a23.respondentstothe ed were evenlydivided in their support for the ed majority view or the alternative view concerning',
3087:'probability assessments and probability thresholds. the reasons given were similar to those expressed respectively in the ed and the alternative',
3088:'view. after further deliberation, the board reaffirmed its decision that probability assessments should not be required when determining compliance with',
3089:'definitions or recognition criteria and the potential existence of probability thresholds should not be mentioned; the board would address probability',
3090:'assessments and consider potential thresholdsinafutureprojectonmeasurement. however,theboarddecidedthatreferences to recognition criteria in paragraph 5 and elsewhere should be modified to indicate more',
3091:'clearly that the statement does not address all matters to be considered in recognition decisions. also, the references to uncertainty',
3092:'about the existence of an element and whether it is measurable should be clarified. a24.asa result, paragraph 5 and relateddiscussionsnowrefer',
3093:'to “basicrecognitioncriteria” and identify additional considerations for recognition decisions to be addressed in one or more page 28 concepts 5',
3094:'fasab handbook, version 20 06/21 concepts 5 future pronouncements. “basic recognition criteria” are defined in paragraph 5 as “the conditions',
3095:'an item should meet in order to be a candidate for recognition.” the board also has expanded the definition of',
3096:'“measurable” in paragraph 5 to mean “a monetary amount can be determined with reasonable certainty or is reasonably estimable.” in',
3097:'the section on “effects of uncertainty” paragraphs 57 through 59 the board has clarified aspects of uncertaintyin financialreporting and modified',
3098:'the discussion to achieve greaterconsistency with the revised paragraphs 5 through 8 under “recognition.” qualitative characteristics a25.the members with an',
3099:'alternative view on the location of probability assessments also presented an alternative view concerning the qualitative characteristics of information in',
3100:'financial reports. these members said that the ed should explicitly acknowledge that the qualitative characteristics—or at a minimum the characteristics',
3101:'of relevance and reliability— should be considered when determining whether an item meets the definition of an element and is',
3102:'measurable. the majority of the board, however, indicated that the proposed concepts statement on elements mentioned the qualitative characteristics in',
3103:'paragraph 1 and did not supersede or change the applicability of those characteristics in accordance with sffac 1.16 past practice',
3104:'of the fasab has been not to repeat in new statements of concepts or standards the content or requirements of',
3105:'prior statements that the new statement does not supersede. those requirements automatically continue until superseded by a new pronouncement. therefore,',
3106:'to repeat the qualitative characteristics in the elements ed was unnecessary and might be confusing to readers of the ed',
3107:'accustomed to the fasab’s past practice in this area by implying that the qualitative characteristics established in sffac 1 had',
3108:'been changed. respondents to the ed were slightly more in favor of the alternative view than the ed majority position',
3109:'on this issue. however, the board concluded that the alternative view might have unintentionally implied that the qualitative characteristics need',
3110:'not be considered unless they were specifically repeated in the elements statement. a26.theboardreaffirmeditsdecision not tolist thequalitativecharacteristicsin thestatementor to refer specifically',
3111:'to their applicability to definition and recognition decisions. nevertheless,theboarddecidedtoclarifytheissueintheelementsstatement. asaresult, the board has a expanded the discussion of the role',
3112:'of this statement in the board’s conceptual framework and the continuity of prior concepts statements see the page on “statements',
3113:'of federal financialaccounting concepts” placed before the table of contents., b highlightedthe reference toqualitativecharacteristicsinparagraph8, andc added the definition of “qualitative',
3114:'characteristics” to the glossary appendix b with a crossreference to the identification of them in paragraph 156 of sffac 1.',
3115:'16 statement of federal financialaccounting concepts 1, objectives of federal financial reporting, 1993. page 29 concepts 5 fasab handbook, version',
3116:'20 06/21 concepts 5 applicability of existing conditions, including current law a27.paragraph 44 of the ed states that to meet',
3117:'the definition of a liability, the federal government’s contract or other agreement to provide assets or services to another entity',
3118:'must be based on existing conditions, including current law, because an essential characteristic of a liability is that the government',
3119:'has a present obligation, even if conditions may change before settlement is due. for example, thecongressmaychangea lawunderwhichthe federalgovernment hasincurredapresent obligation',
3120:'anderasethe obligation orotherwiseenablethegovernment to avoidsettlement. alternatively, the government may be able in the future to renegotiate the obligation with the',
3121:'payee or recipient of the promised services. however, liabilities and all other elements of accrualbasis financial statements are based on',
3122:'transactions or events that already have occurred. the government’s power to change existing conditions does not preclude what otherwise would',
3123:'be a present obligation and recognized as a liability. a28.three board members presented an alternative view to the effect that',
3124:'“the government’s power to modify the law to change or withdraw future benefits related to nonexchange transactions could affect the',
3125:'existence of a present obligation. consequently, . . . the government’s ability to change the law may provide additional evidence',
3126:'about whether a present obligation exists and, in some instances, may preclude recognition of a liability.” a29.alarge majority of the',
3127:'respondents to the ed on this issue supported the position in paragraph 44 of the ed for reasons similar to',
3128:'those stated in that paragraph—primarily that “liabilities and all other elements of accrualbasis financial statements are based on transactionsor eventsthat',
3129:'alreadyhave occurred.” somerespondents noted that, given the broad powerof congress,if itsabilitytochangethe law precluded theexistence of aliability, then the government would',
3130:'have very few liabilities. respondents who supported the alternative view generally geared their responses to the reference in the alternative',
3131:'view to “futurebenefitsrelatedtononexchangetransactions.” someoftheserespondentssaidthat obligations for such benefit programs are different from other obligations, or that the government has no',
3132:'contractual commitment or present obligation for future benefits, or that the government’s ability to change the law “could affect the',
3133:'existence of a present obligation,” as stated in the alternative view. a30.the board redeliberated and clarifiedthat theconceptsembodiedin paragraph44of theed apply',
3134:'equally to all elements. consequently, the scope of the discussion in paragraph 44 has been broadened and the paragraph has',
3135:'been moved to the beginning of the section addressing definitions of elements. the following paragraph is presented there: 17. assessments',
3136:'of whether an item meets the definition of an asset, liability, revenue, or expense are based on conditions that exist',
3137:'at the reporting date, including current law, page 30 concepts 5 fasab handbook, version 20 06/21 concepts 5 because all',
3138:'elements of accrualbasis financial statements are based on transactions or events that already have occurred. therefore, if an item meets',
3139:'or does not meet the definition of an element under the conditions in effect at the reporting date, the power',
3140:'of the government to subsequently change those conditions does not eliminate or create an element at the reporting date. for',
3141:'example, if an item meets the definition of a liability at the reporting date, the power of the government to',
3142:'subsequently change the law so that the item no longer meets the definition does not eliminate the existence of the',
3143:'liability at the reporting date. the revised paragraph relates the concept to all elements and considers both items that meetaswellasthosethat',
3144:'do not meet thedefinitionofanelement at the reportingdate. the board further emphasized that the provisions of paragraph 17 are intended to',
3145:'address the effects of congressional prerogative to change laws generally and not the potential effects on specific federal programs. this',
3146:'statement, in common with most concepts statements, does not address specific programs. conclusions regarding specific programs are issues for separate',
3147:'projects. some members observed that the possibility or probability of a change in the law might be taken into account',
3148:'in measuring a liability or other elements of the financial statements. most members also believed that such a possibility also',
3149:'could be disclosed. definition ofassets a31.alarge majority of the respondents to the ed agreed with the essential characteristics of assets',
3150:'identified by the board and that the board’s definition of assets adequately conveys those characteristics. further, they did not identify',
3151:'any additional characteristics that are essential to all assets. two respondents, while agreeing with the definition of assets, questioned whether',
3152:'the requirement in the definition that the government “can control” the economic benefits or services embodied in an asset should',
3153:'be changed to “controls” the economicbenefitsorservices. therespondentswereconcernedthat “cancontrol” mightbe construed as applying only to the future, whereas they believe the',
3154:'government should be controllingtheeconomicbenefitsorservicesatthereportingdate. theboardreconsidered theissue. somemembersbelievethat “controls” maybeinterpretedtomeanthattheboard must be actively controlling access to the economic benefits or services',
3155:'at the reporting date,whichisnotanessentialcharacteristicofanasset. rather,theessentialcharacteristic is the government’s ability to control access. for example, the government might be willing currently',
3156:'to allow other entities free access to the economic benefits or services embodied in its asset, without relinquishing its right',
3157:'to regulate or deny that access and obtain the benefits exclusively for the government. in contrast, other members believe and',
3158:'the board concluded that “controls” incorporatesthe abilityto exercise or waive itsactivecontrolof the access to economic benefits. the board therefore revised',
3159:'the definition of an asset paragraph 18 to read: page 31 concepts 5 fasab handbook, version 20 06/21 concepts 5',
3160:'an asset is a resource that embodies economic benefits or services that the federal government controls. conforming modifications have been',
3161:'made to the paragraphs describing the essential characteristics of assets. definitions of revenues and expenses a32.the board proposed the following',
3162:'definitions of revenues and expenses in the ed: 52. arevenue is an increase in assets, a decrease in liabilities, or',
3163:'a combination of both from providing goods or services, levying taxesor other impositions, receiving donations, or any other activity excluding',
3164:'borrowing performed during the reporting period. 53. an expense is a decrease in assets, an increase in liabilities, or a',
3165:'combination of both from providing cash or cash equivalents, goods or services, or any other activity excluding repayments of borrowing',
3166:'performed during the reporting period. alarge majority of respondents to the ed agreed that the definitions adequately convey the relationship',
3167:'of revenues and expenses to assets and liabilities. respondents generally did notcommentontheactualdefinitions. however,afewrespondentssuggestedclarifications or simplifications, such as referring to changes',
3168:'in net position instead of to increases or decreases in assets and liabilities, clarifying or avoiding the reference to borrowings,',
3169:'and clarifying the phrase “any other activity.” a33.theboardagreed that referringtochangesinnet positionwould removetheneedtoreferto the exclusion of borrowings and repayments of borrowings.',
3170:'also, the board concluded that the reference to “any other activity” lacked clarity and effectively made the definitions all encompassing.',
3171:'theboarddecidedtosimplifythedefinitionsandhasincludedthefollowing wording in this statement: 52. arevenue is an inflow of or other increase in assets, a decrease in liabilities,',
3172:'or a combination of both that results in an increase in the government’s net position during the reporting period. 53.',
3173:'an expense is an outflow of or other decrease in assets, an increase in liabilities, or a combination of both',
3174:'that results in a decrease in the government’s net position during the reporting period. the board has included examples of',
3175:'revenues and expenses in paragraph 54 instead of in the definitions. the board also has confirmed in paragraph 54 that',
3176:'transactions that are in substance adjustments or components of previous transactions would use the same page 32 concepts 5 fasab',
3177:'handbook, version 20 06/21 concepts 5 elementastheoriginaltransaction. forexample,taxlevieswouldbereportedasrevenues and tax refunds would be reported as reductions of revenues, not expenses.',
3178:'other issues raised by respondents definition of liabilities a34.alarge majority of the respondents to the ed agreed with the essential',
3179:'characteristics of liabilities identified by the board and that the board’s definition of liabilities adequately conveys those characteristics. further, they',
3180:'did not identify any additional characteristics that are essential to all liabilities. nevertheless, a few respondents thought that an agreement',
3181:'or understanding between the parties concerning settlement of the obligation is not an essential characteristic of a liability, or is',
3182:'part of the “present obligation” characteristic. a35.the board discussed the “settlement” characteristic before issuing the ed and concluded that if',
3183:'the government alone can determine whether and when to settle an obligation then it doesnotqualifyasaliability. aliabilityalwaysisbetweentwoseparateentities. theremust be either an',
3184:'obligation and a requirement for settlement with the other entity supported in law or some agreement or “meeting of the',
3185:'minds” between the government and the other entity as to whether an obligation exists and what circumstances would trigger settlement.',
3186:'the board believes that the respondents who disagreed that the “settlement” characteristic is an essential characteristic of a liability may',
3187:'have inferred that the fasab was saying that the precise timing of settlement must be specified and agreed between the',
3188:'two parties. however, that was not the board’s intent. as stated in paragraph 45: . . . the timing of',
3189:'settlement often is expressed in contracts and other agreements as a specific or determinable date. however, in some cases the',
3190:'parties agree that settlement will be triggered by a specific event or by the demand of the recipient of the',
3191:'assets or services, the timing of which may be uncertain. if at the reporting date the government and the other',
3192:'entity do not have an agreement or understanding concerning settlement and the government is free to decide whether and when',
3193:'to settle the obligation, the government’s obligation does not meet the definition of a liability. emphasis added a36.paragraph 46 indicates',
3194:'that both the timing and the amount of the settlement may be uncertain, but that “uncertainty regarding the amount or',
3195:'timing of settlement is addressed through measurement of the liability.” the board does not believe that there is uncertainty about',
3196:'whether the government has a liability simply because the precise settlement date is unknown. for example, with respect to unresolved',
3197:'litigation, the date of settlement may be unknown. based on these considerations, the board reaffirmed its conclusion that an page',
3198:'33 concepts 5 fasab handbook, version 20 06/21 concepts 5 essential characteristic of a liability is that the government be',
3199:'legally required to make settlement with the other entity or the government and the other entity have an agreement or',
3200:'understanding concerning settlement. additional elements a37.afew respondents to the ed suggested that certain items that the board had concluded meet',
3201:'the definitions of revenues or expenses should be defined as separate elements. those items and the number of respondents who',
3202:'suggested them are gains and losses 4 respondents,appropriations2respondents,intragovernmentaltransfers3respondents, and imputed costs 1 respondent. also, two respondents proposed that the currently',
3203:'reported components of net position—unexpended appropriations and cumulative resultsof operations—should be defined as separate elements. in its deliberations leading to',
3204:'the ed, the board concluded that these items are subdivisions of net position according to a particular financial reporting model',
3205:'and should not be considered separate elements. a38.with respect to gains and losses, the board reviewed the practice of other',
3206:'standard setters prior to issuing the ed and found that some define gains and losses as separate elements whereas others',
3207:'do not. regardless of whether they are defined separately from revenues and expenses, the reporting of gains and losses generally',
3208:'serves to highlight particular featuresof certain revenuesand expenses, such astheir unusualornonrecurring nature or their having resulted from an entity’s peripheral',
3209:'or incidental activities. the board has concluded that, conceptually, gains and losses are subsets of revenues and expenses, rather than',
3210:'distinct elements, just as capital assets and financial assets are subsets of assets. the board believes that whether and under',
3211:'what circumstances certain items should be displayed in the financial statements as gains and losses rather than revenues and expenses',
3212:'is an issue for financial reporting standards. a39.sffas 717 defines appropriations and transfers as other financing sources, rather than revenues.',
3213:'however, the standard states that other financing sources are inflows of resources like revenues. moreover, in practice, many component entities',
3214:'regard appropriations as revenues, regardless of whether they are referred to as other financing sources in certain statements. the board',
3215:'believes that, as with gains and losses, the distinction between other financing sources/uses and revenues/expenses is not a true conceptual',
3216:'distinction. rather, it is attributable to display considerations under a particular financial reporting model. as such, the board has concluded',
3217:'that other financing sources, such as appropriations and transfers, are not separate elements from revenues. appropriations are not revenues of',
3218:'the government as a whole. however, they are like revenuesforcomponententitiesbecause theyprovide thelegalbasisfortheentitiestoincur expenses. 17 statement of federal financialaccounting standards 7,',
3219:'accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting, 1996. page 34 concepts 5',
3220:'fasab handbook, version 20 06/21 concepts 5 a40.fasab interpretation 618 states the following: 11. imputed intradepartmental costs are the unreimbursed',
3221:'portion of the full costs of goods and services received by the entity from a providing entity that is part',
3222:'of the same department or larger reporting entity i.e. other bureaus, components or responsibility segments within the department or larger',
3223:'reporting entity. consistent with this definition, the board has concluded that imputed costs are not separate elements, but are included',
3224:'in the definition of expenses for component entities. a41.the board does not consider unexpended appropriations and cumulative results of operations',
3225:'to be separate elements. rather, they are components of net position in the current federal financial reporting model. to define',
3226:'them as elements in this statement would imply that the definitions in this statement are designed to apply to the',
3227:'current reporting model and may not be applicable to other models. on the contrary, the board concluded at the outset',
3228:'of the elements project that the definitions and related concepts in this statement should not be geared or restricted to',
3229:'any particular financial reporting model because that would constrain the board’s ability to modify the model to meet the changing',
3230:'or emerging needs of decision makers. for these reasons, the board has not included definitions of unexpended appropriations or cumulative',
3231:'results of operations in this statement and has not discussed their role in financial reporting. boardapproval a42.theboardadoptedthisstatementbytheaffirmative votesofeightmembers. mr. werfeland',
3232:'mr. steinberg abstained. a43.mr. steinberg, as a new member of the board, did not participate in the statement’s development and',
3233:'has abstained. he is concerned, nevertheless, that the statement does not provide sufficiently for the manner in which the federal',
3234:'government and its agencies meet the financial reporting objectives already established by the board. he points out that with the',
3235:'federal government the preponderance of financial reporting is through the individual agencies’financialstatements, not thefinancial statementsfor the government as awhole. innotrecognizingthatapproach,someofthemostsignificantitemsinthefinancial',
3236:'statements, i.e., expended appropriations, unexpended appropriations, and imputed financing, are not sufficiently addressed, even though they are among the most',
3237:'important items in the financial statements. he also points out that the statement limits itself to elements of accrualbasis financial',
3238:'statements even though there are four objectives for federal financial reporting, the first of which is budgetary integrity, and one',
3239:'of the financial 18 interpretation 6, accounting for imputed intradepartmental costs: an interpretation of sffas 4, 2003. page 35 concepts',
3240:'5 fasab handbook, version 20 06/21 concepts 5 statements required by generally accepted accounting principles is a budget basis financial',
3241:'statement. page 36 concepts 5 fasab handbook, version 20 06/21 concepts 5 appendix b: glossary asset: aresource that embodies economic',
3242:'benefits or services that the federal government controls. basic recognition criteria: the conditions an item should meet in order to',
3243:'be a candidate for recognition in financial statements. control: the ability of the federal government or a component entity to',
3244:'obtain the economic benefits or services embodied in a resource and to deny or regulate the access of others. elements:',
3245:'the broad classes of items, such as assets, liabilities, revenues, and expenses, which comprise the building blocks of financial statements.',
3246:'essential characteristic ofan assetora liability:acharacteristicthatisinherenttoallassets or liabilities and, therefore, without it an asset or liability would not exist. expense: an',
3247:'outflow ofor other decrease in assets, an increase in liabilities, or a combination of both that results in a decrease',
3248:'in the government’s net position during the reporting period. liability: apresent obligation of the federal government to provide assets or',
3249:'services to another entity at a determinable date, when a specified event occurs, or on demand. net position: net position',
3250:'or its equivalent, net assets, is the arithmetic difference between the total assets and total liabilities recognized in the federal',
3251:'government’s or a component entity’s balance sheet. net position may be positive assets greater than liabilities or negative assets less',
3252:'than liabilities. measurable: amonetary amount can be determined with reasonable certainty or is reasonably estimable. measurement: the act or process',
3253:'of measuring; a figure, extent, or amount obtained by measuring. qualitative characteristics: the basic characteristics that information in financial reports',
3254:'must have in order to communicate effectively with users. these characteristics are understandability, reliability, relevance, timeliness, consistency, and comparability.19 19',
3255:'sffac 1, par. 156. page 37 concepts 5 fasab handbook, version 20 06/21 concepts 5 recognition: the process of formally',
3256:'recording or incorporating an element into the financial statements of an entity. recognition comprises depiction of an item in both',
3257:'words and numbers with the amount included in the totals of the financial statements. resource: a useful or valuable possession',
3258:'or quality of a country, organization or person; a means of supplying a want. revenue: an inflow of or other',
3259:'increase in assets, a decrease in liabilities, or a combination of both that results in an increase in the government’s',
3260:'net position during the reporting period. page 38 concepts 5 fasab handbook, version 20 06/21 concepts 5 appendix c: generallyacceptedaccounting',
3261:'principles excerpt fromtheaicpa’sausection 411 the meaningofpresent fairlyinconformity with generallyacceptedaccounting principles 05. independent auditors agree on the existence of a body',
3262:'of generally accepted accounting principles, and they are knowledgeable about these principles and in the determination of their general acceptance.',
3263:'nevertheless, the determination that a particular accounting principleisgenerallyacceptedmaybedifficultbecausenosinglereference sourceexistsfor all such principles. the sources of established accounting principles that are',
3264:'generally accepted in the united states ofamerica are— a. accounting principles promulgated by a body designated by theaicpacouncil to establish',
3265:'such principles, pursuant to rule 203 [et section 203.01] of theaicpacode of professional conduct. rule 203 [et section 203.01] provides',
3266:'that an auditor should not express an unqualified opinion if the financial statements contain a material departure from such pronouncements',
3267:'unless, due to unusual circumstances, adherence to the pronouncements would make the statements misleading. rule 203 [et section 203.01] implies',
3268:'that application of officially established accounting principles almost always results in the fair presentation of financial position, results of operations,',
3269:'and cash flows, in conformity with generally accepted accounting principles. nevertheless, rule 203 [et section 203.01] provides for the possibility',
3270:'that literal application of such a pronouncement might, in unusual circumstances, result in misleading financial statements. see section 508, reports',
3271:'onaudited financial statements, paragraphs .14 and .15. b. pronouncements of bodies, composed of expert accountants, that deliberate accounting issues in',
3272:'public forums for the purpose of establishing accounting principles or describing existing accounting practices that are generally accepted, provided those',
3273:'pronouncements have been exposed for public comment and have been cleared by a body referred to in category a. fn',
3274:'2 c. pronouncements of bodies, organized by a body referred to in category a and composed of expert accountants, that',
3275:'deliberate accounting issues in public forums for the purpose of interpreting or establishing accounting principles or describing existing accountingpracticesthat aregenerallyaccepted,',
3276:'orpronouncementsreferredtoincategory b that have been cleared by a body referred to in category a but have not been exposed for',
3277:'public comment. page 39 concepts 5 fasab handbook, version 20 06/21 concepts 5 d. practices or pronouncements that are widely',
3278:'recognized as being generally accepted because they represent prevalent practice in a particular industry, or the knowledgeable application to specific',
3279:'circumstances of pronouncements that are generally accepted. [revised, october 2000, to reflect conforming changes necessary due to the issuance of',
3280:'statement onauditing standards no. 93.] 06. generally accepted accounting principles recognize the importance of reporting transactions and events in accordance',
3281:'with their substance. the auditor should consider whether the substance of transactions or events differs materially from their form. 07.',
3282:'if the accounting treatment of a transaction or event is not specified by a pronouncement covered by rule 203 [et',
3283:'section 203.01], the auditor should consider whether the accounting treatment is specified by another source of established accounting principles. if',
3284:'an established accounting principle from one or more sources in category b, c, or d is relevant to the circumstances,',
3285:'the auditor should be prepared to justify a conclusion that another treatment is generally accepted. if there is a conflict',
3286:'between accounting principles relevant to the circumstances from one or more sources in category b, c, or d, the auditor',
3287:'should follow the treatment specified by the source in the higher category—for example, follow category b treatment over category c—or',
3288:'be prepared to justify a conclusion that a treatment specified by a source in the lower category better presents the',
3289:'substance of the transaction in the circumstances. 08. the auditor should be aware that the accounting requirements adopted by regulatory',
3290:'agenciesforreportsfiledwith themmaydifferfromgenerallyacceptedaccountingprinciples in certain respects. section 544, lack of conformity with generallyacceptedaccounting principles, paragraph .04and section623,specialreportsprovideguidanceiftheauditoris reporting on financial statements',
3291:'prepared in conformity with a comprehensive basis of accounting other than generally accepted accounting principles. 09. becauseofdevelopmentssuchasnewlegislationortheevolutionofanewtypeofbusiness transaction, there sometimes',
3292:'are no established accounting principles for reporting a specific transaction or event. in those instances, it might be possible to',
3293:'report the event or transaction on the basis of its substance by selecting an accounting principle that appears appropriatewhenappliedina mannersimilartothe',
3294:'applicationofanestablishedprinciple to an analogous transaction or event. [paragraphs .10 through .13,application to state and local government and notforprofit entities, omitted]',
3295:'page 40 concepts 5 fasab handbook, version 20 06/21 concepts 5 application to federal governmental entities 14. for financial statements',
3296:'of federal governmental entities—fn 8 a. category a, officially established accounting principles, consists of federalaccounting standardsadvisory board fasab statements and',
3297:'interpretations, as well asaicpaand fasb pronouncements specifically made applicable to federal governmental entities by fasab statements or interpretations. fasab statements',
3298:'and interpretations will be periodically incorporated in a publication by the fasab. b. category b consists of fasabtechnical bulletins and,if',
3299:'specifically made applicable to federal governmental entities by theaicpaand cleared by the fasab,aicpaindustry audit andaccounting guides andaicpastatements of position. fn',
3300:'9 c. categorycconsistsofaicpaacsec practice bulletinsifspecificallymadeapplicable to federal governmental entities and cleared by the fasab, as well astechnical releases of theaccounting',
3301:'andauditing policy committee of the fasab. d. category d includes implementation guides published by the fasab staff, as well as',
3302:'practices that are widely recognized and prevalent in the federal government. [paragraph added, effectiveapril 2000, by statement onauditing standards no.',
3303:'91.] 15. in the absence of a pronouncement covered by rule 203 [et section 203.01] or another source of established',
3304:'accounting principles, the auditor of financial statements of a federal governmental entitymay consider other accounting literature, depending on its relevance',
3305:'in the circumstances. other accounting literature includes, for example, fasab concepts statements; the pronouncements referred to in categories a through',
3306:'d of paragraph .10 whennot specificallymadeapplicable to federalgovernmental entitiesbythe fasab; fasb conceptsstatements;gasbstatements,interpretations,technicalbulletins,andconcepts statements;aicpaissues papers; internationalaccounting standards of the international accounting',
3307:'standards committee; pronouncements of other professional associations or regulatory agencies; technical information service inquiries and replies included inaicpa technical practiceaids;',
3308:'and accounting textbooks, handbooks, and articles. the appropriateness of other accounting literature depends on its relevance to particular circumstances, the',
3309:'specificity of the guidance, and the general recognition of the issuer or author as an authority. for example, fasab concepts',
3310:'statements would normally be more influential than other sources in this category. [paragraph added, effectiveapril 2000, by statement onauditing standards',
3311:'no. 91.] page 41 concepts 5 fasab handbook, version 20 06/21 concepts 5 effective date 16. thissectioniseffectiveforauditsoffinancialstatementsforperiodsendingaftermarch 15, 1992. [paragraph',
3312:'added, effectiveapril 2000, by statement onauditing standards no. 91.] transition 17. most of the pronouncements or practices in categories b,',
3313:'c, and d of paragraphs .10 and .12 had equal authoritative standing prior to the issuance of this section. an',
3314:'entity following an accounting treatment in category c or d as of march 15, 1992, need not change to an',
3315:'accounting treatment in a category b or category c pronouncement whose effective date is before march 15, 1992. for example,',
3316:'a nongovernmental entity that followed a prevalent industry practice category d asof march 15, 1992, need not change to an',
3317:'accounting treatment included in a pronouncement in category b or c for example, an accounting principle in a clearedaicpastatement of',
3318:'position oracsec practice bulletin whose effective date is before march 15, 1992. for pronouncements whose effective date is subsequent to',
3319:'march 15, 1992, and for entities initially applying an accounting principle after march 15, 1992 except for fasb emerging issues',
3320:'task force consensuspositionsissuedbeforemarch 16, 1992, which become effective inthehierarchy for initial application of an accounting principle after march 15, 1993,',
3321:'the auditor should follow the applicable hierarchy established by paragraphs .10 and .12 in determining whether an entitys financial statements',
3322:'are fairly presented in conformity with generally accepted accounting principles. [paragraph added, effectiveapril 2000, by statement on auditing standards no.',
3323:'91.] page 42 concepts 5 fasab handbook, version 20 06/21 statement of federal financialaccounting concepts 6: distinguishing basic information, requiredsupplementary',
3324:'information, and otheraccompanying information status issued february 4, 2009 affects sffac 2, specifically, par. 2, 3, 55 replaced, 69, 72',
3325:'rescinded, 74, 76, 77, 78, 79, 81 rescinded, and 108, and footnotes 11, 12, 12a, 14, and 17. also, section',
3326:'titled, “displaying financial information.” affected by none. see pages 67 for the preamble to statements of federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.pdf.',
3327:'summary thisstatementamendssffac2, entity and display, toprovideguidanceforusebytheboard in determining whether information should be basic information, required supplementary information rsi, or other',
3328:'accompanying information oai. although each of these categories communicates information to readers of financial reports, each may be subjected to',
3329:'different procedures and reporting requirements under generally accepted government auditing standards. the statement defines the categories as follows: basic information',
3330:'is essential for the financial statements and notes to be presented in conformity with generally accepted accounting principles gaap. rsi',
3331:'is information that a body that establishes gaap requires to accompany basic information. oai is information that accompanies basic information',
3332:'and required supplementary information, but is not required by a body that establishes gaap. this statement describes the process the',
3333:'board may apply in selecting one of these categories forcommunicatinganitemofinformation. theprocessbeginswithdeterminingwhatinformation shouldberequired. acandidate for requiredinformationisconsistentwiththe reporting objectives and meets qualitative',
3334:'characteristics and costbenefit considerations discussed in statement of federal financialaccounting concepts sffac 1, objectives of federal financial reporting. information that',
3335:'meets the criteria for required information is a candidate for basic information or rsi. to help distinguish basic information from',
3336:'rsi, this statement provides a list of factors that the board may consider. page 1 concepts 6 fasab handbook, version',
3337:'20 06/21 concepts 6 information that does not meet the criteria for required information is a candidate for oai. entities',
3338:'may report oai to support required information or to comply with laws or administrative directives. the board may encourage oai',
3339:'to help advance overall federal financial reporting. page 2 concepts 6 fasab handbook, version 20 06/21 concepts 6 table of',
3340:'contents page summary 1 table of contents 3 introduction 4 purpose 4 concepts 4 scope 4 definitions 5 amendingsffac2todistinguishbasic information,rsi,',
3341:'andotheraccompanyinginformation 5 appendixa:basis for conclusions 14 project history 14 boardapproval 17 appendix b:abbreviations 18 page 3 concepts 6 fasab handbook,',
3342:'version 20 06/21 concepts 6 introduction purpose 1. the existing conceptual framework provides guidance on what information should be reported',
3343:'and identifies a number of methods that may be used to communicate this information within a general purpose federal financial',
3344:'report gpffr.1 for example, statement of federal financialaccounting concepts sffac 1, objectives of federal financial reporting, provides guidance on the',
3345:'information that should be reported and sffac 2, entity and display, discusses the financial statements and other methods that maybeusedtoprovidetheinformationandwhichentitiesshouldpreparethem.',
3346:'inaddition, sffac 3, managements discussion and analysis,describesthemanagements discussion and analysis md&a of significant topics. 2. given the various alternatives for',
3347:'communicating information, this statement expands the existing conceptual framework. this statement amends sffac 2 to discuss a process and factors',
3348:'the board considers when deciding whether the information should be considered basic information, required supplementary information rsi, or other accompanying',
3349:'information oai. discussing each of these categories may help those engaged in federal financial reporting to better understand the nature',
3350:'of the information being communicated and their importance to the financial reporting objectives. concepts scope 3. thisstatementspecificallyaffectssffac2,par. 2,3,55,69,72,74,76,77,78,79,81,and 108, and',
3351:'footnotes 11, 12, 12a, 14, and 17. also, this statement affects the section of sffac 2 titled, “displaying financial information.”',
3352:'1the term general purpose federal financial report, abbreviated “gpffr” is used throughout this statement as a generic termtorefer tothereportthat contains',
3353:'theentitys financial statements that are prepared pursuant to generally acceptedaccountingprinciples. inthefederalgovernment,thereportis knownasthe performanceandaccountability report or theagency financial report. page 4',
3354:'concepts 6 fasab handbook, version 20 06/21 concepts 6 definitions 4. required information: information that consists of basic and required',
3355:'supplementary information. a. basic information: information that is essential for financial statements and notes to be presented in conformity with',
3356:'generally accepted accounting principles gaap. b. required supplementary information: information that a body that establishes gaap requires to accompany basic',
3357:'information. 5. otheraccompanyinginformation: informationthataccompanies basicinformationand required supplementary information, but is not required by a body that establishes gaap. amending sffac',
3358:'2 to distinguish basic information, rsi, and other accompanying information 6. sffac 2, par. 2 is amended as follows. the',
3359:'purpose of this statement of accounting concepts is to provide guidance as to what would be encompassed by a federal',
3360:'government entitys financial report. the statement specifiesthe types of entities for which there ought to be financial reportshereinafter called reporting',
3361:'entities, establishes guidelines for defining the makeup of each type of reporting entity, identifies types of financial reportsfor communicating the',
3362:'information for each type of reporting entity, and suggests the types of information each type of report would convey, and',
3363:'identifies the process and factors the board may consider in determining whether information should be basic information, required supplementary information',
3364:'rsi, or other accompanying information oai. 7. sffac 2, par. 3 is amended as follows. astatement of financial accounting concepts',
3365:'is intended to guide the members of the federalaccounting standardsadvisory board fasab as they deliberate and recommend accounting standards for',
3366:'the federal government. the concepts in this statement are consistent with those established in sffac 1 which are not superseded',
3367:'or modified by this statement. the concepts in this statement also are generally consistent with current practice and do not',
3368:'imply radical change. however, they are expected to guide the boards future deliberations. in addition, concepts statements constitute “other literature”',
3369:'and may only be relied upon by financial statement preparers and auditors to resolve specific accountingissuesintheabsenceofgaapliterature. itthisstatement alsowouldbeuseful page 5',
3370:'concepts 6 fasab handbook, version 20 06/21 concepts 6 to the office of management and budget omb, when it carries',
3371:'out its statutory responsibilities for specifying who should prepare financial statements and the form and content of those statements; and',
3372:'as broad guidance for preparers, auditors, and users of financialstatementsof federalagencies.astatement of financialaccountingconceptsdoes not, in and of itself, represent standards',
3373:'that would be considered generally accepted accounting principles for federal agencies to be followed for the preparation of financial statements.',
3374:'8. sffac 2, par. 55 is replaced by the following two paragraphs. 55a. to enhance confidence in the reliability of',
3375:'information presented in financial statements, the statements are often, but not always audited by inspectors general, independent accounting firms, or',
3376:'the governmentaccountability office. in developing accounting standards, the board considers whether information should be categorized as basic information, required supplementary',
3377:'information rsi, or other accompanying information oai. distinguishing these categories is important because each category is subject to different procedures',
3378:'and reporting requirements under generally accepted government auditing standards gagas. when an auditor is engaged to audit an entitys financial',
3379:'statements, basic information as a whole is subject to testing for fair presentation in conformity with gaap. however, rsi and',
3380:'oai are unaudited, butsubjectto certain procedures specified by gagas for rsi and oai, respectively. to assist users in analyzing the',
3381:'different types of information within financial reports, these differences must be conveyed and can be accomplished in a variety of',
3382:'ways. the traditional approach is to separate the categories of information. however, the categories may be commingled if the rsi',
3383:'and oai are clearly labeled as “unaudited” or distinguished in a manner that informs the reader of the level of',
3384:'assurance provided. 55b. classification of the information as basic information, rsi, or oai does not constrain theformofpresentation. forexample,financialstatementsmaybepresentedasbasic financial statements,',
3385:'rsi, or oai. information can be required or encouraged to be in the form of financial statements, narrative, graphs, or',
3386:'tables. to clearly communicate theintendedstatus,theboardmustspecifywhethertheinformationistobeconsidered basic information, rsi, or oai. selecting a category may involve a process which is described',
3387:'in paragraphs 73ato73g. 9. sffac 2, footnote 11 is rescinded. 10. sffac 2, footnote 12 is rescinded. 11. sffac 2,',
3388:'paragraph 72 is rescinded. page 6 concepts 6 fasab handbook, version 20 06/21 concepts 6 12. sffac 2, footnote 12a',
3389:'is amended as follows: the statement of financing may be presented as a financial statement or as a schedule in',
3390:'the notes to financial statements. the omb will provide guidance regarding details of how theinformation will be displayed forthestatementoffinancing,including whether',
3391:'it shallbe presented as a basic financial statement or as a schedule in the notes to the basic financial statements.',
3392:'13. sffac 2, paragraphs 69, 74, 79 and 108 are amended to conform the term “management discussion and analysis” to',
3393:'the term established in sffac 3 “managements discussion and analysis” each time it appears in these paragraphs. 14. the following',
3394:'headings, paragraphs, and table are added to sffac 2, following paragraph 73. distinguishing basic information, rsi, and oai determining required',
3395:'information 73a.selecting a category for communicating information may involve a process that begins with determining what information should be required.',
3396:'required information is information that consists of basic information and rsi. an item of information is a candidate for required',
3397:'information if it is consistent with the objectives of federal financial reporting and meets certain qualitative characteristics and costbenefit considerations.',
3398:'the board developed these factors earlier in the conceptual framework. sffac 1 identifies the reporting objectives paragraphs 112 to 150',
3399:'and the qualitative characteristics paragraphs 157 to 164. it also discusses cost versus benefit considerations paragraphs 151 to 155. determining',
3400:'basic information versus rsi 73b.information that meets the criteria for required information is a candidate for basic information or rsi.',
3401:'basic information is information which is essential for the financial statementsandnotestobepresentedinconformitywithgaap. thefasabstandards are the core2.1of gaap and auditors may be',
3402:'engaged to express an opinion as to 2.1thefirst andhighestlevel ofthegaap hierarchycomprisesstandardsandinterpretations. lower levelgaapmay not conflict with standards or interpretations. page',
3403:'7 concepts 6 fasab handbook, version 20 06/21 concepts 6 whether basic financial statements and notes are presented in conformity',
3404:'with those criteria. 73c.rsi is information that a body that establishes gaap requires to accompany basic information. it may be',
3405:'experimental in nature to permit the communication of information that is relevant and important to the reporting objectives while more',
3406:'experience is gained through resolution of accounting issues. also, the information may be expressed in other than financial measures or',
3407:'may not be subject to reliable estimation. as issues are resolved, the information may be considered basic at some point',
3408:'in the future. 73d.the board specifies what information should be presented as basic information and what information should be presented',
3409:'as rsi. assessing whether required information is a candidate for basic information or rsi may involve the boards consideration of',
3410:'a range of factors which are listed in table 1: factors to consider in distinguishing basic information from rsi on',
3411:'page 230. the factors are not listed in a particular order and some may convey similar ideas. in addition, different',
3412:'board members may assign different weight to each factor. thus, the factors provide a general framework for each board members',
3413:'judgment and are not considered to present a decision tree, hierarchy, or precise algorithm for classifying items. 73e.for example, members',
3414:'may consider the relevance of the information to fair presentation. if the information has a high relevance to fair presentation,',
3415:'it may be a candidate for basicinformation communicated byfinancial statementsand notesto the financialstatements. thefinancialstatementsandnotescouldnotbeconsideredfairly presentediftheinformationismissingormateriallymisstated. therationalesforsome of the other factors',
3416:'that members may consider are: a. useofvarioustypesoffinancialdataorfinancialtransactiondata. membersmay deliberate the nature of the data used or the type of system',
3417:'used to process the information. financial data used or data derived from a system for processing financial transactions, may be',
3418:'more likely to be considered basic information. b. level of importance the board wishes to be communicated in the financial',
3419:'report or the auditors report. in addition to the nature of the information, the board may take into account the',
3420:'effect of categorizing an item as basic information or rsi in the financial report and what the auditors report would',
3421:'communicate if the item is missing or materially misstated. by designating an item as basic information rather than rsi, the',
3422:'board can have some bearing on the level of importance conveyed in the financial report and auditors report. in other',
3423:'words, users may pay less attention to items categorized as “supplementary” in the financial report. conversely, theymaybe moreconcerned withthe auditorsconclusionsregarding',
3424:'page 8 concepts 6 fasab handbook, version 20 06/21 concepts 6 the fair presentation of the financial statements. hence, the',
3425:'more important the item, the more likely it would be a part of the financial statements and notes prepared in',
3426:'conformity with gaap, such that if the item is missing or materially misstated, the matter would be conveyed in the',
3427:'auditors report on the fair presentation of the financial statements. c. the extent to which the information interests a wide',
3428:'audience rather than specialists. if an item of information is of great interest to users, the information may be a',
3429:'candidate for basic information. conversely, if the item is primarily of interest to subject matter specialists, the information may accompany',
3430:'the basic information as rsi. d. extent to which there are not alternative sources of reliable information. if organizations routinely',
3431:'publish an item of information that is scrutinized by independent advisors, it may be more likely to be considered rsi',
3432:'than basic information. e. agreement on criteria that permit comparable and consistent reporting. if there is a lack of specific',
3433:'criteria for measuring an item, preparers may have great discretionindevelopingtheircalculationsandauditorsmaylackcriterianecessary for the expression of an opinion. the item of information',
3434:'may be a candidate for rsi. f. experience among users, preparers, and auditors with the information. the board may consider',
3435:'the views of expert users, preparers, and auditors in developing measurement criteria for basic information. if the level of experience',
3436:'regarding an item is low, input on specific criteria may not be available. also, when there is not sufficient experience',
3437:'to develop measurement criteria, auditors may have concerns about expressing an opinion on the information. they may express qualifications or',
3438:'include explanations in their report. categorizing the information asrsi mayencouragereportingwhile more experience isgained and criteria developed. g. benefit/cost ratio of',
3439:'using resources to compile the information as well as ensure accuracy. the board may consider the benefit and cost associated',
3440:'with producing and auditing the item of information. oai 73f. if an item of information does not meet the criteria',
3441:'for basic information or rsi, it becomes a candidate for oai. oai is information that accompanies basic information and rsi,',
3442:'but is not required by a body that establishes gaap. some entities may page 9 concepts 6 fasab handbook, version',
3443:'20 06/21 concepts 6 desire to report information to supplement required information and enhance a users understanding of the entitys',
3444:'operations or financial condition. this may include, but is not limited to, information on delivery times, turnover, and wastage of',
3445:'inventories; expected replacement of physical capital;and delinquency, aging, and default rates for loan portfolios. in addition, entities report information not',
3446:'required by a body that establishes gaap, but required by laws or administrative directives. the laws or administrativedirectivesmayrequirethe informationto beauditedandmayrequireitto',
3447:'accompany basic information and rsi. however, this information is also considered oai. 73g.although the fasab does not require oai to',
3448:'be presented, the fasab may at times encourage voluntary reporting of items to help in the development of information that',
3449:'may enhance overall federal financial reporting. for example, the fasab may consider an item to be relevantto entity operationsbut, for',
3450:'the moment, does not meet other criteria for required information. table 1: factors to consider in distinguishing basic information from',
3451:'rsi2 factors to consider in distinguishing basic information from rsi lowimpliesrsi factor highimpliesbasic relevance to fair presentation connection with elements',
3452:'of financial reporting use of various types of financial data or financial transaction data level of importance the board wishes',
3453:'to be communicated in the financial report significance, relevance, or importance of the item in light of objectives level of',
3454:'importance the board wishes to be communicated in the auditors report relevance to measuring financial condition or changes in financial',
3455:'condition extent to which the information interests a wide audience rather than specialists extent to which there are not alternative',
3456:'sources of reliable information agreement on criteria that permit comparable and consistent reporting experience among users, preparers, and auditors with',
3457:'the information benefit/cost ratio of using resources to compile the information as well as ensure accuracy connection with basic financial',
3458:'statements reliability and/or precision possible reliability and/or precision needed 2as noted in paragraph 73d, the factors are not listed in',
3459:'a particular order and do not represent a hierarchy of factors. 15. sffac 2, paragraph 74 is amended as follows.',
3460:'page 10 concepts 6 fasab handbook, version 20 06/21 concepts 6 meeting the four objectives of federal financial reporting in',
3461:'the most efficient manner suggests that reporting entities issue a financial report that would include the following: managements discussion and',
3462:'analysis; balance sheet statement of financial position commonly referred to as balance sheet; statement of net costs; statement of changes',
3463:'in net position; statement of custodial activities, when appropriate; statement of budgetary resources; statement of financing;[footnote retained but not presented]',
3464:'statement of program performance measures; [footnote retained but not presented] accompanying footnotes; required supplemental supplementary information pertainingtophysical,human,and research and development',
3465:'capital and selected claims on future resources, when appropriate; and other supplemental financial and management information, when appropriate accompanying information.',
3466:'16. sffac 2, footnote 14 is amended as follows. such components are similar to responsibility segments as referred to in',
3467:'fasab exposure draft sffas 4, “managerial costaccounting for the federal government” see pages 26 30 concepts and standards, par. 7881.',
3468:'responsibility segments are used to accumulate costs and outputs for major lines of activity. 17. sffac 2, paragraph 76 is',
3469:'amended as follows. furthermore, there are frequently instances when one or more of the suborganizations conduct a very visible or',
3470:'critical activity and there is a high level of public interest, e.g., internal revenue service tax collection activity; maintains large',
3471:'and complex accounts with largefundflows activity,e.g., defensebusinessoperationsfund; hasmajorresponsibilities for the appropriate use of earmarked taxes activity, e.g., health care financing',
3472:'administration; or its financial viability is of special concern to the executive branch or the congress, e.g., deposit insurance funds.',
3473:'in those situations, it may be desirable for the sub organization to prepare and issue a separate financial statement that',
3474:'is consistent with the concepts presented in this concepts statement. [footnote retained but not presented] in doing so, it would',
3475:'need to identify the parent entity and describe the suborganizations relationship to the parent. 18. sffac 2, paragraph 77 is',
3476:'amended as follows. page 11 concepts 6 fasab handbook, version 20 06/21 concepts 6 the components of any reporting entity',
3477:'are likely to conduct transactions with other components in the reporting entity, other federal entities, and persons and organizations outside',
3478:'the federal government. likewise, they are likely to have assets due from and liabilities due to other federal components and',
3479:'entities and to nonfederal persons and organizations. in reporting the transactions and balances of a federal reporting entity in its',
3480:'entirety, it is conceptually desirable, although not always practicable, to eliminate the intra entity transactions and balances. factorsto consider are',
3481:'the utility of the information for the entity in its entirety if the intraentity balances are not eliminated, the misunderstanding',
3482:'that might result if the balances are not eliminated, and the costbenefit of making the eliminations. 19. sffac 2, footnote',
3483:'17 presented below is deleted. areporting entity that eliminates none of the intraentity transactions or balances and still desires to',
3484:'present the information for its individual components in separate columns could do so by preparing and issuing a combining financial',
3485:'statement. if the individual columns are added to a total column without elimination of the intraentity transactions or balances, the',
3486:'total column would have to be labeled “memorandum only” to signify that it is not net of eliminations. recognizing that',
3487:'the u. s. standard general ledger does not presently provide accounts for identifying intraentity transactions, the decision as to when',
3488:'the information for a reporting entity other than the federal government as a whole should be presented in a consolidatingfinancial',
3489:'statement ratherthan a combining financialstatement would be specified by omb in a form and content bulletin. 20. sffac 2, paragraph',
3490:'78 is amended as follows. some of a reporting entitys components are likely to be required by law or policyto',
3491:'prepare and issue financial statements in accordance with accounting standards other than those recommended by fasabs and issued by omb',
3492:'and gao, e.g., accounting standards issuedbythefinancialaccountingstandardsboardoraccountingstandardsestablishedby a regulatory agency. those components should continue to issue the required reports. the reporting',
3493:'entitiesof which the componentsare a part can issue consolidated, consolidating, or combining statements that include the components financial information prepared',
3494:'in accordance with the other accounting standards. they need to be sensitive, however, to differences resulting from applying different accounting',
3495:'standards that could be material to the users of the reporting entitys financial statements. if these differences are material, the',
3496:'standards recommended issued by fasab and issued by omb and gao should be applied. the components would need to provide',
3497:'any additional disclosures recommended required by fasab and included in the ombissued standards guidance that would not be required by',
3498:'the other standards. 21. sffac 2, paragraph 79 is amended as follows. page 12 concepts 6 fasab handbook, version 20',
3499:'06/21 concepts 6 in addition to budgetary integrity, operating performance, and systems and control information, rreaders of the financial statements',
3500:'for the entire government are likely to be concerned primarilywith whether the government has been a proper steward. thiscan best',
3501:'be achieved with the preparation and issuance of the following: managements discussion and analysis; balance sheet statement of financial position',
3502:'commonly referred to as balance sheet; statement of operations or net costs; statement of operations and changes in net position;',
3503:'reconciliation of net operating revenue or cost and unified budget surplus or deficit; statement of changes in cash balance from',
3504:'unified budget and other activities; comparison of budgeted and actual use of resources; statement of program performance measures; accompanying footnotes;',
3505:'required supplemental supplementary information pertainingtophysical,human,and research and development capital and selected claims on future resources; and other supplemental financial and',
3506:'management information, when appropriate accompanying information. 22. sffac 2, paragraph 81 is rescinded. page 13 concepts 6 fasab handbook, version',
3507:'20 06/21 concepts 6 appendixa: basis for conclusions this appendix discusses some factors considered significant by members in reaching the',
3508:'conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. some factors were given greater',
3509:'weight than other factors. this statement may be affected by later statements. the fasab handbook is updated annually and includes',
3510:'a status section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the',
3511:'authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can',
3512:'review the basis for conclusions of the amending statement for the rationale for each amendment. project history a1. the fasab',
3513:'developed a core set of accounting standards and initial concepts statements on reporting objectives and entity and display early in',
3514:'its first six years of operation. conceptsweredevelopedasinitialstandardsweredeveloped. in2003,theboardbeganto activelyreviewandaddtoormodifyitsconceptsstatementsasneeded. theboardsdesire to evaluate itsconceptsaftermorethantwelve yearsof successfulprogressisstimulated by a realization that a',
3515:'some critical concepts that have been relied on are not yet included in a concepts statement, b certain aspects of',
3516:'the concepts are not widely understood or accepted, and c an expansion or modification of its concepts statements will help',
3517:'the board communicate more effectively with the growing community of federal financial report users, preparers, and auditors. a2. as part',
3518:'of the overall project to review and expand its conceptual framework, the fasab began deliberations on this statement in october',
3519:'2006. the fasab noted that, in the past, it had relied on certain concepts to distinguish between basic information, rsi,',
3520:'and oai. however, those concepts had not been incorporated into a concepts statement. this statement amends sffac 2 to include',
3521:'those concepts. the board believes that this statement isan important part of itsconceptualframeworkand willprovidemore consistent, useful, and enduring guidance to',
3522:'the board. a3. the board focused on this statement, in part, because of the issues that developed regarding how to',
3523:'communicate complex information in the most useful manner to financial report users. there are several broad financial reporting objectives each',
3524:'with sub objectives that require financial and nonfinancial information. in addition, reporting information to achieve those objectives raises the issue',
3525:'of how the information should be classified. this statement provides guidance on addressing such issues and selecting the means of',
3526:'communicating information necessary to help achieve the reporting objectives. page 14 concepts 6 fasab handbook, version 20 06/21 concepts 6',
3527:'a4. the board published the exposure draft ed, distinguishing basic information, required supplementary information, and other accompanying information, on march',
3528:'26, 2008, with comments requested by june 26, 2008. upon release of the ed, notices and press releases were provided',
3529:'to: the federal register, fasab news, the journal of accountancy,agatoday, the cpajournal, government executive, the cpaletter, and governmentaccounting andauditing update,',
3530:'the cfo council, the presidents council on integrity and efficiency, financial statementaudit network, and the federal financial managers council, and',
3531:'committees of professional associations generally commenting on eds in the past. a5. this broad announcement was followed by direct mailings',
3532:'of the exposure draft to the subcommittee on federal financial management, government information, and international security, committee on homeland security',
3533:'and governmentalaffairs, united states senate, and the subcommittee on government management, organization, and procurement, committee on oversight and government reform,',
3534:'house of representatives. a6. the board received 19 responses from the following sources: federal nonfederal internal external users, academics, others',
3535:'3 auditors 3 1 preparers and financial 12 managers total 15 4 a7. in general, respondents agreed with the process',
3536:'and factors for distinguishing the categories of information. however, many respondents believed that some of the factors listed in table',
3537:'1: factors to consider in distinguishing basic information from rsi, needed clarification. two respondents also noted that the factors could',
3538:'be weighted or assigned a value because some factors seemed more important than others. a8. thepurposeoftheedistoprovideconceptualguidancefordevelopingfuturestandards. it is intended to',
3539:'guide the board in deciding issues such as what information should be a part of the financial statements prepared in',
3540:'conformity with gaap basic information and what information should accompany financial statements prepared in conformity with gaap rsi. table 1',
3541:'provides a general framework for guiding members in deciding whether an item ofinformationshouldbeconsideredbasicinformation or rsi. ageneralframework permits future boards some',
3542:'level of flexibility in developing standards and the framework would not necessarily need to be revised as changes in the',
3543:'environment occurred. page 15 concepts 6 fasab handbook, version 20 06/21 concepts 6 a9. in addition, although some respondents suggested',
3544:'additional factors to consider, the board believes that the general framework presented in the ed includes a broad range of',
3545:'ideas that members may consider. for example, some respondents suggested additional factors regarding the level of uncertainty involved in accounting',
3546:'information, such as the impact of market factors and market volatility that may affect reportable items. however, the issue of',
3547:'uncertainty is embodied in the existing factors, “reliability and/or precision possible” and “reliability and/or precision needed.” a10.toclarifythe intent of thefactorspresented',
3548:'intable 1, theboardaddedbrief explanationsto paragraph 73e and added a footnote to the table to inform readers that, as discussed in',
3549:'paragraph 73d, the factors are not listed in a particular order or considered to present a hierarchy. also, the board',
3550:'removed the factor, “extent to which the information is aggregated lacking detail.” the board acknowledged that members may reach different',
3551:'decisions when applying the factor. also, another factor, “benefit/cost ratio of using resources to compile the information as well as',
3552:'ensure accuracy,” conveys a similar idea that members may consider. a11.some respondents were not clear whether distinguishing between basic information',
3553:'and rsi was the responsibility of the fasab or individuals. also, one respondent noted that a factorisneededtoaddressinstanceswherethere isastatutoryor regulatoryrequirement to',
3554:'presentanitemasbasicinformation,rsi,oroai. toclarifythatthefasabdeterminesthe category of required information, the board replaced paragraph 55 of sffac 2 with paragraph 8 of the statement',
3555:'and modified the language in paragraph 73d by stating that the board specifies what information should be presented as basic',
3556:'information and what information should be presented as rsi. the paragraph was also modified by substituting “board member” or “board',
3557:'members” for “individual” or “individuals.” in addition, when developing the ed, the board discussed that a statutory or regulatory body',
3558:'may require the reporting of information beyond that required by the fasab and may specify audit requirements for the information.',
3559:'also, the information may be included in a report containing information that the fasab requires. paragraph 73f explains that this',
3560:'information is considered oai. a12.regarding the oai category, the board noted that there may be instances where an entity may',
3561:'not have both basic information and rsi. for example, an entity may only have basic information to convey. in such',
3562:'an instance, oai would only accompany basic information. to accommodate circumstances where an entity may not have both basic information',
3563:'and rsi, theboardremoved theword “both” fromthedefinitionof oaiin paragraphs5and73f. a13.some respondents suggested changes to or expressed concern regarding the reporting model,',
3564:'such as removing the statement of financing. also, sffac 2 discusses financial statements that have not been presented in practice',
3565:'such as the statement of program performance measures. as part of the boards overall conceptual framework initiative, the page 16',
3566:'concepts 6 fasab handbook, version 20 06/21 concepts 6 board has started a project to revisit the reporting model. the',
3567:'project plan includes revisitingthefinancialstatementsandothercomponentsof thereportingmodelpresentedin sffac 2 and respondents views will be considered as part of that project. a14.respondents also',
3568:'expressed concern regarding the status of the required supplementary stewardship information rssi category. the rssi category was a response to',
3569:'the unique federalfinancialreportingenvironmentandthebroadfinancialreportingobjectives. forthis category, the board intended that the governmentaccountability office and the office of management andbudget woulddefinea levelof',
3570:'auditorinvolvement greater than applied to required supplementary information but less than applied to basic information. however, that level has never',
3571:'been defined and the board initiated projects to review and re categorize rssi items through a series of standards that',
3572:'would amend sffas 8, supplementary stewardship reporting. a15.currently, the standards to recategorize rssi include the following: 1 sffas 23, eliminating',
3573:'the category national defense property, plant, and equipment, which eliminated the use of rssi to report weapons systems information; 2',
3574:'sffas 25, reclassification of stewardship responsibilities and eliminating the current services assessment, which eliminated the use of rssi for the',
3575:'reporting of information about stewardship responsibilities; and 3 sffas 29, heritage assets and stewardship land, which eliminated the use of',
3576:'rssi for the reporting of stewardship property, plant and equipment pp&e. the board plans to address the remaining rssi item,',
3577:'stewardship investments, in a future standard. once the board reclassifies all items of rssi, the category will be eliminated. a16.theboarddistinguishes',
3578:'conceptsfrom accountingprinciples presentedin standards. as noted earlier, the purpose of the statement is to provide concepts to guide the fasab',
3579:'in developing future standards. thus, until the board amends existing standards regarding rssi, the board expects practice to be governed',
3580:'by those standards. boardapproval a17.thisstatementwasapprovedforissuancebyallmembersoftheboard. thewrittenballots are available for public inspection at the fasab’s offices. page 17 concepts 6 fasab',
3581:'handbook, version 20 06/21 concepts 6 appendix b:abbreviations aicpa americaninstituteofcertifiedpublicaccountants au auditstandardscodifiedandpublishedbytheaicpa fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board gaap generallyacceptedaccountingprinciples gagas',
3582:'generallyacceptedgovernmentauditingstandards gasb governmentalaccounting standards board gpffr general purpose federal financial report md&a managements discussion and analysis oai otheraccompanying information rsi',
3583:'required supplementary information rssi required supplementary stewardship information sfas statement of financialaccounting standards sffac statement of federal financialaccounting concepts sffas',
3584:'statement of federal financialaccounting standards page 18 concepts 6 fasab handbook, version 20 06/21 statement of federal financialaccounting concepts 7:',
3585:'measurement of the elements ofaccrualbasis financial statements in periodsafter initial recording status issued august 16, 2011 affects none. affected by',
3586:'none. see pages 67 for the preamble to statements of federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.gov. summary in financial reporting, measurement is',
3587:'the act or process of assigning dollar amounts to the elements of the financial statements assets, liabilities, and so forth.',
3588:'this concepts statement addresses the measurement of the elements of accrualbasis financial statements of federal government entities in periods after',
3589:'amounts are initially recorded. it identifies and elucidates conceptual issues for the board to consider when deliberating measurement standards in',
3590:'the future. it does not change existing standards. aprincipal question for the board to resolve in future standards is whether',
3591:'and under what circumstances it might be more useful for users decision making to report an asset or liability in',
3592:'periods after its acquisition or incurrence a at the amount initially recorded initial amount, i.e., the historical cost or historical',
3593:'proceeds which may be adjusted subsequently for amortization, depreciation, or depletion, if applicable or b at an amount measured at',
3594:'each financialstatementdateremeasuredamount,suchasthe fairvalue. thisconceptsstatement discusses the advantages and disadvantages of different alternatives for measurement. however, conclusions as to which measurement',
3595:'approach or attribute may be selected for reporting an element under different circumstances are deferred for consideration in the standardsetting',
3596:'process. standardsetting deliberations also would appropriately consider cost benefit implications and other practical reporting concerns. the measurement approach initial or',
3597:'remeasured amounts, attributes, and methods used for measuring assets and liabilities affect how the information is reported and interpreted. the',
3598:'analysisinthisconceptsstatementincludesacomparisonoftheadvantagesanddisadvantages for achieving the federal financial reporting objectives sffac 1 of continuing to report an initial amount after the recognition',
3599:'period versus remeasuring an asset or liability at each financial statement date.also included is a discussion of how well attributesthat',
3600:'are commonly applied or available for measuring assets and liabilities, such as fair value and settlement amount, comply with the',
3601:'qualitative characteristics sffac 1. the analysis suggests that, when the goal is to help ensure that reported information achieves several',
3602:'financial reporting objectives in response page 1 concepts 7 fasab handbook, version 20 06/21 concepts 7 to the various decisionmaking',
3603:'needs of a range of users, it is necessary to accept that different measurement approaches, attributes, and methods may be',
3604:'needed to conveyuseful information about different transactions and underlying events. the identification and discussion of the different measurement possibilities is',
3605:'expected to enhance the understanding of users and preparers as well as the boards deliberations of future standards. page 2',
3606:'concepts 7 fasab handbook, version 20 06/21 concepts 7 table of contents page summary 1 introduction 4 objective 4 focus',
3607:'onassets andliabilities 5 financial reporting objectives and qualitative characteristics 5 concepts 7 measurementapproaches andattributes 7 measurementapproaches 8 changes in specific',
3608:'prices versus changes in the general price level 8 four possiblemeasurementapproaches 9 focus of this statement 12 initialamounts,remeasuredamounts,andthe financialreporting 12',
3609:'initialamounts versus remeasuredamounts 12 achieving financial reporting objectives 14 measurementattributes andqualitative characteristics 17 fair value 18 settlementamount 19 replacement cost',
3610:'20 value in use 21 fulfillment cost 22 appendixa:basis for conclusions 23 background 23 statement objectives and content 24 outreach,',
3611:'responses, and board conclusions 25 boardapproval 27 page 3 concepts 7 fasab handbook, version 20 06/21 concepts 7 introduction 1.',
3612:'in financial reporting, measurement is the act or process of assigning dollar amounts to the elementsof thefinancialstatements. thisconceptsstatement addressesthemeasurement of',
3613:'the elements of accrualbasis financial statements of federal government entities in periods after their initial recording. the elements are assets,',
3614:'liabilities, net position, revenues,andexpenses, asdefinedinstatement offederalfinancialaccountingconcepts 5, definitions of elements and basic recognition criteria for accrualbasis financial statements. differentmeasurementsandconsiderationsmayapplyforfinancialstatements that',
3615:'are not presented on the accrual basis, such as a statement of budgetary resources, statement of socialinsurance, or statement of',
3616:'longrange fiscal projections, and for required supplementary information and other types of general purpose financial reporting. objective 2. the objective',
3617:'of this statement is to identify and elucidate the conceptual issues relevant to establishing measurement standards in the future for',
3618:'accrualbasis financial statements.1a principal question for the board to resolve in future standards is whether and under what circumstances it',
3619:'might be more useful for users decision making2 to report an asset or liability in periods after its acquisition or',
3620:'incurrence a at the amount initially recorded “initial amount”, i.e., the historical cost or historical proceeds which may be adjusted',
3621:'subsequently for amortization, depreciation, or depletion, if applicable or b at an amount measured at each financial statement date “remeasured',
3622:'amount”, such as the fair value. this concepts statement discusses the advantages and disadvantages of different alternatives for measurement. however,',
3623:'conclusions as to which measurement approach or attribute may be selected for reporting an element under different circumstances are deferred',
3624:'for consideration in the standardsetting process. standardsetting deliberations also would appropriately consider cost–benefit implications and other practical reporting concerns. 1this',
3625:'statement does not establish federal financial accounting standards or change existing standards. 2 references in this statement to usefulness for',
3626:'decision making encompass decisions related to accountability, management, and other needs of internal and external users, as discussed in statement',
3627:'of federal financial accounting concepts 1, objectives of federal financial reporting sffac 1. page 4 concepts 7 fasab handbook, version',
3628:'20 06/21 concepts 7 focus onassets and liabilities 3. the measurement concepts in this statement focus on assets and liabilities',
3629:'because remeasuring elements after their initial recording is directly applicable only to assets and liabilities, insofar as the other elements',
3630:'are derived from them.3that is,balance sheets and operating statements articulate and, therefore, the measurement and recognition of changes in assets',
3631:'and liabilities affect reported revenues and expenses. 4. expenses for a reporting period result from consuming assets and incurring liabilities,',
3632:'as well as from accounting adjustments that increase existing liabilities or decrease existing assets. revenues result from acquiring assets and',
3633:'from accounting adjustments that increase existing assets or decrease existing liabilities. consequently, expenses and revenues arise either from currentperiod transactions',
3634:'in which the resulting initial and remeasured amounts are the same e.g., salaries expense and tax revenue, or from adjustments',
3635:'to existing assets and liabilities, such asfor changes in the applicable discount rate e.g., increases in pension liabilities, or for',
3636:'decreases in liabilities due to recognizing revenues for amounts previously reported as deferred revenues. financial reporting objectives and qualitative characteristics',
3637:'5. the concepts in this statement are considered with reference to the federal financial reporting objectives and the qualitative characteristics',
3638:'of information in financial reports.4 the most relevant objectives to the questions discussed in this statement are: a. budgetary integrity.',
3639:'to help the reader determine how information on the use of budgetary resources relates to information on the costs of',
3640:'program operations and whether information on the status of budgetary resources is consistent with other accounting information on assets and',
3641:'liabilities b. operating performance. to help the reader determine 1 the costs of providing specific programs and activities and the',
3642:'composition of, and changes in, these costs 3the balance sheet element of net position is not separately addressed because it',
3643:'is defined as the difference between total assets and total liabilities. 4 sffac 1. page 5 concepts 7 fasab handbook,',
3644:'version 20 06/21 concepts 7 2 the efforts and accomplishments associated with federal programs and the changes over time and',
3645:'in relation to costs 3 the efficiency and effectiveness of the government’s management of its assets and liabilities c. stewardship.',
3646:'to help the reader determine whether 1 the government’s financial position improved or deteriorated over the period 2 future budgetary',
3647:'resources will likely be sufficient to sustain public services and to meet obligations as they come due 3 government operations',
3648:'have contributed to the nation’s current and future wellbeing 6. the qualitative characteristics of information in financial reports are: a.',
3649:'relevance—the capacity of information to make a difference in a decision by helping users to form predictions about the outcomes',
3650:'of past, present, and future events or to confirm or correct prior expectations b. understandability—the quality of information that enables',
3651:'users to perceive its significance c. reliability—the quality of information that assures that information is reasonably free from error and',
3652:'bias and faithfully represents what it purports to represent d. comparability—the quality of information that enables users to identify similarities',
3653:'in and differences between two sets of economic phenomena e. consistency—conformity from period to period with unchanging policies and procedures',
3654:'f. timeliness—having information available to a decision maker before it loses its capacity to influence decisions page 6 concepts 7',
3655:'fasab handbook, version 20 06/21 concepts 7 concepts measurementapproaches andattributes 7. the questions surrounding the measurement of assets and liabilities',
3656:'in accrualbasis financial statements can be grouped into two broad areas of consideration: a. measurement approach the measurement approach is',
3657:'how an asset or liability is measured in periods after initial recording—i.e., at the historical cost or initial transaction amount',
3658:'with subsequent adjustmentsfor amortization, depreciation, or depletion, if applicable orat an amount, such asfair value, measuredat each financialstatement date.adifferent measurement',
3659:'approach may be appropriate for different assets and liabilities. this statement refers to the amount initially recorded as the initial',
3660:'amount and to amounts measured at each subsequent financial statement date as remeasured amounts. b. measurementattribute and method the measurement',
3661:'attribute or measurement basis5 is a measurable characteristic of an asset or liability, such as its fair value or settlement',
3662:'amount.6major questions are: which attributes result in more useful information for decision making, and what factors and circumstances may contribute',
3663:'to that result, such as the classof asset or liability, the type of transaction, and variations in users decisionmaking needs?also,',
3664:'the selection of a measurement attribute often entails the selection of a measurement method. for example, if the measurement approach',
3665:'for a particular asset is to report a remeasured amount and the measurement attribute selected is fair value, possible measurement',
3666:'methods could be to researchquoted market prices, if available, ortoobtaina professionalappraisal. different measurement attributes and methods may be used for',
3667:'different assets and liabilities, and the selections made can affect the usefulness of reported information for decision making. 8. the',
3668:'next section discusses different measurement approaches with reference to the financial reporting objectives. alater section discusses measurement attributes and methods',
3669:'with reference to the qualitative characteristics. 5 both terms are currently in use in the accounting measurement literature and convey',
3670:'a similar concept. 6 these and other measurement attributes are defined and discussed in a later section. page 7 concepts',
3671:'7 fasab handbook, version 20 06/21 concepts 7 measurementapproaches 9. the most basic accounting and financial reporting questions relate to',
3672:'recognition and measurement. when should a government measure the existence of, or changes in, the value of an asset or',
3673:'liability? when and how should revenues and expenses resulting from these changes be measured and recognized? should a government record',
3674:'changes in economic values that have occurred, even though no transaction by the government has taken place? would the reliability',
3675:'of financial statements suffer if such changes were accounted for as they occur, or would the failure to account for',
3676:'them reduce the decision usefulness and representational faithfulness of financial statements? financial reporting standards traditionally have permitted or required recognition',
3677:'of value changes for some assetsandliabilitiesbutnotforothers. theissuesarecomplicatedbecausevaluechanges may be due to changes in interest rates or service potential, or to',
3678:'different types of price changes. changes in specific prices versus changes in the general price level 10. prices of goods',
3679:'and services increase or decrease for primarily two reasons: a. a change in the demand for or supply of a',
3680:'specific product, such as materials or equipment,which affects the marketvalue ofthe product. the accounting and financial reportingquestioniswhetherthese changesshouldbeincludedinthebalance sheetin the',
3681:'period in which they occur or entirely in the period when an asset or liability is disposed of or settled.',
3682:'for flows statements, the question is whether they should reportonlyrealizedgainsandlossesoralsothe unrealizedgainsand lossesgenerated by price changes before disposition of the assets',
3683:'or liabilities holding gains and losses. b. a change in the purchasing power of the monetary unit e.g.,thedollar. thatis,taking into',
3684:'account all goods and services bought and sold in the economy, the general price level might change such that the',
3685:'monetary unit buys more or less today than in a previous period. although the number of monetary units required to',
3686:'buy a product might change, the relationship between the price of that product and the price of other goods or',
3687:'services will remain the same. for example, if the price of machineawas higher than that of machine b before the',
3688:'change in purchasing power, it would also be higher afterward, because the change in purchasing power would affect both prices',
3689:'equally. increases or decreases in the number of monetary units required to purchase goods and services are referred to as',
3690:'inflation or deflation. 11. whether inflation is taken into account can affect how information is reported and interpreted. for example,',
3691:'assume that a federal agency acquired land for $100,000 in december 20x0 and sold it in december 20x1 for $125,000—an',
3692:'apparent gain of $25,000. page 8 concepts 7 fasab handbook, version 20 06/21 concepts 7 suppose, however, that during the',
3693:'yearthe general levelof pricesincreased by15 percent. that is, goods and services that could have been purchased in december 20x0 for',
3694:'$1,000 would have cost $1,150 in december 20x1.7 thus, in the example, the land acquired for $100,000 in 20x0 dollars',
3695:'can be thought of as having a remeasured cost of $115,000 $100,000 x 115/100 in 20x1 dollars. the gain on',
3696:'sale, expressed in constant dollars—in thiscase, 20x1 dollars—isthereforeonly$10,000$125,000 115,000, ratherthan$25,000 in nominal unadjusted dollars. the $15,000 difference between reporting the',
3697:'gain on sale in nominal dollars and reporting it in constant dollars is relevant to users assessment of the stewardship',
3698:'and operating performance of the agencys management. four possible measurementapproaches 12. the distinction between changes in specific prices or values',
3699:'and changes in the general price level purchasing power of the dollar suggests four possible measurement approaches: a. initial amounts/nominal',
3700:'dollars. this is the traditional measurement approach.assets and liabilities are stated at their initial historical cost or historical proceeds amounts,',
3701:'without adjustment for changes in prices, whether general or specific. b. initial amounts/constant dollars. assets and liabilities are stated at',
3702:'their initial amounts expressed in dollars as of the balance sheet current date, rather than dollars of the acquisition date,',
3703:'so that general price level adjustments are recognized. c. remeasured amounts/nominal dollars. assets and liabilities are adjusted to take into',
3704:'account changes in the prices of specific goods or services, but no separate recognition is given to changes in the',
3705:'general price level. d. remeasured amounts/constant dollars. assets and liabilities are remeasured to take into account the current prices of',
3706:'goods and services—that is, adjustments are required for changes in the general price level aswellasforchangesin specificprices. 13. the following expansion',
3707:'of the earlier example compares results for the four measurement approaches. the results are illustrated in tablea. 7changes inthegeneralpricelevelgenerallyare stated',
3708:'as an indexvalue. for example,the implicitprice deflatorfor gross domestic product gdp deflator, maintained by the u.s. department of commerce, bureau',
3709:'of economic analysis, expresses prices of various years as percentages of prices of a selected base year, which is assigned',
3710:'a value of 100. if, for example, 20x0 is the base year 100 and prices in 20x1 are 15 percent',
3711:'higher, then the gdp deflator for 20x1 would be 115. page 9 concepts 7 fasab handbook, version 20 06/21 concepts',
3712:'7 example afederal entity purchased land for $100,000 in december 20x0. the land increased in value to $125,000 by december',
3713:'20x1. the entity retained the land for another year and solditondecember31,20x2for$130,000. thegeneralpricelevelwas100whentheentity acquired the land, 115 on december 31, 20x1,',
3714:'and 127 on december 31, 20x2. on december 31, 20x1, the land was worth $125,000—meaning, the entity could have realized',
3715:'a $25,000 nominaldollar gain by selling it. furtheranalysisreveals, that $15,000 of that gain resulted from general price level changes $100,000',
3716:'x 115/100 while the remaining $10,000 resulted from specific price increases. the next year, 20x2, the land reached a value',
3717:'of $130,000 and management sold it for a net gain of $30,000 over the two year period. all four measurement',
3718:'approaches result in a $30,000 gain being reported, but different information is available for each of the two years. under',
3719:'the initial amounts/nominal dollars approach, the entire $30,000 gain is reported in 20x2. using the initial amounts/constant dollars approach, $15,000',
3720:'of the gain $115,000 100,000 is reported in 20x1 and $15,000 in20x2$130,000 115,000. underboththeremeasuredamountsapproaches,$25,000of the gain $125,000 100,000 isreported in',
3721:'20x1 and $5,000 in 20x2 $130,000 125,000. further analysis reveals that, under both approaches reported using constant dollars, the purchasing',
3722:'power gain in 20x2 is $13,043 [$125,000 x 127/115 – 125,000]. thus, under the initial amounts/constant dollars approach, the remainder',
3723:'of the 20x2 gain $15,000 – 13,043 = $1,957 is attributed to a specific price increase. in contrast, under the',
3724:'remeasured amounts/constant dollars approach, the specific price change in 20x2 is a loss of $8,043 $5,000 – 13,043. such differences',
3725:'can affect users evaluation of operating performance. for example, the increase in the value of the land attributable to the',
3726:'20x1 management team would be either zero or $15,000 under the initial amounts approaches versus $25,000 under the two remeasured',
3727:'amounts approaches. page 10 concepts 7 fasab handbook, version 20 06/21 concepts 7 table a. purchase and sale of land:',
3728:'comparative results under four measurement approaches measurement approach initial amounts/ nominal dollars initial amounts/ constant dollars remeasured amounts/ nominal dollars',
3729:'remeasured amounts/ constant dollars acquisition cost = book value at 12/31/x0 20x0 dollars $100,000 $100,000 $100,000 $100,000 reported book value',
3730:'of land, 12/31/x1 current value of land, 12/31/x1 100,000 125,000 115,0001 125,000 125,0002 125,000 125,0002 125,000 reported total gain, 20x1',
3731:'— purchasing power gain — specific price gain 0 0 0 15,0003 15,000 0 25,0004 0 25,000 25,0004 15,0005 10,000',
3732:'sale price of land, 12/31/x2 130,000 130,000 130,000 130,000 reported total gain, 20x2 — purchasing power gain — specific price',
3733:'gain/loss 30,0006 0 30,000 15,0007 13,0439 1,957 5,0008 0 5,000 5,0008 13,0439 8,043 1$100,000 x 115/100 = $115,000 2market value',
3734:'at 12/31/x1 3$115,000 – 100,000 = $15,000 4$125,000 – 100,000 = $25,000 5$100,000 x 115/100 – 100,000 = $15,000 6$130,000',
3735:'– 100,000 = $30,000 7$130,000 – 115,000 = $15,000 8$130,000 – 125,000 = $5,000 9$125,000 x 127/115 – 125,000 =',
3736:'$13,043 page 11 concepts 7 fasab handbook, version 20 06/21 concepts 7 14. althoughcertainfederalgovernmentstatisticsarereportedinconstantdollars,therehasnot been a strong call to adjust',
3737:'the financial statements in recent decades, when inflation has been low. however, should high inflation be experienced in the future,',
3738:'consideration might be given to reporting financial statement information in constant dollars to assist users in assessing an entitys financial',
3739:'position and operating results after adjusting for inflation. if so, an examination of the advantages and disadvantages of reporting in',
3740:'constant dollars would be appropriate at that time. focus ofthis statement 15. the remainder of this statement focuses on the',
3741:'differences between reporting initial amounts and remeasured amounts in nominal dollars measurement approaches a. and c. in the previous section.',
3742:'under approach a., initial amounts are not adjusted for changes in either general or specific prices. under approach c., remeasured',
3743:'amounts and resulting holdinggainsandlossesincorporate thecombined effectsof bothgeneralandspecificprice changes without separately identifying them. 16. the analysis in this statement addresses assets',
3744:'and liabilities in general. however, a particular financial reporting standard may permit or require the reporting of initial amounts forsomeassetsandliabilitiesand',
3745:'remeasured amountsfor others, basedonthe anticipated usefulness to decision makers of one approach versus the other for the reporting issues addressed',
3746:'in the standard. initialamounts, remeasuredamounts, and the financial reporting objectives 17. thissectiondiscussesinitialamountsandremeasuredamountsingeneralandtheextentto which each measurement approach helpsachieve the federal financial',
3747:'reporting objectives. different measurement attributes are discussed in a later section on measurement attributes and qualitative characteristics. initialamounts versus remeasuredamounts',
3748:'18. traditionally, the amount at which a transaction is reported has been determined in a manner appropriate to the nature',
3749:'of the transaction. for example, assets acquired by purchase are initially reported at the amount of the consideration surrendered by',
3750:'the purchaser plus any additional costs incurred to bring the asset to a serviceable condition. assets acquired through donation are',
3751:'reported at their fair value at the date of donation. accounts receivable and payable are reported at their anticipated net',
3752:'settlement amounts, page 12 concepts 7 fasab handbook, version 20 06/21 concepts 7 which are future exit values.8 examples include',
3753:'reporting accounts receivable at net realizable value and reporting accounts payable at invoice amount less any discounts e.g., for prompt',
3754:'payment. once recorded, the amounts initially determined are often referred to as the historical cost of an asset or historical',
3755:'proceeds of a liability, regardless of how they were determined. in this statement they are referred to as initial amounts.',
3756:'19. certain features of a transaction may make identification of an initial amount more difficult. for example, transactions may have',
3757:'associated costs, such as legal fees, which generally are reported as part of the initial amount. asingle transaction may involve',
3758:'more than one asset or liability, requiring the total transaction amount to be allocated to the components. indirect costs, such',
3759:'as certain labor costs, may need to be allocated to constructed assets through cost accounting procedures. initial amounts for longer',
3760:'lived assets and liabilities generally are allocated to reporting periods. for example, capital assets are depreciated or amortized over their',
3761:'estimated useful lives. discounts or premiums from issuance of debt are amortized or accreted over the term of the debt.',
3762:'many of these features present practical questions to be resolved when setting standards. 20. remeasured amounts of assets and liabilities',
3763:'are determined using one of several possible measurement attributes that reflect economic conditions at the financial statement date, including, for',
3764:'example, fair value or settlement amount. remeasurement updates a previously determined carrying amount to reflect a change in the economic',
3765:'value of an asset or liability that has occurred since the previous financial statement date. a remeasuredamount thusdiffersfromanadjustment toaninitialamount that',
3766:'doesnot reflect a change in value. for example, an increase in the accumulated depreciation balance on a building does not',
3767:'change the economic value of the building and does not constitute remeasurement of its carrying amount. unless the value of',
3768:'the building itself is remeasured at, for example, its fair value, the reported amount will continue to be considered the',
3769:'initial amount. in contrast, an adjustment to an allowance for uncollectible accounts receivable duetoan increasedriskof noncollection constitutesremeasurement of thecarrying amount,',
3770:'even when the gross amount of receivables is not remeasured, because the adjustment reflects a change in the economic value',
3771:'of the receivables—the anticipated net settlement amount. 8an exit value is the price or amount at which an asset could',
3772:'be sold or a liability extinguished. an entry value is the estimated price at which an asset which is currently',
3773:'on the books may be purchased. kohlers dictionary for accountants, sixth edition, w. w. cooper and yuji ijiri, eds. ;',
3774:'prenticehall, inc., englewood cliffs, n.j., 1983. entry and exit values are referred to again in the section on measurement attributes.',
3775:'page 13 concepts 7 fasab handbook, version 20 06/21 concepts 7 achieving the financial reporting objectives 21. assessments of which',
3776:'nominaldollar measurement approach—initial amounts or remeasuredamounts—betterenablesachievement of one or more of the financial reporting objectives vary according to the kinds',
3777:'of information users need and the decisions to be made.9 in practice, federal financial statements traditionally have followed a mixedattribute',
3778:'model. that is, some assets and liabilities, such as general property, plant, and equipment, have been reported at initial amounts',
3779:'adjusted for depreciation, depletion, or amortization, if applicable, and others, such as direct loans and loan guarantees, have been reported',
3780:'at remeasured amounts. 22. given the objective of reporting information that is useful for accountability and users decisionmaking needs and',
3781:'the range of different users and information needs to be addressed, it is likely that federal financial statements will continue',
3782:'to include both measurement approaches as well as different measurement attributes and measurement methods under each approach. consequently, this concepts',
3783:'statement identifies advantagesand disadvantagesofreportinginitialamountsandremeasured amountsand of applying different measurement attributes, but no conclusions are drawn as to which measurement approach',
3784:'or attribute may be preferable either in general or in particular circumstances. such conclusions are the province of the standardsetting',
3785:'process, in the course of which the concepts in this statement will be considered on a projectbyproject basis, along with',
3786:'cost–benefit considerations and other practical reporting concerns that may arise under different alternatives. 23. continuing to report assets and liabilities',
3787:'at their initially recorded amounts in periods following their acquisition or incurrence is a longestablished approach to financial reporting and',
3788:'users are accustomed to that approach. initial amounts generally are reliable and objective, based on documented evidence, although subjectivity subsequently',
3789:'may be introduced through the assumptions or methods adopted for calculating depreciation or amortization, such as depreciable lives and salvage',
3790:'values, or, as previously indicated, through the allocation of indirect costs. initial amounts establish a historical record of transactions that',
3791:'have occurred that facilitates the control and safeguarding of resources. 24. proponentscitetheseadvantagesinsupportofreportingattheirinitialamountsthecostsof inventory and capital assets and the resultant costs',
3792:'of providing programs and activities referred to in the operating performance objective. these proponents believe that it is not useful',
3793:'to remeasure and report assets at their potential sales prices or settlement amounts when they are being held to provide',
3794:'services, rather than for sale. in this view, assets held to provide services should be reported at the amounts paid',
3795:'for them or other initial 9 sffac 1 describes the users of federal financial reporting and their decisionmaking needs. page',
3796:'14 concepts 7 fasab handbook, version 20 06/21 concepts 7 amounts, and the reported cost of using them each period',
3797:'should be a function of that amount. with this approach, the initial amounts of assets will be allocated to service',
3798:'costs over the periods when the assets are used to provide services, based on the prices paid for the assets.',
3799:'25. many also support reporting initial amounts for assets used to provide services because they believe that the adequacy of',
3800:'taxes and other revenues should be assessed based on the amounts actually expended to acquire existing assets, rather than on',
3801:'the currentperiod costs of equivalent assets or service potential. these proponents suggest that reporting program and activity costs based on',
3802:'the initial amounts facilitates users’ ability to assess how the use of budgetary resources relates to the costs of operations',
3803:'budgetary integrity objective, whereas reporting costs each period at remeasured amounts does not. initial amounts also may be advocated when',
3804:'there are significant barriers to the realization or settlement of a remeasured amount. 26. proponents of reporting initial amounts hold',
3805:'that the reliability and objectivity of initial amounts is critical for users decisions. reporting remeasured amounts may introduce significant uncertainties',
3806:'and subjectivity into the information provided to users because of the extent of judgment involved in developing these estimates. those',
3807:'who hold these views point out that remeasured information may reduce the reliability of financial statements. further, they note that',
3808:'information that is not reliable is rarely relevant. 27. supporters of remeasurement believe that users require uptodate information about the',
3809:'price of assets held for sale or to generate future cash inflows. further, they believe that users also need information',
3810:'about the costs of programs and other ongoing activitiesbased on the current costs of the underlying assets, particularly infrastructure and',
3811:'other capital assets that likely were acquired many years ago. in this view, a comparison of current period taxes and',
3812:'other revenues with remeasured current costs of the resources consumed in providing goods and services is more relevant for assessing',
3813:'operating performance, stewardship, andthesustainabilityof servicesthan isa comparison withinitial amounts that are no longer current. to provide uptodate information on the',
3814:'costs of services, the underlying assets need to be reported at a remeasured amount, such as replacement cost. 28. similarly,',
3815:'supporters of remeasurement believe that remeasured amounts of assets and liabilities, especially for assets acquired many years ago, are more',
3816:'relevant than initial amounts for assessing an entitys current financial position, service potential, and ability to meet obligations when due,',
3817:'as well as the magnitude of the entitys current and probable futureresourceneeds. overtime,criticalfactors,suchaspricesandinterestrates,change, yet initial amounts reflect the prices and',
3818:'interest rates in effect at the various transaction dates, not at the reporting date. for example, it is possible for',
3819:'assets acquired at different dates to be reported at different amounts, even though they have the same service page 15',
3820:'concepts 7 fasab handbook, version 20 06/21 concepts 7 potential. similarly,itispossibleforliabilitiesincurredatdifferentdatestobereportedatthe same initial amount, even though they do not represent',
3821:'equivalent economic claims on the entitys resources, because they bear different interest rates. 29. the contrasting views about the usefulness',
3822:'of initial amounts versus remeasured amounts suggest that an important consideration is whether the reporting objectives generally are more concerned',
3823:'with informing users about how efficiently and effectively budgetary resources were ultimately used to deliver goods and services, or about',
3824:'how all economic resourceswereused. theprincipaldifferencebetweenthetwogoalsisthetreatmentofthe effects of price changes unrealized or holding gains and losses on reported assets and liabilities',
3825:'and related operating costs. the different treatments provide different information to users of the financial statements. 30. if an entity',
3826:'reports initial amounts, the statement of net cost reports the expiring benefits from previously expended budgetary resources only when the',
3827:'underlying assets are consumed or sold. the statement of net cost does not provide information about changes that occur in',
3828:'resource prices or the values of existing assets in the intervening periods. in contrast, if the entity reports remeasured amounts,',
3829:'the information reflects the capacity of the underlying assets to provide goods and services in changing circumstances. the statement of',
3830:'net cost captures the periodtoperiod changes in asset amounts holding gains and lossesin the periods in which they occur and',
3831:'reportsthe resourcesconsumed at current amounts, information that can help users assess stewardship and operating results each period. 31. thereportingofholdinggainsandlossescanhelpfulfillthefinancialreportingobjectivesby providing',
3832:'information about management’s performance that is useful to agency and programmanagersaswellasto taxpayersandother usersoffinancialreports,including, for example, the economic results of decisions',
3833:'to hold rather than to sell assets. this information may enhance understanding of the costs of programs and activities based',
3834:'on current costs, how costs are changing, the sufficiency of current resources, and future resource needs. the information also may',
3835:'help users assess the efficiency and effectiveness of the management of the entity’s assets and liabilities, including whether a change',
3836:'in financial position resulted from management’s operating decisions or from changes in prices beyond management’s control. these kinds of information',
3837:'are available from the financialstatements when holding gainsand losses are separately displayed in the statement of net cost. reporting initial',
3838:'amounts without adjustment for holding gains and losses and excluding amortization, depreciation, and depletion may help users compare the resources',
3839:'consumed for goods and services with the resources provided for those purposes. on the other hand, without information about current',
3840:'prices it is difficult for users to assess future resource needs and whether the entity’s financial position has improved or',
3841:'deteriorated. page 16 concepts 7 fasab handbook, version 20 06/21 concepts 7 32. theexpensesrelatedtocapitalassetsthatarereportedinaresourceflowsstatementarea component of the cost of currentyear',
3842:'services. initial amounts may be more useful than remeasured amounts for reporting certain costs of services when the objective is',
3843:'to enable tracking of budgetary resources expended. for example, costs, such as amortization or depreciationof capitalassets,maybeviewed astheexpiration of benefitsderivedfromprior expendituresof',
3844:'budgetaryresources. remeasured amounts may be more useful than initial amounts for assessing operating performance when the objective is to consider',
3845:'the economic costs of providing specific programs and activities and to compare costs with accomplishments. remeasured amounts also may be',
3846:'more useful for assessing stewardship, including whether the entity’s financial position improved or deteriorated over the period, whether public services',
3847:'are sustainable, whether obligations can be met as they come due, and for assessing future resource needs. 33. thepreviousdiscussionsuggeststhattherearedifferentviewsandfactorstobeconsidered concerning',
3848:'whether the financial reporting objectives are better achieved by reporting initial amountsorremeasuredamounts.also,someindividualsbelievethat amixedmeasurement approach, whereby some assets or liabilities are',
3849:'reported at initial amounts and others at remeasuredamounts, serves awiderrange of decisionmaking needs than eitherof the two measurement approachesalone.10 ultimately,',
3850:'which measurement approach is more useful depends on the types of transactions and other events that have occurred and the',
3851:'information needed for the decisions to be made. requiring the same measurement approach for all assets and/or liabilities and related',
3852:'costs is unlikely to be conceptually appropriate or useful for decision makers. rather, when the goal is to help ensure',
3853:'that reported information meets several financial reporting objectives in response to the various decisionmaking needs of a range of users,',
3854:'it is necessary to accept that different measurement approaches, measurement attributes, and measurement methods may be appropriatetoconveyusefulinformationaboutdifferent transactionsandunderlyingevents. measurementattributes and',
3855:'qualitative characteristics 34. the previous section evaluates two measurement approaches—reporting initial amounts and reporting remeasured amounts—in relation to the financial',
3856:'reporting objectives. this section examines initial and remeasured amounts in relation to the qualitative characteristics that information in financial reports',
3857:'should demonstrate.11 10 for example, some who support reporting initial amounts for assets used to provide services also support reporting',
3858:'remeasured amounts for assets expected to be converted into cash. 11 the qualitative characteristics are discussed in sffac 1. page',
3859:'17 concepts 7 fasab handbook, version 20 06/21 concepts 7 35. initialamountsarereferredtoingeneraltermsbecausetheyarenotchangedfromperiodto period except for appropriate adjustments for amortization, depreciation,',
3860:'or depletion. remeasured amounts are discussed with reference to the attribute measured because the attribute selected may affect the degree',
3861:'to which a particular qualitative characteristic is met. also, different attributes may be selected for different assets and liabilities and,',
3862:'because the amounts are remeasured each period, it is possible to change the attribute, if appropriate to achieve the financial',
3863:'reporting objectives under changed circumstances. 36. the measurement attributes discussed are those most commonly applied or available for use: fair',
3864:'value, settlement amount, replacement cost, value in use, and fulfillment cost. additional measurement attributes may be developed in the future.',
3865:'fair value and settlement amount may be used to determine either the initial amount historical cost or historical proceeds or',
3866:'the remeasured amount of an asset or liability. replacement cost and value in use for assets and fulfillment cost for',
3867:'liabilities are not applicable for assessing initial amounts because they are attributes of assets and liabilities that an entity already',
3868:'has recorded. these attributes may be used to remeasure recorded amounts at subsequent financial statement dates. 37. differentmeasurementmethods,withvaryingdegreesofprecision,maybeusedinapplying measurement attributes.',
3869:'for example, fair value may be measured by selecting a market price from applicable quotations, by estimating the present value',
3870:'of future resource flows, through a professional appraisal, or by applying a variety of other estimation techniques. the methods used',
3871:'may introduce different degrees of uncertainty in the resultant amounts and may, therefore, affect the degree to which the qualitative',
3872:'characteristics are met. fair value 38. fair value is the amount at which an asset or liability could be exchanged',
3873:'in a current transaction between willing parties, other than in a forced or liquidation sale. 39. the fair value of',
3874:'an asset or liability may be measured at the market value in established markets, such as those for certain investment',
3875:'or debt securities, or it may be estimated when there is no active market. estimated fair value is commonly used',
3876:'for the initial amounts of assets acquired through donation or other types of nonexchange transactions. 40. the fair value may',
3877:'be an entry purchase value or an exit selling or settlement value. for exchangesin establishedmarkets, theentryand exit valuesforthesameitemshouldbethe same except',
3878:'for transaction costs and differences attributable to the value of services provided bythesellerof an asset e.g., amerchandise vendorto the buyer.12',
3879:'when thereis no established market for the exchange, differences between entry and exit prices may arise due to the use',
3880:'of different assumptions in arriving at an estimate of market value. 12 for example, a px acquires a variety of',
3881:'goods at a wholesale entry value price,provides the service of assembling the goods in a location and display that is',
3882:'convenient to customers, and sells them at a retail exit value price. page 18 concepts 7 fasab handbook, version 20',
3883:'06/21 concepts 7 also, when a federalentity acquiresor constructsan asset for a specific public purpose, the exit value may be',
3884:'lower than the entry value if, for example, a potential purchaser would expect to pay a reduced price to allow',
3885:'for the cost of adapting the asset to an alternative use. 41. methods used to measure fair value include calculating',
3886:'the present value of estimated future cash flows and estimating the fair value by reference to the current purchase or',
3887:'selling prices or other settlement amounts of similar assets or liabilities. apresent value measurement that fully captures the economic differences',
3888:'among different assets and liabilities would most often include the following factors: a. an estimate of the future cash flow,',
3889:'or in more complex cases, series of future cash flows at different times b. expectations about possible variations in the',
3890:'amount or timing of those cash flows c. the time value of money, represented by the riskfree rate of interest',
3891:'d. the price for bearing the uncertainty inherent in the asset or liability e. other, sometimes unidentifiable, factors including illiquidity',
3892:'and market imperfections.13 42. when fair value is used to measure and report an initial transaction, the amount becomes the',
3893:'historical cost or historical proceeds of the resultant asset or liability. the relevance, reliability, understandability, and comparability across entities of',
3894:'the reported amount are high in the initial reporting period, but they may decline with each successive period when compared',
3895:'with remeasured amounts. when market values can be used, amounts that are remeasured at fair value generally are high in',
3896:'relevance, reliability, and understandability, and in their comparability to equivalent amounts reported by other entities and their contribution to timely',
3897:'reporting. when fair values must be estimated, the degree to which the qualitative characteristics are met may vary depending on',
3898:'the availability of information about similar assets and liabilities and the degree of estimation required. settlementamount 43. settlement amount is',
3899:'the amount at which an asset can be realized or a liability can be liquidated. 13 financialaccounting standards board, statement',
3900:'of financialaccounting concepts no. 7, using cash flow information and present value in accounting measurements, february 2000, par. 23. page',
3901:'19 concepts 7 fasab handbook, version 20 06/21 concepts 7 44. settlement amounts are exit values that are based on',
3902:'transactions and may be adjusted by the reporting entity for expectations regarding circumstances that may influence future settlement. when used',
3903:'to report receivables, the settlement amount is often referred to as the net realizable value. for example, the settlement amount',
3904:'or net realizable value for a receivable would be the invoiced amount adjusted for expectations regarding credit losses. for accounts',
3905:'payable, the settlement amount is the amount that the creditor will accept in settlement of its claim for compensation for',
3906:'goods or services provided. for longterm liabilities, the settlement amount is often calculated by applying net present value techniques to',
3907:'expected future cash flows. for example, the settlement amount for loan guarantees may be measured by projecting defaults, and subsequent',
3908:'recoveries, on guaranteed loans and applying an entityspecific discount rate to the resultant cash flows. the resultant measure represents the',
3909:'amount of cash that would need to be invested at the statedinterestratei.e., thediscount rate to providecashflowsequaltotheexpectedfuture cash payments required to',
3910:'settle the guaranteed loans. in contrast to fair value, the settlement amount would not take into account the price that',
3911:'the market would charge for bearing the risk or uncertainty associated with the asset or liability. 45. when used for',
3912:'initially recording and reporting shortterm assets and liabilities, the degree of relevance, reliability, and understandability of settlement amounts could be',
3913:'similar to that afforded byfair values. however, the relevance of initial amounts for longer term assets and liabilities would decline',
3914:'in subsequent periods. remeasured settlement amounts would seemto be more appropriate because their relevance and reliabilitywould be maintained or enhancedasthereportingdatesapproachedthefinalsettlementdate.',
3915:'for somelongterm liabilities, remeasurement may require the professional expertise of disciplines such as, for example, that of actuaries with respect',
3916:'to pension liabilities. replacement cost 46. replacement cost is the amount required for an entity to replace the remaining service',
3917:'potential of an existing asset in a current transaction at the reporting date, including the amount that the entity would',
3918:'receive from disposing of the asset at the end of its useful life. 47. replacement cost is a remeasured amount,',
3919:'an entry value that is often advocated for assets used in providing services, such as capital assets and inventory not',
3920:'held for sale. replacing the remaining service potential of an existing asset is not the same as acquiring an identical',
3921:'asset. however, in practice, it may be difficult to measure remaining service potentialdirectly. theremaybeseveralwaysofarrivingatanapproximation. forexample, one way would be to',
3922:'measure the current cost of a similar asset, reduced by an appropriate amount to allow for the lower service potential',
3923:'of the existing asset due to its age and condition. thus, the replacement cost of an asset is not the',
3924:'same as the fair value of either anequivalentnewassetortheexistingassetatthereportingdate. forexample,toarriveat thereplacement cost of afiftyyearoldofficebuildingatthe midpoint of itsexpectedlife,the page 20 concepts 7',
3925:'fasab handbook, version 20 06/21 concepts 7 fair value of an equivalent, newly constructed office building would have to be',
3926:'adjusted for the value of the difference in age or service potential. in addition, the fair value of the existing',
3927:'building may be higher than the replacement cost because the building can be put to alternative uses that produce greater',
3928:'benefits to the owner. 48. the relevance of replacement cost is high, especially for assessments of financial position and future',
3929:'resource needs. the level of understandability, reliability, and comparability across entities of reported replacement cost amounts may vary according to',
3930:'the data used and the complexity of the calculation. 49. reporting the replacement cost of capital assets used in providing',
3931:'services and related service costs can facilitate comparisons between program and activity costs and accomplishments related to the same period.',
3932:'an objection sometimes raised is that replacement cost is not an attribute of the asset that is actually owned. however,',
3933:'the asset being measured is not the physical asset but the services it can provide. value in use 50. value',
3934:'in use is the benefit to be obtained by an entity from the continuing use of an asset and from',
3935:'its disposal at the end of its useful life. 51. value in use is a remeasured amount for assets used',
3936:'to provide services. it can be measured at the present value of future cash flows that the entity expectsto derive',
3937:'from the asset, including cash flows from use of the asset and eventual disposition. value in use is entity specific',
3938:'and differs from fair value. fair value is intended to be an objective, marketbasedestimateoftheexchangepriceofanassetbetweenwillingparties. valueinuseisan entity’s own estimation of the',
3939:'service potential of an asset that it holds to provide a specific service. examplesincludeinventoryandequipmentwithauniquedesignandpurpose,and specialpurposebuildings,suchasprisons. inthosecases,thevalueinusemaybegreater than the amount the',
3940:'entity could obtain from selling the asset because the selling price would need to accommodate the purchasers need to adapt',
3941:'the asset to another purpose. 52. the service potential of an asset may be difficult to assess when the asset',
3942:'is used in combination with other assets and the total assessment must be allocated to the individual assets. in those',
3943:'cases, the reliability, consistency, and understandability of the remeasured amounts may be lower than when a direct assessment can be',
3944:'made of the value in use of each asset. the relevance of value in use is high for assessments of',
3945:'an individual entity, both with regard to the entity’s management and for users’ evaluations of operating performance, especially the entity’s',
3946:'efficiency and effectiveness in managing its assets. however, the entityspecific nature of value in use reduces interentity comparability. page 21',
3947:'concepts 7 fasab handbook, version 20 06/21 concepts 7 fulfillment cost 53. fulfillment cost includes all costs that an entity',
3948:'will incur in fulfilling the promises that constitute a liability. 54. fulfillment cost is a remeasured, entityspecific amount. it is',
3949:'an exit value that includes payments to the counterparty and other costs that arise from fulfilling the promises that constitute',
3950:'a liability assumed by an entity, such as for environmental remediation. the fulfillment cost differs from the settlement amount. the',
3951:'settlement amount is based on a transaction with an external party, potentially adjusted by the entity for circumstances that may',
3952:'affect the payment amount. the fulfillment cost, in contrast, is the value to the entity of the resources that will',
3953:'be used in liquidating the entitys assumed liability and is not necessarily equal to the carrying amount or the fair',
3954:'value of those resources. thus, the fulfillment cost of an entitys liability is analogous to the value in use of',
3955:'an entitys asset. 55. whenthefulfillmentcostdependsonuncertainfutureevents,possiblealternativeoutcomes need to be considered when developing the estimated cost to reduce the potential for bias',
3956:'in the assessment. when fulfillment requires work to be done—for example, when the liability is for environmental remediation—the relevant costs',
3957:'are those that the entity will incur for either doing the work itself or employing a contractor. the fulfillment costs',
3958:'of longterm liabilities would be discounted to the reporting date, adjusting for risk at the riskfree rate, if appropriate. 56.',
3959:'fulfillment costs are relevant to assessments of an entitys financial position but, because theyareentityspecific,theymaynotbecomparableforassessmentsofotherentities. their reliability and understandability may vary',
3960:'depending on the complexities and uncertainties reflected in their measurement. page 22 concepts 7 fasab handbook, version 20 06/21 concepts',
3961:'7 appendixa: basis for conclusions this appendix discusses factors considered significant by members in reaching the conclusions in this concepts',
3962:'statement. it includes the boards reasons for accepting certain proposals and rejecting others. some factors were given greater weight than',
3963:'other factors. the concepts enunciated in this concepts statement—not the material in this appendix—should guide the resolution of measurement issues',
3964:'that affect specific transactions, events, or conditions. this statement may be affected by later statements. the fasab handbook is updated',
3965:'annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text of',
3966:'the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes.',
3967:'the reader can review the basis for conclusions of the amending statement for the rationale for each amendment. background a1.',
3968:'early in its operations, the fasab developed a core set of accounting standards and initial statements of federal financial accounting',
3969:'concepts sffacs or concepts statements on reporting objectives and entity and display. concepts were developed as initial standards were developed.',
3970:'in 2003, the board decided that it should review and add to or modify its concepts statements as needed. in',
3971:'addition to the initial sffacs, the board has issued concepts statements on managements discussion and analysis; the consolidated financial report',
3972:'of the u.s. government; the definition of elements and basic recognition criteria for accrualbasis financial statements; and distinguishing among basic',
3973:'information, required supplementary information, and other accompanying information. this concepts statement further expands the boards conceptual framework. a2. sffac 1,',
3974:'objectives of federal financial reporting september 1993, defined the users and objectives of federal financial reporting, as well as the',
3975:'qualitative characteristics of reported financial information. sffac 5, definitions of elements and basic recognition criteria for accrualbasis financial statements december',
3976:'2007 identified and defined the elements of accrualbasisfinancial statements and established basic criteria forrecognizing them. this concepts statement builds on',
3977:'the concepts established in sffacs 1 and 5 by discussing different alternatives for measuring assets and liabilities and, by extension,',
3978:'revenues and expenses and the extent to which the alternatives meet the objectives and qualitative characteristics established in sffac 1.',
3979:'a3. fasab has established requirements for measuring certain assets, liabilities, revenues and expenses through federal financial reporting standards without the',
3980:'benefit of an underlying, cohesive framework of measurement concepts. such a framework can provide significant page 23 concepts 7 fasab',
3981:'handbook, version 20 06/21 concepts 7 guidance to the current and successor boards when establishing financial reporting standards in the',
3982:'future. as a result, the consistency, understandability, and usefulness of reported information to decision makers, including preparers and users of',
3983:'financial information, should be enhanced. consistent with the role of the boards conceptual framework, this concepts statement does not change',
3984:'current financial reporting standards or establish new standards. statement objectives and content a4. this concepts statement identifies and elucidates conceptual',
3985:'issues for the board to consider when deliberating measurement standards in the future. a principal question for the board to',
3986:'resolve in future standards is whether and under what circumstances it might be more useful for users decision making to',
3987:'report an asset or liability in periods after its acquisition or incurrence at the amount initially recorded initial amount or',
3988:'at an amount measured at each financial statement date remeasured amount. the measurement approach initial or remeasured amounts, measurement attributes,',
3989:'and measurement methods usedformeasuring assets and liabilities affect howthe information is reported and interpreted. a5. the analysis in this concepts',
3990:'statement includes a comparison of the advantages and disadvantages for achieving the federal financial reporting objectives of different measurement approaches',
3991:'and attributes. the analysis suggests that, when the goal is to help ensure that reported information achieves several financial reporting',
3992:'objectives, different measurement approaches, attributes, and methods may be needed to convey decisionuseful information about different transactions and underlying events.',
3993:'a6. theboardconsideredwhetheritshouldindicatethatsomeofthemeasurementalternatives discussed in this concepts statement are preferred to others in certain specified circumstances. the board concluded, however, that',
3994:'to indicate preferences would effectively result in establishing financial reporting standards in a concepts statement. the board reasoned that decisions',
3995:'concerning whether certain measurement alternatives are preferred should be made in the context of deliberations on specific financial reporting standards.',
3996:'that context will enable the board to focus on the specific reporting issues to be addressed and to consider the',
3997:'benefit vs. the cost of different measurement alternatives and other practical concerns, as well as the conceptual guidance provided by',
3998:'this statement. a7. in developing this concepts statement, the board benefited from research conducted in similar projects on measurement concepts',
3999:'under development by the governmental accounting standards board gasb, the international public sector accounting standards board, and the financial accounting',
4000:'standards board in collaboration with the international page 24 concepts 7 fasab handbook, version 20 06/21 concepts 7 accounting standards',
4001:'board. the fasab met several times in joint session with the gasb on matters of mutual interest in their respective',
4002:'measurement concepts projects. outreach, responses, and board conclusions a8. anexposuredraftedofthisconceptsstatementwasissuedseptember13,2010,witha comment deadline of november 30, 2010. the issuance was announced',
4003:'in the federal register, fasab news, the journal of accountancy, and aga today. listserv notices announced the ed and periodically',
4004:'reminded subscribers about the comment deadline. notices were sent directly to organizations responding to past eds. in addition, the ed',
4005:'was included in updates provided to liaison groups, such as the financial statement audit network. a9. the board received a',
4006:'total of 16 responses from these sources: federal internal nonfederal external total users, academics, others 3 3 auditors 3 1',
4007:'4 preparers and financial managers 9 9 totals 12 4 16 a10.a large majority of the respondents supported the ed',
4008:'and the measurement concepts proposed by the board, including the measurement approaches, attributes, and methods. very few concerns were expressed.',
4009:'a few respondents comments appeared to be based on an assumption that the board was proposing new measurement standards. the',
4010:'board may consider those comments when it deliberates future measurement standards. however, the purpose of this concepts statement is to',
4011:'establish measurement concepts to guide the standardsetting process in the future. a11.no concerns were raised by a majority of the',
4012:'respondents. however, the board does not rely on the number in favor of or opposed to a given position. the',
4013:'board considered the arguments in each response and weighed the merits of the points raised. the following points were raised',
4014:'by a minority of the respondents and the board reached the conclusions indicated. a. the concepts statement should discuss cost–benefit',
4015:'issues four respondents. as discussed in paragraph 22, the board concluded that the cost–benefit of different measurement alternatives should be',
4016:'addressed in deliberations on specific page 25 concepts 7 fasab handbook, version 20 06/21 concepts 7 measurement standards. b. the',
4017:'ed refers to the selection of an initial amount or a remeasured amount for reporting as the principal question, but',
4018:'the ed does not answer the question two respondents. the board reaffirmed that it did not intend to establish preferred',
4019:'measurement approaches or attributes, which would be addressed in the standard setting process. the board revised certain wording in the',
4020:'executive summary and in paragraph 2 of this statement to avoid potential misunderstandings. c. the list of measurement attributes should',
4021:'include goingconcern—the value of the entity as a whole one respondent. the board reaffirmed that the goal of this concepts',
4022:'statement is to present concepts that the board should consider when setting standards that include requirementsfor measuring the elementsof the',
4023:'financial statements. consistentwiththatgoal,ameasurementattributeisdefinedinparagraph 7b as a measurable characteristic of an asset or liability, such as its fair value or settlement',
4024:'amount. the board concluded that goingconcern isnot anattribute of an individual asset or liability. rather, it is a concept that',
4025:'applies to the entity as a whole. moreover, financial reporting standards do not address the direct measurement of the current',
4026:'value of entities as a whole. when setting standards, a goingconcern is assumed. d. delete the attributes replacement cost and',
4027:'fulfillment cost because they are not intended to reflect the current value or historical cost of an asset or liability',
4028:'one respondent. delete value in use because of its inherent subjective nature one respondent. delete fair value, replacement cost, value',
4029:'in use, and fulfillment cost because they do not meet the needs of the respondents agency one respondent. the board',
4030:'reaffirmed that the purpose of this concepts statement is to present measurement concepts that the board will consider when establishing',
4031:'future financial reporting standards. the board concluded that this concepts statement should be comprehensive in terms of available measurement attributes,',
4032:'even though the board may decide when setting financial reporting standards that certain attributes may not be appropriate for a',
4033:'particular measurement standard or for certain agencies activities. e. provide examples of how the attributes are used currently one respondent.',
4034:'some of themeasurementattributesarenotcurrentlyusedinthefederalreportingenvironment. the board agreed, however, that more descriptive information about the attributes would be useful. the board has',
4035:'added language in the discussion of attributes paragraphs 38–56 to clarify how certain attributes could provide useful information. f. provide',
4036:'a comparative chart or table to illustrate the pros and cons of different measurement alternatives, including, for example, preferred alternatives',
4037:'under various page 26 concepts 7 fasab handbook, version 20 06/21 concepts 7 circumstances or pros and cons for different',
4038:'accounting line items two respondents. as discussed in paragrapha6, the board concluded that to indicate preferences for particular alternatives would',
4039:'effectively result in establishing financial reporting standards in a concepts statement. in this concepts statement, the board has provided a',
4040:'balanced discussion of the different measurement approaches and attributes, leaving decisions on which approach and attribute may be preferred for',
4041:'particular classes of assets or liabilities or for specific types of transactions to be made when setting standards. a12.in deliberating',
4042:'the final concepts statement, the board concluded that the attribute settlement amount could be usefully applied for reporting nonfinancial as',
4043:'well as financial assets and liabilities. as a result, the definition of this attribute paragraph 43 was reworded to: settlement',
4044:'amount is the amount at which an asset can be realized or a liability can be liquidated. the board also',
4045:'added language to the discussion of settlement amount and fulfillment cost to clarify the differences among settlement amount, fair value,',
4046:'and fulfillment cost. boardapproval a13.this concepts statement was approved for issuance by all members of the board. page 27 concepts',
4047:'7 fasab handbook, version 20 06/21 statement of federal financialaccounting concepts 8: federal financial reporting status issued affects affected by',
4048:'september 22, 2017 none. none. see pages 67 for the preamble to statements of federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.gov. summary this',
4049:'concepts statement discusses the role of financial statements1 and required supplementary information rsi and their relationship to other reported financial',
4050:'and nonfinancial information. this statement also discusses 1 the content and presentation of financial statements and rsi for governmentwide and',
4051:'component reporting entities, 2 the presentation of budgetary information in component reporting entity financial statements and rsi, 3 the presentation',
4052:'of performance information in financial statements and rsi, and 4 the summarylevel information relating to financial statements and rsi. 1disclosures',
4053:'are an integral part of financial statements. page 1 concept 8 fasab handbook, version 20 06/21 concept 8 table of',
4054:'contents page summary 1 introduction 3 purpose 3 scope 4 concepts 7 federal financial reporting objectives 7 financial statements and',
4055:'rsi 8 other reported financial and nonfinancial information and its relationship to financial statements 11 and rsi concepts for governmentwide',
4056:'and component reporting entities 12 concepts for budgetary information presented in component reporting entity financial statements 16 and rsi performance',
4057:'results 18 summarylevel information 19 appendixa:basis for conclusions 22 project history 22 summary of outreach efforts and responses 27 board',
4058:'approval 30 appendix b:abbreviations 31 page 2 concept 8 fasab handbook, version 20 06/21 concept 8 introduction purpose 1. this',
4059:'statement provides a platform to address current and evolving reporting needs and capabilities and discusses concepts to assist the federalaccounting',
4060:'standardsadvisory board fasab or “the board” in developing standards for improving the reporting models for the governmentwide and component reporting',
4061:'entities. 2. in developing this statement, the board considered concepts that are most important to addressing users’ needs. as a',
4062:'result, some existing fasab concepts such as those discussed in statement of federal financialaccounting concepts sffac 1, objectives of federal',
4063:'financial reporting, are reemphasized to clarify users’ needs. in addition, this statement discusses principles the board considered when developing the',
4064:'existing models and that the board considered important for achieving the reporting objectives. the concepts and principles also explain the',
4065:'relationship between information required by generally accepted accounting principles gaap2 and other reported financial and non financial information orfni. hereinafter,',
4066:'information required by gaap will be referred to as financial statements3 and required supplementary information rsi.4 3. this statement also',
4067:'assists preparers and users in understanding the purposes of financial statements and rsi and how this information relates to orfni.',
4068:'4. this statement enhances the board’s conceptual framework regarding a. the relationship between financial statements and rsi and orfni contributing',
4069:'to the financial reporting objectives, b. thecontentandpresentationoffinancialstatementsandrsiforgovernmentwideand component reporting entities, c. the presentation of budgetary information in component reporting entity',
4070:'financial statements and rsi, 2theamericaninstituteofcertifiedpublic accountants designatedfasab as thesourceof gaap forfederalreporting entities. 3disclosures are an integral part of financial statements.',
4071:'4management’s discussion and analysis is a component of rsi. page 3 concept 8 fasab handbook, version 20 06/21 concept 8',
4072:'d. the presentation of performance information in financial statements and rsi, and e. the summarylevel information relating to financial statements',
4073:'and rsi. 5. theenhancementstothe conceptualframework address users’ needtobetter understand the variety of information available and its relationship to financial statements',
4074:'and rsi. since fasab developed its earlier concepts statements, the range of data and information available to the publichas evolved.',
4075:'thisinformation includes reports that comprise financial statements and rsi, budgetary information, nonfinancial performance information, and information on systems and control.',
4076:'6. moreover, the enhancements address users’ need to better understand 1 the relationships among budget, cost, and performance information for',
4077:'federal programsand services, 2 the government’s financial condition, 3 component reporting entity budgetary information, and 4therelationshipbetweenthegovernmentwideandcomponentreportingentities’ financial statements and rsi.',
4078:'scope 7. as intended, the overall financial reporting objectives discussed in sffac 1 are broad. they reflect the diverse needs',
4079:'of federal financial information users and are designed to improve the quality for example, relevance and consistency of data available',
4080:'in a wide variety of reports. 8. this statement clarifies sffac 1 by emphasizing the objectives most relevant for financial',
4081:'statements and rsi and, therefore, most important for the development of standards. 9. this statement focuses primarily on concepts to',
4082:'support achieving the operating performance and stewardship objectives. it also provides concepts for reporting budgetary information. the conceptswill guide the',
4083:'development of standardsfor the governmentwide and component reporting entity financial statements and rsi. 10. the board develops gaap for reporting',
4084:'on the financial results of operations, financial position, financial condition, and operating performance of the federal government and its component',
4085:'reporting entities, including the status of budgetary resources provided to component reporting entities. these basic items are complemented by a',
4086:'variety of financial measures and orfni. financial statements and rsi that include information on budgetary activity and results will provide',
4087:'a more comprehensive and insightful understanding of the government’s financial position, results of operations, financial condition, and operating performance thanbudgetaryand',
4088:'financialinformation individually. financial statementsand page 4 concept 8 fasab handbook, version 20 06/21 concept 8 rsi are part of a',
4089:'larger body of information available to users; this concepts statement discusses how financial statements and rsi relate to and complement',
4090:'this larger body of information. 11. the board is charged with considering “the budgetary information needs of executive agencies and',
4091:'the needs of users of federal financial information”5 and is committed to supporting efforts to ensure the accuracy and reliability',
4092:'of reporting on the budget. while budgetary and financial accounting information are presented on different bases of accounting, the information',
4093:'is, in effect, about different aspects of the same transactions. thus, information is provided to assist users in understanding those',
4094:'aspects and their relationship. 12. this statement discusses the types of information presented to meet various user needs. figure 1:',
4095:'information forassessingaccountability and for decision making illustrates the relationship between financial statements and rsi and the larger body of information',
4096:'available to users for assessing the government and its components’ accountability and for decision making. 13. the figure shows that',
4097:'information for assessing the government’s accountability and for decision making includes financial reporting by federal reporting entities and reporting by',
4098:'others. this statement focuses on financial reporting by federal reporting entities, which includes information required by gaap and information required',
4099:'by others or reported voluntarily orfni. information requiredbygaapconsistsoffinancialstatementsandrsi. orfni consists of financial and nonfinancial information such as performance information andinformation',
4100:'on the federal budget andtheeconomy. thisinformation ispresented at the discretion of management or to satisfy other reporting requirements. reporting by',
4101:'others includes other financial and nonfinancial information presented by the media, interest groups, or other nonfederal reporting entities. 14. figure',
4102:'1 provides examples of the types of information that may be presented and is not intended to represent current or',
4103:'future financial reporting requirements. in addition, while each of the types of information presented in the figure may be condensed',
4104:'and presented assummarylevelinformation,paragraphs67to74ofthisstatementdiscusssummarylevel information with respect to financial statements and rsi. 5fasab “memorandum of understanding,” october 2009, 2. page 5',
4105:'concept 8 fasab handbook, version 20 06/21 concept 8 figure 1: information forassessing accountability and for decisions page 6 concept',
4106:'8 fasab handbook, version 20 06/21 concept 8 concepts federal financial reporting objectives 15. while users of federal financial information',
4107:'need information similar to that of private sector financial information users, they also need additional types of information. private sector',
4108:'entities primarily obtain their resources through voluntary transactions with individuals or other organizations. however, the federal government primarily obtains its',
4109:'resources from the involuntary payment of taxes and borrowing. users of federal financial information are concerned about matters such as',
4110:'a. the sources of resources, b. how the government used the resources it obtained, c. what services the public received',
4111:'from the resources provided, d. whether the resources provided were sufficient to cover the cost of services provided, e. whether',
4112:'the government’s financial ability to provide services improved or deteriorated, and f. whether the services provided contributed to the accomplishment',
4113:'of the intended purposes. 16. statementoffederalfinancialaccountingconcepts sffac1, objectives of federal financial reporting, provides additional discussion on the types of users',
4114:'of federal financial information, their financial information needs, and the objectives of reporting financial information. there are four overall reporting',
4115:'objectives that form the foundation for all other concepts: a. budgetary integrity. federal financial reporting should assist in fulfilling the',
4116:'government’s duty to be publicly accountable for monies raised through taxes and other means and for their expenditure in accordance',
4117:'with the appropriations laws that establish the government’s budget for a particular fiscal year and related laws and regulations. b.',
4118:'operating performance. federal financial reporting should assist report users in evaluating the service efforts, costs, and accomplishments of the reporting',
4119:'entity; the manner in which these efforts and accomplishments have been financed; and the page 7 concept 8 fasab handbook,',
4120:'version 20 06/21 concept 8 management of the entity’s assets and liabilities. c. stewardship. federal financial reporting should assist report',
4121:'users in assessing the impact on the country of the government’s operations and investments for the period and how, as',
4122:'a result, the government’s and the nation’s financial condition has changed and may change in the future. d. systems and',
4123:'control. federal financial reporting should assist report users in understanding whether financial management systems and internal accounting and administrative controls',
4124:'are adequate to ensure that i. transactions are executed in accordance with budgetary and financial laws and other requirements, ii.',
4125:'transactions are consistent with the purposes authorized, iii. transactions are recorded in accordance with federal accounting standards, iv. assets are',
4126:'properly safeguarded to deter fraud, waste, and abuse, and v. performance measurement information is adequately supported. 17. thereport releasedbythefederalaccountingstandardsadvisoryboardfasabor “the',
4127:'board”, titled clarifying fasab’s nearterm role in achieving the objectives of federal financial reporting, affirmed these objectives and clarified that',
4128:'the board’s primary focus should be on the operating performance and stewardship objectives. with respect to the stewardship objective, the',
4129:'board’s focus is on the government’s financial condition rather than the nation’s financial condition. 18. sffac 2, entity and display,',
4130:'identifies the financial information needed to meet the objectives. it also recognizes some of the identified information that should be',
4131:'presented in financial statements and required supplementary information rsi. financial statements and rsi 19. to achieve the reporting objectives, federal',
4132:'reporting entities may present financial statements, rsi, and other reported financial and nonfinancial information orfni. to establish a platform for',
4133:'discussing the relationship between financial statements and rsi and orfni, this section discusses the role of financial statements, generally accepted',
4134:'accounting principlesgaapand principles relevant to financial statements, and the role of rsi. page 8 concept 8 fasab handbook, version 20',
4135:'06/21 concept 8 20. financial statements and rsi are two means of providing information collectively intended to assist users of',
4136:'federal financial information in assessing the financial results of operations, financial position, financial condition, and operating performance of the federal',
4137:'government and its component reporting entities, including the status of budgetary resources provided to component reporting entities. 21. users of',
4138:'federal financial information need a variety of information to assess the government’s finances. however, the degree to which individual items',
4139:'meet certain qualitative characteristics may vary. thus, as discussed in sffac 6, distinguishing basic information, required supplementary information, and other',
4140:'accompanying information, different means may be used to communicate this information and each is subjected to differentauditproceduresandreportingrequirementsundergenerallyacceptedgovernment auditing standards gagas.',
4141:'sffac 6 defines basic information as “information that is essential for financial statements and notes to be presented in conformity',
4142:'with [gaap]” and rsi as “information that a body that establishes gaap requires to accompany basic information.”6 22. gaap provides',
4143:'criteria for categorizing, recognizing, measuring, and depicting the government’s financial activities in financial statements. in addition, gaap a. is based',
4144:'on a common understanding of terms and elements, as well as the relationships among them; b. ensures financial statements and',
4145:'rsi meet certain qualitative characteristics;7 and c. guides the preparation and exchange of information. 23. the board develops gaap for',
4146:'reporting on the financial results of operations and financial position of the governmentwide and component reporting entities and to provide',
4147:'budgetary information to assist in monitoring the receipt and use of resources. preparing financial statementsthat provide information on financialresults of',
4148:'operations, financial position, and budgetary information necessitates different bases of accounting. for example, the accrual basis of accounting recognizes revenue',
4149:'when earned and recognizes costs when incurred to achieve an objective, such as providing or acquiring services. reported budgetary information',
4150:'in the governmentwide reporting entity uses primarily cashbased budgetary accounting to recognize budget receipts when cash is received and budget',
4151:'outlays when cash is disbursed. budgetary accounting in component reporting entities recognizes events when the component reporting entity receives appropriations',
4152:'and when it enters into an 6sffac 6, par. 4. 7sffac 1, par. 156164 discuss the qualitative characteristics of information',
4153:'in financial reports. page 9 concept 8 fasab handbook, version 20 06/21 concept 8 agreement that obligates the government to',
4154:'make payments in the future, such as when it awards a contract. 24. although a variety of projections may be',
4155:'used in preparing financial statements, longterm projections may be used to inform users on the sustainability of services. longterm projections',
4156:'depict the results that may occur provided current policy regarding receipts and spending is maintained. 25. rsi accompanies financial statements',
4157:'and may include a. performance information to help users evaluate the service efforts, costs, and accomplishments of the entity; b.',
4158:'management’s discussion and analysis md&a to communicate management’s insights about the reporting entity, increase users’ understanding of the information presented',
4159:'and the usefulness of the information, and provide information about the entity’s operations, service levels, successes, challenges, and future;8 c.',
4160:'and other information regarding the entity. according to sffac 2, rsi “may be experimental in nature to permit the communication',
4161:'of information that is relevant and important to the reporting objectives while more experience is gained through resolution of accounting',
4162:'issues.”9 26. financial statements and rsi include explanations to assist users in understanding the differences among the bases of accounting,',
4163:'the information provided, and the use of projections. 27. financial statements and rsi may include narrative and graphic depictions to',
4164:'explain the relationships among items of information. 8see sffac 3, management’s discussion and analysis, for concepts regarding md&a. 9sffac 2,',
4165:'par. 73c. page 10 concept 8 fasab handbook, version 20 06/21 concept 8 other reported financial and nonfinancial information and',
4166:'itsrelationship to financial statements and rsi 28. this section discusses the characteristics of orfni and its relationship to financial statements',
4167:'and rsi. 29. the governmentwide and component reporting entities may present information that is not required by gaap. these entitiesmay',
4168:'present this information to help achieve the reporting objectives or complywith lawsand administrative directives. hereinafter thisinformation will be referred to',
4169:'as orfni. 30. there may be limitations to orfni. for instance, orfni a. may lack exposure to the same level',
4170:'of internal controls as financial statements and rsi, b. may lack consistency with gaap standards for financial statements and rsi,',
4171:'c. may not meet the qualitative characteristics of financial statements and rsi, and/or d. may not be subject to certain',
4172:'procedures required by gagas. 31. multiple methods of presentation may help facilitate user needs. for example, financial statements,rsi,and orfni maybepresented',
4173:'ina hierarchicalstructure that permitsusers to review both highly aggregated data and disaggregated data. the different levels of data help provide',
4174:'users with the information at levels of specificity relevant to their particular needs. for example, users may drilldown from the',
4175:'governmentwide reporting entity’s financial statements to orfni in schedules provided by a component reporting entity. 32. narrativedescriptionsor visual representations may',
4176:'enhanceusers’ understandingofthe financial statements, rsi, and orfni and direct them to additional information. 33. financial statements and rsi provide information',
4177:'to assist users in assessing topics, such as the entity’s financial results of operations, financial position, financial condition, and operating',
4178:'performance. while financial statements and rsi focus on the widespread needs of different users, orfni may be required by administrative',
4179:'directives or presented voluntarily to meet the specific needs of a user or user group. for example, a component reporting',
4180:'entity may present information to address a specific congressional concern. page 11 concept 8 fasab handbook, version 20 06/21 concept',
4181:'8 34. orfni can also contribute to achieving the objectives of federal financial reporting. for instance, information on the risks',
4182:'that stem from major natural disasters or implicit guarantees assist users in assessing the governmentwide reporting entity’s financial condition. inaddition,tocomplywithdirectivesregardingperformancereporting,component',
4183:'reporting entities may present information on how their activities benefit public health, safety, and welfare, their progress on achieving strategic',
4184:'objectives, or their actions to improve performance. orfni may also include information about the federal budget, the nation’s economy, management',
4185:'and performance challenges, or financial information presented on governmentsponsored websites. concepts for governmentwide and component reporting entities 35. this section',
4186:'includes a discussion on 1 the types of information the governmentwide reporting entity financial statementsand rsi provide, 2 the types',
4187:'of information component reporting entity financial statements and rsi collectively provide, and 3 the relationship between the governmentwide and component',
4188:'reporting entities. the governmentwide reporting entity 36. thefederalgovernmentisresponsibleforthenation’sdefenseandgeneralwelfareandisa single economic entity made up of component reporting entities that provide services',
4189:'to individuals and organizations. 37. the federal government has unique capabilities to finance the services provided and accomplish its objectives.',
4190:'it has the power to levy taxes, charge fees, and borrow. 38. the federal government can borrow money to finance',
4191:'services when expenditures exceed receipts during a period. 39. given the operations of the governmentwide reporting entity, financial statements and',
4192:'rsi collectively provide information to assist users in understanding a. the government’s mission, organization, and relationship to component reporting entities;',
4193:'b. the government’s performance; c. the government’s sources and uses of resources and financial results for the period; page 12',
4194:'concept 8 fasab handbook, version 20 06/21 concept 8 d. the provisions in the tax code that reduce tax revenue;10',
4195:'e. the government’s assets, liabilities, and net position as of the end of the reporting period financial position; f. the',
4196:'longterm impact of the government’s policies on debt held by the public; g. the government’s budget surplus or deficit for',
4197:'the period, including how the surplus or deficit relates to the government’s net financial results and change in monetary assets',
4198:'during the period; h. the government’s investments in productivity and economic growth during the period stewardship investments; i. the relationship',
4199:'between the information presented in each financial statement and rsi; j. the changes in amounts and types of elements presented',
4200:'in financial statements; k. the future effects of existing, currently known demands, risks, uncertainties, events, conditions and trends; and l.',
4201:'the possible future effects of anticipated future demands, events, conditions, trends, risks assumed, etc., management believes would be important to',
4202:'users. 40. sffac 1, specifically paragraphs 134 to 145 and paragraphs 180 to 182, discusses users’ need for information regarding',
4203:'the government’s financial position and financial condition and the relationship between the two concepts. information on the government’s financial position',
4204:'is the starting point for assessing the government’s financial condition. sffac 1, paragraph 144, states the following: financial condition is',
4205:'a broader and more forwardlooking concept than that of financial position. reporting on financial condition requires financial and nonfinancialinformation aboutthenational',
4206:'economyand society, aswell asabout the government itself… 10 for example, to encourage home ownership and stimulate residential construction, the federal',
4207:'government may enact tax provisions that reduce the tax liability for taxpayers who incur the costs associated with mortgage interest',
4208:'and local property taxes. these provisions are referred to as tax expenditures. page 13 concept 8 fasab handbook, version 20',
4209:'06/21 concept 8 assisting users in understanding the government’s financial condition requires multiple indicators,11 including information regarding the changes in',
4210:'the government’s financial position, the longterm impact of the government’s policies on debt held by the public, and the sustainability',
4211:'of public services as discussed in sffac 1, paragraphs 140 to 142. information on the government’s financial position and financial',
4212:'condition is needed to assist users in assessing matters such as whether financial burdens were passed on by currentyear taxpayers',
4213:'to futureyear taxpayers without related benefits and the longterm sustainability of government policies. component reporting entities 41. component reporting entities',
4214:'receive budget authority through appropriations made in the legislative process. their missions and reporting requirements are established in various laws',
4215:'enacted over time, resulting in a complex network of operations and services. component reporting entities across the federal government are',
4216:'diverse and the scope and nature of each component reporting entity’s activities can be diverse and at times overlap. 42.',
4217:'in light of the reporting objectives of component reporting entities, financial statements and rsi collectively provide information to assist users',
4218:'in understanding a. the entity’s mission, structure, goals, and objectives, including the relationships among the component reporting entity, other component',
4219:'reporting entities, and the governmentwide reporting entity; b. the entity’s performance in achieving its goals and objectives; c. the entity’s',
4220:'sources and uses of resources and financial results for the period; d. the entity’s assets, liabilities, and net position as',
4221:'of the end of the reporting date financial position; e. the status of the entity’s budgetary resources; f. the investments',
4222:'in productivity and economic growth during the period, consistent with the mission of the component reporting entity; g. the relationship',
4223:'between the information presented in each financial statement andrsi; 11sffac 1, footnote 14. page 14 concept 8 fasab handbook, version',
4224:'20 06/21 concept 8 h. the changes in amounts and types of elements presented in financial statements; i. the future',
4225:'effects of existing, currently known demands, risks, uncertainties, events, conditions and trends; and j. the possible future effects of anticipated',
4226:'future demands, events, conditions, trends, etc., management believes would be important to users. 43. theoperatingperformanceobjectiveoffederalfinancialreportingstates,inpart,thatusersneed information to help them evaluate',
4227:'the entity’s costs and accomplishments and how those costs and accomplishments have been financed.12 44. often,theaccomplishmentofcomponentreportingentitygoals,programs,andobjectivesisdependent on the delivery of',
4228:'services granted or contracted to state and local governments and forprofit and nonprofit organizations. users of those component reporting entity',
4229:'financial statements may be interested in the percentage of the component reporting entity budget authority allocated to these entities and',
4230:'how the component reporting entity measures the delivery of those services. 45. aggregating and categorizing information by strategic goal is',
4231:'one means of providing information on the entity’s costs and accomplishments and its manner of financing. presenting such information in',
4232:'this manner assists users in understanding the entity’s progress in achieving its strategic goals. 46. the operating performance objective also',
4233:'states users need information about a. the costs of providing specific programs and activities and the composition of and changes',
4234:'in these costs;13 b. the efforts and accomplishments associated with federal programs and the changes over time and in relation',
4235:'to costs; and14 c. the efficiency and effectiveness of the government’s management of its assets and liabilities.15 47. informationaboutacomponentreportingentity’sfinancialpositionisimportantforachievingthe operating',
4236:'performance objective and providing information on the entity’s assets and 12sffac 1, par. 122. 13sffac 1, par. 126. 14sffac 1,',
4237:'par. 128. 15sffac 1, par. 128. page 15 concept 8 fasab handbook, version 20 06/21 concept 8 liabilities. because most',
4238:'component reporting entities are not independent economicentities and budget authority from congress specifies the amount, purpose, and duration of their',
4239:'funding, readers should be referred to the governmentwide reporting entity’s financial statements for information about the financial position of the',
4240:'federal government. such information is important for achieving the stewardship objective. the stewardship objective states users need information about whether',
4241:'a. the government’s financial position improved or deteriorated over the period, b. future budgetary resources will likely be sufficient to',
4242:'sustain public services and to meet obligations as they come due, and c. government operations have contributed to the nation’s',
4243:'current and future wellbeing. the governmentwide reporting entity can tax and borrow funds while most component reporting entities do not',
4244:'possess such authority. 48. for component reporting entities that receive budget authority on an annual basis, users need to know',
4245:'1 the budgetary activity during the period, 2 the extent to which budget authority has been used and remains available,',
4246:'and 3 whether additional funding may be needed. information is needed on the amount of the entity’s appropriations that have',
4247:'not been expended at the end of the period, the amount the entity has accumulated from priorperiodfunding, and theamount of',
4248:'liabilitiesforwhich theentityhasincurredbut not receivedbudget authority. 49. usersneedinformationtoassessthefinancialconditionofcomponentreportingentitiesthatderive their funding primarily from sources other than through annual appropriations. some component reporting',
4249:'entities may be delegated authority to carry on their activities similarly to privatesector businesses or maintain their operations and meet',
4250:'their liabilities from revenues received from sources outside of the governmentwide reporting entity. citizens rely on the services provided and',
4251:'are concerned about their sustainability. concepts for budgetary information presented in component reporting entity financial statements and rsi 50. users',
4252:'need information about the budgetary resources provided to finance component reporting entity activities. the budgetary integrity objective states that federal',
4253:'financial reporting should assist the federal government in fulfilling its duty to be accountable for monies raised from the public',
4254:'and their use. information about the amount of budgetary resources made available, the amount of budgetary resources used, and the',
4255:'amount that remains available assists users in monitoring the authority provided, its use, and whether resources remain available. page 16',
4256:'concept 8 fasab handbook, version 20 06/21 concept 8 51. the budget process is the government’s principal mechanism for congress',
4257:'and the president to reach agreement on goals, allocate resources among competing needs, and assessthegovernment’sfiscaleffectoneconomicstabilityandgrowth. whilemost attention is paid to',
4258:'the futureoriented roles of the budget process, budget execution is designed to monitor monies raised through taxes and other means',
4259:'and ensure that those monies are used according to the requirements provided in law. 52. indevelopingbudgetlegislation,congressdecidesontargetsforspendingandreceipts,the deficit or surplus, and',
4260:'the limit on debt. upon determining the targets, congress provides componentreporting entitieswith budget authorityandmaypasslawsaffecting receiptsand other spending.16 53. budget authority',
4261:'provided in appropriation acts is generally considered discretionary spending.appropriations provide component reporting entities with the authority to incur obligations for',
4262:'specific purposes, amounts, and time periods. an appropriation can be limited to a single year or multiple years, or it',
4263:'can be available indefinitely. 54. budget authority provided in laws other than appropriation acts, is generally considered mandatory spending. 55.',
4264:'budget authority comprises the following capacities: a. appropriations—provided in appropriation acts, authorizing laws, or other legislation, appropriations permit agencies to',
4265:'incur obligations and make payments. b. borrowingauthority—usuallyprovidedinlawsotherthanappropriationacts,borrowing authority permits agencies to incur obligations but requires them to borrow funds, usually',
4266:'from the general fund of the treasury to make payments. c. contractauthority—usuallyprovidedinlaws other thanappropriationacts,contract authority permits agencies to incur obligations',
4267:'in anticipation of the collection of receipts that can be used for payments. d. spendingauthorityfrom offsettingcollections—usuallyprovidedinlawsother than appropriation acts, spending',
4268:'authority from offsetting collections permits agencies to credit offsetting collections to an expenditure account, incur obligations, and make payment using',
4269:'the offsetting collections.17 offsetting collections are deducted from grossspendingorgrossoutlaystoreflectthegovernment’snettransactions.theymay 16analytical perspectives, budget of the u.s. government, fiscal year 2016, p.',
4270:'92. 17analytical perspectives, budget of the u.s. government, fiscal year 2016, pp.101102. page 17 concept 8 fasab handbook, version 20',
4271:'06/21 concept 8 result from businesslike transactions with the public or intragovernmental transactions.18 56. when component reporting entities engage in',
4272:'transactions that require either an immediate or future outlayof cash, theyincur an obligation using available budget authority. the use of',
4273:'budget authority reduces the component reporting entity’s budgetary resources and the subsequent outlay of cash reduces the governmentwide reporting entity’s',
4274:'assets. for example,when acomponent reportingentityawardsacontract, it usesbudget authorityand the governmentwide reporting entity’s cash is later reduced when disbursed to the',
4275:'contractor. 57. budget authority is not always used in a single year. for example, budget authority enacted for the construction',
4276:'of a capital asset may include the estimated total cost for the project at the time the project begins. however,',
4277:'the component reporting entity may use that budget authority over several years and the outlay of cash may relate to',
4278:'budget authority provided in previous years as well as the current year. 58. budgetary resources include new budget authority including',
4279:'direct spending authority and obligation limitations and unobligated balances of budget authority from prior years.19 performance results 59. financialstatementsandrsiprovideinformationtoassistusersinassessingthe1amount of',
4280:'financial and nonfinancial resources required to provide services efforts, 2 accomplishments of services, 3 efficiency and effectiveness of providing services,',
4281:'and 4 changes in the performance of services over time. 60. users are concerned about the government’s progress in accomplishing',
4282:'its goals. the reporting objectives consider these concerns and state “financial reporting should provide information that helps the reader to',
4283:'determine … the efforts and accomplishments associated with federal programs and the changes over time and in relation to costs[.',
4284:']”20 61. sffac 1, paragraphs192 to 210, provides concepts for considering how financial statements and rsi might contribute to reporting',
4285:'on performance results. the concepts 18analytical perspectives, budget of the u.s. government, fiscal year 2016, pp. 99100. 19governmentaccountability office, a',
4286:'glossary of terms used in the federal budget process gao05734sp washington, d.c.: sept. 1, 2005. 20 sffac 1, par. 14.',
4287:'page 18 concept 8 fasab handbook, version 20 06/21 concept 8 discuss the categories of performance measures that help address',
4288:'the financial reporting objectives—measures of efforts and accomplishments and measures that relate efforts to accomplishments efficiency and effectiveness measures. 62.',
4289:'sffac 1 also states cost is a component of efforts, efficiency, and effectiveness measures, and measuring cost is a function',
4290:'of accounting and the financial reporting system.21 63. sffac 3, management’s discussion and analysis, notes performance information is an integral',
4291:'part of financial reporting,22 and paragraphs 4249 of sffac 3 discuss concepts for presenting performance information as rsi. statement of',
4292:'federal financialaccounting standards sffas 4, managerial cost accounting standards and concepts, paragraphs 41 through 66, discusses the role of managerial',
4293:'cost accounting in financial reporting, including the following language: measuring and reporting actual performance against established goals is essential to',
4294:'assess governmental accountability. cost information is necessary in establishing strategic goals, measuring service efforts and accomplishments, and relating efforts to',
4295:'accomplishments.23 64. financialstatementsandrsialsoprovideexplanatoryinformationtohelpusersunderstand reported measures and the factors that may have affected the reported performance. sffac 1, paragraphs 211 and',
4296:'212, discuss the limitations of performance measurement. for example, measures of efforts and accomplishments may not indicate why performance is',
4297:'at the reported level. therefore, financial statements and rsi also provide explanatory information to help users understand performance measures and',
4298:'the factors that may have affected the reported performance. summarylevel information 65. for reports to be understandable to different audiences,',
4299:'different reports may be necessary to provide information relevant to the needs of the expected report users, with suitable amounts',
4300:'of detail, explanation, and related narrative.24 21sffac 1, par. 193. 22sffac 3, par. 13. 23sffas 4, par. 58 24sffac 1,',
4301:'par.159 page 19 concept 8 fasab handbook, version 20 06/21 concept 8 66. information in financial statements and rsi may',
4302:'be condensed and provided as a presentation of summarylevel information. 67. presenting layers of information may be useful for communicating',
4303:'needed information. different levelshelp userslocate the detailtheymayneedfortheirspecificanalysis. thetop level may provide highly aggregated information while lower levels provide increasingly more',
4304:'detailed information. however, alllowerlevel information need not be presented in the report itself. lower level information may be either electronically',
4305:'linked or provided in other reports, with information on how to obtain such reports provided. 68. the highly aggregated top',
4306:'level, or summary level, may be most useful to citizens and is likely the level where they will begin their',
4307:'review. citizens need a succinct but comprehensive picture of the reporting entity’s activities. they may not have extensive knowledge of',
4308:'accounting and budgeting concepts to fully understand disaggregated financial and nonfinancial information and the relationship among different items. accordingly, understandability',
4309:'is an important characteristic of summarylevel information. 69. with respect to data, citizens may rely on visual representations rather than',
4310:'tabular presentations and extensive narratives. 70. to help inform users of the reporting entity’s finances, information at the summary level',
4311:'assists users in assessing a. the purpose or the intent of the summary level, informing users of the type of',
4312:'information they might expect to see and the relationship to the governmentwide and/or component reporting entity, as appropriate; b. the',
4313:'scope of the summary level, so usersunderstand the information the level includes; c. basic performance goals and measures; d. sources',
4314:'and uses of resources and financial results; e. assets, liabilities, and net financial position as of the end of the',
4315:'reporting period; f. the status of budgetary resources; g. challenges facing the entity; h. financial condition to include sustainability information;',
4316:'and i. trends. page 20 concept 8 fasab handbook, version 20 06/21 concept 8 71. financial information presented in relation',
4317:'to performance goals and measures may assist users in understanding the summarylevel information presented. 72. agraphicpresentationofotherlevels,includingtheirrelationshipsorlinks,mayassistusers in identifying and accessing',
4318:'sources for additional information. page 21 concept 8 fasab handbook, version 20 06/21 concept 8 appendixa: basis for conclusions this',
4319:'appendix discusses some factors considered significant by board members in reaching the conclusions in this statement. it includes the reasons',
4320:'for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others. the concepts',
4321:'enunciated in this statement–not the material in this appendix–should guide the development of standards for specific transactions, events, or conditions.',
4322:'project history a1. this projectis partoftheboard’s conceptualframeworkinitiative. after severalyears of progress in federal financial reporting, fasab decided to revisit its',
4323:'conceptual framework with a focus on ensuring accounting standards are based on a sound and comprehensive frameworkof objectives and concepts.',
4324:'the conceptual framework project began in 2006.at that time, board members were concerned the reporting objectives were broad, and some',
4325:'members sought to better define the role of gaapbased financial statements in achieving them.also,somepreparerswere concernedabouttheneedforcertainfinancialstatements, such as the component reporting',
4326:'entity balance sheet. accordingly, the board began the conceptualframeworkinitiativebyrevisitingthe reportingobjectives. the board affirmedthe original reporting objectives and subsequently completed concepts',
4327:'defining elements, identifying measurement attributes, and distinguishing between basic information and rsi. the board also began engaging the federal reporting',
4328:'community in discussions regarding the governmentwide and component reporting entity reporting models. user needs and reporting community outreach a2. in',
4329:'2006, fasab staff conducted a series of roundtable discussions to determine whether the objectives remained valid and appropriate and to',
4330:'help define the role of the board in achieving these objectives. roundtable participants provided their views on whether the objectives',
4331:'continued to reflect the information needs of users and whether these objectives were being achieved. the participants believed the reporting',
4332:'objectivesremained valid, and they noted the objectives could be accomplished by reports and similar materialsother than financial statements. consequently, in',
4333:'november 2006, the board agreed to retain the broad objectivesandissued itsreporttitled clarifying fasab’s nearterm role in achieving the objectives of',
4334:'federal financial reporting.the reportdiscussestheboard’sprimaryand secondary focuses relative to the reporting objectives. a3. after completing sffac 6, the board began discussing',
4335:'the need for conceptual guidance that describes the reporting model and how it relates to the reporting objectives. the concepts',
4336:'would guide the board in determining the financial statements that contribute to page 22 concept 8 fasab handbook, version 20',
4337:'06/21 concept 8 the achievement of the reporting objectives and help focus on “what should be” versus “what is.” the',
4338:'former would help achieve the objectives and ensure the statements are useful to readers. members also questioned whether a relationship',
4339:'should exist among financial statements, such as the balance sheet and a statement of net cost, and how the model',
4340:'compares with the reporting models of other governments.as a result, staff 1 researched the diverse needs of users and how',
4341:'they access information; 2 surveyed other countries and their reporting models; and 3 conducted discussions with preparers, citizen intermediaries, congressional',
4342:'staff, program managers, executives, auditors, state and local government planners and analysts, and experts in federal financial reporting. a4. meanwhile,',
4343:'the board continued its deliberations on social insurance and longterm sustainability reporting, projects that would significantly affect the existing reporting',
4344:'model and raise conceptual questions that should be addressed in the conceptual framework initiative. board members discussed conceptual issues such',
4345:'as the purpose of the balance sheet and its elements. eventually, the board developed the conceptual framework needed to better',
4346:'explain unique governmental accounting issues, such as why a. the power to tax is not an asset but nonetheless is',
4347:'relevant to assessing the sustainability or the financial condition of the federal government, b. deficits have shortand longterm implications, c.',
4348:'the timing of cash flows is important, and d. the point estimates on the balance sheet have limitations for assessing',
4349:'financial condition. a5. accordingly, the board decided to consider these and other reporting concepts in the reporting model project. a6.',
4350:'fasabstaffprovidedtheboardwithaseriesofreportsanddiscussionpapers. insummary, staff noted users needed information regarding a. the cost of programs, b. the performance of programs, c. the',
4351:'sustainability of programs, and d. how actual spending compared to the budget. page 23 concept 8 fasab handbook, version 20',
4352:'06/21 concept 8 a7. also, users needed plain language, understandable information, as well as the ability to access additional information',
4353:'and prepare their own reports. task forces andadditional research a8. the board organized the reporting model task force to consider',
4354:'the user needs and reporting community survey results and provide suggestions for the reporting model to the board. in december',
4355:'2010, the task force completed its work and presented recommendations to enhance the reporting model. in general, the task force',
4356:'focused on what could be accomplished in the near future. the team also focused on the financial report of the',
4357:'u.s. government fr because the public would likely start with the fr to learn about the fiscal health of the',
4358:'federal government. consequently, the task force recommended 1 the adoption of a centralized, webbased method of reporting financial and performance',
4359:'information, 2 changes to particular financial statements, and 3 additional disclosures. task force members believed the success of these recommendations',
4360:'required raising public awareness of federal financial reporting. a9. in february 2011, the board discussed the task force recommendations. members',
4361:'discussed systems constraints and challenges and noted many of the recommendations could be adopted voluntarily by preparers. however, board members',
4362:'did note the conceptual framework to guide accounting standards remained incomplete and out of date. the board, at this time,',
4363:'also discussed its priorities and plans and revisited its strategic directions report. the board reaffirmedits conclusionsin the clarifying fasab’s nearterm',
4364:'role in achieving the objectives of federal financial reporting report and noted factors that would likely influence federal financial reporting.',
4365:'those factors included the notion that citizens and citizen intermediaries are the primary audience for the fr, which implies fasab',
4366:'standards should focus on the fr and should primarily consider citizens’ information needs. additionally, the board confirmed component reporting entity',
4367:'reports should support the needs of the fr. a10.later in 2011, the board discussed the report, the chief financial officers',
4368:'act of 1990 – 20 years later: report to the congress and the comptroller general cfo act report. the report',
4369:'recommended congress consider directing fasab, the office of management and budget omb, and the governmentaccountability office to evolve the financial',
4370:'reporting model. consequently, the board reviewed the reporting model of component reporting entities and conducted discussions with cfos and various',
4371:'groups to determine the information of value to users. a11.given the range of issues identified during the discussions with cfos',
4372:'and various groups, theboarddecidedtheproject should besegmentedintothree separate projects—improving cost, improving performance, and improving budgetary reporting. fasab organized task page 24',
4373:'concept 8 fasab handbook, version 20 06/21 concept 8 forces for each project. this approach allowed members to better focus',
4374:'on issues that needed to be addressed. a12.in 2012, the three task forces proceeded to discuss these issues and subsequently',
4375:'recommended the board revisit sffas 4. the task forcesbelieved adequate cost guidance was necessary to support users of budget and',
4376:'performance information and provide cost information that met expectations. upon reviewing the task force recommendations, the board determined the project',
4377:'would involve matters outside of the board’s domain and would require coordination with the department of the treasury and omb.',
4378:'also, members again raised concerns about systems constraints and challenges in presenting integrated cost, budget, and performance information. a13.subsequently, the',
4379:'board engaged with the nationalacademy of publicadministration napa to learn more about the needs of executives and managers. members also',
4380:'learned about preparers’ needs for resources to guide financial information development. the research informed the board on 1 the availability',
4381:'of financial and related information, 2 the effective use of financialdata byseniormanagers, 3the current anddesired roleof the cfo, and 4',
4382:'the options most likely helpful in closing those gaps between the current and desired role of the cfo. the napateam',
4383:'conducted interviews with federal executives and senior managers with operating responsibility for agencies, bureaus, offices, divisions, or comparable organizational units.',
4384:'a14.napa’s report, financial and related information for decisionmaking: enhancing management information to support operational effectiveness and priority goals, discussed the',
4385:'following topics: a. data generally are highly accurate and granular, but federal agencies face challenges in analyzing and transforming data',
4386:'into readily understood, actionable information for executive decision making—especially the linking of budget, costs, and performance. b. the degree to',
4387:'which financial data are effectively used for decision making is heavily driven by each organization’s revenue source user feebased versus',
4388:'appropriation based and operational approach. c. cfo organizations will increasingly need to offer valuable decisionmaking support to executives and senior',
4389:'managers, including sophisticated cost and performance analysis. developing ideal reporting models without constraints a15.at this point, board members noted they',
4390:'needed models of the ideal presentation to serve as the endgoal for the project and help guide their direction. also,',
4391:'given that raising page 25 concept 8 fasab handbook, version 20 06/21 concept 8 concerns about existing systems and challenges',
4392:'directed the discussions away from “what should be,” the boarddetermined development of idealmodelswould not beconstrained by considering existing systemsandwhat theboardcouldaccomplishimmediately.',
4393:'inaddition, the models would take a holistic view and consider the other conceptual issues discussed previously and include explanations on',
4394:'why the resulting construct should be considered ideal. consequently, the board decided to develop conceptual, ideal models that integrate budget,',
4395:'cost, and service performance information. flow information: the starting point for developing ideal models a16.during theapril 2014 meeting, fasab members',
4396:'presented their views of ideal reporting models. the presentations addressed the budgetary integrity objective generally and each of the subobjectives',
4397:'of the operating performance objective. also, with respect to the stewardship objective, the board decided to focus on the federal',
4398:'government as the entity rather than the nation’s economy. in addition, in june of 2014, the board decided not to',
4399:'revisit the reporting objectives or clarify the role of fasab with respect to the objectives. instead, the board began developing',
4400:'the ideal reporting model byfocusing on the flowsand the flow statements that would help achieve the reporting objectives. a17.based on',
4401:'feedback from the reporting community, users still needed to better understand flow information, such as cost and budgetary information and',
4402:'how they relate. the board considered how cost and budgetary information should be disaggregated and addressed how to reconcile cost',
4403:'and budget at a level that would be clear to users. a18.however, members expressed concern about whether the concepts should',
4404:'include illustrations of financial statements and whether concepts should reflect an “aspirational” reporting model or simply describe current practice. consequently,',
4405:'the board developed an inventory of concepts and topics that might be included in the concepts statement. upon completing the',
4406:'inventory, the board would deliberate which items should be retained in the concepts statement. inventory of concepts and framework for',
4407:'an exposure draft a19.in february 2015, the board began developing an inventory of concepts that would help guide development of',
4408:'the reporting models and in december 2015 decided on a framework or outline to guide development of an exposure draft',
4409:'ed concepts statement. the board agreed the framework needed to be comprehensive and include new and existing concepts and topics',
4410:'members had suggested during the project. a20.subsequently, staff began using the framework to develop the ed. the board determined the',
4411:'guidance should focus on information required by gaap—financial statements and rsi —rather than information presented in a general purpose federal',
4412:'financial report gpffr. page 26 concept 8 fasab handbook, version 20 06/21 concept 8 gpffrs are broader and refer to',
4413:'financial statements, rsi, and orfni. the board determined the concepts should discuss the purposes of financial statements and rsi and',
4414:'orfni to assist users in understanding their relationships. a21.the board also determined the concepts should discuss component reporting entity budgetary',
4415:'information, performance results information, and summary level information. throughout the project, the board discussed the need to clarify the role',
4416:'of financial statements and rsi with respect to budgetary and performance information. the board considered that both budgetary and performance',
4417:'information include data derived from financial systems and transactions affected by gaap. including concepts on budgetary and performance information would',
4418:'assist the board in contributing to the reporting objectives andrequiringinformation that helpsusersunderstand therelationshipsamongbudget, cost, and performance information. a22.regarding summary level',
4419:'information, the board considered citizens’ feedback and concluded that citizens are more likely to understand a summarylevel presentation of financial',
4420:'and nonfinancial information than a detailed presentation. concepts would assist the board in determining the guidance that might be needed',
4421:'for summarylevel information. summary of outreach efforts and responses a23.the board issued the ed, federal financial reporting, on september 29,',
4422:'2016 and requested comments by january 6, 2017. a24.upon release of the ed, the board provided notices to the following',
4423:'organizations: a. the federal register b. fasab news c. the journal of accountancy, aga today, the cpa journal, government executive,',
4424:'and the cpa letter d. the cfo council, the council of the inspectors general on integrity and efficiency, and the',
4425:'financial statement audit network e. committees of professional associations generally commenting on exposure drafts in the past a25.the board followed',
4426:'this broad announcement with direct mailings to the following: page 27 concept 8 fasab handbook, version 20 06/21 concept 8',
4427:'a. house committee on oversight and government reform, subcommittee on government operations b. house transportation committee, subcommittee on economic development',
4428:'c. house committee on the budget d. senate committee on homeland security and government affairs and the following subcommittees: i.',
4429:'subcommittee on federal spending oversight and emergency management ii. subcommittee on regulatory affairs and federal management e. senate committee on',
4430:'the budget f. senate committee on the environment and public works g. senator patty murray, ranking member of the senate',
4431:'subcommittee on labor, health and human services, and education, member of the senate committee on the budget, and member of',
4432:'the senate committee on veterans’ affairs. h. senator tom carper, ranking member of the senate committee on homeland security and',
4433:'governmental affairs, member of the senate committee on environment and public works, and member of the senate committee on finance',
4434:'i. cpa caucus a26.the board received 16 comment lettersfrom preparers, auditors, professional associations, and citizens. the respondents generally agreed with',
4435:'the broad concepts proposed and provided commentsand suggestions that theboard may consider when it deliberatesfuture financial reporting standards. a27.the board',
4436:'considered each response, weighing the merits of the points raised and made revisions to the ed to clarify the intent',
4437:'of the concepts. some respondent comments and resulting actions are summarized below. other reported financial and nonfinancial information orfni and',
4438:'types of reports, electronic reporting, and publicaccess to government data page 28 concept 8 fasab handbook, version 20 06/21 concept',
4439:'8 a28.some respondents provided comments regarding orfni and how it might be enhanced with discussions on 1 types of orfni,',
4440:'2 the role of transactional information or information provided through implementation of laws such as the digitalaccountability and transparencyact of',
4441:'2014 dataact, 3 electronic reporting and its relationship to financial statements and rsi, and 4 the relationship between orfni and',
4442:'component reporting entity annual financial reports. a29.to afford the flexibility needed to address future financial reporting issues, the board determined',
4443:'the concepts should be broad. the requirements specified in laws and omb circulars are subject to change and the contents',
4444:'of specific reports, websites, and other meansof providing accesstofinancialinformationaresubjecttochangeaswell. inaddition, some reporting intended for general audiences may include information required',
4445:'by gaap while other reporting may not. explicit discussion of existing practices may cause the board to revise the statement',
4446:'each time changesoccur. while these comments maybe helpful for future standard setting, no adjustments were made to the concepts statement.',
4447:'required supplementary stewardship information rssi, management’s discussion and analysis md&a, financial statements, required supplementary information rsi, and otheraccompanying information oai',
4448:'a30.some respondents suggested providing guidance distinguishing the categories of information, such as financial statements, rsi, and md&a. others suggested providing',
4449:'guidance regarding required supplementary stewardship information rssi. another respondent suggested clarifyingtheconceptsusedto distinguishwhen projectionsmight be used in financial statements and when',
4450:'projections might be considered rsi. in addition, a respondent suggested eliminating the separate categories of rsi, rssi, and other accompanying',
4451:'information oai. although helpful for future standard setting, no adjustments were made to the concepts statement. a31.sffac 6 discusses the',
4452:'distinction among the categories of information and permits the board discretion in deciding which category should be used for an',
4453:'item of information. fasab’sstandardsspecifywhatitemsshouldbeinacategory. forinstance, whilesffac3 discusses concepts for information in md&a, sffas 15, management’s discussion and analysis, requires md&aitems',
4454:'as rsi. a32.sffas 8, supplementary stewardship reporting, requires items to be presented in rssi. an elimination of the rssi category',
4455:'would be accomplished through standards rather than concepts. the board expects existing practice to continue until members have examined and',
4456:'deliberated on the issue and, if warranted, amends sffas 8. page 29 concept 8 fasab handbook, version 20 06/21 concept',
4457:'8 component reporting entity financial position a33.respondents discussed the importance of information about a component reporting entity’s financial position. the',
4458:'board revised paragraph 50 of the ed to emphasize that component reporting entities are not independent economic entities but their',
4459:'financing is distinct from the governmentwide reporting entity’s financing. boardapproval a34.this statement was approved unanimously. written ballots are available for',
4460:'public inspection at fasab’s offices. page 30 concept 8 fasab handbook, version 20 06/21 concept 8 appendix b:abbreviations cfo chief',
4461:'financial officer ed exposure draft fr financial report of the u.s. government fasab federal accounting standards advisory board gaap generally',
4462:'accepted accounting principles gagas generally accepted government auditing standards gpffr general purpose federal financial report md&a management’s discussion and analysis',
4463:'napa national academy of public administration oai other accompanying information omb office of management and budget orfni other reported financial',
4464:'and nonfinancial information rsi required supplementary information rssi required supplementary stewardship information sffac statement of federal financial accounting concepts sffas',
4465:'statement of federal financial accounting standards page 31 concept 8 fasab handbook, version 20 06/21 statement of federal financialaccounting concepts',
4466:'9: materiality:amending statement of federal financial accounting concepts sffac 1, objectives of federal financial reporting,and sffac 3, managements discussion andanalysis',
4467:'status issued may 4, 2020 affects sffac 1, amends paragraph 164 and inserts a chapter titled materiality between the current',
4468:'chapters 6 and 7. sffac 3, amends paragraph 26 footnote 10. affected by none. see pages 67 for the preamble',
4469:'to statements of federal financialaccounting concepts www.fasab.gov/pdffiles/handbookpreamble.gov. summary this concepts statement updates concepts related to the application of materiality in',
4470:'the federal financial reporting environment. through amendments to sffac 1, objectives of federal financialreporting, andsffac 3, managementsdiscussion and analysis, thissffacclarifies',
4471:'implementation of materiality concepts in the issuance of federal financial statements. a reporting entity considers materiality in the application of',
4472:'specific requirements to information contained in its general purpose federal financial reports. this statement clarifies the materiality guidance. it identifies',
4473:'the users, scope, and factors to consider when applying materiality in the federal environment. this statement will also enhance preparers',
4474:'and auditors understanding of materiality concepts in federal financial reporting. page 1 concept 9 fasab handbook, version 20 06/21 concept',
4475:'9 table of contents page concepts 3 amendments to sffac 1, objectives of federal financial reporting 3 amendmentto sffac3,managementsdiscussionandanalysis 5',
4476:'appendixa:basis for conclusions 6 project history 6 materiality concepts 6 summary of outreach efforts and responses 10 board approval 12',
4477:'appendix b:abbreviations 13 page 2 concept 9 fasab handbook, version 20 06/21 concept 9 concepts amendments to sffac 1, objectives',
4478:'of federal financial reporting this paragraph amends statement of federal financial accounting concepts statement or sffac 1, objectives of federal',
4479:'financial reporting, by inserting a chapter titled materiality between the current chapter 6: qualitative characteristics of information in financial reports',
4480:'and chapter 7: how accounting supports federal financial reporting. the new materiality chapter is as follows:1 164a. areporting entity considers',
4481:'materiality in the application of accounting and reporting requirements. the federalaccounting standardsadvisory board fasab or the board intends that information',
4482:'presented in accordance with generally accepted accounting principles gaap12.1 will not contain misstatements, including omissions of information, considered material. such',
4483:'omissions include information that is necessary for a reasonable financial report user reasonable user12.2 to understand the effect of particular',
4484:'material transactions, events, and conditions on the entitys financial statements, notes to the financial statements, and required supplementary information. footnote',
4485:'fn 12.1 such information would include financial statements, notes to the financial statements, and required supplementary information.2 fn 12.2. areasonable',
4486:'financial report user has appropriate knowledge of the federal governments activities and reviews and analyzes the information diligently. fn 12.2.',
4487:'areasonable financial report user has appropriate knowledge of the federal governments activities and reviews and analyzes the information diligently. 164b.amisstatement,includingomission',
4488:'of information, ismaterialif, in light of surrounding facts and circumstances, it could reasonably be expected that the judgment of a',
4489:'reasonable user relying on the information would change or be influenced by the correction or inclusion of the information. 1',
4490:'the inserted chapter will become chapter 7: materiality and the existing chapters following chapter 6 in sffac 1 will be',
4491:'renumbered to accommodate the insertion. 2 statement of federal financialaccounting standards 57, omnibusamendments 2019, eliminates required supplementary stewardship information rssi',
4492:'in the general purpose federal financial report. page 3 concept 9 fasab handbook, version 20 06/21 concept 9 164c. materiality',
4493:'should be evaluated in the context of the specific reporting entity. determining materiality requires appropriate and reasonable judgment inconsidering the',
4494:'specific facts, circumstances, size, and nature of the misstatement. consequently, after quantitative and qualitative factors are considered, materiality may vary',
4495:'by financial statement, line item, or group of line items within an entity. 164d. misstatements should be considered individually and',
4496:'in the aggregate. materiality determinations regarding such misstatements should include consideration of both qualitative and quantitative factors. information that is',
4497:'not considered quantitatively material may be considered qualitatively material if it can reasonably be expected to change or influence the',
4498:'judgment of a reasonable user. qualitative considerations include the public accountability12.3 of the reporting entity; applicable legal and regulatory requirements;',
4499:'the visibility and sensitivity of government programs, activities, and functions; as well as other factors that may affect a reasonable',
4500:'users judgment about the information. fn 12.3. sffac 1, par. 73 and 74 identify different kinds of accountability. these may',
4501:'be relevant qualitative considerations in determining materiality. 164e. materiality concepts and related factors should be considered when making materiality judgments.',
4502:'while specific qualitative and quantitative thresholds for materiality are not provided in this statement, illustrative factors are discussed in paragraphs',
4503:'164c and 164d. 164f. in applying materiality concepts, the specific needs of a reasonable user should be considered. in the',
4504:'federal government environment, such needs generallydiffer from those of the commercial entity financial report user. for example, due to the',
4505:'visibility and sensitivity of government programs, the needs of federal government financial report users extendto havingtheability to assess the allocationand',
4506:'use ofresources in the federal government. compliance with laws, regulations, contracts, and grant agreements is also a significant consideration of',
4507:'the user.12.4 fn 12.4 information requiring protection from unauthorized disclosure is referred to as classified national security information. the application',
4508:'of federal financial accountingstandardsneedstosupport thelegalrequirementstoprotect classified national security information. 164g. to emphasize that materiality should be considered in applying the',
4509:'accounting standards, the board will place the following notice at the end of each statement of federal financialaccounting standards sffas:',
4510:'page 4 concept 9 fasab handbook, version 20 06/21 concept 9 the provisions of this statement need not be applied',
4511:'to information if the effect of applying the provisions is immaterial. fn fn: refer to statement of federalfinancialaccounting concepts1, objectives',
4512:'of federal financial reporting, chapter 7, titled materiality, for a detailed discussion of the materiality concepts. amendment to sffac 3,',
4513:'managements discussion andanalysis this paragraph amends sffac 3, managements discussion andanalysis, footnote 10 at paragraph 26 as follows: fn 10',
4514:'materiality of effects to be discussed should be evaluated in the context of the specific reporting entity, not the government',
4515:'as a whole. page 5 concept 9 fasab handbook, version 20 06/21 concept 9 appendixa: basis for conclusions this appendix',
4516:'discusses some factors considered significant by board members in reaching the conclusions in this statement. it includes the reasons for',
4517:'accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others. the concepts enunciated',
4518:'in this statementnot the material in this appendixshould guide the development of standards for specific transactions, events, or conditions. project',
4519:'history a1. the board added the note disclosures project to its agenda in october 2017 with the objective of improving',
4520:'the relevance, clarity, consistency, and comparability of disclosures among federal entities. staff formed a task force to assist the board',
4521:'with the related research. the board also conducted a survey on disclosures in which a majority of respondents indicated that',
4522:'materialitybased judgment can assist in eliminating redundant and unnecessary disclosures by providing only relevant information. a2. currently, materiality concepts are',
4523:'discussed in three statements: sffac 3; sffas 1, accounting for selected assets and liabilities; and sffas 3, accounting for inventory',
4524:'and related property. the board concluded that the clarity, detail, and organization of that guidance could be improved. as such,',
4525:'the board agreed to update the materiality guidance to assist preparers and auditors understanding of the boards intention with respect',
4526:'to making materiality judgments and improving disclosures. a3. infebruary2018,staffprovideddraftmaterialityconceptstothenotedisclosurestaskforce. the task force included federal financial report preparers, auditors, and consultants.',
4527:'task force members agreed the draft was not significantly different from their understanding of the application of materiality in practice,',
4528:'but it would help in applying materiality concepts in the federal environment by providing more clear, detailed, and organized guidance.',
4529:'materiality concepts a4. this statement does not include substantive changes to underlying materiality concepts. rather, to provide better guidance, this',
4530:'statement clarifies the materiality concepts by discussing the needs of reasonable users, clarifying the concept of misstatement, and identifying specific',
4531:'federal environment considerations. this statement is also intended to enhance preparers and auditors understanding of the materiality concepts in federal',
4532:'financial reporting. page 6 concept 9 fasab handbook, version 20 06/21 concept 9 a5. in developing this statement, several sources',
4533:'were considered, including the materiality discussion in the current fasab handbook, other accounting standards boards publications, relevant audit standards, and',
4534:'securities and exchange commission sec guidance. a6. the board considered the guidance in the government accountability office gaos government auditing',
4535:'standards gas3 when assessing the materiality concepts for the federal environment. similar to what is stated in gas section 6.03',
4536:'and noted in paragraph 164f, the needs of the federal government report user generally differ from those of the commercial',
4537:'entity financialreport user. the board consideredtheusers identifiedinsffac 1citizens, congress, federal executives, andfederalprogram managersindeveloping this materiality statement. in addition, paragraph164f also',
4538:'highlights some important elements related to the visibility and sensitivity of government programs. a7. this statement clarifies that materiality should',
4539:'be assessed using both quantitative and qualitative considerations. quantitative considerations for example, magnitude of the misstatement, without considering the nature',
4540:'of the misstatement and the circumstances in which the judgment about it has to be made, generally do not provide',
4541:'a sufficient basis for a materiality judgment. thus, misstatements should also be assessed using qualitative considerations to determine if those',
4542:'qualitative considerations can reasonably be expected to change or influence the judgment of a reasonable user. a8. the sec staff',
4543:'accounting bulletin topic 1.m.1 states, even though a misstatement of an individual amount may not cause the financial statements taken',
4544:'as a whole to be materially misstated, it may nonetheless, when aggregated with other misstatements, render the financial statements taken',
4545:'as a whole to be materially misleading.4 the board hasa similar view. misstatements should be considered individually and in the',
4546:'aggregate. a9. financial statements presented fairly in accordance with gaap could contain misstatements as long as those misstatements are not',
4547:'material. additionally, the board concluded materialitybased judgment in federal financial reporting can assist in eliminating redundant and unnecessary disclosures. a10.this',
4548:'statement defines materiality in terms of the likelihood that a misstatement, including the omission of information, could reasonably be expected',
4549:'to affect the judgment of a reasonable user relying on the information. the board ultimately concluded that could 3 gao,',
4550:'government auditing standards 2018 revision, gao18568g washington, d.c.: july 17, 2018, 109110. 4“codification of staff accounting bulletins, topic 1: financial',
4551:'statements,” securities and exchange commission, accessed april 30, 2020, https://www.sec.gov/interps/account/sabcodet1.htmm. page 7 concept 9 fasab handbook, version 20 06/21 concept',
4552:'9 reasonably be expected conveyed the appropriate level of certainty to use in determining whether a misstatement would affect the',
4553:'judgment of a reasonable user. the board noted that the meaning of can reasonably be expected in paragraph 33 of',
4554:'sffas 5, accounting for liabilities of the federal government, may be ambiguous. sffas 5, paragraph 33 states, probable refers tothat',
4555:'which can reasonably be expected oris believedtobemore likely than not on the basis of available evidence or logic… the board',
4556:'concluded that can reasonably be expected or is believed represent alternatives, both qualifying to be more likely than not and',
4557:'is not intended to equate reasonably be expected with more likely than not. a11.when developing the materiality definition in paragraph',
4558:'164b, the board considered the terms probable and more likely than not, currently used in existing fasab pronouncements, as alternatives',
4559:'to could reasonably be expected. the board noted that the inconsistencies throughout fasab guidance in the meaning of probable may',
4560:'cause confusion. the board also concluded that more likely than not more than a 50 percent chance of occurrence is',
4561:'not appropriate in assessing the overall application of materiality because it conveys alower degree of likelihood comparedto can reasonably be',
4562:'expected. therefore, the board concluded that both probable and more likely than not were not appropriate to be used in',
4563:'the materiality definition. a12.prior to the exposure of the proposed materiality concepts, the board also discussed whether to use substantial',
4564:'likelihood or could reasonably be expected in its materiality definition. the board noted that substantial likelihood had not been previously',
4565:'used by fasab and would require a specific definition that could inhibit the preparers judgment when applying materiality. a13.because of',
4566:'the public accountability of government entities, various legal and regulatory requirements, and the visibility and sensitivity of government programs, the',
4567:'materiality thresholds in federal practice may be different from those in the commercial practice. each standardssetter sets its standards for',
4568:'the unique characteristics of its constituency. the board concluded that, for purposes of this statement, could reasonably be expected is',
4569:'based on whether a reasonable person would expect that a misstatement would affect the judgment of a reasonable user, and,',
4570:'therefore, could reasonably be expected allows appropriate flexibility and judgment in considering the specific facts, circumstances, size, and nature of',
4571:'the misstatement when assessing whether a misstatement is material. it also accommodates the distinguishing characteristics of the federal environment. ultimately,',
4572:'the board proposed could reasonably be expected in its exposure draft ed and received positive feedback on it from the',
4573:'respondents. a14.in arriving at the materiality definition in paragraph 164b, the board also observed that materiality definitions vary among other',
4574:'standardssetters current and proposed guidance. some of the materiality definitions include: page 8 concept 9 fasab handbook, version 20 06/21',
4575:'concept 9 a. the international accounting standards board iasb uses could reasonably be expected to influence the decisions that the',
4576:'primary users of general purpose financial statements make.5 [emphasis added] b. the financialaccounting standardsboard fasbuses probable that the judgment of',
4577:'a reasonable person relying upon the report would have been changed or influenced.6 [emphasis added] c. the public companyaccounting oversight',
4578:'board pcaob uses substantial likelihood in the following context: …there are certain accounts or disclosures for which there is a',
4579:'substantial likelihood that misstatements of lesser amounts than the materiality level established for the financial statements as a whole would',
4580:'influence the judgment of a reasonable investor.7 [emphasis added] d. in addition, theaudit standards board asb currently uses, misstatements, including',
4581:'omissions, are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence economic',
4582:'decisions of users that are taken based on the financial statements. theasb has proposed to use, misstatements, including omissions, are',
4583:'considered to be material if there is a substantial likelihood that, individually or in the aggregate, they would influence the',
4584:'judgment of a reasonable user made based on the financial statements.8 [emphasis added] a15.the board recognizes the differences in terms',
4585:'used by different standardssetters to define materiality. the board also recognizes the possibility that the definitions of materiality may be',
4586:'applied differently by preparers and auditors. the board considered the merits of convergence with the audit literature but concluded that',
4587:'aligning the materiality definitions was not essential because materiality in terms of financial statement reporting is different from the financial',
4588:'statement audit perspective. a16.the board does not provide specific quantitative or qualitative considerations in this statement. both quantitative and qualitative',
4589:'considerations are typically entity specific. other existing literature already provides detailed guidance on materiality considerations. materiality considerations could vary depending',
4590:'on whether the reporting entity is a subcomponent, component, or the governmentwide reporting entity. 5 iasb, definition of material amendments',
4591:'to ias 1 and ias 8, october 2018. 6fasb, concepts statement no. 8 qualitative characteristics of useful financial information,august 2018.',
4592:'7 pcaob,auditing standard no.11 consideration of materiality in planning and performing an audit,august 2010. 8in june 2019, theasb issuedanexposuredraft of',
4593:'aproposed statement onauditingstandards, amendments to the description of the concept of materiality. page 9 concept 9 fasab handbook, version 20',
4594:'06/21 concept 9 a17.in certain situations, an entity may have a quantitatively significant balance or activity that would lead to',
4595:'a quantitatively high entitywide materiality threshold. if applied to the entitys otherbalancesor activities, such elevated materiality amounts could influencea reasonable',
4596:'users judgment regarding the rest of the entitys activities. in such cases, qualitative factors should be considered to determine whether',
4597:'separate materiality considerations are warranted. materiality may vary by financial statement, line item, or group of line items within that',
4598:'entity. summary of outreach efforts and responses a18.the board issued the ed on october 15, 2018, with comments originally requested',
4599:'by january 23, 2019. in light of the partial government shutdown during the comment period, some departments and agencies may',
4600:'not have been able to respond by the deadline; therefore, fasab extended the comment deadline to march 11, 2019. a19.upon',
4601:'release of the ed, fasab provided notices and press releases to the fasab subscription email list, the federal register, fasab',
4602:'news, the journal of accountancy, association of government accountants topics, the cpa journal, government executive, the cpa letter, the financial',
4603:'statement audit network, and committees of professional associations generally commenting on eds in the past for example, the greater washington',
4604:'society of cpas and the association of government accountants financial management standards board. a20.the board did not rely on the',
4605:'number of respondents in favor of or opposed to a given position. information about the respondents majority view is provided',
4606:'only as a means of summarizing the comments. the board considered each response and weighed the merits of the points',
4607:'raised. the respondents comments are summarized below. a21.fasab received 19 responses from preparers, users of federal financial information, and professional',
4608:'associations. nearly all respondents agreed with the proposed materiality concepts and their placement in a concepts statement. the placement in',
4609:'a concepts statement provides broad flexibility when exercising materiality judgments, while also providing consistency across standards without overriding existing materiality',
4610:'guidance. in addition, respondents also agreed that this guidance is not significantly different from their current application of materiality in',
4611:'practice. a22.some respondentssuggested creatinga separatechapterinsffac 1regarding materiality due to its importance. after carefully considering the comments received and the fact',
4612:'that materiality concepts may affect a reporting entity at various levels and areas of responsibility, accountability, and mission, the board',
4613:'decided to place the materiality guidance in sffac 1 by creating a new chapter 7 titled materiality. page 10 concept',
4614:'9 fasab handbook, version 20 06/21 concept 9 a23.based on several respondents suggestions, the board modified the following guidance originally',
4615:'proposed in the ed: a. the board eliminated the following wording from paragraph164c: therefore, misstatements of relatively small amounts could',
4616:'have a material effect on the financial statements. for example, an amount that is not quantitatively material with respect to',
4617:'a very large line item may be material with respect to a smaller line item.this avoids the misinterpretation that each',
4618:'line would have its own unique quantitative materiality value. b. the board defined the term reasonable financial report user reasonable',
4619:'user in footnote 12.2 to ensure consistency and clarity of its use throughout the guidance. a24.some respondents suggested providing detailed',
4620:'quantitative and qualitative guidance or references to other existing literature for materiality considerations. the board concluded that itsemphasis on the',
4621:'importance of evaluating both quantitative and qualitative factors in the determination of materiality, without providing specifics, allows entities broader flexibility',
4622:'in exercising materiality judgments. references to existing literature would not be valuable, as it is not the boards intent to',
4623:'endorse or prioritize these sources. as such, no specific reference to other existing literature is provided. a25.several respondents asked about',
4624:'the effect of this guidance on the existing non authoritative sections of other statements and the fasab handbook, where materiality',
4625:'is also discussed. for example, there is a materiality discussion in the introduction sections of sffas 1 and sffas 3',
4626:'and in the foreword section of the fasab handbook. these sections are considered nonauthoritative guidance and will be updated with',
4627:'a reference to this statement. a26.additionally, the board observed that existing conceptsand standards discussmateriality in the context of managements discussion',
4628:'and analysis md&a. sffac 3s figure 1: schematic diagram of a sample general purpose federal financial report states: the assertions',
4629:'and report on control called for by the federal managers financial integrityact fmfiaor integrityact would not be stated in full',
4630:'in md&a. they would be reported in a discrete section of the gpffr or incorporated in the gpffr by reference.',
4631:'they are within the scope of md&abecause highly important aspects of systems, compliance, and internal controls should be discussed in',
4632:'md&a. highly important in this context may imply a higher threshold than materiality for the financial statements. sffas 15, managements',
4633:'discussions and analysis, paragraph 5 states: page 11 concept 9 fasab handbook, version 20 06/21 concept 9 because md&amust be',
4634:'concise if it isto be useful, management must select the most important matters to discuss. this means that some items',
4635:'that are material to the financial statements, notes, and other sections of the gpffr may not be discussed in md&a.',
4636:'the issuance of this statement does not affect the materiality considerations applied to md&aas stated in sffac 3 and sffas',
4637:'15. boardapproval a27.this statement was approved unanimously. the written ballots are available for public inspection at fasabs office. page 12',
4638:'concept 9 fasab handbook, version 20 06/21 concept 9 appendix b:abbreviations ed exposure draft fasab federal accounting standards advisory board',
4639:'fn footnote gaap generally accepted accounting principles gao government accountability office gas government auditing standards gpffr general purpose federal financial',
4640:'report md&a management’s discussion and analysis sec securities and exchange commission sffac statement of federal financial accounting concepts sffas statement',
4641:'of federal financial accounting standard page 13 concept 9 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards1: accounting for selectedassets and liabilities',
4642:'status issued march 30, 1993 effective date for fiscal years beginning after september 30, 1993. affects none. affected by paragraph',
4643:'53, sffas 7, affects paragraph 41, by providing additional guidance regarding accruing accounts receivable. sffas 31 amends paragraphs 26, 29,',
4644:'31, 37 and 38, and adds paragraph 38a. sffas 32 amends paragraphs 86. tb 20201 clarifies paragraphs 4052 by providing',
4645:'that recognition of losses applies to both intragovernmental receivables and receivables from nonfederal entities. related guidance tr 12,accrual estimates for',
4646:'grant programs interpretation 10, clarification of nonfederal nonentity fbwt classification sffas 1, paragraph 31 summary this statement defines and illustrates',
4647:'the distinction between entityassets and nonentity assets, as well as intragovernmental and governmentalassets and liabilities. assets available to an entity',
4648:'to use in its operations are entity assets while those assets not available to an entitybut held bythe entity are',
4649:'nonentityassets. while both entityand nonentity assetsaretobereported in entitystatements, thestandardsrequire the segregation of entityand nonentity assets. in addition, a liability due',
4650:'to treasury or other entities must be recognized in an amount equal to nonentity assets. intragovernmental assets and liabilities arise',
4651:'from transactions among federal entities. governmental assetsand liabilitiesarise from transactionsof thefederal government or an entity of the federal government with',
4652:'nonfederalentities. the standards require that all selected assets and liabilities addressed in sffas no. 1 be reported separately as intragovernmental',
4653:'or governmental assets and liabilities. the statement also establishes specific standards for six assets: cash, fund balance with treasury,accounts receivable,',
4654:'interest receivable,advances and prepayments, and investmentsintreasury securities; and three liabilities:accounts payable, interest payable, and other current liabilities. the standards provide',
4655:'definitions of each asset and liability as well as recognition, measurement, and disclosure requirements. page 1 sffas 1 fasab handbook,',
4656:'version 20 06/21 sffas 1 interpretation 10, clarification of nonfederal nonentity fbwt classification sffas 1, paragraph 31:an interpretation of sffas',
4657:'1 and sffas 31 clarifies sffas 1, paragraph 31 by providing that nonfederal nonentity amounts received for unfilled orders including',
4658:'amounts a customer advances for orders that may be placed in the future or deposits made as part of a',
4659:'bid or settlement process and deposited into the general fund of the u.s. government should be reported as an intragovernmental',
4660:'asset by the component reporting entity. page 2 sffas 1 fasab handbook, version 20 06/21 sffas 1 table of contents',
4661:'page summary 1 introduction 4 explanation 6 general standards 7 specific standards: 8 cash 8 fund balance with treasury 9',
4662:'accounts receivable 11 interest receivable 13 advances and prepayments 14 investments in treasury securities 14 accounts payable 16 interest payable',
4663:'17 other current liabilities 18 appendixa:basis oftheboard’s conclusions 19 appendix b:illustrationoftheinterestmethodforamortization 32 appendix c:glossary[seeconsolidatedglossaryinappendix e] 35 page 3 sffas 1',
4664:'fasab handbook, version 20 06/21 sffas 1 introduction objective 1. in this statement, the board recommends accounting standards for selected',
4665:'assets and liabilities of the federal government and its entities. the standards apply to both governmental and commercialtype functions of',
4666:'the federal government. 2. the selected assets and liabilities are among the fundamental elements of federal accounting and financial reporting.',
4667:'by recommending these standards in the board’s first statement, the board’s objective is to provide definitive accounting and reporting guidance',
4668:'to federal agencies in these fundamental areas at the earliest stage of the board’s consideration and development of federal accounting',
4669:'standards. 3. in aseparateproject, theboardis identifyingusers’ needs andfederal accountingand reporting objectives.although the board’s deliberation on objectives has not been finalized,',
4670:'there is a general consensus that one overall objective for accounting and financial reporting is to assure accountability of federal',
4671:'governmental entities. the board believes that issuing these selected standards will help in fostering that overall objectives. 4. specifically, the',
4672:'recommended standards would assist users of financial statements in: assessing the efficiency and effectiveness of the government’s management of its',
4673:'assets and liabilities, and determining whether the government’s financial position improved or deteriorated over the reporting period. approach 5. the',
4674:'board’s initial approach to developing accounting standards was to review the existing accounting standards prescribed by the governmentaccountability office gao',
4675:'in its policy and procedures manual for the guidance of federal agencies, title 2 accounting, title 2.the purposeof the reviewwas',
4676:'to determine whether some of the title 2 standards, with any necessary modifications, could be recommended by the board to',
4677:'the principals of the joint financial management improvement program jfmip. 6. although the title 2 standards had not been fully',
4678:'implemented by federal agencies, they represented a starting point forfurtheranalysis. the title 2 standardswere reviewed in light page 4 sffas',
4679:'1 fasab handbook, version 20 06/21 sffas 1 of the accounting and reporting requirements established in the chief financial officers',
4680:'cfosact of 1990. at the time, the board considered current accounting practices of federal agencies. it also considered the findings',
4681:'from its project on user needs and objectives of federal financial reporting. as a result of the review, the board',
4682:'decided that with certain modifications, accounting standards for selected assets and liabilities could be recommended to the jfmip principals. 7.',
4683:'these selected assets and liabilities involve less complex issues than other assets and liabilities to be considered by the board',
4684:'in the future. the board also believes that the selectedassetsand liabilitiesaresobasictofinancialreporting thattheywillnot conflictwith any conceptual framework that the board may',
4685:'develop.1 8. the standards on the selected assets and liabilities were proposed in the board’s first exposure draft issued in',
4686:'september 1991, entitled financial resources, funded liabilities, and net financial resources and federal entities.atotal of 69 respondents submitted their comments',
4687:'to the board on the exposure draft. apublic hearing on the exposure draft was held on february 28, 1992. 9.',
4688:'in preparing this statement of recommended standards, the board considered the respondents’comments. basedonthe commentsthe boardreceivedand itsreevaluationin relation to the board’s',
4689:'current thinking on user needs and objectives of federal financial reporting, the board made changes to the proposals contained in',
4690:'the exposure draft. the specific changes are discussed inappendixa, “basis of the board’s conclusions.” scope 10. the selected assets addressed',
4691:'in this statement are: cash fund balance with treasury accounts receivable interest receivable advances and prepayments investments in treasury securities',
4692:'11. the selected liabilities addressed in this statement are: 1the board is also addressing other assets and liabilities. it has',
4693:'issued a proposed standard for direct loans and loan guarantees see exposure draft entitled accounting for direct loans and loan',
4694:'guarantees, september 15, 1992, and accounting for inventory and related property, december 1992. page 5 sffas 1 fasab handbook, version',
4695:'20 06/21 sffas 1 accounts payable interest payable other current liabilities materiality 12. except as otherwise noted, the accounting and',
4696:'reporting provisions of the accounting standardsrecommendedinthisstatement neednotbeappliedtoitemsthatarequalitatively and quantitatively immaterial. 13. the determination of whether an item is material depends',
4697:'on the degree to which omitting or misstating information about the item makes it probable that the judgment of a',
4698:'reasonableperson relyingontheinformationwould have beenchanged orinfluencedbythe omission or the misstatement. applicability 14. the accounting standards recommended in this statement are applicable',
4699:'to the federal government and its departments and agencies in the executive branch that fall within the definition of “executive',
4700:'agency” as defined in 31 u.s.c. 102 and 3501. effective date 15. the accounting standards recommended in this statement will',
4701:'be effective for financial statementspreparedforfiscalyearsbeginning afterseptember30,1993. earlieradoptionis encouraged. explanation 16. the board’s focus in this statement is on setting accounting',
4702:'standards for the individual federal entity level of reporting. in this statement, the standards are also applicable to financialreporting bythe',
4703:'u.s. government asa whole, except for those standards related to intragovernmental assets and liabilities, which are defined in the general',
4704:'standards and noted in specific standards. page 6 sffas 1 fasab handbook, version 20 06/21 sffas 1 17. the word',
4705:'“entity” refers to a unit within the federal government, such as a department, agency, bureau, or program, for which a',
4706:'set of financial statements will be prepared. the word entity also encompasses a group of related or unrelated commercial functions,',
4707:'revolving funds, trust funds, and/or other accounts for which financial statements are preparedinaccordancewith omb guidance on the formand content of',
4708:'financialstatements. general standards intragovernmental vs. governmentalassets and liabilities 18. intragovernmental assets and liabilities arise from transactions among federal entities. intragovernmental',
4709:'assets are claims of a federal entity against other federal entities. intragovernmental liabilities are claims against the entity by other',
4710:'federal entities. 19. among the assets covered by this statement, intragovernmental assets include an entity’s fund balance with treasury, investments',
4711:'in treasury securities, accounts and interest receivable from federal entities, and advances and prepayments to federal entities. 20. intragovernmental liabilities',
4712:'include accounts and interest payable to federal entities and other current liabilities due to federal entities, such as receipt of',
4713:'federal advances and prepayments. 21. governmental assets and liabilities arise from transactions of the federal government or an entity of',
4714:'the federal government with nonfederal entities. governmental assets are claims of the federal government or an entity within the federal',
4715:'government against nonfederal entities. governmental liabilities are amounts that the federal government or an entity within the federal government owes',
4716:'to nonfederal entities. the term nonfederal entities encompasses domestic and foreign persons and organizations outside the u.s. government. the term',
4717:'public is also used in this statement to represent nonfederal entities. 22. among the assets covered by this statement, governmental',
4718:'assets that would be reported by a federal entity include cash, accounts and interest receivable from nonfederal entities, and advances',
4719:'and prepayments made to nonfederal entities. 23. governmental liabilities include accounts and interest payable to nonfederal entities, other liabilities due',
4720:'to nonfederal entities, and advances and prepayments received from nonfederal entities. page 7 sffas 1 fasab handbook, version 20 06/21',
4721:'sffas 1 24. intragovernmental assets and liabilities should be reported separately from governmental assets and liabilities. this requirement applies to',
4722:'all of the selected assets and liabilities addressed in this document. entityassets vs. nonentityassets 25. entity assets are those assets',
4723:'which the reporting entity has authority to use in its operations. nonentity assets are those assets that are held by',
4724:'an entity but are not available to the entity. an example of nonentity assets are customs duty receivables that the',
4725:'customs service collects for the u.s. government but has no authority to spend. a similar example is federal income tax',
4726:'receivable that the internal revenue service collects for the u.s. government. 26. both entity assets and nonentity assets under an',
4727:'entity’s custody or management should be reported in the entity’s financial statements, except for nonentity assets meeting the definition of',
4728:'fiduciary assets, which should not be recognized on the balance sheet, but should be disclosed in accordance with the provisions',
4729:'of sffas 31, accounting for fiduciary activities. nonentity assets recognized on an entity’s balance sheet should be segregated from entity',
4730:'assets. an amount equal to nonentity assets should be recognized as a liability due to treasury or other entities recognized',
4731:'on the balance sheet. specific standards cash 27. cash, including imprest funds, should be recognized as an asset. cash consists',
4732:'of: a. coins, paper currency and readily negotiable instruments, such as money orders, checks, and bank drafts on hand or',
4733:'in transit for deposit; b. amounts on demand deposit with banks or other financial institutions; and c. foreign currencies, which,',
4734:'for accounting purposes, should be translated into u.s. dollars at the exchange rate on the financial statement date. 28. entity',
4735:'cash. entity cash is the amount of cash that the reporting entity holds and is authorized by law to spend.',
4736:'page 8 sffas 1 fasab handbook, version 20 06/21 sffas 1 29. nonentity cash. nonentity cash is cash that a',
4737:'federal entity collects and holds on behalf of the u.s. government or other entities. in some circumstances, the entity deposits',
4738:'cash in its accounts in a custodial capacity for the u.s. treasury or other federal component entities, or in a',
4739:'fiduciary capacity for nonfederal parties. a. nonentity cash recognized on the balance sheet should be reported separately from entity cash.',
4740:'b. nonentity cash meeting the definition of a fiduciary asset should not be recognized on the balance sheet, but should',
4741:'be disclosed in accordance with the provisions of sffas 31, accounting for fiduciary activities. 30. restricted cash. cash may be',
4742:'restricted. restrictions are usually imposed on cash deposits by law, regulation, or agreement. nonentity cash is always restricted cash. entity',
4743:'cash may be restricted for specific purposes. such cash may be in escrow or other special accounts. financial reports should',
4744:'disclose the reasons and nature of restrictions. fund balance with treasury 31. afederal entity’s fund balance with the treasury fbwt',
4745:'is the aggregate amount of funds inthe entity’saccountswithtreasuryforwhich theentityisauthorizedtomakeexpenditures and pay liabilities. fbwt is an intragovernmental item, except for fiduciary',
4746:'or other non federal nonentity fbwt. from the reporting entity’s perspective, the reporting entity’s fbwt is an asset because it',
4747:'represents the entity’s claim to the federal government’s resources. however, from the perspective of the federal government as a whole,',
4748:'it is not an asset; and while it represents a commitment to make resources available to federal departments, agencies, programs',
4749:'and other entities, it is not a liability. in contrast, fiduciary and other nonfederal nonentityfbwtis not intragovernmental, and it representsa',
4750:'liability of the appropriate treasury component and of the federal government as a whole to the nonfederal beneficiaries. 32. afederal',
4751:'entity’sfundbalancewithtreasuryincludes clearingaccountbalances andthe dollar equivalent of foreign currency account balances. foreign currency account balances should be translated into u.s. dollars',
4752:'at exchange rates determined by the treasury and effective at the financial reporting date.afederal entity’s fund balance with treasury also',
4753:'includes balances for direct loan and loan guarantee activities held in the credit reform program, financing, and liquidating accounts. 33.',
4754:'an entity’s fund balance with treasury is increased by a receiving appropriations, reappropriations, continuing resolutions, appropriation restorations, and allocations, and',
4755:'b receiving transfers and reimbursements from other agencies. an entity’s fund balance with page 9 sffas 1 fasab handbook, version',
4756:'20 06/21 sffas 1 treasuryis also increased byamounts borrowed fromtreasury, federal financing bank, or otherentities, and amountscollected andcredited to appropriationorfund',
4757:'accountsthat the entity is authorized to spend or use to offset its expenditures. 34. an entity’s fund balance with treasury',
4758:'does not include contract authority or unused authority to borrow. contract authority isa statutory authority underwhich contractsor other obligations may',
4759:'be entered into prior to receiving an appropriation for the payment of obligations. the later enacted appropriation provides cash to',
4760:'liquidate obligations.2 thus, contract authority merely permits a federal entity to incur certain obligations but does not, in itself, add',
4761:'funds to the agency’s accounts with treasury. 35. authority to borrow is a statutory authority that permits a federal agency',
4762:'to incur obligations and make payments for specific purposes out of borrowed funds. authority to borrow adds funds to an',
4763:'agency’s accounts with treasury only after the agency actually uses the authority to borrow a specific amount of funds. thus,',
4764:'authority to borrow is included in an entity’s fund balance withtreasuryonlyto the extent that fundsare actuallyborrowedunder the authority. 36. an',
4765:'entity’s fund balance with treasury is reduced by a disbursements made to pay liabilities or to purchase assets, goods, and',
4766:'services, b investments in u.s. securities securities issued bytreasury or other federal government agencies, c cancellation of expired appropriations;dtransfersandreimbursementstoother entitiesortothetreasury,',
4767:'and e sequestration or rescission of appropriations. 37. disclosure should be made to distinguish three categories of funds within the',
4768:'fbwt reported on the balance sheet: the obligated balance not yet disbursed the unobligated balance, and nonbudgetary fbwt. the obligated',
4769:'balance not yet disbursed is the amount of funds against which budgetary obligations have been incurred, but disbursements have not',
4770:'been made. 38. the unobligated balance is the amount of funds available to an entity against which no claimshave been',
4771:'recorded. unobligated balances are generally available to a federal entity for specific purposes stipulated by law. unobligated balances may also',
4772:'include balances in expired/canceled accounts that are available only for approved adjustments to prior obligations. certain unobligated balances may be',
4773:'restricted to future use and are not apportioned for current use. disclosure should be provided on such restrictions. non budgetary',
4774:'fbwt includes unavailable receipt accounts, clearing accounts and other accounts that do not represent budget authority, as well as nonentity',
4775:'fbwt that is recognized on the balance sheet. 2source of definition: omb circulara34. page 10 sffas 1 fasab handbook, version',
4776:'20 06/21 sffas 1 38a. in addition to entity and nonentity fbwtthat is recognized on the balance sheet, a federal',
4777:'entity may also administer fiduciary fbwton behalf of nonfederal entities or individuals. fiduciary fbwt is not recognized on the balance',
4778:'sheet, but is subject to separate disclosure requirements for fiduciary fbwt, see sffas 31, accounting for fiduciary activities. 39. federal',
4779:'entities should explain any discrepancies between fund balance with treasury in their general ledger accounts and the balance in the',
4780:'treasury’s accounts and explain the causes of the discrepancies in footnotes to financial statements. discrepancies due to time lag should',
4781:'be reconciled and discrepancies due to error should be corrected when financial reports are prepared.agencies also should provide information on',
4782:'unused fundsin expired appropriations that are returned to treasury at the end of a fiscal year. accounts receivable 40. accounts',
4783:'receivable arise from claims to cash or other assets. the accounting standard for accounts receivable is set forth below. 41.',
4784:'recognition of receivables.3areceivable should be recognized when a federal entity establishes a claim to cash or other assets against other',
4785:'entities, either based on legal provisions, such as a payment due date, e.g., taxes not received by the date they',
4786:'are due, or goods or services provided. if the exact amount is unknown, a reasonable estimate should be made. [see',
4787:'sffas 7, paragraph 53 for more.] 42. separate reporting. receivables from federal entities are intragovernmental receivables, and should be reported',
4788:'separately from receivables from nonfederal entities. 43. entity vs. nonentity receivables. receivables should be distinguished between entity receivablesandnonentityreceivables.entity receivables areamountsthatafederalentity',
4789:'claims for payment from other federal or nonfederal entities and that the federal entity is authorized by law to include',
4790:'in its obligational authority or to offset its expenditures and liabilities upon collection.4 nonentity receivables are amounts that the entity',
4791:'collects on 3theword recognition usedinthisdocument bearsthesamemeaningas usedbythefinancialaccounting standards boardfasb inits conceptual statements. itmeans the process of formally recordingor incorporatinganitem intothe',
4792:'financial statements of an entity as an asset, liability, revenue, expense, or the like. arecognized item is depicted in both',
4793:'words and numbers, with the amount included in the statement totals. recognition comprehends both initial recognition of an item and',
4794:'recognition of subsequent changes in or removal of a previously recognized item. fasb statement of financialaccounting concepts no. 5, par.',
4795:'6. 4an entity may have receivables that, once collected, can be used as offsets to the entity’s budget authority and',
4796:'outlays only when authorized by congress. before receiving the authorization, however, those receivables are nonentity receivables. page 11 sffas 1',
4797:'fasab handbook, version 20 06/21 sffas 1 behalf of the u.s. government or other entities, and the entity is not',
4798:'authorized to spend.5 receivables not available to an entity are nonentity assets and should be reported separately from receivables available',
4799:'to the entity. 44. recognition of losses due to uncollectible amounts. losses on receivables should be recognized when it is',
4800:'more likely than not that the receivables will not be totally collected. the phrase more likely than not means more',
4801:'than a 50 percent chance of loss occurrence. 45. anallowanceforestimateduncollectibleamountsshouldberecognizedtoreducethegross amount of receivables to its net realizable value.6 the allowance',
4802:'for uncollectible amounts should be reestimated on each annual financial reporting date and when information indicates that the latest estimate',
4803:'is no longer correct. 46. measurement of losses. losses due to uncollectible amounts should be measured through a systematic methodology.',
4804:'the systematic methodology should be based on analysis of both individual accounts and a group of accounts as a whole.',
4805:'47. individual account analysis. accounts that represent significant amounts should be individually analyzed to determine the loss allowance. loss estimation',
4806:'for individual accounts should be based on a the debtor’s ability to pay, b the debtor’s payment record and willingness',
4807:'to pay, and c the probable recovery of amounts from secondary sources, including liens, garnishments, cross collections and other applicable',
4808:'collection tools. 48. the allowance for losses generally cannot be based solely on the results of individual account analysis. in',
4809:'many cases, information may not be available to make a reliable assessment of losses on an individual account basis or',
4810:'the nature of the receivables may not lend itself to individual account analysis. in these cases, potential losses should be',
4811:'assessed on a group basis. 49. group analysis. to determine the loss allowance on a group basis, receivables should be',
4812:'separated into groups of homogeneous accounts with similar risk characteristics. 50. thegroupsshouldreflecttheoperatingenvironment. forexample,accountsreceivablecan be grouped by: a debtor category business',
4813:'firms, state and local governments, and 5 governmental receipts include collections arising from the sovereign and regulatory powers unique to',
4814:'the federal government, e.g., income tax receipts, customs duties, court fines, certain license fees, etc. afederal entity may be responsible',
4815:'for collecting these receipts on behalf of the u.s. government, but is not authorized to use the monies collected to',
4816:'offset its expenditures. 6in the board’s exposure draft,accounting for direct loansand loan guarantees, september 15, 1992, receivables are accounted for',
4817:'on a net present value basis. [see sffas no. 2] page 12 sffas 1 fasab handbook, version 20 06/21 sffas',
4818:'1 individuals, b reasons that gave rise to the receivables tax delinquencies, erroneous benefit payments, trade accounts based on goods',
4819:'and services sold, and transfers of defaulted loans to accounts receivable, or c geographic regions foreign countries, and domestic regions.',
4820:'within a group, receivables are further stratified by risk characteristics. examples of risk factors are economic stability, payment history, alternative',
4821:'repayment sources, and aging of the receivables. 51. statistical estimation by modeling or sampling is one appropriate method for estimating',
4822:'losseson groups of receivables. statistical estimation should take into consideration factors that are essential for estimating the level of losses,',
4823:'including historical loss experience, recent economic events, current and forecast economic conditions, and inherent risks. 52. disclosure. agencies should disclose',
4824:'the major categories of receivables by amount and type, the methodology used to estimate the allowance for uncollectible amounts, and',
4825:'the total allowance. interest receivable 53. interest receivable should be recognized for the amount of interest income earned but not',
4826:'received for an accounting period. interest receivable should be recognized as it is earned on investments in interestbearing securities. interest',
4827:'also should be recognized on outstanding accounts receivable and other u.s. government claims against persons and entities in accordance with',
4828:'provisions in 31 u.s.c. 3717, interest and penalty claims. see also federal claims collection standards, 4 cfr part 103, paragraph',
4829:'102.13.7 54. no interest should be recognized on accounts receivable or investments that are determined to be uncollectible unless the',
4830:'interest is actually collected. payments received from the debtor are required to be applied first to penalty and administrative cost',
4831:'charged, second to interest receivable, and third to outstanding debt principal, per federal claims collection standards, 4 c.f.r. 102.13f. 55.',
4832:'however,untiltheinterestpaymentrequirementisofficiallywaivedbythegovernmententity or the related debt is written off, interest accrued on uncollectible accounts receivable should be disclosed. 56. interest receivable',
4833:'from federal entities should be accounted for and reported separately from interest receivable from the public. 7accountingfor imputed interest, interest',
4834:'on longterm leases, interest onloans, andinterest onamounts deposited in credit reform accounts will be addressed when the board considers accounting',
4835:'standards in these areas. page 13 sffas 1 fasab handbook, version 20 06/21 sffas 1 advances and prepayments 57. advances',
4836:'arecash outlaysmade bya federal entityto itsemployees, contractors, grantees, or others to cover a part or all of the recipients’ anticipated',
4837:'expenses or as advance payments for the cost of goods and services the entity acquires. examples include travel advances disbursed',
4838:'to employees prior to business trips, and cash or other assets disbursed under a contract, grant, or cooperative agreement before',
4839:'services or goods are provided by the contractor or grantee. 58. prepayments are payments made by a federal entity to',
4840:'cover certain periodic expenses before those expenses are incurred. typical prepaid expenses are rents paid to a lessor at the',
4841:'beginning of a rental period. progress payments made to a contractor based on a percentage of completion of the contract',
4842:'are not advances or prepayments. 59. advancesandprepaymentsshouldberecordedasassets.advancesandprepaymentsare reduced when goods or services are received, contract terms are met, progress is',
4843:'made under a contract, or prepaid expenses expire. atravel advance, for example, should be initially recorded as an asset and',
4844:'should be subsequently reduced when travel expenses are actually incurred. amounts of advances and prepayments that are subject to refund',
4845:'for example, a settled travel claim indicating the traveler owes part of the advance to the government should be transferred',
4846:'to accounts receivable. 60. advancesandprepaymentspaidoutbyanentityareassetsoftheentity. ontheotherhand, advances and prepayments received by an entity are liabilities of the entity see the',
4847:'recommended standard for other current liabilities. in financial reports of an entity, advances and prepayments the entity paid out assets',
4848:'should not be netted against advances and prepayments that the entity received liabilities. 61. advances and prepayments made to federal',
4849:'entities are intragovernmental items and should be accounted for and reported separately from those made to nonfederal entities. investments in',
4850:'treasury securities 62. scope. this standard applies to investment by federal entities in treasury securities, including a nonmarketable par value',
4851:'treasury securities, b marketbased treasury securities expected to be held to maturity, and c marketable treasury securities expected to be',
4852:'held to maturity. this standard does not apply to investments by federal entities in securities debt and equity and other',
4853:'financial instruments issued by other than the u.s. treasury. page 14 sffas 1 fasab handbook, version 20 06/21 sffas 1',
4854:'63. nonmarketable par value treasury securities are specialseriesdebt securities that the u.s. treasury issues to federal entities at face value',
4855:'par value. the securities are redeemed at face value on demand; thus investing entities recover the full amounts invested. 64.',
4856:'marketbased treasury securities are debt securities that the u.s. treasury issues to federal entities without statutorily determined interest rates. although',
4857:'the securities are not marketable, their terms prices and interest rates mirror the terms of marketable treasury securities. 65. marketable',
4858:'treasury securities, including treasury bills, notes, and bonds, are initially offered by treasury to the marketplace and can then be',
4859:'bought and sold on securities exchange markets. their bid and ask prices are publicly quoted by the marketplace. 66. treasury',
4860:'securities expected to be held to maturity. aside from nonmarketable par value treasury securities, this standard applies to marketbased and',
4861:'marketable treasury securities that are expected to be heldto maturity.aninvestmentin securitiesis expected to be held to maturity only if the',
4862:'investing entity has the intent and ability to hold those securities to maturity. an investment in treasury securities should not',
4863:'be considered as expected to be held to maturity if the investing entity is likely to sell the securities in',
4864:'response to shortterm cash needs, changes in market interest rates, or for other reasons. 67. separate accounting and reporting for',
4865:'federal and nonfederal securities. investments of a federal entity in u.s. securitiessecuritiesissued bytreasuryand federalagenciesare intragovernmental investments. these u.s. securities also',
4866:'represent intragovernmental liabilities of the treasury department or other federal entities that issue the securities. investments in securities issued by',
4867:'the u.s. treasury or other federal entities should be accounted for and reported separately from investments in securities issued by',
4868:'nonfederal entities. 68. initial recording. the three types of treasury securities covered by this standard nonmarketable par value treasury securities,',
4869:'marketbased treasury securities expected to be held to maturity, and marketable treasury securities expected to be held to maturity should',
4870:'be recognized at their acquisition cost. if the acquisition is made in exchange for nonmonetary assets, the acquired securities should',
4871:'be recognized at the fair market value of either the securities acquired or the assets given up, whichever is more',
4872:'definitively determinable. 69. iftheacquisitioncostdiffersfromthefaceparvalue,thesecurityshouldberecordedatthe acquisition cost, which equals the security’s face value plus or minus the premium or discount on',
4873:'the investment.adiscount is the excess of the security’s face amount over its purchase price.apremium is the excess of the purchase',
4874:'price over the security’s face page 15 sffas 1 fasab handbook, version 20 06/21 sffas 1 value. the balance in',
4875:'the valuation account is treated as a contra account to the debt security. 70. valuation subsequent to acquisition. subsequent to',
4876:'their acquisition, investments in treasury securities should be carried at their acquisition cost, adjusted for amortization, if appropriate, as explained',
4877:'below. 71. if an amount of premium or discount exists, the carrying amount of the investments should be adjusted in',
4878:'each reporting period to reflect the amortization of the premium or the discount. premiumsand discounts shouldbeamortizedoverthelife of thetreasury security using',
4879:'the interest method. under the interest method, the effective interest rate the actual interest yield on amounts invested multiplied by',
4880:'the carrying amount of the treasury security at the start of the accounting period equals the interest income recognized during',
4881:'the period the carrying amount changes each period by the amount of the amortized discount or premium. the amount of',
4882:'amortization of discount or premium is the difference between the effective interest recognized for the period and the nominal interest',
4883:'for the period as stipulated in the treasury security. seeappendix b for an illustration of the interest method of amortization.',
4884:'72. disclosure of market value. for investments in marketbased and marketable treasury securities, the market value of the investments should',
4885:'be disclosed. for purposes of determining a market value, investments should be grouped by type of security, such as marketable',
4886:'or marketbased treasury securities. the market value of investments in a group is calculated by the market price of securities',
4887:'of that group at the financial reporting date multiplied by the number of notes or bonds held at the financial',
4888:'reporting date. 73. investment reclassification. in rare instances, significant unforeseeable circumstances may cause a change in an entity’s intent or',
4889:'ability to hold to maturity certain securities that are initially classified as expected to be held to maturity. in these',
4890:'circumstances, the affected securitiesshould be reclassified assecuritiesavailable forsale or earlyredemption redemption before the security’s maturity. once a security is reclassified',
4891:'it is no longer subject to this standard. accounts payable 74. accounts payable are amounts owed by a federal entity',
4892:'for goods and services received from, progress in contract performance made by, and rents due to other entities. 75. accounts',
4893:'payable are not intended to include liabilities related to ongoing continuous expenses such as employees’ salary and benefits, which are',
4894:'covered by other current liabilities. see recommended standard for other current liabilities. page 16 sffas 1 fasab handbook, version 20',
4895:'06/21 sffas 1 76. amounts owed for goods or services received from federal entities represent intragovernmental transactions and should be',
4896:'reported separately from amounts owed to the public. 77. when an entity accepts title to goods, whether the goods are',
4897:'delivered or in transit, the entity should recognize a liability for the unpaid amount of the goods. if invoices for',
4898:'those goods are not available when financial statements are prepared, the amounts owed should be estimated. 78. when a contractor',
4899:'provides the government with goods that are also suitable for sale to others, the liability usually arises when the contractor',
4900:'physically delivers the goods and the government receives them and takes formal title. however, when a contractor builds or manufactures',
4901:'facilities or equipment to the government’s specifications, formal acceptance of the products by the government is not the determining factor',
4902:'for accounting recognition. constructive or de facto receipt occurs in each accounting period, in accordance with the following paragraph. 79.',
4903:'for facilities or equipment constructed or manufactured by contractors or grantees accordingtoagreements orcontract specifications,amounts recordedaspayableshouldbe based on an estimate of',
4904:'work completed under the contract or the agreement. the estimate of such amounts should be based primarily on the federal',
4905:'entity’s engineering and management evaluation of actual performance progress and incurred costs. 80. the reporting entity should disclose accounts payable',
4906:'not covered by budgetary resources. interest payable 81. interestpayableshouldberecordedfortheamountofinterestexpenseincurredandunpaid. interest incurred resultsfromborrowing fundsfromtreasury, federalfinancing bank, other federalentities,or thepublic. interest alsoshouldbe',
4907:'recordedonlatepayment of billsbythe federal entity see provisions in 31 u.s.c. 3901 through 3907, prompt payment and on refunds see provisions',
4908:'in 26 u.s.c. 6611. interest payable of an entity on borrowed funds and unpaid bills should be recognized at the',
4909:'end of each period. 82. interest payable to federal entities is an intragovernmental liability and should be accounted for separately',
4910:'from interest payable to the public. page 17 sffas 1 fasab handbook, version 20 06/21 sffas 1 other current liabilities',
4911:'83. the term other current liabilities is used to report currentliabilitiesthatare not recognized in specific categories such as accounts payable;',
4912:'interest payable; debt owed to the public, treasury, or other entities; and liabilities for loan guarantee losses. other current liabilities',
4913:'may include unpaid expenses that are accrued for the fiscal year for which the financial statements are prepared and are',
4914:'expected to be paid within the fiscal year following the reporting date. 84. typical examples of other current liabilities to',
4915:'be recognized are: a accrued employees’ wages, bonuses, and salaries for services rendered in the current fiscal year for which',
4916:'paychecks will be issued in the following year; b accrued entitlement benefits payable, such as oldage survivors insurance oasi and',
4917:'veterans compensation and pension benefits applicable to the current period but not yet paid, and c annuities for the current',
4918:'fiscal year administered by trust, pension, or insurance programs for which payment would be made in the following fiscal year.',
4919:'such liabilities may be presented on the face of the financial reports as other current liabilities or as one or',
4920:'more separate categories depending on the materiality of the amounts. 85. federal entities may receive advances and prepayments from other',
4921:'entities for goods to be delivered or services to be performed. before revenues are earned, the current portion of the',
4922:'advances and prepayments should be recorded as other current liabilities. after the revenue is earned goods or services are delivered,',
4923:'or performance progress is made according to engineering evaluations, the entity should record the appropriate amount asa revenue or financing',
4924:'source and should reduce the liability accordingly. other current liabilities due to federal entities are intragovernmental liabilities that should be',
4925:'reported separately from those due to employees and the public. 86. the reporting entity should disclose the amount of current',
4926:'liabilities not covered by budgetary resources. the u.s. governmentwide financial statements need not include this disclosure. page 18 sffas 1',
4927:'fasab handbook, version 20 06/21 sffas 1 appendixa: basis of the board’s conclusions 87. thisappendix provides adiscussiononthesubstantive commentsthattheboardreceived from respondents',
4928:'to exposure draft no. 1, “financial resources, funded liabilities, and net financial resources of federal entities” november 18, 1991 and',
4929:'from testimony at a public hearing on the exposure draft held february 28, 1992. theappendix explains the basis of the',
4930:'board’s conclusions on issues raised by the respondents. this statement may be affected by later statements. the fasab handbook is',
4931:'updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text',
4932:'of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future',
4933:'changes. the reader can review the basis for conclusions of the amending statement for the rationale for each amendment. basic',
4934:'concepts 88. net financial resources. in the exposure draft, the board proposed the concept of net financial resources . the',
4935:'term net financial resources was referred to as an entity’s total financial resources less its total funded liabilities exposure draft,',
4936:'page 11. the exposure draft stated that the amount of net financial resources provides a general measure of an entity’s',
4937:'financial sufficiency before new appropriations are provided. the exposure draft further stated that information on the components of an entity’s',
4938:'net financial resources obligated and unobligated balances of budget authority and other items can provide additional insight into an entity’s',
4939:'financial situation. 89. many respondents do not see convincing evidence that the concept of net financial resources is useful. they',
4940:'point out that there are no concrete examples to illustrate how the information can be used. some respondents also do',
4941:'not believe that the measure of net financial resources is well defined. theypoint out that one of the elements missing',
4942:'from the concept is the amount of unfunded liabilities. they state that without measuring unfunded liabilities, the measure of net',
4943:'financial resources is incomplete and can be misleading. 90. the board has decided to postpone consideration of the net financial',
4944:'resources concept. the board believes that the usefulness of the concept can be further explored after it completes its project',
4945:'on users’ needs and objectives for financial accounting and reporting. 91. entity financial resources. in the exposure draft, the board',
4946:'discussed the concept of entity financial resources. the concept wasdefined asassetsof a federal entitythat consist of a the entity’s cash',
4947:'and funds authorized and available for disbursement excluding contract authority and unused authority to borrow, b resources of the entity',
4948:'that are page 19 sffas 1 fasab handbook, version 20 06/21 sffas 1 expected to be converted into cash to',
4949:'satisfy liabilities, and c conversion of cash into another form for example prepayments that would be consumed. under this definition,',
4950:'the exposure draft identified as financial resources: cash, funds with treasury, claims to cash for example accounts receivable and loans',
4951:'receivable, claims to goods and services for example advances and prepayments, inventories held for sale, and investments. 92. as indicated',
4952:'in the exposure draft, financial resources are a subset of assets that provide liquidity cash and assets that can be',
4953:'converted to cash to meet a federal entity’s operational needs. the concept was considered useful because federal entities obtain resources',
4954:'from the budget to finance their operations and are held accountable for the use of the financial resources. 93. theboardhasdecidednottousethetermfinancialresourcesinthisdocument.',
4955:'however,a definition of the term financial resources and its usefulness will be further considered by the board in its conceptual',
4956:'framework project. in the absence of the term, the items that would provide future economic benefits to the government and',
4957:'its entities are referred to as assets. the term asset as used in this document means an item that embodies',
4958:'a probable future economic benefit that can be obtained or controlled by the federal government or a reporting entity as',
4959:'a result of past transactions or events. the definition of assets will be considered by the board in the future.',
4960:'94. funded liabilities. the exposure draft proposed the definition of “funded liabilities” as “liabilities for which the federal entity has',
4961:'received budget authority to cover the related expenditure or expense.” 95. theterm “fundedliabilities” wouldlimittherecognitionofliabilitiestotheextentthattheyare funded. the board believes that the',
4962:'liabilities addressed in this document should be recognized when they are incurred, regardless of whether they are funded. the board',
4963:'therefore decided not to use the term “funded liabilities” in this document. however, the board recommendsthat disclosure be made for',
4964:'liabilities that are not covered by budgetary resources. 96. the word “liability” used in this document means a probable and',
4965:'measurable future outflow of resources arising from past transactions or events.8acomprehensive definition of liabilities is being considered by the board',
4966:'in its project concerning liabilities in general. however, this document addresses only those selected liabilities that routinely recur in normal',
4967:'operations and that are due within a fiscal year. these liabilities are accounts payable, interest payable, and other current liabilities.',
4968:'the category of other current 8acomprehensive definition of “liabilities” is being considered by the board in its project concerning liabilities',
4969:'in general. [see sffass 5 and 12 for more on liabilities.] page 20 sffas 1 fasab handbook, version 20 06/21',
4970:'sffas 1 liabilities includes salary and entitlement benefit expenses that are accrued and would be paid within a fiscal year.',
4971:'general standards 97. the recommended standards apply to reporting by the federal government and its entities for both governmental assets',
4972:'and liabilities and intragovernmental assets and liabilities reported at the entity level. 98. an entity may have two categories of',
4973:'assets and liabilities intragovernmental and governmental assets and liabilities. the difference between intragovernmental and governmental assets and liabilities is explained',
4974:'below: 1 intragovernmental assets and liabilities. these assets and liabilities arise from intragovernmental transactions. for example, investments held by a',
4975:'federal entity in treasury securities are reported by the entity as an asset. however, the treasury securities also are liabilities',
4976:'of the department of the treasury. thus, the securities represent intragovernmental assets and liabilities. another example is fund balance withtreasury.an',
4977:'entity’s fund balance withtreasury of an entity will be reported as an asset by the entity. however, it is not',
4978:'an asset of the federal government; rather, it is a commitment of the u.s. government to provide funds to a',
4979:'federal entity. see discussion, which follows, on fund balance with treasury. 2 governmental assets and liabilities. these are assets and',
4980:'liabilities that arise from transactions of the federal government with nonfederal entities persons and organizations outside the u.s. government, either',
4981:'foreign or domestic. for example, income taxes to be collected from the public are reported on irs financial statements as',
4982:'receivables. these receivables are assets of the federal government. 99. the recommended standards require that intragovernmental assets and liabilities be',
4983:'reported separately from governmental assets and liabilities. 100. assets reported by an entity also are distinguished between entity and nonentity',
4984:'assets. 1 entity assets. entity assets are assets that are available to an entity for its use. entity assets include',
4985:'both intragovernmental and governmental assets. supplies inventory held by an entity for consumption in its operations is an entity asset',
4986:'as well as a governmental asset. areceivable of a federal entity from another federal entity is an entity asset if',
4987:'the receiving entity has authority to use the amount collected. page 21 sffas 1 fasab handbook, version 20 06/21 sffas',
4988:'1 2 nonentity assets. an entitymayhaveassetsunder itscustodyand managementthat the entity is not authorized to use. in thisstatement, these assets are',
4989:'called nonentity assets, as distinguished from entity assets that the entity is authorized to use in its operations. for example,',
4990:'customs duty receivables to be collected by the customs service is a nonentity asset that would be reported by the',
4991:'customs service. 101. the board recommends that both entity assets and nonentity assets under an entity’s custody or management be',
4992:'recognized in the entity’s financial statements. nonentity assets should be separately reported in an entity’s financial statements. 102. the following',
4993:'exhibit, using receivables as an example, illustrates the relationship between entity and nonentity assets on one hand and intragovernmental and',
4994:'governmental assets on the other hand. accounts receivable entity assets nonentity assets intragovernmental assets amounts receivable from a federal entity',
4995:'for goods or services delivered that will be available to the receiving entity to spend. amounts to be collected from',
4996:'a federal entity that will not be available to the receiving entity to spend. governmentalassets amountsreceivablefroma amounts such as taxesto',
4997:'be nonfederal entity for goods or collected from a nonfederal servicesthatwillbeavailableto entitythat will notbeavailable the receiving entity to spend. to',
4998:'the receiving entity to spend. specific standards cash 103. the board has retained from the exposure draft the requirement for',
4999:'separate reporting of restricted and unrestricted cash. however, after considering comments on the exposure draft, the board has modified the',
5000:'definition of restricted cash. 104. the exposure draft proposed that unrestricted cash include amounts in demand deposits. however, whether an',
5001:'amount of cash is restricted does not depend on where the cash is kept. for example, federal entities may hold',
5002:'cash in demand deposit accounts on behalf of treasury. since the entities have no authority to spend the cash, from',
5003:'the entities’ perspective, these amounts of cash are restricted. page 22 sffas 1 fasab handbook, version 20 06/21 sffas 1',
5004:'105. the recommended standard in this document redefines restricted cash as 1 amounts of cash that an entity holds on',
5005:'behalf of treasury or other entities and does not have authority to spend, and 2 amounts of cash that are',
5006:'legally restricted to specific purposes. fund balance with treasury 106. the recommended standard provides guidance on the composition of fund',
5007:'balance with treasury. events that cause an entity’s fund balance to increase include receiving appropriations, allocations, transfers, receipts that the',
5008:'entity is authorized to spend or to use to offset its expenditures and borrowing from treasury. an entity’s fund balance',
5009:'is reduced by amounts disbursed to pay liabilities and expenditures, amounts invested in securities, amounts of appropriations canceled or rescinded,',
5010:'and amounts transferred to other agencies or to the treasury. 107. with respect to fund balance with treasury, the board',
5011:'has considered the following issues: 1 is fund balance with treasury an asset? 108. the board believes that from the',
5012:'perspective of a federal entity such as a bureau, a program, or a fund, fund balance with treasury is an',
5013:'asset. in fact, it is the most important source against which an entity can make expenditures and incur liabilities. 109.',
5014:'however, the board recognizes that a fund balance with treasury is an intragovernmental item. it represents a entity’s authorized claim',
5015:'to the federal government’s resources on one hand, and the government’s commitment to supply resources to the entity on the',
5016:'other hand. the claims and commitments would not be reported when financial reports of individual entities are consolidated on a',
5017:'governmentwide level. thus, from the perspective of the federal government as a whole, fund balances with treasury are not assets',
5018:'of the federal government. 2 how does fund balance with treasury relate to budgetary resources? 110. afund balance is created',
5019:'by budget authority. an appropriation is the major form of budget authority that creates a fund balance with treasury for',
5020:'an entity. thus, the relationship between fund balance with treasury and budget authority cannot be ignored. 111. however, an entity’s',
5021:'fund balance with treasury does not necessarily equal its budgetary resources. the difference between these two concepts may be clarified',
5022:'by examining their definitions. afund balance represents the sum of amounts that is actually available in an entity’s accounts with',
5023:'treasury. budgetary resources on the other hand encompass all authorities for an entity to incur obligations. some of the authorities',
5024:'do not in themselves page 23 sffas 1 fasab handbook, version 20 06/21 sffas 1 provide funds to the entity.',
5025:'contract authority, for example, allows an entity to incur obligations under a contract. however, it does not, in itself, provide',
5026:'funds to the entity’s accounts with treasury.an appropriation is necessary for the entity to have funds to liquidate obligations incurred',
5027:'under contract authority. 112. authority to borrow does not in itself place funds into an entity’s accounts with treasury. in',
5028:'order to increase its fund balance with treasury, an entity must actually borrow under its borrowing authority. 113. for these',
5029:'reasons, the recommended standard states that fund balance withtreasury does not include contract authority and unused authority to borrow. 3',
5030:'should the fund balance exclude funds designated for special purposes? 114. some respondents to the exposure draft believe that the',
5031:'standard should identify funds held with treasury that are not available to the entity’s operations. for example, the department of',
5032:'energy collects fines levied under the emergency petroleumallocationact of 1973, deposits those funds in an escrow account with treasury, and',
5033:'ultimately disburses those funds to injured parties or for other uses as directed by court decisions. 115. it is not',
5034:'unusual that funds in certain accounts are held and restricted to specific purposes. amounts of trust funds, for example, are',
5035:'held for the specific purpose of making benefit payments toeligiblerecipients. therestrictiononfunds heldforthedepartmentofenergyto pay persons injured by oil pricing and allocation',
5036:'violations is another example. the board believes that the fund balance of a reporting entity should include funds held in',
5037:'all accounts of the entity regardless of whether they are designated for specific purposes. accounts receivable 116. respondents raised issues',
5038:'related to the recognition and measurement of losses due to uncollectible amounts. before addressing the board’s actions in relation to',
5039:'respondents’ comments, however, the terms recognition and measurement as used in this statement are explained below: 117. recognition means formally',
5040:'recording or incorporating an item into the records and financial statements as an asset, liability, expense, revenue, or similar element.',
5041:'for assets or liabilities, recognition encompasses subsequent changes to the amounts of assets and liabilities. page 24 sffas 1 fasab',
5042:'handbook, version 20 06/21 sffas 1 118. measurement istheprocess of expressingan asset orliabilityin monetaryunits.measuring an item requires selecting an appropriate',
5043:'measurement attribute such as historical cost, current market value, net realizable value, or present value of future cash flows. 119.',
5044:'in the proposed standard and the discussion of accounts receivable, the term recognition concerns the timing of recording an asset',
5045:'or the impairment of an asset in the financial records. the term measurement concerns the valuation basis and the dollar',
5046:'amount of the asset that should be reported. 120. detailed discussions of respondents’commentsand the board’sactions are provided in the following',
5047:'paragraphs. 121. timing of receivable recognition. the exposure draft states that a receivable should be recorded when events e.g., payment',
5048:'due dates or transactions occur that entitle an entity to accrue revenue or receive a reimbursement or fund transfer. some',
5049:'respondents questioned the use of payment due dates as a criterion for recognizing receivables. these respondentsstated a receivable should be',
5050:'recognized when an entityisowed an amount or earns a revenue, and that due dates are irrelevant. 122. some receivables result',
5051:'from exchange transactions. for example, receivables may result from goods and services provided to other entities. however, claims to cash',
5052:'or other assets also result from the federal government’s legal authority to levy taxes and impose duties, fees and fines.',
5053:'these receivables are not related to revenueearning functions or exchange transactions, but are based on the federal government’s authority to',
5054:'collect the payments anda party’sliabilityto pay cash or provide other assetsto coverthe claims. for the accrual of taxes, the tax',
5055:'due date represents the date that the government demands payment. the payment due date is a definitive criterion for accruing',
5056:'taxes. 123. the board, therefore, recommendsthat a receivable be recognized when a claim to cash or other assets is established',
5057:'based either on goods or services provided or the government’s legal authority to levy and collect. the board is not',
5058:'recommending a revenue recognition standard at this time. 124. loss recognition. in the exposure draft, it was proposed that a',
5059:'loss be recognized when it is more likely than not that a receivable has been impaired. the phrase more likely',
5060:'than not means a greater than 50 percent probability of occurrence. 125. several respondents questioned why the board used the',
5061:'more likely than not criterion for loss recognition instead of the probable criterion used in the private sector under generally',
5062:'accepted accounting principles gaap.9 126. the board may refer to the pronouncements and statements issued by other standard setting bodies',
5063:'in deliberating accounting standards for the federal government. however, 9 fasb statement of standards no. 5, accounting for contingencies. page',
5064:'25 sffas 1 fasab handbook, version 20 06/21 sffas 1 the board is not bound by these pronouncements and statements,',
5065:'especially when accounting standards promulgated for other sectors are not relevant to the federal government. 127. in the case of',
5066:'loss recognition on receivables, the board believes that there should be a definitive guideline for recognizing government credit losses. the',
5067:'word probable is subject to broad interpretation often being interpreted as meaning a virtual certainty of occurrence and could allow',
5068:'for belated recognition of losses. 128. the board proposed the more stringent criterion of more likely than not, which requires',
5069:'the recognition of losses when there is more than a 50 percent chance that some receivables willnot be collected. inrecommendingthe',
5070:'morelikelythan notcriterion, the board’sintent is to achieve unbiased, consistent, and reliable loss recognition in federal government accounting. 129. the more',
5071:'likely than not criterion can be applied to both individual accounts and groups of accounts. both significant individual accounts receivable',
5072:'e.g., unusually large refunds due fromcontractors,medicaidreimbursementsfromthirdparties,substantialtaxdelinquencies, or other large claims and groups of small accounts should be analyzed and losses',
5073:'recognized if it is more likely than not that some or all of the amounts owed will not be collected.',
5074:'130. when applying the loss recognition criterion, the board believes it is appropriate to recognize the nature of federal receivables.',
5075:'many of the federal government’s receivables, unlike trade accounts of private firms or loans made by banks, are not created',
5076:'through credit screening procedures. these receivables arise because of activities such as fines from regulatory violations, refunds from erroneous benefit',
5077:'payments, reimbursements, and overdue taxes and duties. in these circumstances, historical experience and economic factors indicate that the receivables frequently',
5078:'are not fully collectible. these receivables meet the loss recognition test because of their inherent risk. therefore, an appropriate amount',
5079:'of allowance for losses should be recognized at their inception. 131. loss measurement. because of the large volume of federal',
5080:'transactions, accounts receivable generally exist in large groups. some groups may consist of several hundred thousand accounts. in such cases,',
5081:'losses on uncollectible amounts should be assessed on a group basis using statistical sampling techniques. statistical sampling should be supplemented',
5082:'by historical trend experience, adjusted for current conditions. 132. on the other hand, some government receivables arise from transactions of',
5083:'significant amounts. these receivables should be individually analyzed to assess losses due to risks specifically attributable to the individual accounts.',
5084:'the assessment of impairment of individual accounts may not always provide a valid basis to estimate the impairment of the',
5085:'page 26 sffas 1 fasab handbook, version 20 06/21 sffas 1 entire group. often, losses may exist for the group',
5086:'that are not currently identifiable on an individual basis. the board believesthatthefederalgovernment’sreceivablesare generally subject to losses due to inherent risks.',
5087:'therefore, allowances for receivables should be viewed in the context of the overall risk of the receivables being assessed. 133.',
5088:'based on the above considerations, the recommended standard provides that, for reporting purposes, losses on accounts receivable should be determined',
5089:'by evaluating accounts on both a group and an individual basis. interest receivable 134. in the exposure draft, the proposed',
5090:'standard requires that interest be recognized on a receivable until the receivable is repaid or written off. at the same',
5091:'time, the proposed standard requires that an allowance for uncollectible interest be provided. the intent of the proposed standard is',
5092:'to establish the debtor’s liability for the accrued interest. 135. some respondents expressed concern that there isusually a lengthy period',
5093:'from the time a receivable is determined to be uncollectible until it is written off. it would be burdensome to',
5094:'recognize interest on the uncollectible receivable and, at the same time, offset the amount of interest recognized by an allowance',
5095:'for uncollectible interest. 136. the initial intent of this procedure was to maintain a correct amount of the debtor’s liability.',
5096:'this purpose can be achieved by recordkeeping procedures rather than financial reporting. therefore, for financial reporting, the board has concurred',
5097:'that a interest receivable should be recognized only on collectible accounts, and b interest receivable on uncollectible accounts should be',
5098:'recognized only when it is actually received. advances and prepayments 137. there were no comments on the substance of the',
5099:'recommended accounting standard for advances and prepayments since the standard does not contain significant changes from the current accounting practice',
5100:'within federal government agencies. some respondents requested that the board clarify that prepayments do not include progress payments made on',
5101:'longterm contracts. since progress payments are made based upon percentage of completion of a contract, the board concluded that progress',
5102:'payments are not advances or prepayments. 138. comments were also received questioning whether advances and prepayments should be included within',
5103:'the definition of financial resources as proposed in the exposure draft page 27 sffas 1 fasab handbook, version 20 06/21',
5104:'sffas 1 since advances and prepayments are not usually converted to cash or budget authority available for use by the',
5105:'entity. 139. the board recognizes that, as in the case of inventories held for consumption, advances and prepayments convert into',
5106:'goods and services, but do not convert into cash. however, since the term financial resources is not used in this',
5107:'statement, the issue is now moot. advancesandprepaymentsnormallybenefitcurrent operationsand, therefore,arenormally considered current assets. investments in treasury securities 140. the recommended standard',
5108:'applies to investments in treasury securities, including 1 nonmarketable par value treasury securities, 2 marketbased treasury securities held to maturity,',
5109:'and 3 marketable treasury securities held to maturity. 141. in the future, the board will address investments that are not',
5110:'covered by this standard. in the interim, federal entities should continue their current accounting practices for those investments not covered',
5111:'by this standard. 142. federal entities, particularly the social security and the retirement trust funds, invest available funds in excess',
5112:'of their current needs in special treasury securities issued in the government account series. the terms of the treasury securities',
5113:'are usually designed to meet the cash needs of government accounts. the vast majority of the investments are in nonmarketable',
5114:'treasurysecurities issued exclusively to federal agencies. most of them are par value securities, and some are marketbased securities whose prices',
5115:'and interest rates reflect market terms. thus, although the scope of the recommended standard is limited, it covers more than',
5116:'90 percent of federal entities’ investments. 143. afew federal entities are permitted to buy and sell marketable treasury securities on',
5117:'the open market. some federal entities which conduct business with the public or provide insurance to the private sector may',
5118:'acquire marketable treasury securities as a part of a rescue and takeover transaction. this standard applies to marketable treasury securities',
5119:'only to the extent that they are expected to be held to maturity. 144. in the exposure draft, the board',
5120:'proposed that investments in par value nonmarketable treasurysecuritiesbe reported at cost. the board also proposed that marketable securities and marketbased',
5121:'treasury securities be reported at market value as of the reporting date. 145. anumber of respondents, however, expressed concern with',
5122:'the recognition of increases and decreases in assets based on market value, and the recognition of associated gains or losses.',
5123:'these respondents believe these are unrealized gains and losses which do not page 28 sffas 1 fasab handbook, version 20',
5124:'06/21 sffas 1 represent actual increases or decreases in assets. some respondents also indicated that market value fluctuations generally do',
5125:'not affect an entity’s investments in securities intended to be held to their maturity. 146. in this statement, the board',
5126:'continues to use the cost based valuation for nonmarketable par valuetreasury securities. the cost basis is appropriate for thistype of',
5127:'security because the invested amounts will be fully recovered at redemption. 147. the board also recommends the cost or amortized',
5128:'cost basis for the valuation of marketbased treasury securities and marketable treasury securities that are to be held to maturity.',
5129:'the board believes that the cost basis is appropriate because the invested amounts can be fully recovered when the treasury',
5130:'securities mature. during the time periods when the securities are outstanding, the market prices of the securities may fluctuate due',
5131:'to interest rate changes or other temporary causes. however, so long as the securitiesare not to be sold to the',
5132:'market, the investing entitywouldnot be affected by such market price fluctuations. for this reason, the board decided to recommend the',
5133:'cost based approach rather than market value approach for marketabletreasurysecuritiesexpectedto be held to maturity. 148. the board considered the valuation',
5134:'issues related to securities not covered by this standard. theboard hasconcluded that theuseof a fairvalue approach pertainsto a broad conceptual',
5135:'issue that needs to be addressed in its conceptual framework. until the board reaches decisions on the conceptual framework, it',
5136:'is premature to recommend a valuation basis for securities beyond those covered by this standard. 149. the board believes that',
5137:'the criteria for classifying an investment as expected to be held to maturity should be based on the intent and',
5138:'ability of the investing entity to hold the security to its maturity. intent and ability differ from a mere absence',
5139:'of an intent to sell the security. an evaluation of whether an entity has the intent and ability to hold',
5140:'its investments should be based on the entity’s current and projected financial condition and its recent pattern in buying, selling,',
5141:'and managing treasury securities. asecurity should not be classified as expected to be held to maturity if for cash needs',
5142:'or other investment management reasons the investing entity is not able to hold the security to its maturity. 150. at',
5143:'each financial reporting date, the appropriateness of this classification should be reassessed. in rare instances, an entity’s originally stated intent',
5144:'or ability to hold a security to maturity may change due to significant unforeseen changes in the entity’s cash needs',
5145:'or in other circumstances. when this occurs, securities initially classified as expected to be held to maturity should be reclassified',
5146:'to securities available for sale or early redemption. page 29 sffas 1 fasab handbook, version 20 06/21 sffas 1 accounts',
5147:'payable 151. accounts payable are set up to record an entity’s liability for goods and services received or work progress',
5148:'made by a contractor for which payment has not been made. 152. some respondents questioned the timing of recognizing a',
5149:'liability in accounts payable. a federal entity, under budgetary accounting, records an obligation when the entity places a purchase order',
5150:'or signs a contract. an obligation, once incurred, reduces an entity’s resources available for obligation. budgetary accounting entries are required',
5151:'to record the amounts obligated and to reduce the available budget authority. for financial reporting purposes,liabilitiesarerecognizedwhengoodsandservicesarereceivedorarerecognized based on an estimate',
5152:'of work completed under a contract or agreement. 153. some federal entities believe it is appropriate to recognize a liability',
5153:'in accounts payable when a purchase order is placed. the theory of this practice is that the purchase order represents',
5154:'a use of the entity’s budgetary resources and that recognizing the liability would correctly reduce the entity’s available budgetary resources.',
5155:'154. proponents for this practice also argue that, in many cases, goods produced under government contracts bear unique specifications for',
5156:'government needs and, as a result, cannot be sold to other customers. thus, they argue that it is virtually certain',
5157:'that the government has incurred a liability toward the contractor. 155. the board recognizes that there is a need to',
5158:'reconcile budget execution results and financial effects. in budgetaryaccounting, when a purchase order is placed, an obligation is recorded to',
5159:'ensure budgetary control. however, recognition of the claim from a financial accounting standpoint does not occur until goods are delivered,',
5160:'work progress is actually made by a contractor, or services are performed since these eventsgenerallytrigger a cash outlay that liquidates',
5161:'the obligation. the board does not believe that recognizing a liability prior to a actual receipt or constructive receipt of',
5162:'goods or services should be adopted as a financial accounting standard. it also does not believe that it is appropriate',
5163:'to erase the distinction between recording obligations for budget purposes and recognizing a liability for financial accounting purposes. 156. somerespondentsquestionwhether',
5164:'aliabilityshould berecognizedformultiyearcontracts that are to be financed through appropriations over a number of years. as has been discussed earlier, when',
5165:'a contract is entered, an obligation is recognized in budgetary accounting. however, until goods or services are received or work',
5166:'progress is made, the board doesnot believe that an obligation should be recognized asa liability. when goodsor servicesare received or',
5167:'workprogressis made under either a short or longterm contract, a liability for unpaid amounts should be recognized. page 30 sffas',
5168:'1 fasab handbook, version 20 06/21 sffas 1 interest payable 157. there were no substantial comments on the recommended accounting',
5169:'standard for interest payable. the recommended standard does not differ from the current accounting practice within federal government agencies. other',
5170:'current liabilities 158. the recommended standard covers the current liabilities that are not specifically defined in other standards. current liabilities',
5171:'specifically defined in this statement are accounts payable and interest payable. accounts payable and interest payable represent liabilities arising from',
5172:'discrete transactions. the board also plans to issue statements to define other specificliabilitiessuchasliabilitiesincurred under aloan guarantee contract andborrowings from other',
5173:'entities. 159. other current liabilities generally are related to ongoing and continuous expenses, which are typically recognized throughout each accounting',
5174:'period rather than on an individual transaction basis. atypical example is the liability for employees salary that is accrued at',
5175:'the end of a fiscal year but is not paid. 160. the exposure draft indicated that a liability was considered',
5176:'funded if the related expense was incurred under budget authority. some respondents suggested that the term budget authority be changed',
5177:'to budgetary resources . they argued that budgetary resources encompass not only new budget authority, but also other resources available',
5178:'to incur liabilities for specified purposes in a given year. 161. the board agrees that a liability or a portion',
5179:'of the liability should be considered funded from the reporting entity’s perspective if it is covered by available budgetary resources.',
5180:'however, the recommendedstandard takes the position thata liability should be recognized when it is incurred, regardless of whether it is',
5181:'covered by available budgetary resources. the recommended standard also requires that disclosure should be made for liabilities that are not',
5182:'covered by available budgetary resources. page 31 sffas 1 fasab handbook, version 20 06/21 sffas 1 appendixb:illustrationoftheinterestmethodforinvestmentdiscountand premium thisappendix provides',
5183:'an illustration of the interest method for amortizing a discount or premium of an investment in a marketable or a',
5184:'marketbased treasury security, such as a treasury bond. the interest method is required in the recommended standard for investments. before',
5185:'explaining the interest method itself, the concept of discount and premium will be explained. bond discountand premium the price of',
5186:'a bond equals the present value of the bond’s net future cash flows, including principal and interest payments, discounted to',
5187:'the time of its issuance. the discount rate is referred to as the effective interest rate. since the effective interest',
5188:'rate usually equals the market interest rate, it may differ from the stated interest rate the coupon rate of the',
5189:'bond. the difference between the effective interest rate of a bond and its stated interest rate causes the bond price',
5190:'to be different from its face amount. atreasury bond may be purchased at a price higher or lower than the',
5191:'bond’s face amount par amount. the difference between the purchase price and the face amount is a discount if the',
5192:'price islower than the face amount; or a premium if the price is higherthan the face amount. the investorinitiallyrecordsthe bond',
5193:'at itsface amount and records the discount or the premiumin a valuation allowance account. thus, the carrying amount of the',
5194:'bond equals its face amount minusor plusthediscount orthe premium. the discountorthe premiumisamortized over thelife of the bond, so that the',
5195:'bond would be redeemed at its face amount at its maturity. the interest method under the interest method of amortization,10',
5196:'an amount of interest equal to the carrying amount of the investment times the effective interest rate, is calculated for',
5197:'each accounting period. this calculated interest isthe effective interest of the investment referred to aseffective yield in some literature. the',
5198:'amountofeffective interest iscomparedwiththestatedinterestoftheinvestment. the stated interest is the interest that is payable to the investor according to the stated interest',
5199:'10 the interest method of amortization is described in several fasb statements andapb opinions. for example, see paragraph 18, fasb',
5200:'statement no. 91, accounting for nonrefundable fees and costs associated with originating or acquiring loans and initial direct costs of',
5201:'leases, and paragraph 16 ofapb opinion no. 12, omnibus opinion. page 32 sffas 1 fasab handbook, version 20 06/21 sffas',
5202:'1 rate.the difference between the effectiveinterest andthe stated interest istheamount bywhich the discount or the premium should be amortized i.e.,',
5203:'reduced for the accounting period. examples in the first example,11 which shows the amortization of a discount, treasury bonds with',
5204:'the face amount of $100,000 were purchased by a federal entity on the bonds’ issuance date, january 1, 1992. the',
5205:'bonds’stated interest rateis7 percent, andinterestispayable attheend of eachyear. the bonds will mature in 5 years, on december 31, 1996. the',
5206:'cost of the investment is $96,007, with a discount of $3,993, which reflects an effective interest rate of 8 percent.',
5207:'in table 1 below, the annual discount amortization is in column 4, which equals column 3 minus column 2. table',
5208:'1: discountamortization date stated interest 7% effective interest 8% discount amortization unamortized balance bonds carryingamount 1/1/92 12/31/92 12/31/93 12/31/94 12/31/95',
5209:'12/31/96 7,000 7,000 7,000 7,000 7,000 $7,681 7,735 7,794 7,857 7,926 $681 735 794 857 926 $3,993 3,312 2,577 1,783',
5210:'926 0 $ 96,007 96,688 97,423 98,217 99,074 100,000 in the second example, which is the amortization of a premium,',
5211:'treasury bonds with the face amount of $100,000 were purchased by a federal entity on the bonds’ issuance date january',
5212:'1, 1992. the bonds’stated interest rateis7 percent, andinterestispayable attheend of eachyear. the bonds will mature in 5 years, on december',
5213:'31, 1996. the cost of the investment is $104,212, with a premium of $4,212, which reflects an effective interest rate',
5214:'of 6 percent. in table 2 below, the annual premium amortization is in column 4, which equals column 2 minus',
5215:'column 3. 11the examples are adapted from glenna. welsch and charlest. zlatkovich, intermediateaccounting, 8th ed. boston: richard d. irwin, inc.,',
5216:'1989, p. 656. page 33 sffas 1 fasab handbook, version 20 06/21 sffas 1 table 2: premiumamortization bonds stated effective',
5217:'premium unamortized carrying date interest 7% interest 6% amortization balance amount 1/1/92 $4,212 $104,212 12/31/92 7,000 $6,253 $747 3,465 103,465',
5218:'12/31/93 7,000 6,208 792 2,673 102,673 12/31/94 7,000 6,160 840 1,833 101,833 12/31/95 7,000 6,110 890 943 100,943 12/31/96 7,000',
5219:'6,057 943 0 100,000 page 34 sffas 1 fasab handbook, version 20 06/21 sffas 1 appendix c: glossary see consolidated',
5220:'glossary in “appendix e: consolidated glossary”. page 35 sffas 1 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards2: accounting for direct loans',
5221:'and loan guarantees status issued august 23, 1993 effective date for fiscal years beginning after september 30, 1993. affects none.',
5222:'affected by sffas 18 sffas 19 sffas 32 amends par. 56 related guidance tr 3 revised,auditing estimates for direct loan',
5223:'and loan guarantee subsidies under the federal credit reformact – amendments to technical release no. 3 preparing and auditing direct',
5224:'loan and loan guarantee subsidies under the federal credit reform act tr 6, preparing estimates for direct loan and loan',
5225:'guarantee subsidies under the federal credit reformact – amendments to technical release no. 3 preparing and auditing direct loan and',
5226:'loan guarantee subsidies under the federal credit reform act summary the statement provides accounting standards for federal direct loans and',
5227:'loan guarantees. the standardsrequirethatdirect loansobligated andloanguaranteescommittedafterseptember30, 1991, be accounted for on a present value basis. the use of the present',
5228:'value accounting method is consistent with the intent of the federal credit reformact of 1990. the standards contain the following',
5229:'essential requirements: direct loans disbursed and outstanding are recognized as assets at the present value of their estimated net cash',
5230:'inflows. the difference between the outstanding principal of the loans and the present value of their net cash inflows is',
5231:'recognized as a subsidy cost allowance. for guaranteed loans outstanding, the present value of estimated net cash outflows of the',
5232:'loan guarantees is recognized as a liability. disclosure is made of the face value of guaranteed loans outstanding and the',
5233:'amount guaranteed. for direct or guaranteed loans disbursed during a fiscal year, a subsidy expense is recognized. the amount of',
5234:'the subsidyexpense equalsthe present value of estimated cash outflows over the life of the loans minus the present value of',
5235:'estimated cash inflows. the subsidy cost allowance for direct loans and the liability for loan guarantees are reestimated each year,',
5236:'taking into account all factors that may have affected the estimated cash flows. any adjustment resulting from the reestimates is',
5237:'recognized as a subsidy expense or a reduction in subsidy expense. page 1 sffas 2 fasab handbook, version 20 06/21',
5238:'sffas 2 when direct loans or loan guarantees are modified, the cost of modification is recognized at an amountequalto thedecrease',
5239:'inthe presentvalue of the direct loansor theincreasein the present value of the loan guarantee liabilities measured at the time of',
5240:'modification. upon foreclosure of direct or guaranteed loans, the acquired property is recognized as an asset at the present value',
5241:'of its estimated future net cash inflows. the standards permit but do not require restating precredit reform direct loans and',
5242:'loan guarantees at present value. page 2 sffas 2 fasab handbook, version 20 06/21 sffas 2 table of contents page',
5243:'summary 1 executive summary 4 introduction 5 theaccountingstandards 9 appendixa:basis oftheboard’s conclusions 18 appendix b: technical explanations and illustrations 33',
5244:'page 3 sffas 2 fasab handbook, version 20 06/21 sffas 2 executive summary 1. the statement provides accounting standards for',
5245:'federal direct loans and loan guarantees. the standards require that direct loans obligated and loan guarantees committed after september 30,',
5246:'1991, be accounted for on a present value basis. the use of the present value accounting method is consistent with',
5247:'the intent of the federal credit reformact of 1990. 2. the standards contain the following essential requirements: direct loans disbursed',
5248:'and outstanding are recognized as assets at the present value of their estimated net cash inflows. the difference between the',
5249:'outstanding principal of the loans and the present value of their net cash inflows is recognized as a subsidy cost',
5250:'allowance. for guaranteed loans outstanding, the present value of estimated net cash outflows of the loan guarantees is recognized as',
5251:'a liability. disclosure is made of the face value of guaranteed loans outstanding and the amount guaranteed. for direct or',
5252:'guaranteed loans disbursed during a fiscal year, a subsidy expense is recognized. the amount of the subsidy expense equals the',
5253:'present value of estimated cash outflows over the life of the loans minus the present value of estimated cash inflows.',
5254:'the subsidy cost allowance for direct loans and the liability for loan guarantees are reestimated each year, taking into account',
5255:'all factors that may have affected the estimatedcash flows.anyadjustment resultingfromthereestimatesisrecognizedasa subsidy expense or a reduction in subsidy expense. when direct',
5256:'loans or loan guarantees are modified, the cost of modifications is recognized at an amount equal to the decrease in',
5257:'the present value of the direct loans or the increase in the present value of the loan guarantee liabilities measured',
5258:'at the time of modification. upon foreclosure of direct or guaranteed loans, the acquired property is recognized as an asset',
5259:'at the present value of its estimated future net cash inflows. 3. the standards permit but do not require restating',
5260:'precredit reform direct loans and loan guarantees at present value. page 4 sffas 2 fasab handbook, version 20 06/21 sffas',
5261:'2 introduction background 4. the federal government, in discharging its responsibility to promote the nation’s general welfare, makes direct loans1',
5262:'and guarantees loans to segments of the population not adequately served by nonfederal financial institutions. examples of federal credit programs',
5263:'include farmers’ home loans, small businessloans, veterans’mortgage loans, and student loans. for those unable to afford credit at the market',
5264:'rate, federal credit programs provide subsidies in the form of direct loans offered at an interest rate lower than the',
5265:'market rate. for those to whom nonfederal financial institutions would be reluctant to grant credit because of the high risk',
5266:'involved, federal credit programs guarantee the payment of these nonfederal loans, absorbing the costs of defaults. 5. because federal credit',
5267:'programs provide interest subsidies and sustain losses caused by defaults, the costs of these programs are significant. it is crucial,',
5268:'therefore, that the actual and expected costs of federal credit programs be fully recognized in both budget and financial reporting.',
5269:'the federal credit reformact of 1990 6. theprimaryintentofthe federalcreditreformact of1990is to ensurethatthesubsidy costs of direct loans and loan guarantees are',
5270:'taken into account in making budgetary decisions. to achieve this general result, theact has the following specific purposes: a ensure',
5271:'a timely and accurate measure and presentation in the president’s budget of the costs of direct loan and loan guarantee',
5272:'programs, b place the cost of credit programs on a budgetary basis equivalent to other federal spending, c encourage the',
5273:'delivery of benefits in the form most appropriate to the needs of beneficiaries, and d improve the allocation of resources',
5274:'among credit programs and between credit and other spending programs. 7. themajor provisionsoftheact, whichiseffective for fiscalyear1992andthereafter,areto: 1terms included inappendix c:',
5275:'glossary are printed in capitalletters when they appear for the first time. note: see “appendix e: consolidated glossary”. page 5',
5276:'sffas 2 fasab handbook, version 20 06/21 sffas 2 requirethat,foreachfiscalyearinwhichthedirectloansortheloanguaranteesareto beobligated, committed,ordisbursed, thepresident’sbudgetreflect thelongtermcost to the government of the subsidies',
5277:'associated with the direct loans and loan guarantees. the subsidycost estimate for the president’s budget is to be based on',
5278:'the present value of specified cash flows discounted at the average rate of marketable treasury securities of similar maturity. require',
5279:'that, before direct loans are obligated or loan guarantees are committed, annualappropriationsgenerallybeenactedtocoverthesecosts. however, mandatory programs have permanent indefinite appropriations. provideforborrowingauthorityfromtreasurytocoverthenonsubsidyportionofdirect',
5280:'loans. establish budgetary and financing control for each credit program through the use of three types of accounts: the programaccount',
5281:'budgetary, the financing account nonbudgetary, and the liquidatingaccount budgetary. the need foraccounting information 8. accounting information on credit programs provides',
5282:'the basis for evaluating program performance by comparing actual accounting data with estimated budget data. budget analystsand decisionmakers can use',
5283:'accounting information to compare actual cash flows with projected cash flows and actual costs of direct loans and loan guarantees',
5284:'with their estimated costs. 9. forcreditprogrammanagers,informationonestimateddefaultlossesandrelatedliabilities, when recognized in a timely manner, can be an important tool in evaluating credit',
5285:'program performance. the information can help determine a credit program’s overall financial condition and identify its financing needs. 10. furthermore,',
5286:'cost and performance information on loans and loan guarantees maintained by cohort and risk category can highlight those groups that',
5287:'are not expected to meet budget estimates because of increased risk. based on such information, program managers can take timely',
5288:'action to reduce costs, control risks where possible, and improve credit program performance. present valueaccounting 11. thefederalcreditreformactof1990requires that effectiveoctober 1,',
5289:'1991,thecostof direct loans and loan guarantees be estimated at present value for the budget. the objectives of using the present',
5290:'value measurement in federal credit reform are to measure page 6 sffas 2 fasab handbook, version 20 06/21 sffas 2',
5291:'recognize, and control subsidy costs of direct loans and loan guarantees.2 12. for direct loans, the effect of using the',
5292:'present value measurement is to estimate the extent of thedisbursed amountsthat would be recovered, andtheextent of the disbursed amounts that',
5293:'is a subsidy cost. the portion that can be recovered is the present value of projected net cash inflows discounted',
5294:'at the treasury rate of similar maturity. this portion is not considered a cost to the government because it is',
5295:'expected to be returned to the government in future amounts. the remaining portion of the cash disbursement represents a cost',
5296:'to the government, resulting either from lending at a rate lower than the treasury interest rate, or from default losses,',
5297:'or both. 13. under credit reform, the subsidy portion of direct loans is financed by appropriations, and the unsubsidized portion',
5298:'of the loans, which equals the present value of the government collections from the borrowers, is financed with funds borrowed',
5299:'from treasury. the subsidy cost of loans must be reestimated and updated annually. 14. the present value measurement basis is',
5300:'also applied to loan guarantees. before credit reform, as in the case of direct loans, loan guarantees were measured for',
5301:'the budget on a cash basis. thus, loan guarantees could appear to be virtually cost free, since cash payments by',
5302:'the government were not required unless and until the guaranteed loans defaulted at a future date. under credit reform, the',
5303:'future cash outflows required by loan guarantee commitments must be projected and discounted at an appropriate treasury interest rate. the',
5304:'present value of the cash outflows is the cost of the loan guarantees. before loan guarantees are committed, annual appropriations',
5305:'generally must be enacted to cover the cost of the loan guarantees. financial reporting 15. the board believes that present',
5306:'value measurement should be adopted for financial accounting and reporting on direct loans and loan guarantees that have been or',
5307:'will be obligated or committed after september 30, 1991. since theact requires that the costs of these post1991 direct loansand',
5308:'loan guarantees be estimated at present valueforbudget purposes, financialreportsonactualresultsmeasuredat presentvaluecan be used as feedback to compare with budget estimates. such',
5309:'comparisons can be used as a basis to improve future estimates and reestimates. 2congressional budget office, “credit reform: comparable budget',
5310:'costs for cash and credit” dec. 1989, p.33. page 7 sffas 2 fasab handbook, version 20 06/21 sffas 2 16.',
5311:'the board recognizes that effective use of the present value accounting method depends on accurate projections of future cash flows',
5312:'over the life of direct or guaranteed loans. the efforts to make accurate projections should begin with establishing and using',
5313:'reliable recordsof historical credit performance data, andshould takeintoconsideration current and forecasted economic conditions. 17. the board recognizes the value of',
5314:'having financial accounting support the budget. it endorses the logic underlying credit reform, and it recommends that accounting standards for',
5315:'credit be consistent with budgeting undercredit reform. the board isaware that asmore experience is gained, some modifications may be made',
5316:'in budgetary requirements. it is the intention of the board that so long as the modifications are made on a',
5317:'credit reform basis and do not materially affect the basic recognition and measurement principles embodied in the accounting standards, accounting',
5318:'practices for direct loans and loan guarantees should change as needed in order to be consistent with the budget. 18.',
5319:'the board considered the expected costs and efforts that would be required in restating pre1992 direct loansand loan guarantees at',
5320:'present value. based on this consideration, the standards permit but do not require restating those loans and loan guarantees on',
5321:'a present value basis. 19. the standards were proposed in an exposure draft issued in september 1992. comments werereceivedfrom36organizationsandindividuals. oralcommentswerealsopresentedat',
5322:'a meeting by representatives of federal agencies with major credit programs. the board considered all the comments received and incorporated',
5323:'changes, as appropriate. issues raised by those who responded to the exposure draft and the board’s conclusions are presented inappendixa,',
5324:'“basis of the board’s conclusions.” effective date 20. the fasab recommends that the accounting standards recommended in this statement become',
5325:'effective for fiscal years beginning after september 30, 1993. an earlier implementation is encouraged. page 8 sffas 2 fasab handbook,',
5326:'version 20 06/21 sffas 2 theaccounting standards explanation 21. these standards concern the recognition and measurement of direct loans, the',
5327:'liability associated with loan guarantees, and the cost of direct loans and loan guarantees. the standards apply to direct loansand',
5328:'loan guarantees on a group basis, such as a cohort or a risk category of loans and loan guarantees. present',
5329:'value accounting does not apply to direct loans or loan guarantees on an individual basis, except for a direct loan',
5330:'or loan guarantee that constitutes a cohort or a risk category. accounting standards post1991 direct loans 22. direct loans disbursed',
5331:'and outstanding are recognized as assets at the present value of their estimated net cash inflows. the difference between the',
5332:'outstanding principal of the loans and the present value of their net cash inflows is recognized as a subsidy cost',
5333:'allowance. post1991 loan guarantees 23. for guaranteed loans outstanding, the present value of estimated net cash outflows of the loan',
5334:'guarantees is recognized as a liability. disclosure is made of the face value of guaranteed loans outstanding and the amount',
5335:'guaranteed. subsidy costs of post1991 direct loans and loan guarantees 24. for direct or guaranteed loans disbursed during a fiscal',
5336:'year, a subsidy expense is recognized. the amount of the subsidyexpense equalsthe present value of estimated cash outflows over the',
5337:'life of the loans minus the present value of estimated cash inflows, discounted at the interest rate of marketable treasury',
5338:'securities with similar maturity to the cash flows, applicable to the period during which the loans are disbursed hereinafter referred',
5339:'to as the applicable treasury interest rate. 25. for the fiscal year during which new direct or guaranteed loans are',
5340:'disbursed, the components of the subsidy expense of those new direct loans and loan guarantees are page 9 sffas 2',
5341:'fasab handbook, version 20 06/21 sffas 2 recognized separately among interest subsidy costs, default costs, fees and other collections, and',
5342:'other subsidy costs. 26. the interest subsidy cost of direct loans is the excess of the amount of the loans',
5343:'disbursed overthe present value of the interest and principal paymentsrequired by the loan contracts, discounted at the applicable treasury rate.',
5344:'the interest subsidy cost of loan guarantees is the present value of estimated interest supplement payments. 27. the default cost',
5345:'of direct loans results from projected deviations by the borrowers from the paymentschedulesforprincipal,interest,andfeepaymentsintheloancontracts. however, the measurement of default costs does',
5346:'not include prepayments. the default cost is measured at the present value of projected payment deviations due to defaults minus',
5347:'projected net recoveries. projected net recoveries include the amounts that would be collected from borrowers at a later date or',
5348:'the proceeds from the sales of acquired assets minus the costs of foreclosing, managing, and selling the assets. 27a. the',
5349:'default cost of loan guarantees results from paying lenders’ claims upon default of the guaranteed loans. the default cost of',
5350:'loan guarantees is measured at the present value of projected payments to lenders required by the guarantee, plus uncollected fees,',
5351:'minus interest supplements not paid as the result of the default, and minus projected net recoveries as defined in paragraph',
5352:'27. 28. the present value of fees and other collections is recognized as a deduction from subsidy costs. 29. other',
5353:'subsidy costs consist of cash flows that are not included in calculating the interest or default subsidy costs, or in',
5354:'fees and other collections. they include the effect of prepayments within contract terms. subsidy amortization and reestimation 30. thesubsidy costallowancefor',
5355:'directloansis amortizedbytheinterestmethod using the interest rate that was used to calculate the present value of the direct loans when the',
5356:'direct loans were disbursed, after adjusting for the interest rate reestimate. the amortized amount is recognized as an increase or',
5357:'decrease in interest income. 31. interest is accrued and compounded on the liability for loan guarantees at the interest rate',
5358:'that was used to calculate the present value of the loan guarantee liabilities when the guaranteed loans were disbursed, after',
5359:'adjusting for the interest reestimate. the accrued interest is recognized as interest expense. page 10 sffas 2 fasab handbook, version',
5360:'20 06/21 sffas 2 32. credit programs should reestimate the subsidy cost allowance for outstanding direct loans and the liability',
5361:'for outstanding loan guarantees as required in this standard. there are two kinds of reestimates: a interest rate reestimates, and',
5362:'b technical/default reestimates.2a entities should measure and disclose each program’s reestimates in these two components separately. an increase or decrease',
5363:'in the subsidy cost allowance or loan guarantee liability resulting from the reestimates is recognized as an increase or decrease',
5364:'in subsidy expense for the current reporting period. aan interest ratereestimate isa reestimate due to a change in interest ratesfrom',
5365:'the interest ratesthat wereassumed in budget preparation and used in calculating the subsidyexpense to the interest rates that are prevailing',
5366:'during the time periods in which the direct or guaranteed loans are disbursed. credit programs may need to make an',
5367:'interest rate reestimate for cohorts from which direct or guaranteed loans are disbursed during the reporting year. if the assumed',
5368:'interest rates that were used in calculating the subsidy expense for those cohorts differ from the interest ratesthat are prevailing',
5369:'at the time of loan disbursement, an interest rate reestimate for those cohorts should be made as of the date',
5370:'of the financial statements. batechnical/default reestimate is a reestimate due to changes in projected cash flows of outstanding direct loans',
5371:'and loan guaranteesafterreevaluating the underlying assumptions and other factors that affect cash flow projections as of the financial statement date,',
5372:'except for any effect of the interest rate reestimates explained in a above. in making technical/default reestimates, reporting entities should',
5373:'take into consideration all factors that may have affected various components of the projected cash flows, including defaults, delinquencies, recoveries,',
5374:'and prepayments. the technical/default reestimate should be made each year as of the date of the financial statements. criteria for',
5375:'default cost estimates 33. the criteria for default cost estimates provided in this and the following paragraphs apply to both',
5376:'initial estimates and subsequent reestimates. default costs are estimated and reestimated for each program on the basis of separate cohorts',
5377:'and risk categories. the reestimates take into account the differences in past cash flows between the projected and realized amounts',
5378:'and changes in other factors that can be used to predict the future cash flows of each risk category. 34.',
5379:'in estimating default costs, the following risk factors are considered: 1 loan performance experience; 2 current and forecasted international, national,',
5380:'or regional economic 2a the term “technical/default reestimate” used in this statement is identical in meaning to the term technical',
5381:'reestimate used in omb circulara11, as revised in july 1999. page 11 sffas 2 fasab handbook, version 20 06/21 sffas',
5382:'2 conditions that may affect the performance of the loans; 3 financial and other relevant characteristics of borrowers; 4 the',
5383:'value of collateral to loan balance; 5 changes in recoverable value of collateral; and 6 newly developed events that would',
5384:'affect the loans’ performance. improvements in methods to reestimate defaults are also considered. 35. each credit program should use a',
5385:'systematic methodology, such as an econometric model, to project default costs of each risk category. if individual accounts with significant',
5386:'amounts carry a high weight in risk exposure, an analysis of the individual accounts is warranted in making the default',
5387:'cost estimate for that category. 36. actual historical experience of the performance of a risk category is a primary factor',
5388:'upon which an estimation of default cost is based. to document actual experience, a data base should be maintained to',
5389:'provide historical information on actual payments, prepayments, late payments, defaults, recoveries, and amounts written off. revenues and expenses 37. interest',
5390:'accrued on direct loans, including amortized interest, is recognized as interest income. interest accrued on the liability of loan guarantees',
5391:'is recognized as interest expense. interest due from treasury on uninvested funds is recognized as interest income. interest accrued on',
5392:'debt to treasury is recognized as interest expense. 38. costs for administering credit activities, such as salaries, legal fees, and',
5393:'office costs, that are incurred for credit policy evaluation, loan and loan guarantee origination, closing, servicing, monitoring, maintaining accounting and',
5394:'computer systems, and other credit administrative purposes, are recognized as administrative expense. administrative expenses are not included in calculating the',
5395:'subsidy costs of direct loans and loan guarantees. pre1992 direct loans and loan guarantees 39. the losses and liabilities of',
5396:'direct loans obligated and loan guarantees committed before october 1, 1992, are recognized when it is more likely than not',
5397:'that the direct loans will not be totally collected or that the loan guarantees will require a future cash outflow',
5398:'to pay default claims. the allowance of the uncollectible amounts and the liability of loan guarantees should be reestimated each',
5399:'year as of the date of the financial statements. in estimating losses and liabilities, the risk factors discussed in the',
5400:'previous section should be considered. disclosure is made of the face value of guaranteed loans outstanding and the amount guaranteed.',
5401:'40. restatement of pre1992 direct loans and loan guarantees on a present value basis is permitted but not required. page',
5402:'12 sffas 2 fasab handbook, version 20 06/21 sffas 2 modification of direct loans and loan guarantees 41. the term',
5403:'“modification” means a federal government action, including new legislation or administrative action, that directly or indirectly alters the estimated subsidy',
5404:'cost and the present value of outstanding direct loans, or the liability of loan guarantees. 42. direct modifications are actions',
5405:'that change the subsidy cost by altering the terms of existing contracts or by selling loan assets. existing contracts may',
5406:'be altered through such means asforbearance, forgiveness, reductions in interest rates, extensions of maturity, and prepayments without penalty. such actions',
5407:'are modifications unless they are considered reestimates, or workouts as defined below, or are permitted under the terms of existing',
5408:'contracts. 43. indirect modifications are actions that change the subsidy cost by legislation that alters the way in which an',
5409:'outstanding portfolio of direct loans or loan guarantees is administered. examples include a new method of debt collection prescribed by',
5410:'law or a statutory restriction on debt collection. 44. the term “modification” does not include subsidy cost reestimates, the routine',
5411:'administrative workouts of troubled loans, and actions that are permitted within the existing contract terms. workouts are actions taken to',
5412:'maximize repayments of existing direct loans or minimize claims under existing loan guarantees. the expected effects of workouts on cash',
5413:'flows are included in the original estimate of subsidy costs and subsequent reestimates. a. modification of direct loans 45. with',
5414:'respect to a direct or indirect modification of pre1992 or post1991 direct loans, the cost of modification is the excess',
5415:'of the premodification value3 of the loans over theirpostmodificationvalue4theamountofthemodificationcostisrecognizedasa modification expense when the loans are modified. 3the term “premodification value”',
5416:'is the present value of the net cash inflows of direct loans estimated at the time of modification under premodification',
5417:'terms and discounted at the interest rate applicable to the time when the modification occurs on marketable treasury securities that',
5418:'have a comparable maturity to the remaining cash flows of the direct loans under premodification terms simply stated, the premodification',
5419:'terms at the current rate. 4the term “postmodification value” is the present value of the net cash inflows of direct',
5420:'loans estimated at the time of modification under postmodification terms and discounted at the interest rate applicable to the time',
5421:'when the modification occurs on marketable treasury securities that have a comparable maturity to the remaining cash flows of the',
5422:'direct loans under postmodification terms simply stated, the postmodification terms at the current rate. page 13 sffas 2 fasab handbook,',
5423:'version 20 06/21 sffas 2 46. when post1991 direct loans are modified, their existing book value is changed to an',
5424:'amount equal to the present value of the loans’ net cash inflows projected under the modified terms from the time',
5425:'of modification to the loans’ maturity and discounted at the original discount rate the rate that was originally used to',
5426:'calculate the present value of the direct loans, when the direct loans were disbursed, after adjusting for the interest rate',
5427:'reestimate. 47. when pre1992 direct loans are directly modified, they are transferred to a financing account and their book value',
5428:'is changed to an amount equal to their postmodification value. any subsequent modification is treated as a modification of post1991',
5429:'loans. when pre1992 direct loans are indirectly modified, they are kept in a liquidating account. their bad debt allowance is',
5430:'reassessed and adjusted to reflect amounts that would not be collected due to the modification. 48. the change in book',
5431:'value of both pre1992 and post1991 direct loans resulting from a direct or indirect modification and the cost of modification',
5432:'will normally differ, due to the use of different discount rates or the use of different measurement methods. any difference',
5433:'between the change in book value and the cost of modification is recognized as a gain or loss. for post1991',
5434:'direct loans, the modificationadjustmenttransfer5 paid or received to offset the gain or loss is recognized as a financing source or',
5435:'a reduction in financing source. b. modification of loan guarantees 49. with respect to a direct or indirect modification of',
5436:'pre1992 or post1991 loan guarantees, the cost of modification is the excess of the postmodification liability6of the loan guaranteesover their',
5437:'premodificationliability.7the modification costis recognized as modification expense when the loan guarantees are modified. 5omb instructions provide that if the decrease',
5438:'in book value exceeds the cost of modification, the reporting entity receives from the treasury an amount of modification adjustment',
5439:'transfer equal to the excess; and that if the cost of modification exceeds the decrease in book value, the reporting',
5440:'entity pays to the treasury an amount of modification adjustment transfer to offset the excess. see omb circulara11. 6the term',
5441:'“postmodification liability” is the present value of the net cash outflows of the loan guarantees estimated at the time of',
5442:'modification under the postmodification terms, and discounted at the interest rate applicable to the time when the modification occurs on',
5443:'marketable treasury securities that have a comparable maturity to the remaining cash flows of the guaranteed loans under postmodification terms',
5444:'simply stated, the postmodification terms at the current rate. 7the term “premodification liability” is the present value of the net',
5445:'cash outflows of loan guarantees estimated at the time of modification under the premodification terms and discounted at the interest',
5446:'rate applicable to the time when themodificationoccurs onmarketabletreasury securitiesthat haveacomparablematurity totheremainingcashflows of the guaranteed loans under premodification terms simply stated,',
5447:'the premodification terms at the current rate. page 14 sffas 2 fasab handbook, version 20 06/21 sffas 2 50. the',
5448:'existing book value of the liability of modified post1991 loan guarantees is changed to an amount equal to the present',
5449:'value of net cash outflows projected under the modified terms from the time of modification to the loans’ maturity, and',
5450:'discounted at the original discount rate the rate that was originally used to calculate the present value of the liability,',
5451:'when the guaranteed loanswere disbursed, afteradjusting for the interest rate reestimate. 51. when pre1992 loan guarantees are directly modified, they',
5452:'are transferred to a financing account and the existing book value of the liability of the modified loan guarantees is',
5453:'changed to an amount equal to their postmodification liability.any subsequent modification is treated as a modification of post1991 loan guarantees.',
5454:'when pre1992 direct loan guarantees are indirectly modified, they are kept in a liquidating account. the liability of those loan',
5455:'guarantees is reassessed and adjusted to reflect any change in the liability resulting from the modification. 52. the change in',
5456:'the amount of liability of both pre1992 and post1991 loan guarantees resulting fromadirect orindirect modification andthecost of modificationwillnormallydiffer, due to',
5457:'the use of different discount rates or the use of different measurement methods. any difference between the change in liability',
5458:'and the cost of modification is recognized as a gain or loss. for post1991 loan guarantees, the modification adjustment transfer8',
5459:'paid or received to offset the gain or loss is recognized as a financing source or a reduction in financing',
5460:'source. c. sale of loans 53. the sale of post1991 and pre1992 direct loans is a direct modification. the cost',
5461:'of modification is determined on the basis of the premodification value ofthe loans sold. ifthe premodification value of the loans',
5462:'sold exceeds the net proceeds from the sale, the excess is the cost of modification, which is recognized as modification',
5463:'expense. 54. for a loan sale with recourse, potential losses under the recourse or guarantee obligations are estimated, and the',
5464:'present value of the estimated losses from the recourse is recognized as subsidy expense when the sale is made and',
5465:'as a loan guarantee liability. 55. the book value loss or gain on a sale of direct loans equals the',
5466:'existing book value of the loanssold minusthe net proceedsfrom thesale. since the bookvalue lossor gainand the cost of modification are',
5467:'calculated on different bases, they will normally differ. any 8 omb instructions provide that if the increase in liability exceeds',
5468:'the cost of modification, the reporting entity receives from the treasury an amount of modification adjustment transfer equal to the',
5469:'excess; and that if the cost of modification exceeds the increase in liability, the reporting entity pays to the treasury',
5470:'an amount of modification adjustment transfer to offset the excess. see omb circulara11. page 15 sffas 2 fasab handbook, version',
5471:'20 06/21 sffas 2 difference between the book value loss or gain and the cost of modification is recognized asa',
5472:'gain orloss.9forsalesof post1991 direct loans, the modificationadjustment transfer10 paid or received to offset the gain orlossis recognized asa financing source',
5473:'or a reduction in financing source. d. disclosure 56. disclosure is made in notes to financial statements to explain the',
5474:'nature of the modification of direct loans or loan guarantees, the discount rate used in calculating the modification expense, and',
5475:'the basis for recognizing a gain or loss related to the modification. the u.s. governmentwide financial statements need not include',
5476:'this disclosure. foreclosure of post1991 direct loans and guaranteed loans 57. when property is transferred from borrowers to a federal',
5477:'credit program, through foreclosure or other means, in partial or full settlement of post1991 direct loans or as acompensationforlossesthat thegovernment',
5478:'sustained underpost1991loanguarantees, the foreclosed propertyisrecognizedasan asset at thepresent value of itsestimated future net cash inflows discounted at the original discount',
5479:'rate adjusted for the interest rate reestimate. 58. if a legitimate claim exists by a third party or by the',
5480:'borrower to a part of the recognized value of the foreclosed assets, the present value of the estimated claim is',
5481:'recognized as a special contra valuation allowance. 59. at a foreclosure of guaranteed loans, a federal guarantor may acquire the',
5482:'loans involved. the acquired loans are recognized at the present value of their estimated net cash inflows from selling the',
5483:'loans or from collecting payments from the borrowers, discounted at the original discount rate adjusted for the interest rate reestimate.',
5484:'60. when assets are acquired in full or partial settlement of post1991 direct loans or guaranteed loans, the present value',
5485:'of the government’s claim against the borrowers is reduced by the amount settled as a result of the foreclosure. 9if',
5486:'there is a book value gain, the gain to be recognized equals the book value gain plus the cost of',
5487:'modification. 10see footnote no. 5 for an explanation of “modification adjustment transfer.” page 16 sffas 2 fasab handbook, version 20',
5488:'06/21 sffas 2 writeoff of direct loans 61. when post1991 direct loans are written off, the unpaid principal of the',
5489:'loans is removed fromthe grossamountofloansreceivable. concurrently, thesameamount ischargedtothe allowance for subsidy costs. prior to the writeoff, the uncollectible amounts should',
5490:'havebeen fullyprovided forinthe subsidycost allowance through the subsidycost estimate or reestimates. therefore, the writeoff would have no effect on expenses.',
5491:'[see sffas 18, par. 10 and 11 for additional disclosure requirements.] the provisions of this statement need not be applied',
5492:'to immaterial items. page 17 sffas 2 fasab handbook, version 20 06/21 sffas 2 appendixa: basis of the board’s conclusions',
5493:'this appendix discussesthe substantive commentsthat the board received from respondents to the exposure draft,accounting for direct loans and loan guarantees,',
5494:'issued in september 1992. theappendix explains the board’s conclusions on issues raised by the respondents. this statement may be affected',
5495:'by later statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements',
5496:'that amend this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix',
5497:'will not be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement',
5498:'for the rationale for each amendment. present valueaccounting 62. several respondents were opposed to using present value accounting for direct',
5499:'loans and loan guarantees. they pointed out that although the federal credit reformact of 1990 requires the use of present',
5500:'value to measure the subsidy costs of direct loans and loan guarantees for the budget, the law does not require',
5501:'using present value for financial reporting. they believed that since there are no legal requirements, the adoption of present value',
5502:'accounting should be based on costbenefit considerations. 63. these respondents emphasized the complexity and cost of implementing and maintaining present',
5503:'value accounting. because of the need to separately account for the direct loans or loanguaranteesobligatedorcommitted byeachcreditprogramina fiscalyearbycohort, as years go',
5504:'by, the number of cohorts would multiply.an agency with a number of loan and loan guarantee programs estimated that within',
5505:'5 years, there would be more than 200 cohorts, one for each year and each program. since most of its',
5506:'loans are longterm, maturing in 30 or more years, the number of cohorts would be staggering. 64. the respondents who',
5507:'were opposed to present value accounting doubted whether there would be any significant improvement in financial information on loans and',
5508:'loan guarantees reported on a present value basis compared with information traditionally reported on a nominal value basis. they contended',
5509:'that both present value accounting and nominal value accounting rely on historical experience and management judgment to evaluate risk as',
5510:'the primary variable in determining a default allowance. they further argued that since present value calculations involve cash flow estimates',
5511:'over future years, information based on the estimatesisnot necessarilymore reliablethaninformationreportedunderthe nominalvalue accounting method. page 18 sffas 2 fasab handbook, version',
5512:'20 06/21 sffas 2 65. anumber ofrespondents expressedsupportofthe board’sproposalto usepresent value accounting for direct loans and loan guarantees. they believed',
5513:'that it is a positive step to bring budgeting and financial reporting together. they also believed that implementation of the',
5514:'proposed standards would present useful information for monitoring programs with direct loans and loan guarantees. 66. inproposingpresentvalueaccounting,theboard’sprimaryconsiderationsweretocarryout the intent of',
5515:'the federal credit reformact of 1990 and to make financial reporting compatible with the budget. see exposure draft, vol. 1,',
5516:'par. 15. the board believes that one of the objectives of financial reporting is to enable the reader to determine',
5517:'the status of budgetary resources, and whether those resources were acquired and used in accordance with the enacted budget.11 67.',
5518:'thefederalcreditreformactof1990requires usingpresentvaluefor thebudget. the board doesnot believe that thisrequirement should be ignored for financial reporting. since budgetary resources for direct',
5519:'loan and loan guarantee subsidies are provided on a present value basis, financial reporting on the acquisition, use, and status',
5520:'of the resources should be on the same basis. only by using the same basis can financial information be used',
5521:'to compare the actual results with the budget. 68. indeed, distortion in information would result if present value were not',
5522:'used to report direct loans or loan guaranteesthat are budgeted on a present value basis. thiscan be illustrated by the',
5523:'following example. 69. suppose a group of 5year term loans in the aggregate amountof $100,000 were disbursed by a federal',
5524:'credit program at the end of fiscal year 1992. the loans require paying an annual interest of 5 percent and',
5525:'repaying the principal in fiscal year 1997. it was estimated that the interest would be collected each year, but only',
5526:'$80,000 of the principal would be repaid when the loans mature. during the year the loans were disbursed, the average',
5527:'interest rate of treasury securities of the same maturity was 9 percent. 70. basedonthecashflowprojectionshownintable1below,attheendofthe1992fiscalyear, the present value of the direct',
5528:'loans was $71,440 and the loans’ subsidy cost was $28,560. it is assumed in this example, that as required by',
5529:'credit reform, the subsidy cost $28,560 was funded with appropriations, and the remaining amount $71,440 was financed with borrowing from',
5530:'treasury at 9 percent. 11fasab exposure draft, objectives of federal financial reporting, vol. 1, par. 13. page 19 sffas 2',
5531:'fasab handbook, version 20 06/21 sffas 2 table 1: the present value of direct loans fiscal years expected payments 1993',
5532:'$5,000 1994 5,000 1995 5,000 1996 5,000 1997 $85,000 present value at 9% $71,400 71. if the nominal value accounting',
5533:'method were used in financial reporting, the $20,000 of the principal that was estimated to be uncollectible would have been',
5534:'reported as a bad debt expense. the estimated uncollectible amount of $20,000 would have been recognized as thecost of theloansinfinancialstatements.',
5535:'inreality, however,theagencyspent $28,560of budgetary resources to fund the cost of the loans. 72. also, if the nominal value accounting method',
5536:'were used, the loans as assets would have been reported at $80,000 at the end of the 1992 fiscal year,',
5537:'which equals the $100,000 principal of the loans minus an allowance of $20,000 for the uncollectible amount. on the other',
5538:'hand, debt to treasury would have been reported at $71,440, which was the amount actually borrowed to finance the loans.',
5539:'the financial information would have shown an excess of the assets over the liability by $8,560. in reality, however, even',
5540:'if the default estimate was correct, the entire collection of interest and principal would be used to pay interest and',
5541:'principal to treasury. the credit program in fact would have no excess in assets. the following is a comparison of',
5542:'the loans reported on a present value basis and on a nominal value basis.12 12tables are provided only for illustration.',
5543:'they do not represent a reporting format. page 20 sffas 2 fasab handbook, version 20 06/21 sffas 2 table 2:',
5544:'reporting on the direct loansat present value on september 30, 1992 assets liabilities loans receivable $100,000 debt to treasury $71,440',
5545:'subsidy cost allowance 28,560 28,560 loans receivable, net $ 71,440 net position $0 table 3: reporting on the direct loansat',
5546:'nominal value on september 30, 1992 assets liabilities loans receivable $100,000 debt to treasury $71,440 subsidy cost allowance 28,560 20,000',
5547:'loans receivable, net $ 80,000 net position $8,560 73. asimilar distortionwouldresultinreportingloanguarantees. thedistortion wouldbe caused by reporting loan guarantee liabilities on',
5548:'a nominal value basis, whereas the budgetary resources received to finance the liabilities are measured at a present value basis.',
5549:'74. in evaluating efforts and costs of implementing present value accounting for post1991 direct loans and loan guarantees, one should',
5550:'keep in mind that the federal direct loan and loan guarantee programs have modified or will have to modify their',
5551:'accounting systems in order to implement the budgeting requirements of the federal credit reformact of 1990. they will have to',
5552:'maintain data by cohort and risk category, compute interest on borrowing from treasury and on uninvested funds, and make subsidy',
5553:'estimates and reestimates. the accounting standards provided in this statement do not require more than the budget processrequiresinthese respects, andthustheywould',
5554:'notresult in asubstantialamount of additional effort or cost. 75. some respondents indicated that it would be burdensome if present value',
5555:'accounting were to be implemented on a loanbyloan or transaction basis. the board does not propose that the accounting standards',
5556:'be implemented on a loanbyloan basis. the standards page 21 sffas 2 fasab handbook, version 20 06/21 sffas 2 should',
5557:'apply to a cohort or risk category of direct loans or loan guarantees in the aggregate. 76. in addition to',
5558:'making financial reporting consonant with the budget, the board also believes that the standards proposed in the exposure draft will',
5559:'produce better financial information for the following reasons: 77. first,theproposedstandardswouldrequiremeasuringandrecognizingthesubsidycostsof direct loans and loan guarantees at their inception rather than',
5560:'at a later date. the current accounting practice does not require this. in the absence of this requirement, the cost',
5561:'of direct loans is not recognized when the loans are disbursed, and the liability to pay claims under loan guarantees',
5562:'is not usually recognized when guaranteed loans are disbursed. 78. second, the proposed standards would require a comprehensive evaluation of',
5563:'future cash flows over the life of direct loans and guaranteed loans, including payments of interest, principal, fees, prepayments, defaults,',
5564:'delinquencies, and recoveries. the current accountingpracticetypicallyprovidesan allowancefor theportionof the principalthatwould not be collected. it does not take into account the',
5565:'impact of other cash flow elements. 79. third, the proposed standards would require discounting the net cash flows at the',
5566:'government’s borrowing rate on marketable treasury securities. discounting is a basic feature of present value accounting that measures and recognizes',
5567:'the interest subsidy cost of direct loans and loan guarantees, and the time value of all cash flows. the time',
5568:'value of such cash flows is not accounted for under the nominal value accounting method, and the interest subsidy cost',
5569:'is not accounted for when the loans are disbursed. 80. finally, the proposed standards would require an annual systematic review',
5570:'of the projected cash flows. the projections would be revised and updated to reflect newly developed events, changes in economic',
5571:'conditions, and better understanding of the factors that cause defaults. the subsidy costs would be reestimated accordingly. the reestimation requirement',
5572:'assures that credit programs maintain an uptodate data base by cohort and risk category of actual collections, defaults, and amounts',
5573:'written off on federal loans and loan guarantees. such a complete data base was not available prior to credit reform.',
5574:'81. in summary, the recognition of cost at inception, the comprehensive evaluation of all future cash flows, and the discounting',
5575:'of future cash flows to present value are complementary elements at the core of present value accounting. when taken together,',
5576:'they place an economic value on the cost the federal government incurs in making direct loans and loan guarantees. likewise,',
5577:'they place an economic value rather than a nominal value on loan assets and loan guarantee liabilities. page 22 sffas',
5578:'2 fasab handbook, version 20 06/21 sffas 2 82. based on the view that financial accounting should be compatible with',
5579:'the budget, and based on the other advantages of using the present value accounting, the board has concluded that the',
5580:'present value accounting method should be used in the accounting standards for post1991 direct loans and loan guarantees. subsidy cost',
5581:'component 83. the exposure draft proposed that when direct or guaranteed loans are disbursed, their subsidyexpenseberecognizedseparatelyamonginterestsubsidycosts,defaultcosts, fees as a deduction',
5582:'from the costs, and other subsidy costs. 84. the exposure draft also proposed the following requirement: the interest subsidy allowance',
5583:'shall be amortized using the interest method. compound interest shall be accumulated on the allowances for default losses, fees, and',
5584:'other cost components. 85. the exposure draft posed a question: should the subsidy cost components, if material, be recognized separately',
5585:'in financial reporting? some respondents agreed that the subsidy cost components should be separately recognized. they believed that separate recognition',
5586:'would provide the level of detail needed to understand the program betterand improve their component estimates for budget formulation. 86.',
5587:'some respondents were opposed to reporting subsidy costs by component on the grounds that 1 only the aggregate amount of',
5588:'subsidy costs is needed for budget execution purposes, 2 information on cost components may not be used by management, and',
5589:'3 the cost of complex recordkeeping and calculations outweigh the benefit. 87. after considering the benefits and efforts required in',
5590:'accounting for subsidy cost components, the board has concluded that when direct or guaranteed loans are disbursed, the subsidy expense',
5591:'of the direct loans or loan guarantees should be recognized in separate components. the board believes that by reporting the',
5592:'subsidy expense components of direct or guaranteed loans disbursed during the reporting year, the cost components of newly disbursed direct',
5593:'loans and loan guarantees can be compared with those of prior years. the cost component information would be valuable for',
5594:'making credit policy decisions, monitoring portfolio quality, and improving credit performance. information on interest subsidies and fees would help in',
5595:'making decisions on setting interest rates and fee levels. information on default costs would help in evaluating credit performance. 88.',
5596:'in calculating the present value of the subsidy costs for the budget, agencies must first develop data on cash flow',
5597:'components. omb requires agencies to use the omb credit subsidy model, which takes these cash flows as inputs and automatically',
5598:'calculates the components of the subsidy cost. since the information on subsidy cost components of new page 23 sffas 2',
5599:'fasab handbook, version 20 06/21 sffas 2 direct loans and loan guarantees is available, reporting the information would not require',
5600:'significant additional efforts. 89. however,theboardrealizesthatitwouldrequireconsiderableeffortstomaintainrecordsfor thepresent value of cost componentsfor each existingcohortof loansandloanguarantees, amortize or accumulate interest on each component',
5601:'each year, adjust each component each year for reestimates, and, if applicable, adjust each component for modifications when they occur.',
5602:'after considering the efforts that would be required and the benefits that could bederived,theboarddecidednot to recommendtherequirementtoamortize oraccumulate interest on each',
5603:'subsidy cost component. without this requirement, credit programs may amortize the subsidy allowance of each cohort in aggregate, using the',
5604:'interest method. they would not have to maintain records for the present value of each cost component and adjust them',
5605:'annually. this would greatly ease the recordkeeping and calculation burden. 90. by eliminating the requirement to amortize and accumulate interest',
5606:'on each component of the subsidy cost allowance, the board realizes that information would not be available to track changes',
5607:'in the present values of the components. however, data would still be available to track changes in the total amount',
5608:'of a cohort’s subsidy allowance affected by annualreestimates. theprimaryfactor that causeschangesin the subsidyallowance would be default reestimates. furthermore, the boardbelievesthatitisof',
5609:'acriticalimportancethat eachcreditprogrammaintainadatabaseforactualcollections,defaults, delinquencies,and recoveries. for purposes of monitoring program performance and estimating future losses, the actual default and collection data',
5610:'base is more important than tracking changes in the allowance for the present value of subsidy costs by component. the',
5611:'actual default and collection data base is also necessary for estimating and reestimating subsidy costs. accounting for fees 91. in',
5612:'the exposure draft, the board proposed that the present value of estimated fee receipts be recognized as a deduction from',
5613:'the subsidy expense. the board posed a question: how should fees be recognized on an entity’s financial reports? should they',
5614:'be recognized as a deduction of subsidy expense, or as a revenue? 92. many respondents agreed with the proposal that',
5615:'the present value of estimated fee collections be recognized as a deduction of subsidy expense. some respondents contended that fees',
5616:'should be recognized as a revenue rather than as an expense component. they stated that offsetting revenues against expenses would',
5617:'not provide clear revenue/expense information concerning the operating results of a credit program. some of the respondents also said that',
5618:'to the extent some of the fees are used to defray administrative costs, they should not offset subsidy expenses because',
5619:'the federal credit reformact of 1990 excludes administrative costs from subsidy expenses. page 24 sffas 2 fasab handbook, version 20',
5620:'06/21 sffas 2 93. the board is not persuaded by the arguments that fees should be reported as a revenue.',
5621:'the subsidy expense of direct loans and loan guarantees is the focal point of credit reform, and it is measured',
5622:'as the present value of the net cash flows of the direct loans and loan guarantees. since the estimated fees',
5623:'are a component of the cash flows, the board believes that the present value of fees should be reported as',
5624:'a component of the subsidy expense. since the board has concluded that all of the subsidy expense components, including the',
5625:'present value of fees, are to be reported separately, reporting the present value of fees as an expense component would',
5626:'not reduce information on the collection of fees. furthermore, the administrative expenses that are excluded from subsidy costs are often',
5627:'covered by appropriations, rather than paid by fee collections. thus, it is not necessary to allocate a portion of the',
5628:'fee collections to pay the administrative costs that are not a part of the subsidy costs. pre1992 direct loansand loan',
5629:'guarantees 94. the phrase pre1992 direct loans and loan guarantees refers to direct loans obligated and loan guarantees committed before',
5630:'october 1, 1991, the effective date of the federal credit reformact of 1990. in theexposure draft, theboard did notrecommendrestating pre1992',
5631:'direct loans and loan guarantees at present value. the board’s position was that the costs of restating those direct loans',
5632:'and loan guarantees would outweigh the benefits. 95. most respondents who commented on this issue agreed with the board’s position.',
5633:'they emphasized that the restatement of pre1992 direct loans and loan guarantees would be a complex process and would require',
5634:'substantial resources. they pointed out that a major difficulty is caused by the lack of complete and accurate historical data',
5635:'that a restatement needsto bebasedupon. because of thelackof accuratedata, evenif theagenciesincurred a great deal of cost, the restated loans and',
5636:'loan guarantees could not be accurately compared with post1991 loans and loan guarantees on the same basis. the respondents pointed',
5637:'out that since the pre1992 direct loans and loan guarantees were obligated or committed in the past, restated information would',
5638:'be of limited usefulness to current budget decisions. they also pointed out that the amount of pre1992 direct loans and',
5639:'loan guarantees outstanding would diminish over time as loans matured, defaulted, or were modified. 96. in addition to considering the',
5640:'comments on the exposure draft, the board also considered the findings of a gao report presented to the board.13 the',
5641:'gao report suggested that by not requiring a restatement of pre1992 direct loans and loan guarantees at present value, 13gao',
5642:'report to the chairman, senate budget committee, federal credit programs: agencies had serious problems meeting credit reform accounting requirements gao/afmd9317,',
5643:'jan. 1993. page 25 sffas 2 fasab handbook, version 20 06/21 sffas 2 poor information would be perpetuated, which could',
5644:'affect the ability to 1 forecast the future budgetary impact of precredit reform credit activity, 2 minimize losses, and 3',
5645:'judge the reasonable accuracy of subsidy estimates for post1991 credit. the gao report recommended using simplified methods, such as sampling',
5646:'techniques, to restate pre1992 direct loans and loan guarantees at present value. 97. however, there was a strong indication in',
5647:'the comments the board received and in the findings of the gao report that agencies have been experiencing serious difficulties',
5648:'in implementing the credit reform requirements related to post1991 direct loans and loan guarantees. arestatement of pre1992 direct loans and',
5649:'loan guarantees, even on a sampling basis, would require additional use of the agencies’ limited accounting resources. the board also',
5650:'agrees with the view that as the pre1992 direct and guaranteed loans are approaching their maturity and are paid off,',
5651:'liquidated, or written off, the difference between their present value and nominal value becomes less significant. thus, the board concludes',
5652:'that it is appropriate not to require restating pre1992 direct loans and loan guarantees at present value. 98. thedepartmentofveteransaffairs statedinits',
5653:'comments thatithad accountedfor pre1992 loan guarantees on a present value basis. the department of education indicated in its comments that',
5654:'it planned to report pre1992 loans on a present value basis. their efforts to account for pre1992 loans and loan',
5655:'guarantees at present value, although not at the same level of detail as required by credit reform, could very well',
5656:'result in improved information for credit management. other agencies may follow their examples. the board believes that reporting those pre1992',
5657:'direct loans and loan guarantees on a present value basis should be permitted. 99. although a restatement of pre1992 direct',
5658:'loansand loan guaranteesat present valueis not required, theboard continuestobelieve that it is of fundamentalimportance to estimateand recognize losses and liabilities',
5659:'for those direct loans and loan guarantees. loss estimation and recognition are necessary to support federal government financial planning and',
5660:'management. the information on both current and potential liabilities related to federal credit programs alerts congress and federal officials to',
5661:'the longterm costs and future financing needs. 100. the recommended standards would require that losses of pre1992 direct loans and',
5662:'liabilities related to pre1992 loan guarantees be recognized when it is more likely than not that the loans will not',
5663:'be totally collected or the loan guarantees will require a future cash outflow to pay default claims. this is the',
5664:'same standard that the board recommended for the recognition of losses on receivables in fasab statement of recommendedaccounting standards no.',
5665:'1,accounting for selectedassets and liabilities. page 26 sffas 2 fasab handbook, version 20 06/21 sffas 2 101. the board believes',
5666:'that each loan guarantee program should disclose the aggregate amount of outstanding guaranteed loans. in addition, it should also disclose',
5667:'its risk exposure, which is the guaranteed portion of the total outstanding guaranteed loans. modifications 102. amodification is a government',
5668:'action that alters the estimated subsidy cost of outstanding direct loans or loan guarantees. both a government action and an',
5669:'alteration in subsidy cost are necessary conditions for a modification. asubsidy reestimate is not a modification. 103. direct modifications change',
5670:'the subsidy cost by legislation or administrative actions that alter the terms of existing contracts or by selling loan assets.',
5671:'existing contracts may be altered by such means as forgiveness, forbearance, reductions in interest rates, extensions of maturity, and prepayments',
5672:'without penalty. such actions are modifications unless they are considered workouts as explained below or are permitted by the existing',
5673:'contract terms. 104. indirect modifications change the subsidy cost by legislation that alters the way in which an outstanding portfolio',
5674:'of direct loans or loan guarantees is administered. examplesinclude a new method of debt collection prescribed by law or a',
5675:'statutory restriction on debt collection. such new legislation would produce a onetime effect on the subsidy cost of outstanding direct',
5676:'loans and loan guarantees only. after the enactment of the legislation, the effects of the legislation are included in the',
5677:'original subsidy cost estimates of newly obligated direct loans and newly committed loan guarantees. thus, the legislation is not a',
5678:'modification with respect to direct loans obligated and loan guarantees committed subsequent to its enactment. 105. the term “modification” does',
5679:'not include the routine administrative workouts of troubled loans or loans in imminent default. workouts are actions undertaken to maximize',
5680:'the repayments to the government under existing direct loans or to minimize claim payments that the government would make under',
5681:'loan guarantees. the expected effects of workouts on cash flows are included in the original estimate and the reestimates of',
5682:'the subsidy cost. therefore, a workout effort isnot a government action that altersthe estimated subsidycost of direct loans or loan',
5683:'guarantees. 106. the term “modification” also does not include actions that are permitted within the existing contract terms, such as',
5684:'prepayments without penalty permitted by existing loan contracts. the expected effectsof such actionson cash flowsare included in the original estimate',
5685:'and the reestimates of the subsidy cost. page 27 sffas 2 fasab handbook, version 20 06/21 sffas 2 107. neither',
5686:'the term “modification” nor the term “workout” includes additional disbursements to borrowers that increase the amount of direct loans outstanding.',
5687:'these disbursements are considered to be new loans in the amount of the increment. 108. when direct loans and loan',
5688:'guarantees are modified, the subsidy cost of the modification must be calculated. the book value of the modified loans and',
5689:'the liabilities of the modified loan guarantees must be restated. the exposure draft used two types of discount rates to',
5690:'calculate the present values of post1991 direct loans and loan guarantees that are modified: current discount rates and original discount',
5691:'rates. 109. the term “current discount rate” refers to the interest rate applicable to the time when the modification occurs',
5692:'on marketable treasury securities that have a comparable maturity to the remaining maturity of the direct or guaranteed loans, under',
5693:'either premodification terms, or postmodification terms, whichever is appropriate. the cost of modification is measured as the excess of the',
5694:'present value of premodification net cash flows over the present value of postmodification cash flows, both discounted at a current',
5695:'discount rate. this is consistent with the measurement method described in omb instructions. 110. the term “originaldiscountrate” refersto thediscount rate',
5696:'that isoriginallyusedtocalculate the present value of the direct loans or the present value of loan guarantee liabilities, when the direct',
5697:'or guaranteed loans were disbursed. the value of modified loans or the liability of modified loan guarantees equalsthe present value',
5698:'of modified cash flows discounted at the original discount rate. the original discount rate is used to determine the value',
5699:'of modified loans because this is the interest rate that the treasurycharges on funds that it lends to the credit',
5700:'program to finance the loans. the original discount rate is also used to determine the liability of modified loan guarantees',
5701:'because this is the interest rate that the treasury pays on funds that it holds for the credit program to',
5702:'pay future claims. 111. because of using the two different rates, a difference will normally occur between the change in',
5703:'the book value of modified direct loans and the cost of the modification. in the case of loan guarantees, there',
5704:'will normally also be a difference between the change in the liability of modified loan guarantees and the cost of',
5705:'modification. 112. the exposure draft used an example to illustrate the difference.14 the example used the original discount rate of',
5706:'6 percent to calculate the book value of a modified loan, and it used the current discount rate of 8',
5707:'percent to calculate the cost of modification. the calculations resulted in a difference between the change in book value and',
5708:'the cost of modification. 14see exposure draft, vol. 2, pars. 221 through 231, andappendix 2, pages 139 through 143. page',
5709:'28 sffas 2 fasab handbook, version 20 06/21 sffas 2 113. omb instructions require that an amount equal to the',
5710:'difference between the change in book value and the cost of modification either be returned to, or received from, thetreasury',
5711:'to offset the difference. the amount transferred to offset the difference is referred to in omb instructions as the modification',
5712:'adjustment transfer. this transfer does not constitute a part of the cost of modification and is not a budget outlay',
5713:'or collection. 114. several respondentsobjected to use of the current rate for measuring the modification cost. they believed that both',
5714:'the modification cost and the value of the modified loans or the liability of modified loan guarantees should be measured',
5715:'on the same basis, using the original discount rate. they said that by using the original discount rate for measuring',
5716:'both the cost and the book value or the liability, there would be no difference between the modification cost and',
5717:'change in book value or change in loan guarantee liability. they argued that the additional computations at current discount rate',
5718:'do not result in any additional meaningful information for use by management. they contended that the complexity of the computation,',
5719:'the effect of changing discount rates, and the resulting differencebetween thechange in bookvalue and thecost of modification wouldonly detract from',
5720:'management’s ability to analyze the results of modification. 115. the board realizes that it is undesirable to calculate the cost',
5721:'of modification and change in book value on different bases. because the cost of modification and the book value are',
5722:'calculated on different bases, the modification expense recognized would not equal the decrease in the book value of direct loans',
5723:'orthe increase in the liabilityof loan guarantees resulting from the modification. 116. however, itisalsoundesirable to recognizea modification expense at ameasurement',
5724:'basis that differs from the budget and appropriation basis. the omb instructions concerning the definition and the cost of modification',
5725:'have carried a great weight on the board’s consideration of the subject. the omb instructions require that the cost of',
5726:'modification be measured at the current rate, and appropriations approved for a modification will equal the cost of modification. the',
5727:'board believes that financial reporting should reflect the modification cost recognized in the budget and the modification appropriations received. 117.',
5728:'the board also appreciates the rationale in omb instructions. the federal credit reform act of 1990 requires that the calculation',
5729:'of modification cost be based on the estimated present value of the direct loans or loan guarantees at the time',
5730:'of modification. this requirement hasbeeninterpretedascalculating thepresent valueof modificationcostatthe discount rate applicable at the time of modification. the board also agrees',
5731:'with the substantive rationale for using the current rate. by using the current rate, the calculation of the modification cost',
5732:'will reflect the economic cost of the modification at the time when the modification decision is made. page 29 sffas',
5733:'2 fasab handbook, version 20 06/21 sffas 2 118. the board found that some of the opposition to the use',
5734:'of the current rate for modifications arose because of a misunderstanding about the difference between modifications and workouts. once the',
5735:'distinction was clarified between workouts which are included in the initialsubsidyestimatesand are quantifiedusingthe originalratesandmodificationswhich require separate action as described, but',
5736:'are less frequent in occurrence, much of the opposition to using current rates for modifications disappeared. 119. in considering a',
5737:'solution for the measurement difference between the modification cost and the book value of the loan or the loan guarantee',
5738:'liability, the board has considered as an alternative whether the current rate could also be used to calculate the value',
5739:'of modified direct loans or the liability of modified loan guarantees so that the change in direct loan book value',
5740:'or loan guarantee liability could equal the cost of modification. the board has decided against this for the two reasons',
5741:'explained below. 120. first, under credit reform, the unsubsidized portion of direct loans is financed by funds borrowed from treasury,',
5742:'while the subsidy cost of the direct loans is financed by appropriations. thus, the carrying amount of direct loans at',
5743:'any point should equal the balance of debt to treasury. proceeds from collecting direct loan principal and interest will be',
5744:'used to repay debt to treasury. this exact match between loan assets and liabilities debt to treasury is a unique',
5745:'feature that makes credit reform loans and loan guarantees different from private sector lending. 121. when a modification occurs, the',
5746:'book value of the direct loans is affected. an amount of modification appropriation, plus or minus the modification adjustment transfer,',
5747:'would be used to reduce the debt to treasury. by doing so, the book value of the modified loans and',
5748:'the balance of the debt to treasury would continue to be equal. it is important to note that the interest',
5749:'rate on the debt to treasury does not change as a result of the modification; it remains the original rate.',
5750:'thus, the debt balance to treasury in fact equals the present value of future payments to treasury discounted at the',
5751:'original rate. since the debt to treasury is based on the original rate, that rate should also be used to',
5752:'calculate the book value of modified loans, so that the book value of the loans and the balance of debt',
5753:'to treasury would be kept equal. 122. aparallel situation exists with loan guarantees. the financing account of each loan guarantee',
5754:'program maintains a fund balance with the treasury equal to the liability of the loan guarantees. the fund balance and',
5755:'the liability grow at the same compound interest rate. the fund balance will accrue interest at the original rate applicable',
5756:'at the time the guaranteed loans were disbursed. the interest rate will not change because of a modification of the',
5757:'loan guarantees. thus, only by measuring the liability of the modified loan guarantees at the original rate could the liability',
5758:'be kept equal to the fund balance. page 30 sffas 2 fasab handbook, version 20 06/21 sffas 2 123. second,',
5759:'evenif the currentratewere used tocalculate the bookvalue of modified loans, the difference between the change in book value or the',
5760:'change in liability balance and the modification cost would not disappear. in measuring the change in book value or the',
5761:'change in liability balance, the starting point is the premodification book value or the premodification liability balance, which is based',
5762:'on the original discount rate. if the current rate is used to calculate the postmodification book value of modified direct',
5763:'loans, the change in book value would equal the difference between the premodification book value based on the original rate',
5764:'and the postmodification book value based on the current rate. similarly, if the current rate is used to calculate the',
5765:'postmodification balance of modified loan guarantee liabilities, the change in liability balance would equal the difference between the premodification balance',
5766:'based on the original rate and the postmodification balance based on the current rate. 124. the cost of modification, on',
5767:'the other hand, iscalculated differently. the startingpoint of the calculation is not the existing premodification book value of the modified',
5768:'loans or the existing premodification book value of the liability of the modified loan guarantees. for both direct loans and',
5769:'loan guarantees, the calculation uses the present value of premodification net cash flows discounted at the current discount rate as',
5770:'the starting point. this premodification value differs from the existing premodification book value because the latter is based on the',
5771:'original discount rate. the cost of modification equals the difference between the present value of premodification net cash flows discounted',
5772:'at the current rate and the present value of postmodification net cash flows also discounted at the current rate. since',
5773:'the calculations take a different starting point, the cost of modification would not equal the change in book value. 125.',
5774:'because of the two reasons above, the board believes that the best solution available is to measure the cost of',
5775:'modification at the current discount rate, and to calculate the carrying amount of modified loans and loan guarantee liabilities at',
5776:'the original discount rate. 126. however, while it makes sense to determine the cost of modification based on the current',
5777:'discount rate, financial reporting cannot discard the premodification balance of direct loans or loan guarantee liabilitiesthat are carried in the',
5778:'accounting records. because of the use of different discount rates, the change in book value will be different from the',
5779:'cost of modification. the board believes that the effect of a modification on assets or liabilities should be reflected in',
5780:'the operating statement. the board believes that in addition to recognizing the cost of modification as a modification expense, any',
5781:'difference between the change in book value and the modification expense should be recognized as a gain or loss. thus,',
5782:'the net effect of the modification on the operating statement equals the decrease in loan assets or the increase in',
5783:'the liability of loan guarantees resulting from the modification. 127. based on this view, the board has concluded that, with',
5784:'respect to a modification of direct loans, any difference between the change in the book value of the direct loans',
5785:'resulting page 31 sffas 2 fasab handbook, version 20 06/21 sffas 2 from the modification and the cost of modification',
5786:'should be recognized as a gain or loss in the operating statement. similarly, any difference between the change in the',
5787:'amount of liability of loan guarantees resulting from the modification and the cost of modification should be recognized as a',
5788:'gain or loss in the operating statement. the gain or loss is to be recognized in a category distinguished from',
5789:'the modification expense. the modification adjustment transferpaid orreceived to offset the gainorlossisto be reported asa financing source or a reduction',
5790:'in financing source. 128. the board further believes that agency financial statements should include a footnote to explain the calculation',
5791:'of the cost of modifications and nature of gain or loss on modifications. page 32 sffas 2 fasab handbook, version',
5792:'20 06/21 sffas 2 appendix b: technical explanationsand illustrations thisappendix explains and illustrates the accounting standards for direct loans and',
5793:'loan guarantees. the explanationsand illustrations are presented to show how the standards may be applied but are not standards themselves.',
5794:'they also take into account omb and treasury regulations on credit reform. thisappendix has 4 parts: part i: post1991 direct',
5795:'loans part ii: pre1992 direct loans part iii: post1991 loan guarantees part iv: pre1992 loan guarantees topics covered include: the',
5796:'measurement and recognition of direct loans, subsidy costs, and the liability of loan guarantees; the reestimation and the amortization of',
5797:'the subsidy cost allowance; the reestimation of loan guarantee liabilities and the accumulation of interest on the liabilities; the recognition',
5798:'of revenues and expenses; modifications of direct loans and loan guarantees including the sale of direct loans; the writeoff of',
5799:'direct loans; and the foreclosure of assets upon default. theappendix does not illustrate financial statements, journal entries, or accounting procedures.',
5800:'readers should consult omb, gao, and treasury for guidance. part i: post1991 direct loans post1991 direct loans are direct loans',
5801:'obligated after september 30, 1991. the accounting for post1991 direct loans is explained and illustrated in this part of theappendix',
5802:'through an example described below: at the end of fiscal year 1994, a federal credit program disburses a number of',
5803:'direct loans with a total principal of $10 million. those loans constitute a cohort for that year. the maturity term',
5804:'of that cohort is 5 years and the stated annual interest rate is 4 percent. all of the amounts used',
5805:'in the text below are in thousands of dollars. page 33 sffas 2 fasab handbook, version 20 06/21 sffas 2',
5806:'the loan contracts require an annual payment of $2,246 per year for 5 years, paid at the end of each',
5807:'year. in table 1 below, the required annual payments are shown in column a.15 the amounts in column b equal',
5808:'the beginning loan balance of each period multiplied by the stated interest rate of 4 percent. the amounts in column',
5809:'c are principal repayments, which equal the amounts in column a minus the amounts in column b. the amounts in',
5810:'column d are the ending principal balance of each period, which equal the beginning balance minus the principal repayment of',
5811:'that period, shown in column c. table 1: payment schedule in thousands of dollars yearend fy paymenta interest b principalc',
5812:'loan balance d 1994 $10,000 1995 $2,246 $400 $1,846 8,154 1996 2,246 326 1,920 6,234 1997 2,246 249 1,997 4,237',
5813:'1998 2,246 169 2,077 2,160 1999 2,246 86 2,160 0 it is also assumed that: theaverageinterestrateoftreasurymarketablesecuritiesofasimilarmaturityfortheperiod during which the loans',
5814:'are disbursed is 6 percent. fees totaling $500 are received when the loans are disbursed. the fees are used to',
5815:'reduce the need to borrow from treasury. a. reporting post1991 direct loans and their subsidy costs the accounting standard for',
5816:'post1991 direct loans requires that direct loans disbursed and outstanding be recognized as assets at the present value of their',
5817:'estimated net cash inflows. the difference between the outstanding principal of the loans and the present value of their net',
5818:'cash inflows is recognized as a subsidy cost allowance.16 15the annual payment is derived by dividing the present value factor',
5819:'of 4.45182 into the principal of $10,000. the present value factor can be found in any ordinary annuity table, and',
5820:'it equals the present value of $1 paid over 5 periods discounted at 4 percent. alternatively, knowing the loan principal,',
5821:'the number of pay back periods, and the interest rate, one can use computer software or a financial calculator to',
5822:'find the required payment per period. 16in thisappendix, the requirements of the accounting standards are summarized to address specific situations.',
5823:'however, the standards are not quoted verbatim. readers should refer to the text of the standards for their exact wording.',
5824:'page 34 sffas 2 fasab handbook, version 20 06/21 sffas 2 to implement the standard in the example, a cash',
5825:'flow projection and present value calculations are prepared. based upon the risk factors and other criteria for default cost estimates',
5826:'that are enumerated in the accounting standards, it is estimated that losses in cash flows due to the defaults would',
5827:'equal 30 percent of the scheduled payments for fiscal year 1997 and each year thereafter.17 table 2 below displays the',
5828:'cash flow projections and present value calculations. table 2: projected cash flows discounted to the end of fy 1994 in',
5829:'thousands of dollars fee p & i default net cash fy collections paymentsa losses inflows 1994 $500 $500 1995 $2,246',
5830:'2,246 1996 2,246 2,246 1997 2,246 $674 1,572 1998 2,246 674 1,572 1999 2,246 674 1,572 pv at 6% $500',
5831:'$9,461 $1,603 $8,358 athe term “p& i payments” used in this table as well as other tables throughout thisappendix denotes',
5832:'scheduled principal and interest payments required in loan contracts. the present value of the loans’ estimated net cash inflows is',
5833:'$8,358. the direct loans are recognized as assets at that amount. since the loans’ outstanding principal is $10,000, the difference',
5834:'between the loans’ outstanding principal and their present value is $1,642, which is recognized as the subsidy cost allowance. the',
5835:'accounting standard for post1991 direct loans requires that for direct loans disbursed during a fiscal year, a subsidy expense be',
5836:'recognized. the amount of the subsidy expense equals the present value of estimated cash outflows over the life of the',
5837:'loansminusthepresent value ofestimated cash inflows, discounted atthe interestrate of marketable treasury securities with a similar maturity term, applicable to the',
5838:'period during which the loans are disbursed hereinafter referred to as the applicable treasury interest rate. 17the standard defines losses',
5839:'in cash flows due to default as being due to defaults net of recoveries. however, to simplify computations, recoveries are',
5840:'assumed to be zero throughout parts i and ii of thisappendix. references to defaults throughout parts i and ii should',
5841:'be understood to mean defaults net of recoveries for all cases where recoveries are expected. the accounting standard for recoveries',
5842:'is illustrated in part iii of thisappendix. page 35 sffas 2 fasab handbook, version 20 06/21 sffas 2 in the',
5843:'example, thepresent valueof theloans’cashoutflowsisthedisbursed amountof $10,000. the present value of the loans’ estimated net cash inflows is $8,358. the difference',
5844:'between those two amounts is $1,642, which is recognized as subsidy expense. the accounting standard for post1991 direct loans requires',
5845:'that for the fiscal year during which new direct loans are disbursed, the components of the subsidy expense of those',
5846:'new direct loans be recognized separately among interest subsidy costs, default costs, fees and other collections, and other subsidy costs.',
5847:'the interest subsidy cost of direct loans is the excess of the amount of the loans disbursed over the present',
5848:'value of the interest and principal payments required by the loan contracts, discounted at the applicable treasury interest rate 6',
5849:'percent in this example. in this example, the amount of the loans disbursed is $10,000. the present value of the',
5850:'scheduled interest and principal payments is $9,461. the difference between those two amounts is $539, which is recognized as the',
5851:'interest subsidy cost. the default cost of direct loans results from any anticipated deviation, other than prepayments, by the borrowers',
5852:'from the payment schedules in the loan contracts. the deviations include delinquencies and omissions in interest and principal payments. the',
5853:'default cost is measured at the present value of the projected payment delinquencies and omissions minus net recoveries. see footnote',
5854:'3. in this example, the present value of the projected payment omissions minus net recoveries is $1,603, which is recognized',
5855:'as the default cost. the present value of fee collections is $500, which is recognized as a deduction from subsidy',
5856:'costs. there are no other subsidy costs18 in this example. the subsidy expense of the loans is the sum of',
5857:'the above cost components, which is $1,642, calculated as follows: interest subsidy cost $ 539 fee collections 500 loan default',
5858:'cost 1,603 total subsidy cost $1,642 the loan disbursements are financed by three sources: subsidy payments, borrowing from treasury, and',
5859:'fee collections. the subsidy cost of $1,642 is provided by appropriated funds; and 18the term “other subsidy costs” is explained',
5860:'in the standard for subsidy costs of post1991 direct loans and loan guarantees. page 36 sffas 2 fasab handbook, version',
5861:'20 06/21 sffas 2 the present value of loans, equal to $8,358, is provided by fee collections and funds borrowed',
5862:'from treasury at the treasury interest rate of 6 percent. the fees are collected when the loans are disbursed. because',
5863:'all cash flows, including fee collections, are used to calculate the subsidy cost allowance, the amount of the fee collections',
5864:'is credited to the subsidy cost allowance. the collected amount reduces the amount that has to be borrowed from the',
5865:'treasury. as a result, the subsidy cost allowance is $2,142, which is the sum of the interest subsidy cost of',
5866:'$539 and the default subsidy cost of $1,603. this is $500 more than the total subsidy cost of $1,642. the',
5867:'debt totreasury is $7,858, which is$500 lessthan the present value of the loans of $8,358. table 3 displays the asset',
5868:'and liability balances at the end of fiscal year 1994. table 3: assetsand liabilitiesas of the end of fy1994 in',
5869:'thousands of dollars assets liabilities loans receivable $10,000 debt to treasury $7,858 less: allowance for subsidy costs 2,142 loans receivable,',
5870:'net $7,858 b. subsidy reestimationandamortization 1 subsidy reestimation the accounting standard for post1991 direct loans requires that the subsidy cost',
5871:'allowance for direct loans be reestimated each year as of the date of the financial statements. since the allowance represents',
5872:'the present value of the net cash outflows of the underlying direct loans, the reestimation takes into account all factors',
5873:'that may have affected the estimate of each component of the cash flows, including prepayments, defaults, delinquencies, and recoveries. any',
5874:'increase or decrease in the subsidy cost allowance resulting from the reestimates is recognized as a subsidy expense or a',
5875:'reduction in subsidy expense. the standard further states that reporting the subsidy cost allowance of direct loans and reestimates by',
5876:'component is not required. inappendixa, the basis of the board’s conclusions, it is pointed out that the primary factor that',
5877:'causes changes in the subsidy cost allowance would be default reestimates. the accounting page 37 sffas 2 fasab handbook, version',
5878:'20 06/21 sffas 2 standard provides a number of risk factors and other default cost criteria to be considered in',
5879:'making the default cost estimates and reestimates. in thisillustration, it isoriginallyestimated that 30percent of theloan paymentswould be lost due to',
5880:'defaults for fiscal year 1997 and thereafter. the first reestimate is made early in fiscal year 1995. because so little',
5881:'time has passed since the subsidy was initially estimated, the estimated cash flows are unchanged and the reestimate is zero.',
5882:'this illustration assumes that the interest rates at the time of loan obligation and disbursement are the same, so no',
5883:'reestimate is needed for the difference in interest rates. the second reestimation is performed early in fiscal year 1996, in',
5884:'preparing financial statements for fiscal year 1995. it reestimates the subsidy cost allowance as of the end of fiscal year',
5885:'1994. after evaluatingalloftheriskfactors, it isconcludedthat defaultswould occurin fiscalyear1996, insteadof1997, andthat 60 percent, instead of 30 percent, of the cashflowswouldbelostdue to',
5886:'the defaults in fiscal year 1996 and thereafter. table 4 below displays the present values of the reestimated cash flows',
5887:'discounted to the end of fiscal year 1994. table 4: subsidy cost reestimation: projected cash flows discounted to the end',
5888:'of fy 1994 in thousands of dollars fy p & i payments default losses net cash flows 1995 $2,246 $0',
5889:'$2,246 1996 2,246 1,348 898 1997 2,246 1,348 898 1998 2,246 1,348 898 1999 2,246 1,348 898 pv at 6%',
5890:'$9,461 $4,405 $5,056 the present valueof the reestimated net cash inflowsdiscounted to the endof fiscalyear 1994 is $5,056, compared to',
5891:'the loans’ book value of $7,858, a decrease of $2,802. thus, the subsidy cost allowance is increased by $2,802, from',
5892:'$2,142 to $4,944. the amount of the increase in the subsidy cost allowance which is the decrease in the present',
5893:'value of the loans, resulting from the reestimate, is recognized as subsidy expense reestimates. asubsidy payment of $2,802, equal to',
5894:'the subsidy expense resulting from the reestimate, is received under permanent indefinite authority. the amount is used to repay borrowing',
5895:'from treasury. thus, the outstanding balance of the debt to treasury is reduced by $2,802 to $5,056. furthermore, the direct',
5896:'loan program also receives a payment under permanent indefinite authority to cover the interest accrued on the reestimate subsidy payment',
5897:'of $2,802 for the page 38 sffas 2 fasab handbook, version 20 06/21 sffas 2 period from the end of',
5898:'fiscal year 1994 to the end of fiscal year 1995. the payment is $168, which equals $2,802 times the applicable',
5899:'treasury interest rate of 6 percent. this amount is recognized as interest income reestimates, and the money is used to',
5900:'pay the interest on the $2,802 borrowed from treasury but repaid with the reestimate subsidy. table 5displaysthe asset and liability',
5901:'balancesasof the end of fiscal year1994, adjusted for the reestimate that was calculated early in fiscal year 1996. table 5:',
5902:'assetsand liabilitiesas of the end of fy1994:amountsadjusted for reestimate calculated in early fy1996 in thousands of dollars assets liabilities loans',
5903:'receivable $10,000 debt to treasury $5,056 less: allowance for subsidy cost 4,944 loans receivable, net $5,056 2 subsidy amortization the',
5904:'accounting standard for post1991 direct loans requires that the subsidy cost allowance for direct loans be amortized by the interest',
5905:'method using the interest rate that wasoriginally used to calculatethe presentvalueof thedirectloans when thedirectloans were disbursed. the amortized amount is',
5906:'recognized as an increase or decrease in interest income. the subsidy cost allowance is amortized as a whole, not by',
5907:'components. under the interest method of amortization, the amortization of each period equals the effective interest of the outstandingdirect loansminusthe',
5908:'nominalinterest. foranyperiod forwhichinterest isto bepaid a fiscal year in this example, the effective interest equals the book value which is',
5909:'also the present value of the direct loans at the beginning of the period times the applicable treasury rate. the',
5910:'nominal interest equals the outstanding nominal balance of the loans at the beginning of the period times the interest rate',
5911:'stated in the loan contracts. in the example, the book value of the direct loans, as reestimated, is $5,056. the',
5912:'effective interest for fiscal year 1995 is $303, which equals the book value of $5,056 times the applicable treasury rate',
5913:'of 6 percent. the nominal interest for that year is $400, which equals the nominal principalof the direct loans$10,000timesthe stated',
5914:'rate of 4 percent. the amortized amount is a negative amount of $97 for fiscal year 1995, which equals the',
5915:'effective interest minus the nominal interest. the subsidy cost allowance is increased by $97, from $4,944 to $5,041. the page',
5916:'39 sffas 2 fasab handbook, version 20 06/21 sffas 2 amortized amount isrecognizedasa reductionininterest income. interest incomefor fiscal year 1995',
5917:'is calculated in section c: revenues and expenses.19 the same procedure of amortization is applied for each of the subsequent',
5918:'years so long as the direct loans are outstanding. the collection of interest and principal payments must be properly accounted',
5919:'for together with the amortization, so that the asset and liability balances can be updated. at the end of fiscal',
5920:'year 1995, payments of $2,246 are received from the borrowers as scheduled. of this amount, $400 is interest payments, and',
5921:'the remaining amount of $1,846 is principal repayments. thus, the outstanding nominal balance of the loans is reduced by $1,846',
5922:'to $8,154. the $2,246 received from the borrowers was paid to treasury. although the debt to treasury outstanding at the',
5923:'endof fiscalyear 1994 was$7,858, the amount of $2,802hasbeenpaid off by the subsidy payment for the reestimate. this left $5,056 of',
5924:'debt to treasury. the interest that accrued on this remaining debt to treasury is $303; the interest that accrued on',
5925:'the amount of debt paid off bythe subsidyreestimate is$168, butit iscoveredbytheinterest on thereestimate. therefore, of the $2,246 collected from the',
5926:'borrowers, $303 is interest paid to treasury. the remaining $1,943 is principal repayment to treasury. after the principal repayment, the',
5927:'outstanding debt to treasury becomes $3,113. table 6 belowdisplaysthe asset and liability balances after the amortization and the collection of',
5928:'interest and principal payments at the end of fiscal year 1995. table 6: assetsand liabilitiesafter amortizationat the end of fy1995',
5929:'in thousands of dollars assets liabilities loans receivable $8,154 debt to treasury $3,113 less: allowancefor subsidy costs 5,041 loans receivable,',
5930:'net $3,113 19amortization can alternatively be computed as interest expense other than reestimates $471 minus the sum of interest income',
5931:'from borrowers $400, interest income from reestimates $168, and interest income on fund balance withtreasury $0. these figures are derived',
5932:'in section c below. page 40 sffas 2 fasab handbook, version 20 06/21 sffas 2 c. revenues and expenses the',
5933:'accounting standard for post1991 direct loans requires that interest accrued on direct loans, including amortized interest, be recognized as interest',
5934:'income. interest accrued on debt to treasury is recognized as interest expense. in this example, interest income for fiscal year',
5935:'1995 is $471, which consists of the following items: nominal interest $400 amortized interest 97 interest reestimates 168 total interest',
5936:'income $471 interest expense on the debt totreasuryforthe fiscalyear is also $471, which equalsthe debt to treasury of $7,859 at',
5937:'the beginning of the year times 6 percent. it is financed with the following sources: collections from borrowers $303 interest',
5938:'on reestimated subsidy payments 168 total interest expense $471 costs of administering credit activities, such as salaries, legal fees, and',
5939:'office costs, that are incurred for credit policy evaluation, loan origination, closing, servicing, monitoring, maintaining accounting and computer systems, and',
5940:'other credit administrative purposes, are recognized separately as administrative expenses. administrative expenses are not included in calculating the subsidy costs',
5941:'of direct loans. d. modification of post1991 direct loans the accounting standard on modifications states that the term “modification” means',
5942:'a federal governmentaction,including new legislation oradministrative action, thatdirectly orindirectly alters the estimated subsidy cost and the present value of outstanding',
5943:'direct loans. readers should refer to the text of the standard and toappendixa, basis of the board’s conclusions, for a',
5944:'more detailed definition of modifications. assume that in october 1995, shortly after the close of fiscal year 1995, congress passed',
5945:'legislation to aid the borrowers. the legislation forgave some of the outstanding loans, and extended the maturity of the remaining',
5946:'loans for one additional year to the end of fiscal year 2000. it is estimated that 70 percent of the',
5947:'outstanding amounts, or $5,708, is forgiven. page 41 sffas 2 fasab handbook, version 20 06/21 sffas 2 the legislative action',
5948:'is within the definition of direct modification because it is a federal government action that directly changes the estimated subsidy',
5949:'cost and the present value of outstanding direct loans by altering the terms of existing contracts. the accounting standard on',
5950:'modifications states that with respect to a direct or indirect modification of pre1992 or post1991 direct loans, the cost of',
5951:'modification is the excess of the premodification value of the loans over their postmodification value. the amount of the modification',
5952:'cost is recognized as a modification expense when the loans are modified. the accounting is implemented in the steps described',
5953:'below. 1 calculate the premodification value the premodification value is the present value of the net cash inflows of the',
5954:'direct loans estimated at the time of modification under premodification terms and discounted at the current discount rate. as used',
5955:'in this part and part ii of thisappendix, the current discount rate is the interest rate applicable at the time',
5956:'of modification on marketabletreasury securities with a similar maturity to the remaining maturity of the direct loans under premodification terms',
5957:'or postmodification terms, whichever is appropriate.20 the cash flows of the loans under premodification terms during 199699 are assumed to',
5958:'be the same as the cash flows that were reestimated early in fiscal year 1996 for these years and that',
5959:'are shown in table 4. those cash flows are used to calculate the loans’ premodification value. it is assumed that',
5960:'the treasury rate for a comparable maturity 4 years and applicable to the time of modification is 4.5 percent. as',
5961:'table 7 below shows, the present value of the premodification cash flows discounted at 4.5 percent is $3,223. 20the definition',
5962:'of the current discount rate is provided inappendix c, glossary. [seeappendix e of this volume.] page 42 sffas 2 fasab',
5963:'handbook, version 20 06/21 sffas 2 table 7: premodification value in thousands of dollars, calculated at the current discount rate',
5964:'fy p & i payments default losses net cash flows 1996 $2,246 $1,348 $ 898 1997 2,246 1,348 898 1998',
5965:'2,246 1,348 898 1999 2,246 1,348 898 pv at4.5% $8,058 $4,835 $3,223 2 calculate the postmodification value the loans’postmodification value',
5966:'is the present value of the loans’netcash inflowsestimated at the time of modification under postmodification terms and discounted at the',
5967:'current discount rate for a 5year maturity. the modification forgives 70 percent of the outstanding principal amounts, and requires the',
5968:'remaining 30 percent, or $2,446, be paid back in 5 years instead of 4 years starting with year 1996. the',
5969:'stated interest rate remains at 4 percent. as shown in table 8 below, under the modified terms, the required annual',
5970:'principal and interest payment is $549. table 8: payment schedule of the modified loans in thousands of dollars yearend loan',
5971:'fy payment interest principal balance 1995 $2,446 1996 $549 $97 $452 1,994 1997 549 79 470 1,524 1998 549 61',
5972:'488 1,036 1999 549 41 508 528 2000 549 21 528 0 it is estimated that 20 percent of the',
5973:'scheduled cash inflows of the modified loans would be lost dueto defaults. thecurrent discount rate fora maturityof 5 yearsis5 percent.astable',
5974:'9shows, the present value of the postmodification cash inflows discounted at 5 percent is $1,902. page 43 sffas 2 fasab',
5975:'handbook, version 20 06/21 sffas 2 table 9: postmodification value in thousands of dollars, calculated at the current discount rate',
5976:'fy p & i payments default losses net cash flows 1996 $549 $110 $439 1997 549 110 439 1998 549',
5977:'110 439 1999 549 110 439 2000 549 110 439 pv at5% $2,377 $475 $1,902 3 calculateand recognize the cost',
5978:'of modification the cost of modification is the excess of the premodification value over the postmodification value. since the premodification',
5979:'value is $3,223, and the postmodification value is $1,902, the cost of modification is $1,321, which is recognized as a',
5980:'subsidy expense for modifications. 4 calculate the change in the loans’book value the accounting standard on direct loan modifications requires',
5981:'that when post1991 direct loans are modified, theirexistingbookvalue be changed to an amount equal to the presentvalue of the loans’',
5982:'net cash inflows projected under the modified terms from the time of modification to the loans’ maturity and discounted at',
5983:'the original discount rate the rate that is originally used to calculated the present value of the direct loans, when',
5984:'the direct loans were disbursed. in this example, the original discount rate is 6 percent. astable 10 below shows, the',
5985:'present value of the net cash inflows estimated under the modified terms and discounted at 6 percent is $1,849. page',
5986:'44 sffas 2 fasab handbook, version 20 06/21 sffas 2 table 10: postmodification book value in thousands of dollars, calculated',
5987:'at the original discount rate fy p & i payments default losses net cash flow 1996 $549 $110 $439 1997',
5988:'549 110 439 1998 549 110 439 1999 549 110 439 2000 549 110 439 pvat6% $2,312 $463 $1,849 at',
5989:'the time the modification action is taken, the existing book value of the loans is $3,113. the book value is',
5990:'changed to $1,849. this represents a decrease in book value by $1,264. table11displaystheeffect of themodificationonthebookamounts. thetableshowsthat, dueto the forgiveness, 1',
5991:'the outstanding balance of the loans receivable is reduced from $8,154 to $2,446, 2 the bookvalue isreduced from $3,113 to',
5992:'$1,849, and 3 the subsidy cost allowance, which is the difference between the gross amount and the bookvalue, is changed',
5993:'from $5,041 to $597. table 11: change in the value of modified loans in thousands of dollars gross amount book',
5994:'allowance value before modification after modification $8,154 $2,446 $5,041 $597 $3,113 $1,849 5 calculate the gain or lossand the debt',
5995:'to treasury theaccountingstandardondirect loanmodificationsstatesthat thechangeinbookvalueofboth pre1992 and post1991 direct loans resulting from a direct or indirect modification and the cost',
5996:'of modification will normally differ, due to the use of different discount rates or the use of different measurement methods.',
5997:'any difference between the change in book value and the cost of modification is recognized as a gain or loss.',
5998:'page 45 sffas 2 fasab handbook, version 20 06/21 sffas 2 for post1991 direct loans, the modification adjustment transfer21 paid',
5999:'or received to offset the gain or loss is recognized as a financing source or a reduction in financing source.',
6000:'the change in book value in this case is $1,264, compared to the cost of modification of $1,321. the amount',
6001:'of the modification cost exceeds the change in book value by $57. this excess is recognized as a gain. the',
6002:'credit program receives a subsidy appropriation equal to the cost of modification. since the cost of modification exceeds the decrease',
6003:'in book value by $57, the credit program pays to the treasury a modification adjustment transfer of $57 to offset',
6004:'the excess. this is reported as a reduction in financing source. the $1,321 subsidy appropriation received minus the $57 modification',
6005:'adjustment transfer paid is used to repay debt to treasury. as a result, the debt to treasury is reduced by',
6006:'$1,264 from $3,113 to $1,849. table 12 displays the asset and liability balances after the modification in october 1995. table',
6007:'12:assetsand liabilitiesafter modification in october 1995 in thousands of dollars assets liabilities loans receivable $2,446 debt to treasury $1,849 less:',
6008:'allowance for subsidy cost 597 loans receivable, net $1,849 6 provide disclosures the accounting standard requires that disclosure be made',
6009:'in notes to financial statementsto explain the nature ofthe modification ofdirectloans, thediscountrateused in calculating the modification expense, and the basis',
6010:'for recognizing a gain or loss related to the modification. 21omb instructions provide that if the decrease in book value',
6011:'exceeds the cost of modification, the reporting entity receives from the treasury an amount of modification adjustment transfer equal to',
6012:'the excess; and if the cost of modification exceeds the decrease in book value, the reporting entity pays to treasury',
6013:'an amount of modification adjustment transfer to offset the excess. see omb circulara11. page 46 sffas 2 fasab handbook, version',
6014:'20 06/21 sffas 2 with respect to the modification described above, a footnote disclosure should be made in the financial',
6015:'statements for fiscal year 1996. the disclosure would explain the following:22 a the direct loans in the cohort of fiscal',
6016:'year 1994 were modified in october 1995. the modification was to forgive 70 percent of the outstanding loans and to',
6017:'extend the maturity of the remaining loans to the end of fiscal year 2000. b the modification expense is $1,321,',
6018:'which is the decrease in the present value of the cash flows from that estimated under premodification terms to that',
6019:'estimated under postmodification terms, discounted at the current interest rate of marketable treasury securities of similar maturity. the premodification cash',
6020:'flows were discounted at the current discount rate of 4.5 percent, which was applicable to a maturity of 4 years,',
6021:'and the postmodification cash flows were discounted at the current discount rate of 5 percent, which was applicable to a',
6022:'maturity of 5 years. c as a result of the modification, the book value of the loans receivable decreased by',
6023:'$1,264, from $3,113, as reported at the end of fiscal year 1995, to $1,849. the difference between this decrease in',
6024:'book value and the modification expense, which amounts to $57, is recognized as a gain in the operating statement. e.',
6025:'writeoff of direct loans the accounting standard on writeoff of direct loans requires that when post1991 direct loans are written',
6026:'off, the unpaid principal of the loans be removed from the gross amount of loans receivable. concurrently, the same amount',
6027:'is charged to the allowance for subsidy costs. prior to the writeoff, the uncollectible amounts should have been fully provided',
6028:'for in the subsidy cost allowance through the subsidy cost estimate or reestimates. therefore, the writeoff would have no effect',
6029:'on expenses. direct loansin thisexample that are determined to beuncollectibleare written off asof the endof fiscal year 1996. however, before',
6030:'the writeoff, accounting is performed for the yearend reestimation, the amortization of the allowance for subsidycosts, and the recording of',
6031:'collections and payments. this takes the following steps: 1 the reestimation of the subsidy costallowance in early fiscal year 1997,',
6032:'before the writeoff, the credit program makes a yearend reestimation for the subsidy cost allowance. this reestimation is for the',
6033:'balances calculated as of the end of fiscal year 1995 adjusted for the modification in october 1995 table 12. the',
6034:'result of the 22the disclosure will not be illustrated for other modifications explained in thisappendix. page 47 sffas 2 fasab',
6035:'handbook, version 20 06/21 sffas 2 reestimation indicates that 20 percent of the outstanding loan payments due after the modification',
6036:'were lost because of defaults for fiscal year 1996, and the expected loss would be 30 percent in fiscal year',
6037:'1997 and thereafter. the reestimated loss of 30 percent for fiscal year 1997andthesubsequentyearsis10percentagepointsmorethan thepreviousestimatemade in october 1995, when the loans',
6038:'were modified. astable 13 below shows, the net present value of the reestimated net cash inflows, discounted at the original',
6039:'rate of 6 percent to the end of fiscal year 1995, is $1,670. table 13: subsidy cost reestimation: projected cash',
6040:'flows discounted to the end of fy1995 inthousands of dollars fy p & i payments default losses net cash flows',
6041:'1996 $549 $110 $439 1997 549 165 384 1998 549 165 384 1999 549 165 384 2000 549 165 384',
6042:'pv at6% $2,313 $643 $1,670 based on the reestimate, the direct loans’ book value is reduced by $179, from $1,849',
6043:'to the reestimated present value of $1,670. this is accomplished by adjusting the subsidy cost allowance upward by $179, from',
6044:'$597 to $776. the increase of $179 in the subsidy cost allowance is recognized as subsidy expense reestimates. asubsidy payment',
6045:'of $179 equal to the subsidy cost increase resulting from the reestimate is received underpermanent indefinite authority and isused toreducedebt',
6046:'totreasury.asa result, the debt totreasuryisreducedfrom$1,849to $1,670. furthermore, thedirect loan program also receives a payment under permanent indefinite authority to cover',
6047:'the interest accrued on the increasedsubsidyexpense of $179. thepayment is$11, which equals$179 timesthe applicable treasury interest rate of 6 percent.',
6048:'this amount is recognized as interest income reestimates, and the money is used to pay interest accrued for fiscal year',
6049:'1996 on the $179 borrowed from treasury, that is repaid by the subsidy reestimate. the following table displays the asset',
6050:'and liability balances as of the end of fiscal year 1995, adjusted for the modification in october 1995 and the',
6051:'results of the reestimate that is calculated in early fiscal year 1997. page 48 sffas 2 fasab handbook, version 20',
6052:'06/21 sffas 2 table 14:assetsand liabilitiesas of the end of fy1995:amountsadjusted for modification in october 1995 and reestimates calculated in',
6053:'early fy 1997 in thousands of dollars assets liabilities loans receivable $2,446 debt to treasury $1,670 less: allowance for subsidy',
6054:'cost 776 loans receivable, net $1,670 2 the amortization of the subsidy cost allowance the subsidycost allowance isamortizedasof theend of',
6055:'fiscal year 1996. the amortized amount equals the loans’ effective interest minus their nominal interest. the loans’ effective interest for',
6056:'fiscal year 1996 is $100, which is the loan’s book value of $1,670, as reestimated, times the original discount rate',
6057:'of 6 percent. the loans’ nominal interest is $98, which is the loans’ nominal outstanding balance of $2,446 times the',
6058:'stated interest rate of 4 percent. thus, the amortized amount is $2, which is the effective interest minus the nominal',
6059:'interest. the amortized amount is recognized as interest income, and the allowance for subsidy costs is reduced by $2, and',
6060:'becomes $774. 3 collections and payments of the scheduled annual payment of $549 for fiscal year 1996, payments of $439',
6061:'are received from the borrowers, which equal 80 percent of the scheduled payments. of the amount received, $78isinterest payment which',
6062:'equals80percent oftheloans’balance of $2,446 timesthestated interest rate of 4 percent, and the remaining $361 is principal repayment. the outstanding nominal',
6063:'principal of the loans is reduced by $361 to $2,085. there is unpaid accrued interest of $20 which equals 20',
6064:'percent of the loans’ nominal balance as of the end of fiscal year 1995 times the stated interest rate of',
6065:'4 percent. at this point of time, the loans’ book value is $1,331, which equals the outstanding principal of $2,085,',
6066:'plus interest receivable of $20, minus the subsidy cost allowance of $774. the debt to treasury was $1,849 after the',
6067:'modification in october 1995. of that amount, $179 hasbeen paid off with the subsidy payment received asa result of the',
6068:'reestimate, which reduces thedebtto$1,670; andthe$11 of accrued interest on the$179hasbeenpaid off withthe interest on the reestimate. the interest accrued on',
6069:'the remaining debt is $100, which equals the debt balance of $1,670 times the treasury interest rate of 6 percent.',
6070:'of the $439 in payments received from the borrowers, $100 is used to pay interest due treasury, and the remaining',
6071:'$339 is used to reduce debt totreasury.as a result, the balance of debt to treasury becomes $1,331. page 49 sffas',
6072:'2 fasab handbook, version 20 06/21 sffas 2 table 15 displays the asset and liability balances after the amortization and',
6073:'the recording of collections and payments at the end of fiscal year 1996. table 15:assetsand liabilitiesafter amortizationat the end of',
6074:'fy 1996 in thousands of dollars assets liabilities loans receivable $2,085 debt to $1,331 treasury interest receivable 20 less: allowance',
6075:'for subsidy costs 776 loans & interest receivable, net $1,331 4 writeoff of uncollectible direct loans it is confirmed that',
6076:'nonperforming loans with an outstanding balance of $489 20 percent of the direct loan balance after modification in october 1995',
6077:'are in default and will not be collected. the credit program is authorized to write off those loans, and the',
6078:'unpaid accrued interest of $20. the total amount of the writeoff is $509. thus, the principal is reduced by $489',
6079:'to $1,596, and the interest receivable of $20 is written off. the subsidy cost allowance is reduced by $509, from',
6080:'$774 to $265. the loans’ book value is not changed by the writeoff; it remains $1,331, which equals the remaining',
6081:'principal of $1,596, minus the subsidy allowance of $265. table 16 below shows the asset and liability balances after the',
6082:'writeoff. table 16:assetsand liabilitiesafter the writeoffas of the end of fy1996 in thousands of dollars assets liabilities loans receivable $1,596',
6083:'debt to treasury $1,331 less: allowance for subsidy costs 265 loans receivable, net $1,331 the book value of $1,331, as',
6084:'indicated in the above table, equals the present value of estimated net cash inflows of the remaining outstanding loans. the',
6085:'estimated cash flows and the present value calculations are shown in table 17. page 50 sffas 2 fasab handbook, version',
6086:'20 06/21 sffas 2 in table 17 the amounts in column a are the scheduled annual principal and interest payments.',
6087:'since the principal of the outstanding loans is $1,596 and the remaining life of the loans is 4 years, the',
6088:'required annual payment is $439. the amounts in column b equal the default amounts reestimated at the end of fiscal',
6089:'year 1996 minus the scheduled payments of the loans that have been written off recoveries on those loans are assumed',
6090:'to be zero. the amounts in column c are the projected net cash inflows of the outstanding loans. table 17:',
6091:'projected cash flowsafter loan writeoff: discounted to the end of fy 1996 in thousands of dollars fy p & i',
6092:'payments default losses net cash flows 1996 $ 549 $110 $ 439 1997 549 165 384 1998 549 165 384',
6093:'1999 549 165 384 2000 549 165 384 pv at6% $2,313 $643 $1,670 it should be noted that to calculate',
6094:'the amortization correctly in subsequent periods, the unpaid principal and interest should be written out of the nominal principal balance.',
6095:'the amortization would be distorted if the unpaid amounts were kept in the nominal principal balance and continued to accrue',
6096:'interest. however, direct loan programs may need to keep the nonpaying loans in their accounting records until collection efforts are',
6097:'exhausted and the loans are authorized to be written off. the nonpaying loans and interest accrued on them should be',
6098:'accountedforseparately,so that theamortizationofthe subsidycostallowanceof theperforming loans can be calculated correctly. readers should consult treasury, omb, or gao, for guidance on',
6099:'accounting for nonpaying loans. f. sale of direct loans the accounting standard on sale of loans states that the sale',
6100:'of post1991 and pre1992 direct loans is a direct modification.23 it is assumed that after the close of fiscal year',
6101:'1996, the credit program is authorized to sell the loans. in october 1996, all of the loans are sold with',
6102:'recourse. the net proceeds from the sale 23this assumes that the sales proceeds were not included in the cash flow',
6103:'estimates for the initial subsidy calculation. page 51 sffas 2 fasab handbook, version 20 06/21 sffas 2 amount to $1,100.',
6104:'accounting for the sales takes the steps explained in the paragraphs that follow. 1 recognize the cost of modification the',
6105:'accounting standard on sale of loans requires that the cost of modification be determined on the basis of the premodification',
6106:'value of the loans sold. if the premodification value of the loans sold exceeds the net proceeds from the sale,',
6107:'the excess is the cost of modification, which is recognized as modification expense. the premodification value of the loans sold',
6108:'is the present value of the loans’ net cash inflows estimated under premodification terms and discounted at the current discount',
6109:'rate. the net cash inflows of the direct loans estimated prior to the sale are assumed to be the same',
6110:'as those estimated after the loan writeoff at the end of fiscal year 1996 shown in table 17. it is',
6111:'assumed that the current discount rate for a similar maturity 4 years is 5 percent. to calculate the premodification value,',
6112:'the net cash flows are now discounted at the current discount rate of 5 percent. as table 18 shows, the',
6113:'premodification value of the loans sold is $1,362. table18:premodificationvalueoftheloanssold,asof october1996inthousandsof dollars,calculatedat the current discount rate fy p & i payments',
6114:'default losses net cash flows 1997 $439 55 $384 1998 439 55 384 1999 439 55 384 2000 439 55',
6115:'384 pv at6% $1,557 $195 $1,362 the premodification value oftheloanssold exceeds thenet proceeds of $1,100 from thesaleby $262, which is',
6116:'recognized as a modification expense. the credit program receives an appropriation equal to that amount to coverthe modification cost. the',
6117:'credit program must have an appropriation equal to the modification cost before it can sell the loans. 2 recognize book',
6118:'value gain or loss the accounting standard on sale of direct loans states that the book value loss or gain',
6119:'on a sale of direct loans equals the existing book value of the loans sold minus the net proceeds from',
6120:'the sale. since the book value loss or gain and the cost of modification are calculated on different bases, they',
6121:'will normally differ. any difference between the page 52 sffas 2 fasab handbook, version 20 06/21 sffas 2 bookvalueloss orgainand',
6122:'thecostofmodification is recognized asagain orloss.24 for sales of post1991 direct loans, the modification adjustment transfer paid or received to offset',
6123:'the gain or loss is recognized as a financing source or a reduction in financing source. the existing book value',
6124:'of the loans sold is $1,331. upon the sale, this amount is removed from the books. at the same time,',
6125:'the net proceeds of $1,100 from the sale are recorded. the book value loss is$231. the accounting standard requiresthat any',
6126:'difference between the book value loss and the cost of modification be recognized as a gain or loss. in this',
6127:'case, the cost of modification is $262 and the book value loss is $231. the difference of $31 is recognized',
6128:'as a gain. under the omb instructions, this amount will be paid to treasury as a modification adjustment transfer, and',
6129:'is recorded as a reduction in financing sources. 3 recognize the subsidy expense on recourse the accounting standard on sale',
6130:'of loans requires that for a loan sale with recourse, potential losses under the recourse or guarantee obligations be estimated,',
6131:'and that the present value of the estimated losses from the recourse be recognized as subsidy expense when the sale',
6132:'is made and as a loan guarantee liability. it is estimated that 10 percent of the loans sold with a',
6133:'principal of $160 would default at the end of fiscal year 1997. upon their default, the federal credit program will',
6134:'pay the loan purchaser an amount equal to the defaulted principal plus accrued interest. the estimated future default payment is',
6135:'$166, which equals the principal of the loans that are expected to default plus the 4 percent nominal interest of',
6136:'$6 accrued on those loans for one year. at the time the loans are sold, the interest rate of treasury',
6137:'securities of a similar maturity is 5 percent. the present value of the estimated default payment discounted at 5 percent',
6138:'is $158. this amount is recognized as a subsidy expense and a loan guarantee liability. the credit program receives an',
6139:'appropriation of $158 to cover the guarantee expense, which is paid to the loan guarantee financing account and becomes part',
6140:'of the fund balance of that account. an appropriation must be availableto coverthe subsidyexpensebeforetheloanscan be sold, since the payment to',
6141:'the loan guarantee financing account must be made in order for the guarantee to take effect. 24if there is a',
6142:'book value gain, the gain to be recognized equals the book value gain plus the cost of modification. page 53',
6143:'sffas 2 fasab handbook, version 20 06/21 sffas 2 at thispoint, thecredit programhas$1,489in cash,which wasderivedfromthe followingevents: net proceeds from the',
6144:'loan sale $1,100 appropriation to cover the modification cost 262 appropriation to cover estimated recourse liability 158 less: modification adjustment',
6145:'transfer 31 total in fund balance $1,489 the credit program uses $1,331 to pay off the debt to treasury, which',
6146:'was borrowed to finance the direct loans. the remaining balance of $158 has been paid to the loan guarantee financing',
6147:'account as stated above. that amount, together with interest for one year at 5 percent, is to cover the recourse',
6148:'liability of the loan guarantee financing account. part ii: pre1992 direct loans pre1992 direct loans are direct loans obligated prior',
6149:'to october 1, 1991, and are recorded in liquidating accounts. the accounting standard requires that the losses of pre1992 direct',
6150:'loans be recognized when it is more likely than not that the direct loans will not be totally collected. the',
6151:'allowance oftheuncollectibleamountsshould bereestimated each yearas of the date of the financial statements. in estimating losses, the risk factors discussed in',
6152:'the standard for post1991 direct loans should be considered. the standard further states that restatement of pre1992 direct loans on',
6153:'a present value basis is permitted but not required. all of the amounts used in the text that follows are',
6154:'in thousands of dollars. a. provision for uncollectibleamounts assume that at the end of fiscal year 1994 a credit program',
6155:'has pre1992 direct loans with outstanding principal of $5,000 at 7 percent interest rate, maturing in three years at the',
6156:'end of fiscal year 1997. the program management evaluates the risk factors enumerated in the accounting standard, and estimates that',
6157:'the net lossof principal due to defaultswould be $2,000. thus, the program management provides an allowance of $2,000 for uncollectible',
6158:'amounts, and page 54 sffas 2 fasab handbook, version 20 06/21 sffas 2 charges that amount to bad debt expense.25',
6159:'thus, the book value of the loans is $3,000, as shown below: loans receivable $5,000 less uncollectible amounts 2,000 loan',
6160:'receivable, net $3,000 b. modification of pre1992 direct loans assume that in october 1994, shortly after the close of fiscal',
6161:'year 1994, a decision is made to take the following actions: 1 forgive 50 percent of the amountsdue, 2 lower',
6162:'the interest rate to 4 percent, and 3 extend the due date to the end of fiscal year 2000. these',
6163:'actions are within the definition of direct modification because they are federal government actions that would directly change estimated subsidy',
6164:'costs and the present value of outstanding direct loans by altering the terms of existing contracts. the accounting standard on',
6165:'direct loan modifications states that with respect to a direct or indirect modification of pre1992 direct loans, the cost of',
6166:'modification is the excess of the premodification value of the loans over their postmodification value. the amount of the modification',
6167:'cost is recognized as a modification expense when the loans are modified. accounting for the cost of modification takes the',
6168:'following steps: 1 calculate the premodification value the premodification value is the present value of the net cash inflows of',
6169:'the direct loans estimated at the time of modification under premodification terms and discounted at the current discount rate. it',
6170:'is estimated that under the premodification terms, 40 percent of the cash flows would be lost due to defaults in',
6171:'fiscal year 1995 and each year thereafter. the current discount rate for a maturityof 3 years is 4 percent.astable 19',
6172:'below shows, the present value of the estimated net cash inflows discounted at 4 percent is $3,172. this is the',
6173:'premodification value of the loans. 25this assumes that no allowance for uncollectible amounts was provided prior to fiscal year 1994.',
6174:'if there is an allowance for uncollectible amounts, that allowance should be adjusted to the current estimate and the difference',
6175:'between the current estimate and the existing allowance should be charged to bad debt expense. page 55 sffas 2 fasab',
6176:'handbook, version 20 06/21 sffas 2 table 19: premodification value in thousands of dollars, calculated at the current discount rate',
6177:'fy p & i payments default losses net cash flows 1995 $1,905 $762 $1,143 1996 1,905 762 1,143 1997 1,905',
6178:'762 1,143 pv at 4% $5,287 $2,115 $3,172 2 calculate the postmodification value the loans’postmodification value is the present value',
6179:'of the loans’netcash inflowsestimated at the time of modification under postmodification terms and discounted at the current discount rate. the',
6180:'modification reduces the outstanding principal by 50 percent to $2,500, lowers the nominal interest rate to 4 percent, and extends',
6181:'the maturity by 3 years to the end of fiscal year 2000. as shown in table 20 below, under the',
6182:'postmodification terms, the required payments will be $477 per year for six years. table 20: payment schedule of the modified',
6183:'loans in thousands of dollars yearend loan fy payment interest principal balance 1994 $477 $2,500 1995 477 $100 $377 2,123',
6184:'1996 477 85 392 1,731 1997 477 69 408 1,323 1998 477 53 424 899 1999 477 36 441 458',
6185:'2000 477 19 458 0 taking into consideration that the loans owed by borrowers with poor conditions have been forgiven,',
6186:'it is estimated that only 10 percent of the cash flows would be lost due to defaults. the current discount',
6187:'rate for a maturity of 6 years is 5 percent. as shown in table 21, the present value of the',
6188:'estimated net cash inflows discounted at 5 percent is $2,179. this is the loans’ postmodification value. page 56 sffas 2',
6189:'fasab handbook, version 20 06/21 sffas 2 table 21: postmodification value in thousands of dollars, calculated at the current discount',
6190:'rate fy p & i payments default losses net cash flows 1995 $477 $48 $429 1996 477 48 429 1997',
6191:'477 48 429 1998 477 48 429 1999 477 48 429 2000 477 48 429 pv at 5% $2,421 $242',
6192:'$2,179 3 calculateand recognize the cost of modification the cost of modification is the excess of the loans’ premodification value',
6193:'over the loans’ postmodification value. since the loans’ premodification value is $3,172, and their postmodification value is $2,179, the cost',
6194:'of modification is $993, which is recognized as a subsidy expense for modifications. the credit programreceivesan appropriationof$993to cover themodification expense,',
6195:'which is paid to the financing account. the financing account, in turn, pays this amount to the liquidating accountaspartofitspaymenttoacquiretheloans. asubsidyappropriationequaltothecostof',
6196:'modification must be available before the modification can take place. 4 calculate the change in book value and the gain',
6197:'or loss with respect to modifications of pre1992 direct loans, the standard requires that when pre1992 direct loans are directly',
6198:'modified, they be transferred to a financing account and their book value be changed to an amount equal to their',
6199:'postmodification value. any subsequent modification is treated as a modification of post1991 loans.26 the change in book value of pre1992',
6200:'direct loans resulting from a direct or indirect modification and the cost of modification will normally differ, due to the',
6201:'use of different discount rates or the use of different measurement methods. any difference between the 26 the accounting standard',
6202:'provides that when pre1992 direct loans are indirectly modified, they are kept in a liquidatingaccount; and that their baddebt allowanceis',
6203:'reassessedand adjusted toreflect amounts that would not be collected due to the modification. indirect modifications of pre1992 direct loans are',
6204:'not illustrated. page 57 sffas 2 fasab handbook, version 20 06/21 sffas 2 cost of modification and the change in',
6205:'the loans’ book value due to modification is recognized as a gain or loss. prior to the modification, the book',
6206:'value of the loans was recorded in the liquidating account at $3,000. upon modification, the loansare transferred from the liquidating',
6207:'account to the financing account and recorded at their postmodification value of $2,179. the change in book value is a',
6208:'decrease of $821. since the cost of modification is $993, and the change in book value is $821, the difference',
6209:'of $172 is recognized as a gain. the financing account pays the liquidating account an amount equal to the loans’',
6210:'premodification value of $3,172. this comes from two sources. first, the financing account receives the $993 that is appropriated for',
6211:'the cost of modification. second, the financing account borrows from treasury the remainder, which is $2,179, the postmodification value of',
6212:'the loans. in exchange, the liquidating account transfersto the financing account the loan assets that had a book value of',
6213:'$3,000 before the modification was made. the gain to the liquidating account is $172, which, as shown above, equals the',
6214:'difference between the cost of modification and the change in book value of the loans. post1991 loan guarantees are loan',
6215:'guarantees committed after september 30, 1991. the accounting standards for post1991 loan guarantees are explained and illustrated through the use',
6216:'of an example described below: acohort of 5year termloans that amounts to $10 million in face value is guaranteed bya',
6217:'federal loan guarantee program. the guarantee covers 60 percent of the principal and interest payments. the borrowers are required to',
6218:'pay interest annually at 7 percent, and to repay the principal when the loans mature at the end of the',
6219:'the year. the government agrees to pay a 1 percent interest supplement to the lenders at the end of each',
6220:'year over the loans’ life. the loans are disbursed on september 30, 1994. the federal loan guarantee program collects a',
6221:'fee of 5 percent, when the loans are disbursed. the average interest rate of marketable treasury securities of a similar',
6222:'maturity for the period in which the guaranteed loans are disbursed is 6 percent. all of the amounts used in',
6223:'the text that follows are in thousands of dollars. part iii: post1991 loan guarantees a. reporting the liability of post1991',
6224:'loan guarantees and their subsidy costs theaccounting standard forpost1991loan guaranteesrequiresthatforguaranteed loans outstanding, the present value of estimated net cash outflows',
6225:'of the loan guarantees be page 58 sffas 2 fasab handbook, version 20 06/21 sffas 2 recognized as a liability.',
6226:'disclosure is made of the face value of the guaranteed loans outstanding and the amount of the outstanding balance that',
6227:'is guaranteed. to implement the standard in the example, cash flow estimates and present value calculations are prepared. it isprojectedthat',
6228:'theborrowerswouldpayinterest whendue, butwoulddefaulton 60 percent, or $6,000, of the principal repayments. upon default, the federal credit program will pay60 percent',
6229:'of the defaulted principal, equal to $3,600, to the lenders. it is projected that a net recovery of $2,000 will',
6230:'be realized a year later through the foreclosure and sale of pledged assets. the fees of $500 are received when',
6231:'the guaranteed loans are disbursed. table 22 below shows the estimated cash flows and the present values of the cash',
6232:'flows. table 22: projected cash flows discounted to the time of disbursement in thousands of dollars fee interest net default',
6233:'fy receipts supplements payments recoveries cash flows 1994 $500 $500 1995 $100 100 1996 100 100 1997 100 100 1998',
6234:'100 100 1999 100 $3,600 $3,700 2000 $2,000 2,000 pv at 6% $500 $421 $2,690 $1,410 $1,201 the present value',
6235:'of the estimated net cash outflows of the loan guarantees is $1,201. this amount is recognized as a liability. disclosure',
6236:'is made in a footnote to the financial statements for fiscal year 1994 that guaranteed loans have an outstanding principal',
6237:'of $10,000, and the guaranteed amount is $6,000. asimilar disclosure is made in each year so long as the guaranteed',
6238:'loans are outstanding. theaccounting standard forpost1991loan guaranteesrequiresthatforguaranteed loans disbursed during a fiscal year, a subsidy expense be recognized. the amount',
6239:'of the subsidy expense equals the present value of estimated cash outflows over the life of the guaranteed loans minus',
6240:'the present value of estimated cash inflows, discounted at the interest rate of marketable treasury securities with a similar maturity',
6241:'term, applicable to the period during which the loans are disbursed hereinafter referred to as the applicable treasury interest rate.',
6242:'page 59 sffas 2 fasab handbook, version 20 06/21 sffas 2 in the example, the present value of the cash',
6243:'outflows minus the present value of the cash inflows is $1,201, which is recognized as a subsidy expense. the accounting',
6244:'standard for post1991 loan guarantees requires that for the fiscal year during which new guaranteed loans are disbursed, the components',
6245:'of the subsidy expense of those new loan guarantees be recognized separately among interest subsidy costs, default costs, fees and',
6246:'other collections, and other subsidy costs. the interest subsidy cost of the loan guarantees is the present value of the',
6247:'interest supplement payments to the lenders, which, in this example, is $421. the default cost is the present value of',
6248:'the projected default payments minus the present value of net recoveries. the present value of the default payments is $2,690,',
6249:'and the present value of the net recoveries is $1,410. thus, the default cost is $1,280. the present value of',
6250:'fee collections, which is $500, is recognized as a deduction from subsidy costs. there are no other subsidy costs in',
6251:'this example. the subsidy expense of the loan guarantees is the sum of the above cost components, which is $1,201,',
6252:'calculated as follows: interest subsidy cost $421 fee collections 500 loan default cost 1,280 total subsidy cost $1,201 the loan',
6253:'guarantee program receives an appropriation equal to the subsidy cost of $1,201. whentheguaranteedloansaredisbursed, theappropriatedamountispaidtothe loanguarantee financing account and is recorded',
6254:'in fund balance with treasury. the $500 of fees are collected at the same time. theamount of the feesisdebited tofundbalance',
6255:'withtreasuryand credited to the liability of the loan guarantees. thus, the fund balance israised to $1,701, on whichtreasury pays 6',
6256:'percent interest. the loan guarantee liability is also raised from $1,201 to $1,701. table 23 shows the projected cash flows',
6257:'and their present values after the receipt of fees. page 60 sffas 2 fasab handbook, version 20 06/21 sffas 2',
6258:'table23: projectedcashflowsdiscountedtotheendoffy 1994,afterthereceiptof feesinthousandsof dollars interest default net net cash fy supplements payments recoveries flows 19941995$100$1001996100100199710010019981001001999100$3,6003,7002000$2,0002,000 pv at6%$421$2,690$1,410$1,701 table 24',
6259:'displays the asset and liability balances at the end of the 1994 fiscal year. table 24:assetsand liabilitiesat the end of',
6260:'fy 1994 in thousands of dollars assets liabilities fund balance with treasury $1,701 loan guarantee liability $1,701 b. liability reestimationand',
6261:'interest compounding 1 the reestimation of the liability of loan guarantees the accounting standard for post1991 loan guarantees requires that',
6262:'the liability for loan guarantees be reestimated each year as of the date of the financial statements. since the liability',
6263:'represents the present value of the net cash outflows of the underlying loan guarantees, the reestimation takes into account all',
6264:'factors that may have affected the estimate of each component of the cash flows, including prepayments, defaults, delinquencies, and recoveries.',
6265:'any increase or decrease in the loan guarantee liability resulting from the reestimates is recognized as a subsidy expense or',
6266:'a reduction in subsidy expense. reporting the liability of loan guarantees and reestimates by component is not required. inappendixa, the',
6267:'basis of the board’s conclusions, it is pointed out that the primary factor that causes changes in the subsidies would',
6268:'be default reestimates. the accounting standard provides a number of risk factors and other default cost criteria to be considered',
6269:'in making the default cost estimates and reestimates. page 61 sffas 2 fasab handbook, version 20 06/21 sffas 2 in',
6270:'the example, it is initially estimated that 60 percent of the loans will default on the principal repayments when the',
6271:'loans mature at the end of fiscal year 1999, and that $2,000 will be recovered from the sale of foreclosed',
6272:'assets. the first reestimate is made early in fiscal year 1995. because so little time has passed since the subsidy',
6273:'was initially estimated, the estimated cash flows are unchanged and the reestimate is zero. this illustration assumes that the interest',
6274:'rates at the time of commitment and disbursement are the same, so no reestimate is needed for the difference in',
6275:'interest rates. the second reestimation of the subsidy cost is made early in fiscal year 1996, in preparing financial statements',
6276:'for fiscal year 1995. it reestimates the loan guarantee liability as of the end of fiscal year 1994. it indicates',
6277:'that the initial default estimate is correct. however, it also indicates that the net recovery realized at the end of',
6278:'fiscal year 2000 would be $1,000, rather than $2,000.as shown in table 25, because of the decrease in the amount',
6279:'of recovery, the present value of the net cash outflowsdiscounted to the end of fiscalyear 1994, is $2,406, rather than',
6280:'$1,701, as previously estimated for the end of fiscal year 1994 and shown in table 23. table25: subsidy cost reestimation:',
6281:'projectedcashflowsdiscounted to the endof fy 1994in thousands of dollars interest default net net cash fy supplements payments recoveries flows 1995',
6282:'$100 $100 1996 100 100 1997 100 100 1998 100 100 1999 100 $3,600 3,700 2000 $1,000 1,000 pv at',
6283:'6% $421 $2,690 $705 $2,406 the reestimated liability is $2,406, compared to the existing liability of $1,701, an increase of',
6284:'$705. the increase of $705 is added to the loan guarantee liability and is recognized as a subsidy expense reestimates.',
6285:'the credit program receives a subsidy payment under permanent indefinite authority equal to $705 to cover the cost increase resulting',
6286:'from the reestimate. in addition, a payment of $42 is also received under permanent indefinite authority to cover the interest',
6287:'accrued on the $705 reestimate payment for the period from the end of fiscal year 1994 to the end of',
6288:'fiscal year 1995, and is reported as interest income. the total amount of $747 received is added to the fund',
6289:'balance. page 62 sffas 2 fasab handbook, version 20 06/21 sffas 2 2 interest compounding the accounting standard for post1991',
6290:'loan guarantees requires that interest be accrued and compounded on the liability of loan guarantees at the interest rate that',
6291:'was originally used to calculate the present value of the loan guarantee liabilities when the guaranteed loans were disbursed. the',
6292:'accrued interest is recognized as interest expense. with the passage of time, the present value of the liability of the',
6293:'loan guarantees increases at a rate equal to the rate of interest used to discount the liability. the increase for',
6294:'fiscal year 1995 is $144,whichequalsthebalance of theliabilityof$2,406, asreestimated, multipliedbytheinterest rate of 6 percent. the amount of the increase in the',
6295:'present value of the liability is added to the liability balance, and concurrently it is recognized as interest expense. as',
6296:'a result, the liability becomes $2,550. interest is also accrued on the credit program’sfund balance of $1,701 at 6 percent.',
6297:'the amount of interest accrued is $102, which is added to the fund balance, and is recognized as interest income.',
6298:'as mentioned previously, the payments of $747 to cover the reestimated subsidy cost and the accrued interest are also added',
6299:'to the fund balance. the interest supplement of $100 is paid for fiscal year 1995. both the fund balance and',
6300:'the liability are reduced by $100. as a result of the above transactions, the fund balance becomes $2,450, calculated as',
6301:'follows: page 63 sffas 2 fasab handbook, version 20 06/21 sffas 2 fundbalance atthe end offy1994 $1,701 interest on the',
6302:'fund balance subsidy payment reestimates interest on subsidy payment reestimates 42 interest supplement paid 100 fund balance at the end',
6303:'of fy 1995 $2,450 the loan guarantee liability is also $2,450 at the end of fiscal year 1995, calculated as',
6304:'follows: liability balance at the end of fy 1994, as reestimated $2,406 increase due to passage of time 144 interest',
6305:'supplement paid 100 liability balance at the end of fy 1995 $2,450 table 26 displays the asset and liability balances',
6306:'at the end of the 1995 fiscal year. table 26:assetsand liabilitiesafter interestaccumulationsat the end of fy1995 in thousands of dollars',
6307:'assets liabilities fund balance with treasury $2,450 loan guarantee liability $1,701 c. revenues and expenses the accounting standard for post1991',
6308:'loan guarantees requires that interest accrued on the liability of loan guarantees be recognized as interest expense, and that interest',
6309:'due from treasury on uninvestedfunds be recognized as interest income. interest accrued on debt to treasury, if any, is recognized',
6310:'as interest expense. in the example, interest accrued on the liability of loan guarantees is $144, which equals the reestimated',
6311:'liability of $2,406 times 6 percent. the amount is recognized as interest expense, and the same amount is added to',
6312:'the liability, as explained above. interest income recognized for fiscal year 1995 is also $144, consisting of a interest income',
6313:'of $102 on the fund balance, which equals the fund balance of $1,701 times 6 percent, and b interest income',
6314:'of $42 on the subsidy payment reestimates. costs of administering loan guarantee activities, such as salaries, legal fees, and office',
6315:'costs, that are incurred for credit policy evaluation, origination, closing, servicing, monitoring, maintaining accounting and computer systems, and other credit',
6316:'administrative purposes, are page 64 sffas 2 fasab handbook, version 20 06/21 sffas 2 recognized separately as administrative expenses. administrative',
6317:'expenses are not included in calculating the subsidy costs of loan guarantees. d. modification of post1991 loan guarantees assume that',
6318:'in october 1995, shortly after the close of fiscal year 1995, the loan guarantee programtakesactionto expand itsguaranteefrom60percent oftheoutstanding loan principalto',
6319:'80 percent. this action is within the definition of direct modification because it is a government action that directly changes',
6320:'the estimated subsidy cost and the present value of the loan guarantee liability by altering the terms of the loan',
6321:'guarantee agreement. theaccounting standard on modificationsof loan guaranteesstates thatwith respect to a direct or indirect modification of pre1992 or post1991',
6322:'loan guarantees, the cost of modification is the excess of the postmodification liability of the loan guarantees over their premodification',
6323:'liability. the modification cost is recognized as modification expense when the loan guarantees are modified. the accounting is implemented in',
6324:'the steps described below. 1 calculate the premodification liability the premodification liability is the present value of the net cash',
6325:'outflows of loan guarantees estimated at the time of modification under the premodification terms and discounted at the current discount',
6326:'rate. as used in this part and part iv of thisappendix, the current discount rate is the interest rate applicable',
6327:'at the time of modification on marketabletreasury securities with a similar maturity to the remaining maturityof the guaranteed loansunder premodification',
6328:'termsor postmodification terms, whichever is appropriate.27 the cash flows for the loan guarantees under premodification terms during 19962000 are assumed',
6329:'to be the same as the cash flows that were reestimated early in fiscal year 1996 for these years and',
6330:'that are shown in table 25. assume that the current discount rate for a comparable maturity 4 remaining years is',
6331:'4 percent. as table 27 shows, the present value of the premodification net cash outflows discounted at 4 percent is',
6332:'$2,618. 27the definition of the current discount rate is provided inappendix c, glossary. [seeappendix e of this volume.] page 65',
6333:'sffas 2 fasab handbook, version 20 06/21 sffas 2 table 27: premodification liability in thousands of dollars; calculated at the',
6334:'current discount rate interest default net net fy supplements payments recoveries cash flows 1996 $100 $100 1997 100 100 1998',
6335:'100 100 1999 100 $3,600 3,700 2000 $1,000 1,000 pv at 4% $363 $3,077 $822 $2,618 2 calculate postmodification liability',
6336:'the loan guarantees’ postmodification liability is the present value of the loan guarantees’ net cashoutflowsestimatedatthetimeofmodificationunderpostmodificationtermsand discounted at the current discount',
6337:'rate. the modification increases the guarantee percentage from 60 percent to 80 percent. it is estimated that 60 percent or',
6338:'$6,000 in principal repayments will default. this estimate is not affectedbythemodification. however, withtheexpansion oftheguarantee percentage,thecredit program will pay 80 percent',
6339:'of the defaulted amounts, equal to $4,800, to the lenders. the net cash outflowsestimated under the postmodification termsare discountedatthe currentrate',
6340:'of4 percent. as shown in table 28 below, the present value of the estimated net cash outflows is $3,644. this',
6341:'is the postmodification liability of the loan guarantees. page 66 sffas 2 fasab handbook, version 20 06/21 sffas 2 table',
6342:'28: postmodification liability in thousands of dollars; calculated at the current discount rate interest default net net cash fy supplements',
6343:'payments recoveries flows 1996 $100 $100 1997 100 100 1998 100 100 1999 100 $4,800 4,900 2000 $1,000 1,000 pv',
6344:'at 4% $363 $4,103 $822 $3,644 3 calculateand recognize the cost of modification the cost of modification is the excess',
6345:'of the loan guarantee’spostmodification liabilityover their premodification liability. since the loan guarantees’postmodification liability is$3,644, and their premodification liability is $2,618,',
6346:'the cost of modification is $1,026, which is recognized as a subsidy expense for modifications. 4 calculate the change in',
6347:'the book value of the liability the accounting standard on loan guarantee modifications requires that the existing book value of',
6348:'the liability of modified post1991 loan guarantees be changed to an amount equal to the present value of the net',
6349:'cash outflows projected under the modified terms from the time of modification to the loans’ maturity, and discounted at the',
6350:'original discount rate the rate that is originally used to calculate the present value of the liability, when the guaranteed',
6351:'loans were disbursed. in this example, the original discount rate is 6 percent. the present value of the loan guarantees’',
6352:'net cash outflows estimated under the modified terms and discounted at 6 percent is $3,401. see table 29. page 67',
6353:'sffas 2 fasab handbook, version 20 06/21 sffas 2 table 29: postmodification book value liability in thousands of dollars; calculated',
6354:'at the original discount rate interest default net net cash fy supplements payments recoveries flows 1996 $100 $100 1997 100',
6355:'100 1998 100 100 1999 100 $4,800 4,900 2000 $1,000 1,000 pv at 6% $346 $3,802 $747 $3,401 at the',
6356:'time the modification action was taken, the existing book value of the loan guarantee liability was $2,450 see table 26.',
6357:'the book value is changed to $3,401. this is an increase of $951 in the book value of the loan',
6358:'guarantee liability. 5 recognizeagain or loss the accounting standard on loan guarantee modifications states that the change in the amount',
6359:'of liability of both pre1992 and post1991 loan guarantees resulting from a direct or indirect modification and the cost of',
6360:'modification will normally differ, due to the use of different discount rates or the use of different measurement methods. any',
6361:'difference between the change in liability and the cost of modification is recognized as a gain or loss. for post1991',
6362:'loan guarantees, the modification adjustment transfer28 paid or received to offset the gain or loss is recognized as a financing',
6363:'source or a reduction in financing source. the change in book value in this case is $951, compared to the',
6364:'cost of modification of $1,026. the difference between those two amounts is $75, which is recognized as a gain. the',
6365:'credit program receives a subsidy appropriation equal to the cost of modification. since the cost of modification exceeds the increase',
6366:'in book value by $75, the credit program pays to treasury a modification adjustment transfer of $75 to offset the',
6367:'gain. this is reported as a reduction in financing source. the net effect of the modification isto increase the fund',
6368:'balance of the credit program by $951 to $3,401. 28omb instructions provide that if the increase in liability exceeds the',
6369:'cost of modification, the reporting entity receives from the treasury an amount of modification adjustment transfer equal to the excess;',
6370:'and if the cost of modification exceeds the increase in liability, the reporting entity pays to treasury an amount of',
6371:'modification adjustment transfer to offset the excess. see omb circulara11. page 68 sffas 2 fasab handbook, version 20 06/21 sffas',
6372:'2 table 30 displays the asset and liability balances after the modification in october 1995. table 30:assetsand liabilitiesafter the modification',
6373:'in october 1995 in thousands of dollars assets liabilities fund balance with treasury $3,401 loan guarantee liability $3,401 e. defaultand',
6374:'foreclosure assume that for fiscal year 1996 and thereafter, annual reestimations do not result in any changes in cash flow',
6375:'estimates.29 after accumulating interest at 6 percent and paying the $100 interest supplement annually, the credit program has $3,856 in',
6376:'its fund balance with treasury at the end of fiscal year 1999, prior to paying anydefault claims. table 31 shows',
6377:'annual changes in the fund balance. table 31: fund balance in thousands of dollars interest at the end of fy',
6378:'interest accrued supplement paid fund balance 1995$3,4011996$204$1003,50519972101003,61519982171003,73219992241003,856 at the same time, the program’s loan guarantee liability at the end of',
6379:'fiscal year 1999 is also $3,856, which equals the estimated default claim payment of $4,800 minus $943, the present value',
6380:'of the estimated net recovery from foreclosing assets. it has been estimated that the net recovery would be $1,000 and',
6381:'would be realized at the end of fiscal year 2000. the present value of the net recovery discounted to the',
6382:'end of fiscal year 1999 at the original discount rate of 6 percent is $943. as expected, when the guaranteed',
6383:'loans mature at the end of 1999, $6,000 of the principal is in default. to meet itsguarantee obligation, the loan',
6384:'guarantee program must pay80 percent of the default amount, or $4,800, to the lenders. when the defaults occur, the loan',
6385:'guarantee program 29this assumption is made only to avoid repetitious illustrations. page 69 sffas 2 fasab handbook, version 20 06/21',
6386:'sffas 2 in this example has the options to foreclose property pledged by the borrowers who defaulted, and/or to acquire',
6387:'the loans involved, as a compensation for the default payment. the accounting standard on foreclosure requires that when property is',
6388:'transferred from borrowers to a federal credit program, through foreclosure or other means, as a compensation for losses that the',
6389:'government sustained under post1991 loan guarantees,30 the foreclosed property be recognized as an asset at the present value of its',
6390:'estimated future net cash inflows discounted at the original discount rate. the accounting standard states that at a foreclosure of',
6391:'guaranteed loans, a federal guarantor may acquire the loans involved. the acquired loans are recognized at the present value of',
6392:'their estimated net cash inflows from selling the loans or from collecting payments from the borrowers, discounted at the original',
6393:'discount rate. in this example, the default occurs at the loans’ maturity and virtually no cash inflows can be realized',
6394:'either from selling the loans or collecting payments from the borrowers. the loan guarantee program therefore forecloses the assets. it',
6395:'continues to estimate that the net cash inflow from possessing and selling the foreclosed property will be $1,000 and will',
6396:'be received at the end of fiscal year 2000. the present value of the estimated net cash inflow discounted at',
6397:'the original rate of 6 percent to the end of fiscal year 1999 is $943. theaccounting standard requires that if',
6398:'a legitimate claim existsby a thirdparty orby the borrower to a part of the recognized value of the foreclosed assets,',
6399:'the present value of the estimated claim be recognized as a special contra valuation allowance. in this example, no such',
6400:'claim is assumed. thus, the present value of the foreclosed property is recorded asan asset at $943. concurrently, the amount',
6401:'of $943 iscredited to the loanguarantee liability, so that the loan guarantee liability is increased from $3,856 to $4,800. the',
6402:'default payment of $4,800 is more than the fund balance of $3,856, and the loan guarantee program does not receive',
6403:'cash from selling the foreclosed assets until one year later. the loan guarantee program borrows the difference of $943 from',
6404:'treasury.31 thus, the fund balance is increased by $943 to $4,800, allowing the default payment to be made. 30the accounting',
6405:'standard is the same for property transferred in partial or full settlement of post1991 direct loans, and the application of',
6406:'the standard to direct loans is illustrated by the present example of loan guarantees. 31borrowing from treasury is necessary in',
6407:'this example because all default payments occur at the same time. if they occurred in different years, the default payments',
6408:'in most cases might be covered by the fund balance and the proceeds from selling foreclosed assets. borrowing would only',
6409:'be needed for defaults near the maturity date of the guaranteed loans. page 70 sffas 2 fasab handbook, version 20',
6410:'06/21 sffas 2 when the default payment is made, both the fund balance and the loan guarantee liability are reduced',
6411:'to zero. the credit program takes collection action against the borrowers. however, further recovery is not anticipated.at this time, the',
6412:'loan guarantee program has the following asset and liability balances as shown in table 32. table 32:assetsand liabilitiesat the end',
6413:'of fy 1999 in thousands of dollars assets liabilities foreclosed property $943 debt to treasury $943 f. disposition of the',
6414:'foreclosed property the foreclosed property is initially recorded at the present value of the estimated net cash inflows. until the',
6415:'property issold, the present value of the property must be updated to recognize changes in value due to the passage',
6416:'of time. the recognition is made through an accrual of interest at the original discount rate. the amount of interest',
6417:'accrued for fiscal year 2000 is $57, which equals the book value of the foreclosed property at the beginning of',
6418:'the fiscal year, which is $943, times the original discount rate of 6 percent. this amount of interest is recognized',
6419:'as interest income, and is added to the book value of the foreclosed property.as a result, the book value of',
6420:'the foreclosed property becomes $1,000 at the end of fiscal year 2000. interest is also accrued on the debt to',
6421:'treasury of $943 at the rate of 6 percent. the amount of interest for fiscal year 2000 is $57, and',
6422:'is recognized as interest expense. the amount is added to the debt to treasury.as a result the debt totreasury becomes',
6423:'$1,000 at the end of fiscal year 2000. it is assumed that the property is sold at the end of',
6424:'fiscal year 2000 and the amount of net proceeds from the sale is $1,000. the amount of the net proceeds',
6425:'is used to pay off the debt to treasury. as a result, the asset and liability balances for this cohort',
6426:'of loan guarantees are reduced to zero. areestimation should be performed for the net cash flow of the property after',
6427:'the end of fiscal year 2000. if the reestimation resulted in a reduction of the present value of the property,',
6428:'the amount of the reduction would be recognized as subsidy expense reestimates. as illustrated in preceding sections on reestimates, a',
6429:'payment from permanent indefinite authority would be availabletocoverthe subsidyreestimateexpense. inthiscase,becausethepropertywassold at the estimated time for the estimated amount, there is',
6430:'no reestimate subsidy expense. page 71 sffas 2 fasab handbook, version 20 06/21 sffas 2 part iv: pre1992 loan guarantees',
6431:'pre1992 loan guarantees are loan guarantees committed prior to october 1, 1991, and the liabilities under pre1992 loan guarantees are',
6432:'recorded in liquidating accounts. the accounting standard requires that the liabilities of pre1992 loan guarantees be recognized when it is',
6433:'more likely than not that the loan guarantees will require a future cash outflow to pay default claims. the liability',
6434:'of loan guarantees should be reestimated each year as of the date of the financial statements. in estimating liabilities, the',
6435:'risk factors discussed in the standard for post1991 loan guarantees should be considered. disclosure is made of the face value',
6436:'of guaranteed loans outstanding and the amount guaranteed. thestandard statesthatrestatementofpre1992loan guaranteeson apresentvaluebasis is permitted but not required. all of the',
6437:'amounts used in the text that follows are in thousands of dollars. a. recognition of liabilities assume that a federal',
6438:'credit program guarantees a group of loans and the guarantee was committed prior to october 1, 1991. at the end',
6439:'of fiscal year 1994, the loans have outstanding principal of $5,000 at 7 percent interest rate, maturing in three years.',
6440:'the borrowers are required to pay interest annually and to repay the principal at the end of 1997. the guarantee',
6441:'covers 60 percent of the principal.32 disclosure is made in a footnote to the financial statements for fiscal year 1994',
6442:'that guaranteed loans have an outstanding principal of $5,000, and the guaranteed amount is $3,000. asimilar disclosure is made in',
6443:'each year so long as the guaranteed loans are outstanding. the program management evaluates the risk factors enumerated in the',
6444:'accounting standard, and estimates that $2,500 of the loans’ principal repayments would be defaulted when the loans mature. the program',
6445:'will pay 60 percent of the defaulted amount, equal to $1,500. it is also estimated that the credit program would',
6446:'realize a net recovery of $500 through acquiring and selling pledged assets. thus, the program management recognizes a liability of',
6447:'$1,000, which equals the estimated default payment minus the net recovery. the $1,000 is charged to default expense.33 32aloan guarantee',
6448:'may guarantee both principal and interest payments. in that case, the estimate and recognition of loan guarantee liabilities should be',
6449:'based on defaults on both principal and interest payments. 33this assumes that no liability was previously recognized. if a liability',
6450:'has been recognized for the loan guarantees, the liability should be adjusted to the current estimate, and any increase in',
6451:'liability should be charged to default expense. page 72 sffas 2 fasab handbook, version 20 06/21 sffas 2 b. modification',
6452:'of pre1992 loan guarantees assume that in october 1994, shortly after the close of fiscal year 1994, a decision is',
6453:'made to increase the guarantee from 60 percent of the loan payments to 80 percent. this action is within the',
6454:'definition of direct modification because it is a federal government action that directly changes the estimated subsidy cost and the',
6455:'present value of outstanding loan guarantees by altering the terms of existing contracts. the accounting standard on modifications of loan',
6456:'guarantees states that with respect to a direct or indirect modification of pre1992 or post1991 loan guarantees, the cost of',
6457:'modification is the excess of the postmodification liability of the loan guarantees over their premodification liability. the modification cost is',
6458:'recognized as modification expense when the loan guarantees are modified. accounting for the cost of modification takes the following steps:',
6459:'1 calculate the premodification liability the premodification liability is the present value of the net cash outflows of the loan',
6460:'guarantees estimated at the time of modification under premodification terms and discounted at the current discount rate. it isestimated that',
6461:'under the premodification terms, a default payment of $1,500 would be made at the end of fiscal year 1997, and',
6462:'a net recovery of $500 from the sale of foreclosed assets would be received at the end of fiscal year',
6463:'1998. the current discount rate for a maturity of 3 years is 4 percent. as shown in table 33, the',
6464:'present value of the estimated net cash outflows discounted at 4 percent is $906. this is the premodification liability of',
6465:'the loan guarantees. table 33: premodification liability in thousands of dollars, calculated at the current discount rate default net net',
6466:'cash fy payments recoveries outflow 1995 1996 1997 $1,500 $1,500 1998 $500 500 pv at 4% $1,333 $427 $ 906',
6467:'2 calculate the postmodification liability the loan guarantees’ postmodification liability is the present value of the loan guarantees’ net cashoutflowsestimatedatthetimeofmodificationunderpostmodificationtermsand',
6468:'discounted at the current discount rate. the modification expands the guarantee from 60 percent to 80 percent. it is estimated',
6469:'that $2,500 of the principal repayments will default when the loans mature. with the expansion of the page 73 sffas',
6470:'2 fasab handbook, version 20 06/21 sffas 2 guarantee percentage, the credit program will pay 80 percent of the defaulted',
6471:'amounts, equal to $2,000, to lenders at the end of fiscal year 1997. anet recovery of $500 would be received',
6472:'from selling foreclosed assets at the end of fiscal year 1998. the cash outflows estimated under the postmodification terms are',
6473:'discounted at the current discount rate of 4 percent.as shown in table 34 below, the present value of the estimated',
6474:'net cash outflow is $1,351. this is the postmodification liability of the loan guarantees. table 34: postmodification liability in thousands',
6475:'of dollars, calculated at the current discount rate fy 1995 1996 default payments net recoveries net cash outflows 1997 $2,000',
6476:'$2,000 1998 $500 500 pv at 4% $1,778 $427 $1,351 3 calculateand recognize the cost of modification the cost of',
6477:'modification is the excessof the loan guarantees’ postmodification liability over their premodification liability. since the loan guarantees’postmodification liability is$1,351, and',
6478:'their premodification liability is $906, the cost of modification is $445, which is recognized as a subsidy expense for modifications.',
6479:'asubsidy appropriation of that amount is required before the modification can take place. the appropriated amount is paid to the',
6480:'financing account. 4 calculate the change in the book value of the liability with respect to modifications of pre1992 loan',
6481:'guarantees, the standard requires that when pre1992 loan guarantees are directly modified, they be transferred to a financing account and',
6482:'the existing book value of the liability of the modified loan guarantees be changed to an amount equal to their',
6483:'postmodification liability. any subsequent modification is treated as a modification of post1991 loan guarantees.34 prior to the modification, the liability',
6484:'of the loan guarantees was recorded in a liquidating account at $1,000. upon modification, the loan guarantees are transferred from',
6485:'the liquidating account to a financing account, since this is a direct modification. the liability is recorded in the financing',
6486:'account at the postmodification liability of $1,351. the change in book value of the liability is an increase of $351.',
6487:'34the accounting standard states that when pre1992 loan guarantees are indirectly modified, they are kept in a liquidating account, and',
6488:'that the liability of those loan guarantees is reassessed and adjusted to reflect any change in the liability resulting from',
6489:'the modification. indirect modifications of pre1992 loan guarantees are not illustrated in the appendix. page 74 sffas 2 fasab handbook,',
6490:'version 20 06/21 sffas 2 5 recognize a gain or loss the accounting standard on loan guarantee modifications states that',
6491:'the change in the amount of liability of both pre1992 and post1991 loan guarantees resulting from a direct or indirect',
6492:'modification and the cost of modification will normally differ, due to the use of different discount rates or the use',
6493:'of different measurement methods. any difference between the change in liability and the cost of modification is recognized as a',
6494:'gain or loss. in this case, the cost of modification is $445, and the change in book value is $351.',
6495:'the difference of $94 is recognized as a gain. when the loan guarantees are transferred from the liquidating account to',
6496:'the financing account, the liquidating account pays the financing account an amount equal to the loan guarantees’ premodification liability of',
6497:'$906. the transfer of the loan guarantees has the following effects on theliquidating account: 1the existing liabilityof thetransferred loanguaranteesequalto $1,000',
6498:'is removed, 2 the fund balance is reduced by $906, which is the amount paid to the financing account, and',
6499:'3 a gain of $94 is recognized. the financing account records the liability of the loan guarantees at $1,351, which',
6500:'is their postmodification liability. it also records a fund balance of $1,351, which consists of the $906 received from the',
6501:'liquidating account, and the $445 appropriated to cover the cost of modification. page 75 sffas 2 fasab handbook, version 20',
6502:'06/21 statementoffederalfinancialaccountingstandards3: accounting for inventory and related property status issued october 27, 1993 effective date for fiscal years beginning after',
6503:'september 30, 1993. affects none. affected by sffas 7, amends par. 69, 70, 72 and 7477, plus table 2, summary',
6504:'ofaccounting standards, andtable 1, summary of accounting standardsforfeited property. sffas 32 amends par. 28, 30, 35, 50, 55, 56, 66,',
6505:'71, 78, 91, and 109. sffas 48 amends par. 20, 2226, 42, 44, and 53. related guidance interpretation 7, items',
6506:'held for remanufacture. tr 4, reporting on nonvalued seized and forfeited property. summary this statement provides accounting standards that apply',
6507:'to several types of tangible property, other than long term fixed assets, held by federal government agencies. these accounting standards',
6508:'cover the following assets: inventory i.e., items held for sale; operating materials and supplies; stockpile materials; seized and forfeited property;',
6509:'foreclosed property; and goods held under price support and stabilization programs including nonrecourse loans and purchase agreements. inventory held for',
6510:'sale the standards require reporting of inventory by categories as follows: 1 inventory held for sale, 2 inventory held in',
6511:'reserve for future use, 3 excess, obsolete, and unserviceable inventory, and 4 inventory held for repair. the standards require historical',
6512:'cost or latest acquisition cost valuation of inventory held for sale and inventory held in reserve for future sale. the',
6513:'standards permit use of any other valuation method e.g., standard costwhich reasonablyapproximates historical cost. when historicalcost valuation is used, acceptable',
6514:'cost flow assumptions include the firstin, firstout, weighted average or moving average cost flow assumptions. the standards do not provide',
6515:'for use of the page 1 sffas 3 fasab handbook, version 20 06/21 sffas 3 lastin, firstout cost flow assumption',
6516:'or lower of cost ormarket valuation. when latest acquisition cost valuation is used the inventory is revalued periodically and an',
6517:'allowance account is established for unrealized holding gains and losses. excess, obsolete and unserviceable inventory is to be valued at',
6518:'net realizable value. inventory held for repair is to be valued at either historical cost or latest acquisition cost less',
6519:'an allowance for the estimated repair cost. operating materials and supplies operating materials and supplies are to be accounted for',
6520:'under the consumption method and valued at historical cost or any method approximating historical cost e.g., standard cost or latest',
6521:'acquisition cost. when historical cost valuation is used, acceptable cost flow assumptions include the firstin, firstout, weighted average or moving',
6522:'average cost flow assumptions. in addition, categories for 1 operating materials and supplies held for use, 2 operating materials and',
6523:'supplies held in reserve for future use, or 3 excess, obsolete and unserviceable operating materials and supplies must be reported.',
6524:'an exception to the consumption method is provided when 1 the operating materials and supplies are not significant amounts, 2',
6525:'they are in the hands of the end user for use in normal operations, or 3 it is not costbeneficial',
6526:'to apply the consumption method. in any of these events, the purchases method may be used. stockpile materials stockpile materials',
6527:'are to be accounted for through the consumption method using the historical cost valuation or any method that reasonably approximates',
6528:'historical cost. when historical cost valuation is used, acceptable cost flow assumptions include the firstin, firstout, weighted average or moving',
6529:'average cost flow assumptions. the carrying amount of materials that have suffered 1 a permanent decline in value to an',
6530:'amount less than their cost or 2 damage or decay shall be reduced to the expected net realizable value of',
6531:'the material. seized and forfeited property the market value of seized property other than monetary instruments is to be disclosed',
6532:'in the notesto the financial statements. seized monetary instruments are recognized as assetswith an offsetting liability. this treatment was provided',
6533:'to foster a higher level of control over seized monetary instruments. page 2 sffas 3 fasab handbook, version 20 06/21',
6534:'sffas 3 forfeited property is recognized as an asset upon forfeiture and valued at market value less any liens. revenue',
6535:'recognition is deferred until sale except for monetary instruments. special provisions are made for items seized in satisfaction of tax',
6536:'liabilities and for transfer of the property to government entities for their use. foreclosed property foreclosed property must be classified',
6537:'as post1991 property or pre1992 property to remain consistent with the provisionsof the credit reformact of 1990. post1991 property isassociated',
6538:'with loans or loan guarantees issued after september 30, 1991 and is valued at its net present value. pre1992 property',
6539:'is associated with loans or loan guarantees issued before september 30, 1991 and is valued at the lower of cost',
6540:'or net realizable value. goods held under price support and stabilization programs goods held under price support and stabilization programs',
6541:'e.g., commodities are valued at the lower of cost or net realizable value. for nonrecourse loan amounts the standards provide',
6542:'that allowances be established for expected losses and losses recognized if it is more likely than not that they will',
6543:'occur and the losses are measurable. for purchase agreements, the standards provide that contingent liabilities be established and losses recognized',
6544:'if it is more likelythan not that a loss will occur and that the loss is measurable. page 3 sffas',
6545:'3 fasab handbook, version 20 06/21 sffas 3 table of contents page summary 1 executive summary 5 introduction 8 inventory',
6546:'10 operating materials and supplies 15 stockpile materials 18 seized and forfeited property 20 foreclosed property 24 goods held under',
6547:'price support and stabilization programs 27 appendixa: basis for conclusions 31 page 4 sffas 3 fasab handbook, version 20 06/21',
6548:'sffas 3 executive summary 1. this is the third statement of recommended accounting standards issued by the federal accounting standardsadvisory',
6549:'board referred to as fasab or the board. the standards presented in this document apply to several types of tangible',
6550:'property, other than long term fixed assets, held by federal government agencies. 2. these accounting standards cover the following assets:',
6551:'inventory i.e., items held for sale; operating materials and supplies; stockpile materials; seized and forfeited property; foreclosed property; and goods',
6552:'held under price support and stabilization programs including nonrecourse loans and purchase agreements.1 3. the following tables summarize the provisions',
6553:'in the recommended accounting standards. the tables highlight the major provisions; they should not be substituted for close review of',
6554:'the standards themselves. 1as well as addressing the commodities acquired through price support and stabilization programs, this standard addresses nonrecourse',
6555:'loans and purchase agreements. page 5 sffas 3 fasab handbook, version 20 06/21 sffas 3 table 1: summary ofaccounting standards',
6556:'standard description valuation methods recognition requirements and comments inventory tangible personal property that is 1 held for sale, 2 in',
6557:'the process of production for sale, or 3 to be used in the provision of services for a fee. 1',
6558:'historical cost or any other valuation methods which approximate historical cost 2latestacquisition cost an asset upon receipt of title or',
6559:'goods. as cost of goods sold upon delivery to buyer. for latest acquisition cost, an allowance account will be established',
6560:'equal to the cumulative unrealized holding gains/losses associated with ending inventory. categories will be established for inventory held for sale;',
6561:'inventory held in reserve for future sale; excess, obsolete and unserviceable inventory; and inventory held for repair. operating tangiblepersonal historicalcostorany',
6562:'materials and property to be other valuation supplies consumed in normal methods which operations approximate historical cost. the consumption method',
6563:'shall be applied. however, if operating materials and supplies are 1 not significant amounts, 2 in the hands of the',
6564:'enduser, or 3 if it is not cost beneficial to apply the consumption method, the purchases method may be applied.',
6565:'categories will be established for operating materials and supplies; operating materials and supplies held in reserve for future use; excess,',
6566:'obsolete and unserviceable operating materials and supplies; and operating materials and supplies held for repair. stockpile materials strategic and critical',
6567:'materials held due to statutory requirements for use in national defense, conservation, historical costor any other valuation methods which approximate',
6568:'historical cost as an asset upon receipt of title or goods. as an expense upon disposal, use, or sale. or',
6569:'national emergencies page 6 sffas 3 fasab handbook, version 20 06/21 sffas 3 table 2: summary ofaccounting standards standard description',
6570:'valuation methods recognition requirements and comments seized and forfeited property monetary instruments and propertyacquiredasaresult of forfeiture proceedings market value as',
6571:'an asset upon forfeiture with a deferred revenue established.a as revenue upon sale or disposition of nonmonetary forfeited property. as',
6572:'revenue upon forfeiture for monetary instruments. foreclosed property assets received in satisfaction of a loan receivable or as a result',
6573:'of a claim under a guaranteed or insured loan post1991;b net present value pre1992;c lowerof cost or net realizable value',
6574:'as an asset upon foreclosure commodities items acquired, held, sold or otherwise disposed of to stabilize or support market prices',
6575:'lower of cost or net realizable value as an asset upon receipt. as a loss on farm price support if',
6576:'the net realizable value is less than the cost at acquisition. as an expense upon disposal or use. commodity nonrecourse',
6577:'loans shortterm loans with commodities pledged as collateral the principal amount of the loan less any allowance for expected losses',
6578:'as an asset upon issuance. as a loss on farm price support at reporting date if they are more likely',
6579:'than not and measurable. commodity purchase agreements agreements to purchase commodities ata given price at the option of the seller',
6580:'estimated amount of the contingent loss as a contingent liability if the loss is more likely than not and measurable.',
6581:'aseized property other than monetary instruments would not be recognized as the entity’s asset since it is not owned by',
6582:'the government. however, the market value of seized property should be disclosed in notes to the financial statements. this recognizes',
6583:'that the entity has a fiduciary responsibility for the property. seized monetary instruments are recognized as assets with an offsetting',
6584:'liability to recognize the potential for remission to the owners. this treatment was provided in order to maintain a higher',
6585:'level of financial control over seized monetary instruments. b “post1991” refers to foreclosed property that is received in satisfaction of',
6586:'loans obligated or loan guarantees committed after september 30, 1991. c “pre1992” refers to foreclosed property that is received in',
6587:'satisfaction of loans obligated or loan guarantees committed before october 1, 1991. in addition, any programs or agencies that are',
6588:'specifically exempt from the provisions of the federal credit reform act should follow accounting provisions for “pre1992” property. page 7',
6589:'sffas 3 fasab handbook, version 20 06/21 sffas 3 introduction objective 4. inthisstatement,theboardrecommendsaccountingstandardsforsixassetsofthefederal government and its entities. the first group',
6590:'of assets addressed, those formerly referred to as “inventory,” includes inventory held for sale, operating materials and supplies, stockpile materials,',
6591:'and commodities. the decision to include other assets held for sale resulted in adding two items: 1 seized and forfeited',
6592:'property and 2 foreclosed property. approach 5. followingpublicationofthe board’s exposure draftaccountingfor inventoryandrelated property on january 8, 1993, the board received',
6593:'comments from 44 organizations and individuals. apublic hearing, at which eight people presented oral comments on the exposure draft, was',
6594:'held onapril 21 and 22, 1993. 6. in preparing this statement of recommended standards, the board considered all the comments',
6595:'received and incorporated changes, as appropriate. the issues raised and the specific changes made are discussed inappendixa, “basis of the',
6596:'board’s conclusions.” materiality 7. theboardintends thatthestandards’ applicationbelimitedtoitemsthatarematerial. “materiality” has not been strictly defined in the accounting community; rather, it has',
6597:'been a matter of judgment on the part of preparers of financial statements and the auditors who attest to them.',
6598:'the board relies on the financialaccounting standards board’s fasb concept as modified by certain concepts expressed in governmental auditing standards.',
6599:'presented below is the board’s position on the issue of materiality at this time. 8. the accounting and reporting provisions',
6600:'of the board’s accounting standards need not be applied to immaterial items. the determination of whether an item is immaterialrequiresthe',
6601:'exercise of considerable judgment, based on consideration of specific facts and circumstances. 9. fasb’sstatementofaccountingconceptsno. 2, “qualitativecharacteristicsofaccounting information,” discusses the concept',
6602:'of materiality. according to this statement, the page 8 sffas 3 fasab handbook, version 20 06/21 sffas 3 determination of',
6603:'whether an item is material depends on the degree to which omitting or misstating information about this item makes it',
6604:'probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the',
6605:'omission or the misstatement. this concept includes both qualitative and quantitative considerations. an item that is not considered material from',
6606:'a quantitative standpoint may be considered qualitatively material if it would influence or change the judgment of the financial statement',
6607:'user. 10. the board believes that fasb’s definition of materiality is generally appropriate for use in applyingtheaccountingandreportingprovisionsof theboard’saccounting standards. inthe',
6608:'federalgovernment environment, however, the definition isextended to apply to all financial information included in the annual financial report and, therefore,',
6609:'is not limited to the principal schedules and related notes. 11. in applying the concept of materiality, the needs of',
6610:'the users of the annual financial report should also be considered. in the federal government environment, such needs generally differ',
6611:'from those of users of commercial entity financial statements. for example, federal government financial statement user needs extend to having',
6612:'the ability to assess the efficiency and the effectiveness of the entity’s programs. further, compliance with budget and other financerelated',
6613:'laws, rules, and regulations is also a significant consideration of such users. 12. this is expressed wellin thegovernmentauditingstandardsthe “yellow book”:',
6614:'“in government audits the materiality level and/or threshold of acceptable risk may be lower than in similartype audits in the',
6615:'privatesector because of the public accountability of the entity, the various legal and regulatory requirements, and the visibility and sensitivity',
6616:'of government programs, activities, and functions.” ch. 3, par. 33. 13. while this standard applies to an auditor’s evaluation of',
6617:'materiality rather than a preparer’s, it does provide insight into the factors affecting materiality in the federal government. 14. therefore,',
6618:'the accounting and reporting provisions of the board’s recommended standards should be applied to all items that would influence or',
6619:'change the users’ judgment of the entity’s efficiency and effectiveness and its compliance with laws and regulations in a material',
6620:'manner. 15. in order to emphasize that materiality should be considered in applying all accounting standards, the board has decided',
6621:'to place a notice at the end of each recommended accounting standard. the notice will read as follows: the provisions',
6622:'of this statement need not be applied to immaterial items. page 9 sffas 3 fasab handbook, version 20 06/21 sffas',
6623:'3 effective date 16. theboardrecommendsthattheaccountingstandardspresentedinthisstatementbecome effective for fiscal year ending september 30, 1994, and thereafter. earlier implementation is encouraged. inventory',
6624:'17. definition. “inventory”istangiblepersonalpropertythatis1heldforsale,2inthe process ofproductionforsale,or3tobeconsumedintheproductionofgoodsforsaleor inthe provisionofservicesforafee.theterm“heldforsale”shallbeinterpretedtoinclude itemsfor saleortransferto1entitiesoutsidethefederalgovernment,or2otherfederal entities.the principalobjectiveofthesaleortransferofinventoryistoprovideaproductor serviceforafee thatgenerallyrecoversfullcostoranidentifiedportionofthecost.“other federalentities”may includeentitieswithinthesameorganization/agency.salestransactions maybeexecutedthrough transferoffundsbetweenfederalentities;itisnotessentialthat thetransactionbeanexchangeof goodsforcashorcashequivalents.inaddition,inventory maybeacquiredthroughdonationor',
6625:'barter.inventoryexcludessomeotherassetsheldfor sale,suchas1stockpilematerials,2 seizedandforfeitedproperty,3foreclosed property,and4goodsheldunderpricesupportand stabilizationprograms.theseitems maybesold;however,thepurposeofacquiringthemisnot toprovideaproductoraservice forafee. 18. inventoryshallbecategorizedas1inventoryheldforsale,2inventoryheldinreservefor futuresale, 3excess,obsoleteandunserviceableinventory, or4inventoryheldforrepair. these categories are defined in paragraphs 17,',
6626:'27, 29, and 32 respectively. 19. recognition. inventory shall be recognized when title passes to the purchasing entity or when',
6627:'the goods are delivered to the purchasing entity. upon sale when the title passes or the goods are delivered or',
6628:'upon use in the provision of a service, the related expense shall be recognized and the cost of those goods',
6629:'shall be removed from inventory. delivery or constructive delivery shall be based on the terms of the contract regarding shipping',
6630:'and/or delivery. 20. valuation. inventory shall be valued at either 1 historical cost or 2 a method that reasonably approximates',
6631:'historical cost. 21. 1historicalcostshallincludeallappropriatepurchase,transportationandproductioncosts incurred to bring the items to their current condition and location. any abnormal costs, such as',
6632:'excessive handling or rework costs, shall be charged to operations of the period. donated inventoryshall be valuedat itsfairvalueatthetime of donation.',
6633:'inventoryacquired page 10 sffas 3 fasab handbook, version 20 06/21 sffas 3 through exchange of nonmonetary assets e.g., barter shall',
6634:'be valued at the fair value of the asset received at the time of the exchange. any difference between the',
6635:'recorded amountof theasset surrenderedand thefairvalue of theasset received shallbe recognized as a gain or a loss. 22. the firstin, firstout',
6636:'fifo; weighted average; or moving average cost flow assumptions may beappliedinarrivingat the historicalcost ofending inventory andcostofgoodssold. in addition, any other',
6637:'valuation method may be used if the results reasonably approximate those of one of the above historical cost methods. 23.',
6638:'[paragraphs 2325 were rescinded by sffas 48, opening balances for inventory, operating materials and supplies, and stockpile materials, paragraph 17.',
6639:']2, 3 24. [paragraphs 2325 were rescinded by sffas 48, opening balances for inventory, operating materials and supplies, and stockpile',
6640:'materials, paragraph 17.] 25. [paragraphs 2325 were rescinded by sffas 48, opening balances for inventory, operating materials and supplies, and',
6641:'stockpile materials, paragraph 17.] 26. valuation method for opening balances and exceptions to valuation. a. alternative valuation method for opening',
6642:'balances.3a deemed cost3b is an acceptable valuation method for opening balances of inventory, operating materials and supplies om&s, and stockpile',
6643:'materials when a reporting entity is presenting financial statements, or one or more line items addressed by statement of federal',
6644:'financialaccounting standards sffas 48, opening balances for inventory, operating materials and supplies, and stockpile materials, following generally accepted accounting principles',
6645:'gaap promulgated by the fasab either 1 for the firsttime or 2 after a period during which existing systems could',
6646:'not provide the information necessary for producing such gaapbased financial statements without use of the alternative valuation method. the following',
6647:'should be considered in 2[footnote 2 was rescinded by sffas 48, paragraph 17.] 3[footnote 3 was rescinded by sffas 48,',
6648:'paragraph 17.] 3aopening balances are account balances that exist at the beginning of the reporting period. opening balances are based',
6649:'upon the closing balances of the prior period and reflect the effects of transactions and events of prior periods and',
6650:'accounting policies applied in the prior period. opening balances also include matters requiring disclosure that existed at the beginning of',
6651:'the period, such as contingencies and commitments. 3bdeemed cost is an amount used as a surrogate for initial amounts that',
6652:'otherwise would be required to establish opening balances. page 11 sffas 3 fasab handbook, version 20 06/21 sffas 3 applying',
6653:'an alternative valuation method: i. the alternative valuation method may only be applied in establishing opening balancesforthereportingperiodthatthereportingentity,takenasawhole,makes an unreserved assertion3cthat',
6654:'its financial statements, or one or more line items addressed by sffas 48, are presented fairly in accordance with gaap.',
6655:'ii. the application of this method based on the second condition specified above is available once per reporting entity. iii.',
6656:'reporting entities that meet either condition in paragraph 26a. and elect to apply the alternative valuation method in establishing opening',
6657:'balances permitted by sffas 48 are subject to the reporting requirements under paragraph 13 of statement of federal financialaccounting standards',
6658:'21: reporting corrections of errors and changes in accounting principles. iv. because the reporting entity may have multiple component reporting',
6659:'entities using various valuation methods simultaneously, deemed cost should be based on one, or a combination, of the following valuation',
6660:'methods:3d 1 standard price selling price3e or fair value3f 2 latestacquisitioncost3g 3 replacement cost3h 4 estimated historical cost initial amount',
6661:'5 actual historical cost initial amount 3can unreserved assertion is an unconditional statement. 3dthe methods are not listed in order',
6662:'of preference. 3ethe latest known representative acquisition cost plus authorized cost recovery rate for each item of inventory and relatedproperty.',
6663:'this is establishedannually and isoften referred to as selling price. selling priceand fairvalue mayor may not be identical due to',
6664:'the intragovernmental nature of some sales. 3ffair value is the amount at which an asset or liability could be exchanged',
6665:'in a current transaction between willing parties, other than in a forced or liquidation sale. sffac 7, par. 38 3gthelatestacquisitioncost',
6666:'lac methodprovides that alllikeunits thatare held be valued atthe invoice priceof the most recent like item purchased, less any discounts,',
6667:'plus any additional costs incurred to bring the item to a form and location suitable for its intended use. fasab',
6668:'handbook glossary as of june 30, 2014 3hreplacement cost is the amount required for an entity to replace the remaining',
6669:'service potential of an existing asset in a current transaction at the reporting date, including the amount that the entity',
6670:'would receive from disposing of the asset at the end of its useful life. sffac 7, par. 46 page 12',
6671:'sffas 3 fasab handbook, version 20 06/21 sffas 3 v. disclosurerequirementsareporting entity electingtoapplydeemedcostin establishing opening balances for inventory, om&s, or',
6672:'stockpile materials should disclose this fact and describe the method used in the first reporting period in which the reporting',
6673:'entity makes an unreserved assertion that its financial statements, or one or more line items are presented fairly in accordance',
6674:'with gaap. financialstatements,orasapplicable,reportsonlineitems,of subsequent periods need not repeat this disclosure unless the statements for which deemed cost was applied in',
6675:'establishing opening balances are presented for comparative purposes. no disclosure of the distinction or breakout of amount of deemed cost',
6676:'of inventory, om&s, or stockpile materials included in the opening balance is required. b. exceptions to valuation. an exception for',
6677:'reporting inventory, om&s, and stockpile materials at net realizable value is available for agricultural, mineral, and other products e.g. petroleum',
6678:'with all the following criteria: i. units of which are interchangeable, ii. units of which have immediate marketability, iii. units',
6679:'for which appropriate costs may be difficult to obtain. other categories of inventory 27. inventory held inreserveforfuture sale. inventorystocksmaybemaintainedbecause they',
6680:'are not readily available in the market or because there is more than a remote chance that they will eventually',
6681:'be needed although not necessarily in the normal course of operations. these stocks shall be classified as inventory held in',
6682:'reserve for future sale. inventory held in reserve for future sale shall be valued using the same basis as inventory',
6683:'heldforsale in normaloperations. the valueof inventory heldin reserve forfuturesale shall be either 1 included in the inventory line item on',
6684:'the face of the financial statements with separate disclosure in footnotes or 2 shown as a separate line item on',
6685:'the face of the financial statements. 28. the criteria considered by management in identifying inventory held in reserve for future',
6686:'sale shall be disclosed. examples of factors to be considered in developing the criteria are 1 all relevant costs associated',
6687:'with holding these items including the storage and handling costs, 2 the expected replacement cost when needed, 3 the time',
6688:'required to replenish inventory, 4 the potential for deterioration or pilferage, and 5 the likelihood that page 13 sffas 3',
6689:'fasab handbook, version 20 06/21 sffas 3 asupplyoftheitemswill beavailableinthefuture. the abovelisteddisclosurerequirements are not applicableto theu.s. governmentwide financialstatements. sffas 32 providesfor',
6690:'disclosures applicable to the u.s. governmentwide financial statements. 29. excess, obsolete, and unserviceable inventory. “excess inventory” is inventory stock that',
6691:'exceeds the demand expected in the normal course of operations because the amount on hand is more than can be',
6692:'sold in the foreseeable future and that does not meet management’s criteria to be held in reserve for future sale.',
6693:'“obsolete inventory” isinventory that is no longer needed due to changes in technology, laws, customs, or operations. “unserviceable inventory” is',
6694:'damaged inventory that is more economical to dispose of than to repair. the category “excess, obsolete and unserviceable inventory” shall',
6695:'be either 1 included in the inventory line item on the face of the financial statements with separate disclosure in',
6696:'footnotes or 2 shown as a separate line item on the face of the financial statements. 30. such inventory shall',
6697:'be valued at its expected net realizable value. the difference between the carrying amount of the inventory before identification as',
6698:'excess, obsolete or unserviceable and its expected net realizable value shall be recognized as a loss or gain and either',
6699:'separately reported or disclosed. any subsequent adjustments to its net realizable value or any loss or gain upon disposal shall',
6700:'also be recognized as a loss or gain. the u.s. governmentwide financial statements need not separately report or disclose the',
6701:'difference between the carrying amount of the inventory and its expected not realizable value. 31. management shall develop and disclose',
6702:'in the financial statements its criteria for identifying excess, obsolete and unserviceable inventory. 32. inventory held for repair. inventory held',
6703:'for repair may be treated in one of two ways: 1 the allowance method or 2 the direct method. 1',
6704:'under the allowance method, inventory held for repair shall be valued at the same value as a serviceable item. however,',
6705:'an allowance for repairs contraasset account i.e., repair allowance shall be established. the annual or other period credits required to',
6706:'bring the repair allowance to the current estimated cost of repairs shall be recognized as current period operating expenses. as',
6707:'the repairs are made the cost of repairs shall be charged debited to the allowance for repairs account. 33. 2',
6708:'under the direct method, inventory held for repair shall be valued at the same value as a serviceable item less',
6709:'the estimated repair costs. when the repair is actually made, the cost of the repair shall be capitalized in the',
6710:'inventory account up to the value of a serviceable item.any difference between the initial estimated repair cost and the actualrepair',
6711:'cost shall be either debited or credited to the repair expense account. page 14 sffas 3 fasab handbook, version 20',
6712:'06/21 sffas 3 34. transition to either of these two methods may result in recognizing an accumulated amount of needed',
6713:'repairs that were not previously accounted for. to avoid overstating repair expense for the first period that repair expense is',
6714:'accrued, prior period amounts are to be separately identified or estimated. the estimated amount to repair inventory that is attributable',
6715:'to prior periods shall be credited to the repair allowance under the repair allowance method or to the inventory account',
6716:'under the direct method and reported as an adjustment to equity. disclosure requirements 35. general composition of inventory. basis for',
6717:'determining inventory values; including the valuation method and any cost flow assumptions. changes from prior year’s accounting methods; if any.',
6718:'balances for each of the following categories of inventory; inventory held for current sale, inventory held in reserve for future',
6719:'sale, excess, obsolete and unserviceable inventory, and inventory held for repair unless otherwise presented on the financial statements. restrictions on',
6720:'the sale of material. the decision criteria for identifying the category to which inventory is assigned. changes in the criteria',
6721:'for identifying the category to which inventory is assigned the above listed disclosure requirements are not applicable to the u.s.',
6722:'government wide financial statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. the',
6723:'provisions of this statement need not be applied to immaterial items. operating materialsand supplies 36. definition. “operating materials and supplies”',
6724:'consist of tangible personal property to be consumed in normal operations. excluded are 1 goods that have been acquired for',
6725:'use in constructing real property or in assembling equipment to be used by the entity, 2 stockpile materials, 3 goods',
6726:'held under price stabilization programs, 4 foreclosed property, 5 seized and forfeited property, and 6 inventory. 37. operating materials and',
6727:'supplies shall be categorized as 1 operating materials and supplies held for use, 2 operating materials and supplies held in',
6728:'reserve for future use, or 3 excess, obsolete and unserviceable operating materials and supplies. these categories are defined in paragraphs',
6729:'36, 45, and 47 respectively. page 15 sffas 3 fasab handbook, version 20 06/21 sffas 3 38. recognition. the consumption',
6730:'method of accounting for the recognition of expenses shall be applied for operating materials and supplies. operating materials and supplies',
6731:'shall be recognized and reported asassetswhen produced or purchased. “purchased” isdefined as when title passes to thepurchasing entity. if the',
6732:'contract between the buyer andthe selleris silent regarding passage of title, title is assumed to pass upon delivery of the',
6733:'goods. delivery or constructive delivery shall be based on the terms of the contract regarding shipping and/or delivery. 39. the',
6734:'cost of goods shall be removed from operating materials and supplies i.e., the asset account and reported asan operating expense',
6735:'in the period they are issued to an end user for consumption in normal operations. 40. if 1 operating materials',
6736:'and supplies are not significant amounts, 2 they are in the hands of the end user for use in normal',
6737:'operations, or 3 it is not costbeneficial to apply the consumption method of accounting, then the purchases method may be',
6738:'applied to operating materials and supplies. the purchases method provides that operating materials and supplies be expensed when purchased. 41.',
6739:'an end user is any component of a reporting entity that obtains goods for direct use in the component’s normal',
6740:'operations. any component of a reporting entity, including contractors, that maintains or stocks operating materials and supplies for future issuance',
6741:'shall not be considered an end user. 42. valuation under the consumption method. operating materials and supplies shall be valued',
6742:'on the basis of historical cost or on a basis that reasonably approximates historical cost. the provisions of paragraph 26,alternative',
6743:'valuation method for opening balances, extend to operating material and supplies. 43. historical cost shall include all appropriate purchase and',
6744:'production costs incurred to bring the items to their current condition and location. any abnormal costs, such as excessive handling',
6745:'or rework costs, shall be charged to operations of the period. donated operating materials and supplies shall be valued at',
6746:'their fair value at the time of donation. operating materials and supplies acquired through exchange of nonmonetary assets e.g., barter',
6747:'shall be valued at the fair value of the asset received at the time of the exchange. any difference between',
6748:'the recorded amount of the asset surrendered and the fair value of the asset received shall be recognized as a',
6749:'gain or a loss. 44. the firstin, firstout fifo; weighted average; or moving average cost flow assumptions shall be applied',
6750:'in arriving at the historical cost of ending operating materials and supplies and cost of goods consumed. page 16 sffas',
6751:'3 fasab handbook, version 20 06/21 sffas 3 other categories of operating materials and supplies 45. operating materials and supplies',
6752:'held in reserve for future use. operating materials and suppliesstocksmaybe maintainedbecause they are not readilyavailable in the market or because',
6753:'there is more than a remote chance that they will eventually be needed, althoughnot necessarilyinthenormalcourseofoperations. these stocksshallbeclassified as operating materials',
6754:'and supplies held in reserve for future use. operating materials and supplies held in reserve for future use shall be',
6755:'valued using the same basis as operating materials and supplies held for use in normal operations. the value of operating',
6756:'materials and supplies held in reserve for future use shall be either 1 included in the operating materials and supplies',
6757:'line item on the face of the financial statements with separate disclosure in footnotes or 2 shown as a separate',
6758:'line item on the face of the financial statements. such materials and supplies shall be valued the same as operating',
6759:'materials and supplies held for use in normal operations. 46. the criteria considered by management in identifying operating materials and',
6760:'supplies held in reserve for future use shall be disclosed. examples of factors to be considered in developing the criteria',
6761:'are 1 all relevant costs associated with holding these items includingthestorageandhandlingcosts; 2theexpectedreplacementcost whenneeded; 3 the time required to replenish operating',
6762:'materials and supplies; 4 the potential for deterioration or pilferage; and 5 the likelihood that a supply of the item',
6763:'will be available in the future. 47. excess, obsolete, and unserviceable operating materials and supplies. “excess operating materials and supplies”',
6764:'are operating materials and supplies stocks that exceed the amount expected to be used in normal operations because the amount',
6765:'on hand is more than can beused inthe foreseeable future andthatdonot meetmanagement’scriteria tobe held in reserve for future use. “obsolete',
6766:'operating materials and supplies” are operating materials and supplies that are no longer needed due to changes in technology, laws,',
6767:'customs, or operations. “unserviceable operating materials and supplies” are operating materialsand suppliesthat are physicallydamaged and cannot be consumed in operations.',
6768:'the category “excess, obsolete and unserviceable operating materials and supplies” shall be either 1 included in the operating materials and',
6769:'supplies line item on the face of the financial statements with separate disclosure in footnotes or 2 shown as a',
6770:'separate line item on the face of the financial statements. 48. such operating materials and supplies shall be valued at',
6771:'their estimated net realizable value. the difference between the carrying amount of the operating materials and supplies before identification as',
6772:'excess, obsolete or unserviceable and their estimated net realizable value shall be recognized as a loss or gain and either',
6773:'reported separately or disclosed. any subsequent adjustments to their estimated net realizable value or any loss or gain upon disposal',
6774:'shall also be recognized as a loss or gain. page 17 sffas 3 fasab handbook, version 20 06/21 sffas 3',
6775:'49. management shall develop and disclose in the financial statements its criteria for identifying excess, obsolete, and unserviceable operating materials',
6776:'and supplies. disclosure requirements 50. general composition of operating materials and supplies. basis for determining operating materials and supplies values;',
6777:'including valuation method and any cost flow assumptions. changes from prior year’s accounting methods, if any. balances for each of',
6778:'the categories of operating materials and supplies described above. restrictions on the use of material. decision criteria for identifying the',
6779:'category to which operating materials and supplies are assigned. changes in the criteria for identifying the category to which operating',
6780:'materials and supplies are assigned. the above listed disclosure requirements are not applicable to the u.s. government wide financial statements.',
6781:'sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. the provisions of this statement',
6782:'need not be applied to immaterial items. stockpile materials 51. definition. “stockpile materials” are strategic and critical materials held due',
6783:'to statutory requirements for use in national defense, conservation or national emergencies. they are not held with the intent of',
6784:'selling in the ordinary course of business. the following items are specifically excluded from stockpile materials: 1 items that are',
6785:'held by an agency for sale or use in normal operations see proposed standards for inventory and operating materials and',
6786:'supplies, 2 items that are held for use in the event of an agency’s operating emergency or contingency see proposed',
6787:'standard for operating materials and supplies, and 3 materials acquired to support market prices see proposed standard for goods held',
6788:'under price support and stabilization programs. 52. recognition. the consumption method of accounting for the recognition of expense shall be',
6789:'applied for stockpile materials. these materials shall be recognized as assets and reported when produced orpurchased. “purchase” isdefined asthe date',
6790:'that title passesto the purchasing entity. if the contract between the buyer and the seller is silent regarding passage of',
6791:'title, title is assumed to pass upon delivery of the goods. the cost of stockpile page 18 sffas 3 fasab',
6792:'handbook, version 20 06/21 sffas 3 materials shall be removed from stockpile materials and reported as an operating expense when',
6793:'issued for use or sale. 53. valuation. stockpile materials shall be valued on the basis of historical cost or on',
6794:'a basis that reasonably approximates historical cost. the provisions of paragraph 26,alternative valuation method for opening balances, extend to stockpile',
6795:'materials. historical cost shall include all appropriate purchase, transportation and production costs incurred to bring the items to their current',
6796:'condition and location. any abnormal costs, such as excessive handling or rework costs, shall be charged to operations of the',
6797:'period. the firstin, firstout fifo; weighted average; or moving average cost flow assumptions shall be applied in arriving at the',
6798:'historical cost of stockpile materials. 54. exception to valuation. the carrying amount of materials that have suffered 1 a permanent',
6799:'decline in value to an amount less than their cost or 2 damage or decay shall be reduced to the',
6800:'expected net realizable value of the materials. the decline in value shall be recognized as a loss or an expense4',
6801:'in the period in which it occurs. 55. held for sale. when stockpile materials are authorized to be sold, those',
6802:'materials shall be disclosed as stockpile materials held for sale. the materials authorized for sale shall be valued using the',
6803:'same basis used before they were authorized for sale. any difference between the carrying amount of the stockpile materials held',
6804:'for sale and their estimated selling price shall be disclosed. the cost of stockpile materials shall be removed from stockpile',
6805:'materials and reported as cost of goods sold when sold. any gain or loss upon disposal shall be recognized as',
6806:'a gain or loss at that time. the u.s. governmentwide financial statements need not separately report or disclose any difference',
6807:'between the carrying amount of the stockpile materials held for sale and their estimated selling price. disclosure requirements 56. general',
6808:'composition of stockpile materials. basis for valuing stockpile materials; including valuation method and any cost flow assumption. changes from prior',
6809:'year’s accounting methods, if any. restrictions on the use of materials. balances of stockpile materials in each category described above',
6810:'i.e., stockpile materials and stockpile materials held for sale. decision criteria for categorizing stockpile materials as held for sale. changes',
6811:'in criteria for categorizing stockpile materials as held for sale. 4the decline in value shall be considered an expense if',
6812:'it is an expected decline in the normal course of operations. page 19 sffas 3 fasab handbook, version 20 06/21',
6813:'sffas 3 the above listed disclosure requirements are not applicable to the u.s. government wide financial statements. sffas 32 provides',
6814:'for disclosures applicable to the u.s. governmentwide financial statements for these activities. the provisions of this statement need not be',
6815:'applied to immaterial items. seized and forfeited property 57. asaconsequenceofvariouslaws,certainpropertyisseizedbyauthorizedlawenforcement agencies. in some instances, there may be as many as',
6816:'three government entities involved with seized property. the first is the seizing agency. second, the seizing agency may turn the',
6817:'property over to a custodial agency. third, financial records may be maintained by a “central fund” created to support the',
6818:'seizure activities of multiple agencies.alternatively, the seizing agency may carry out one or both of the custodial agency or central',
6819:'fund roles. 58. the seized assets may be subsequently forfeited to the government through abandonment or administrative or judicial procedures.',
6820:'the forfeited property is then sold, converted for use bythe government, or transferred to other governmental entities. because thisproperty is',
6821:'first seized, then all or a portion of it is forfeited, this standard separately addresses the accounting and reporting for',
6822:'seized property and the accounting and reporting for forfeited property. seized property 59. definition. “seized property” includes monetary instruments, real',
6823:'property and tangible personal property of others in the actual or constructive possession of the custodial agency. 60. recognition. seized',
6824:'property shall be accounted for in the financial records of the entity that is operating as the central fund.5 61.',
6825:'seized monetary instruments shall be recognized as seized assets when seized. in addition, a liability shall be established in an',
6826:'amount equalto the seizedasset value. seized monetary instruments are recognized upon seizure due to 1 the fungible nature of monetary',
6827:'instruments and 2 the high level of control over the assets that is necessary. 5if the central fund is other',
6828:'than the seizing or custodial agency, the latter should maintain sufficient internal records to carry out its stewardship responsibility. page',
6829:'20 sffas 3 fasab handbook, version 20 06/21 sffas 3 62. seized property other than monetary instruments shall be disclosed',
6830:'in the footnotes. the value of the seized property shall be accounted for in an agency’s property management records until',
6831:'the property is forfeited, returned, or otherwise liquidated. 63. valuation. seized property shall be valued at its market value6 when',
6832:'seized or, if market value cannot be readily determined, as soon thereafter as reasonably possible. market value shall be based',
6833:'on the value of the property assuming an active market exists for the property. if no active market exists for',
6834:'the property in the general area in which it was seized, a value in the principal market nearest the place',
6835:'of seizure shall be used. 64. exceptions to valuation. valuation of property seized under the internal revenue code shall be',
6836:'based on the taxpayer’s equity, that is, market value less any thirdparty liens. 65. seized monetary instruments shall be valued',
6837:'at their market value. disclosure requirements 66. explanation of what constitutes a seizure and a general description of the composition',
6838:'of seized property. methods of valuing seizures. changes from prior year’s accounting methods; if any. analysis of change in seized',
6839:'property, including the dollar value and number of seized properties that are 1 on hand at the beginning of the',
6840:'year, 2 seized during the year, 3 disposedof duringtheyear,and 4on hand at theend of the yearaswellasknown liensorotherclaimsagainst the property. thisinformation',
6841:'should be presented bytype of seized property and method of disposition where material. the above listed disclosure requirements are not',
6842:'applicable to the u.s. government wide financial statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements',
6843:'for these activities. forfeited property 67. this subsection defines “forfeited property” and presents the accounting and reporting standards for it.',
6844:'presented below are examples of forfeited property. 6“market value” is the estimated amount that can be realized by disposing of',
6845:'an item through arm’s length transactions in themarketplace or the price usually representative at which bona fide sales have been',
6846:'consummated for products oflikekind,quality, andquantity inaparticular marketatanymomentof time. for investmentsinmarketablesecurities, the term refers to the perunit market price of a',
6847:'security times the number of units of that security held. page 21 sffas 3 fasab handbook, version 20 06/21 sffas',
6848:'3 monetary instruments, intangible property, real property and tangible personal property, property acquired by the government in satisfaction of a',
6849:'tax liability, and unclaimed and abandoned merchandise. 68. definition. “forfeited property” consists of 1 monetary instruments, intangible property, real property,',
6850:'and tangible personal property acquired through forfeiture proceedings; 2 property acquired by the government to satisfy a tax liability; and',
6851:'3 unclaimed and abandoned merchandise. [sffas 7, par. 264269 affect par. 69, 70, 71, and 74 through 77.] 69. recognition',
6852:'and valuation. monetary instruments shall be reclassified from seized monetary instruments to forfeited monetary instruments when forfeited. monetary instruments shall',
6853:'be valued at their market value when a forfeiture judgment is obtained. when the asset is recorded, revenue shall be',
6854:'recognized in an amount equalto the value of the monetary instrument and the associated liability for possible remittance shall be',
6855:'removed. 70. intangible property, real property and tangible personal property shall be recorded with an offsetting deferred revenue when forfeiture',
6856:'judgment is obtained. the property shall be valued at itsfairvalue at the time of forfeiture.avaluation allowance shallbe established for liens',
6857:'or claims from a thirdparty. this allowance shall be credited for the amount of any expected payments to thirdparty claimants.',
6858:'71. forfeited property that cannot be sold due to legal restrictions but which may be either donated or destroyed shall',
6859:'be subject to the disclosure requirements described below. however, no financial value shall be recognized for these items. the u.s.',
6860:'governmentwide financialstatementsarenot subject to thedisclosure requirementsfor forfeitedproperty that cannot be sold due to legal restrictions. 72. revenue from the sale',
6861:'of property shall be recognized when the property is sold. 73. property not held for sale may be placed into',
6862:'official use, transferred to another federal government agency, distributed to a state or local law enforcement agency, or distributed to',
6863:'a foreign government. page 22 sffas 3 fasab handbook, version 20 06/21 sffas 3 74. when a determination is made',
6864:'that property will be distributed in one of the ways described above and not held for sale, the property shall',
6865:'be reclassified as forfeited property held for donation or use. revenue associated with property not disposed of through sale shall',
6866:'be recognized upon approval of distribution and the previously established deferred revenue shall be reversed. 75. revenue shall be classified',
6867:'as it arises from sale or from disposition, and this distinction shall be maintained in the entity’s accounting reports. 76.',
6868:'property acquired by the government in satisfaction of a taxpayer’s liability shall be recorded when title to the property passes',
6869:'to the federal government.at that time, a credit shall be made to the related account receivable. the property shall be',
6870:'valued at its market value less any thirdparty liens. upon sale of the property, revenue shall be recognized in theamount',
6871:'ofthe sale proceedsandthepropertyandthe thirdpartyliensareremovedfrom the accounts. 77. unclaimed and abandoned merchandise shall be recorded with an offsetting deferred revenue when',
6872:'statutory and/or regulatory requirements for forfeiture have been met. the merchandise shall be valued at its market value. upon sale',
6873:'of the merchandise, revenue shall be recognized in the amount of the sale proceeds and the merchandise and the deferred',
6874:'revenue are removed from the accounts. disclosure requirements 78. composition of forfeited property. methods of valuing forfeited property. restrictions on',
6875:'the use or disposition of forfeited property. changes from prior year’s accounting methods, if any. analysis of change in forfeited',
6876:'property providing the dollar value and number of forfeitures that 1 are on hand at the beginning of the year,',
6877:'2 are made during the year, 3 are disposed of during the year and the method of disposition, and 4',
6878:'are on hand at the end of the year. this information would be presented by type of property forfeited where',
6879:'material. if available, an estimate of the value of property or funds to be distributed to federal, state and local',
6880:'agencies in future reporting periods. the above listed disclosure requirements are not applicable to the u.s. government wide financial statements.',
6881:'sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. the provisions of this statement',
6882:'need not be applied to immaterial items. page 23 sffas 3 fasab handbook, version 20 06/21 sffas 3 table 1:',
6883:'summary of accounting standard—forfeited property category of property method of disposition valuation method recognized as assets recognized as revenue monetary',
6884:'instruments sale; proceeds credited to entity’s fund market value upon seizure upon obtaining forfeiture judgment intangible property and real and',
6885:'tangible personal property acquired by forfeiture proceeding sale transferred, distributed, or held for internal use market value market value upon',
6886:'obtaining forfeiture judgment upon obtaining forfeiture judgment upon sale upon obtaining approval to transfer, distribute or use internally property acquired',
6887:'to satisfy tax liability sale; proceeds credited to treasury general fund market value less amount of liens upon obtaining title',
6888:'to property upon sale of property unclaimed/ abandoned merchandise sale; proceeds used to reimburse other funds; excess credited to treasury',
6889:'general fund market value upon meeting statutory and/or regulatory requirements upon sale foreclosed property 79. definition. the term “foreclosed property”',
6890:'means any asset received in satisfaction of a loan receivable or as a result of payment of a claim under',
6891:'a guaranteed or insured loan excluding commodities acquired under price support programs. all properties included in foreclosed property are assumed',
6892:'to be held for sale. 80. in accordancewiththe federalcreditreformactof1990, theremainder ofthis standard will refer to specific provisions for pre1992 foreclosed',
6893:'property and post1991 foreclosed property. “pre1992 foreclosed property” refers to property associated with direct loans obligated or loan guarantees committed',
6894:'before october 1, 1991. “post1991 foreclosed property” refers to property associated with direct loans obligated or loan guarantees committed after',
6895:'september 30, 1991. the distinction is necessary because for budget purposes, the cash flows associated with post1991 direct loans and',
6896:'loan guarantees, including the cash flows associated with post1991 foreclosed property, must be measured on apresent valuebasis. however, pre1992foreclosedpropertyneednot be',
6897:'valued on this basis. additionally, any programs that are specifically exempt from the use of present value page 24 sffas',
6898:'3 fasab handbook, version 20 06/21 sffas 3 techniques for determining the costs of direct loans and loan guarantees shall',
6899:'rely on the accounting principles provided for pre1992 foreclosed property.7 81. valuation of foreclosed property. post1991 foreclosed property is valued',
6900:'at the net present value of the projected future cash flows associated with the property. pre1992 foreclosed property is recorded',
6901:'at cost and adjusted to the lower of cost or its net realizable value; any difference is carried in a',
6902:'valuation allowance. both of these methods are described further below. for either post1991 or pre1992 foreclosed property, other valuation methods',
6903:'may be used as an approximation for the above methods if no material differences in valuation will result. 82. net',
6904:'present value. the first step in determining net present value is projecting the future cash flows associated with the property.',
6905:'the projected future cash flows shall include estimatesof 1 the sales proceeds, 2 rent, management expense, and repair costsduring the',
6906:'holding period, and 3 selling expenses e.g., advertising and commissions. in estimating the sales proceeds, the entity’s historical experience in',
6907:'selling property and the nature of the sale shall be considered. for instance, market value based on sales between willing',
6908:'buyersand sellersmaynot be appropriate for propertiesto be disposedof in aforced or liquidation sale. if the entity has historically been unable',
6909:'to realize the fair value of property, this shall be considered in estimating sales proceeds. 83. the second step is',
6910:'to discount these cash flows to their present value. in order to place the projected cash flows on a present',
6911:'value basis, a discount interest rate must be selected. the discount rates used shall be the same rates that were',
6912:'used to discount the cash flows of the related loans or guarantees. 84. following foreclosure, the net present value measured',
6913:'in a manner consistent with the measurement at the time of foreclosure shall be adjusted periodically to recognize both changes',
6914:'in the expected future cash flows and for accrual of interest due to the passage of time. any adjustments to',
6915:'the carrying amounts shall be included in the presentation of “interest income” and the reestimate of “subsidy expense.”8 85. netrealizablevalue.',
6916:'pre1992foreclosedpropertyheldforsaleshouldbe reportedinthe entity’s financial statements at expected net realizable value. the expected net realizable value shall be based on an',
6917:'estimate of the market value of the property adjusted for any expected losses and any other costs of the sale.',
6918:'the estimate of market value shall be 7section 506 of the federal credit reformact exempts specific agencies, such as the',
6919:'federal deposit insurance corporation and thetennessee valley authority. 8see fasab exposure draft no. 2, accounting for direct loans and loan',
6920:'guarantees, september, 1992. page 25 sffas 3 fasab handbook, version 20 06/21 sffas 3 based on 1the market value of',
6921:'the propertyif anactivemarket exists; 2 the market value of similar properties if no active market exists; or3 areasonable forecast of',
6922:'expected cash flows adjusted for estimates of all holding costs, including any cost of capital. in addition to considering market',
6923:'value, the expected net realizable value shall consider the entity’s historical experience in disposing of foreclosed properties; i.e., if the',
6924:'entity is typically unable to obtain market value for properties, the expected net realizable value shall be adjusted to be',
6925:'consistent with historically experienced losses. additionally, if the entity will not be able to sell the property under normal market',
6926:'conditions or is forced to sell the property within a given time, this factor shall be considered in arriving at',
6927:'net realizable value. 86. iftheexpectednetrealizablevalueis less than thecost,9aloss hasoccurred. thisloss shallbe chargedto operations, anda valuationallowance shallbe established. if theasset’s net',
6928:'realizable value subsequently increases or decreases, this amount shall be credited or charged to results of operations and the valuation',
6929:'allowance adjusted. however, the asset value shall not be adjusted above cost. 87. assets subject to claims of other parties.',
6930:'if the property is taken subject to claims of the lender, debtor, or other party, these claims shall be accounted',
6931:'for in a valuation allowance. these claims can be in the form of a lien or a residual interest of',
6932:'the debtor or lender, etc. for post1991 foreclosed property, these claims shall be recorded at their net present value at',
6933:'the time of foreclosure. the discount rate applied shall be the same rate that applies to the related foreclosed property.',
6934:'for post1991 foreclosed property, any periodic changes in the net present value of the claim shall be offset by a',
6935:'charge or a credit to “interest income” and the reestimate of “subsidy expense,” as appropriate under the standards for direct',
6936:'loans and loan guarantees. for pre1992 foreclosed property, these claims shall be recorded at the expected amount of the cash',
6937:'required to settle the claims. 88. receipts and disbursements during the holding period for post1991 foreclosed property. any receipts or',
6938:'disbursements associated with acquiring and holding post1991 foreclosed property shall be charged or credited to foreclosed property. this shall include',
6939:'rental receipts, maintenance and repair expense, advertising costs, and anyother elements of the projected cash flows considered in arriving at',
6940:'the net present value. 89. sale of foreclosed property. upon sale, any difference between the net carrying amount of foreclosed',
6941:'property and the net proceedsof the sale shall be recognized as a component of operating results. for post1991 foreclosed property,',
6942:'interest income shall be accrued from the previous periodic adjustment in the carrying amount up to the sale date. the',
6943:'9cost is the carrying amount of the loan at the time of foreclosure or, for a loan guarantee, the amount',
6944:'of the claim paid. page 26 sffas 3 fasab handbook, version 20 06/21 sffas 3 difference between the adjusted carrying',
6945:'amount and the net sales proceeds shall be recognized as a reestimate of “subsidy expense.” for pre1992 foreclosed property, this',
6946:'difference shall be recognized as a gain or a loss on the sale of foreclosed property. 90. assets converted from',
6947:'heldforsale assets to operating assets.assets not sold but placed into operation shall be removed from foreclosed property when such action',
6948:'is taken. if reimbursement for the transfer of assets from one program to another is made, the proceeds from the',
6949:'transfer shall be treated in the same manner as a sale to a thirdparty. disclosure requirements 91. valuation basis used',
6950:'for foreclosed property. changes from prior year’s accounting methods, if any. restrictions on the use/disposal of the property. balances in',
6951:'the categories described above. number of properties held and average holding period by type or category. number of properties for',
6952:'which foreclosure proceedings are in process at the end of the period. the above listed disclosure requirements are not applicable',
6953:'to the u.s. government wide financial statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for',
6954:'these activities. the provisions of this statement need not be applied to immaterial items. goods held under price supportand stabilization',
6955:'programs 92. definition. goods acquired under price support and stabilization programs are referred to as commodities. “commodities” are items of',
6956:'commerce or trade having an exchange value. they are acquired, held, sold, or otherwise disposed of to satisfy or help',
6957:'satisfy economic goals. 93. in conducting price support operations, the money is frequently disbursed in the form of “nonrecourse loans.”',
6958:'recipients of such loans pledge specific farm commodities as collateralfortheloansand havethe alternativesofredeeming theloansrepaying themwith interest or surrendering the commodities in',
6959:'exchange for the outstanding loan balance. 94. besides acquiring commodities through surrender of collateral for nonrecourse loans, an entity may',
6960:'acquire commodities by a purchase settlement. apurchase settlement is exercised on the basis of a purchase agreement between a producer',
6961:'and the commodity page 27 sffas 3 fasab handbook, version 20 06/21 sffas 3 credit corporation ccc. on the basis',
6962:'of the agreement, a producer has the option to sell commodities to ccc and receive full payment for the commodity',
6963:'at the price support rate. the amount of the purchasesettlement iscalculated by multiplying the price support rate by the number',
6964:'of units purchased by the ccc. support price rates are set by law. 95. because nonrecourse loans and purchase agreements',
6965:'are closely associated with the acquisition of the actual commodities, the three components of the price support program are addressed',
6966:'in this accounting standard. 96. recognition. nonrecourse loans shall be recognized as assets when the loan principal is disbursed. these',
6967:'loans shall be recorded at the amount of the loan principal. interest income shall be recognized as it is earned',
6968:'and an interest receivable established. 97. purchase agreement settlements are executed at the option of the producer seller. this creates',
6969:'an uncertainty regarding losses to be incurred by the purchaser. at financial statement dates a loss shall be recognized if',
6970:'information indicates that it is probable that a losshasbeenincurredon purchase agreementsoutstandingandtheamountof thelosscan be reasonably measured. the amount of the loss',
6971:'shall be estimated and may be based on the contract price and the expected net realizable value of the commodities',
6972:'to be acquired. 98. if the contingent loss is not recognized because it is less than probable or it is',
6973:'not reasonably measurable, disclosure of the contingency shall be made if it is at least reasonably possible that a loss',
6974:'may occur. 99. commodities shall be recognized as assets and reported on the face of the financial statements upon the',
6975:'producer’s surrender of title to satisfy a nonrecourse loan or upon purchase by the agency. 100. revenue shall be recognized',
6976:'upon the sale of commodities.at the time ofsale, the carrying amountof thecommoditiessoldshall be removed fromcommoditiesand reportedascost of goods sold. 101.',
6977:'the carrying amount of commodities held for other purposes shall be removed from the commodities asset account and reported as',
6978:'an expense upon transfer of the commodity. 102. valuation. all nonrecourse loans shall be valued at the loan amount. losses',
6979:'on nonrecourse loans shall be recognized when it is more likely than not that the loans will not be totally',
6980:'collected. the phrase “more likely than not” means more than a 50 percent chance of loss occurrence. the loan amount',
6981:'shall be preserved in the asset account as the gross value of the loan. when the loss is recognized, a',
6982:'valuation allowance, “allowance for losses”, a contraasset shall be established to reduce the gross value to its expected net realizable',
6983:'value. the allowance shall be reestimated on each financial reporting date. page 28 sffas 3 fasab handbook, version 20 06/21',
6984:'sffas 3 103. the liability for losses on purchase agreements shall be valued at the net of the contract price',
6985:'and the net realizable value of the commodities described in the purchase agreement.10 104. at the time of acquisition and',
6986:'for financial statement purposes, all commodities shall be valued at the lower of cost or net realizable value. 105. the',
6987:'cost for commodities acquired via a nonrecourse loan settlement is the amount of the loan principal excluding interest, processing and',
6988:'packaging costs incurred after acquisition, plus other costs e.g., transportation incurred in taking title to the commodity. 106. the cost',
6989:'for commodities acquired via a purchase settlement is the unit price agreed upon in the purchase agreement multiplied by the',
6990:'number of units purchased by ccc plus other costs e.g., transportation incurred in taking title to the commodity. 107. forfinancialstatement',
6991:'purposes,anyadjustmentsnecessarytoreducethecarryingamount of commodities to the lower of cost or net realizable value shall be recognized as a loss on farm',
6992:'price support and reported in the current period. the adjustment to the carrying amount shallbe recorded ina commodityvaluation allowance. recoveriesoflossesmaybe',
6993:'recognized up to the point of any previously recognized losses on the commodities, and the commodity valuation allowance reduced accordingly',
6994:'in the current period. 108. forcost determination, anyofthefollowingcost flowassumptionsmaybeappliedinarriving at inventory balances and cost of goods sold or transferred: firstin,',
6995:'firstout fifo; weighted average; moving average; and specific identification. disclosure requirements 109. l basis for valuing commodities; including the valuation',
6996:'method and any cost flow assumptions. changes from prior year’s accounting methods, if any. restrictions on the use, disposal, or',
6997:'sale of commodities an analysis of change in the dollar value and volume of commodities, including those 1 on hand',
6998:'at the beginning of the year, 2 acquired during the year, 3 disposed of during the year by method of',
6999:'disposition, 4 on hand at the end of the year, 5 on hand at year’s end and estimated to be',
7000:'donated or transferred during the coming period, and 6 that may be received as a result of surrender of collateral',
7001:'related to nonrecourse loans outstanding. the analysis should also show the dollar value and volume of purchase agreement commitments. 10contract',
7002:'price is the amount the government would be committed to pay in exchange for the commodities. page 29 sffas 3',
7003:'fasab handbook, version 20 06/21 sffas 3 the above listed disclosure requirements are not applicable to the u.s. government wide',
7004:'financial statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. the provisionsof thisstatement',
7005:'need not be appliedtoimmaterial items. page 30 sffas 3 fasab handbook, version 20 06/21 sffas 3 appendixa: basis of the',
7006:'board’s conclusions 110. thisappendix discusses the substantive comments that the board received from respondentstotheexposuredraft, accounting for inventory and related property,issuedin',
7007:'january 1993. theappendix explains the board’s conclusions on issues raised by the respondents. aseparate section is identified for each of',
7008:'the six recommended standards. this statement may be affected by later statements. the fasab handbook is updated annually and includes',
7009:'a status section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the',
7010:'authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can',
7011:'review the basis for conclusions of the amending statement for the rationale for each amendment. inventory 111. several respondents questioned',
7012:'the need for the various inventory categories proposed; inventory held in reserve for future sale; and excess, obsolete and unserviceable',
7013:'inventory. respondents and speakers stated that 1 the requirement to segregate inventory and inventory held in reserve for future sale',
7014:'could result in arbitrary and subjective balance sheet allocations, 2 the category for excess, obsolete and unserviceable is unnecessary and',
7015:'3 it is not costeffective to modify systems to capture this data. however, other respondents supported the categories and indicated',
7016:'that they would result in more meaningful information. 112. based on the comment letters received and the presentations at the',
7017:'public hearing, the objections seemed to be based on the belief that the board intended to develop rigid guidelines for',
7018:'the categorization of inventory. however, it is apparent that these or similar categories are used internally by organizations. the board',
7019:'is merely attempting to improve disclosure related to these categories. the board concluded that the four categories should be maintained.',
7020:'the same issue was raised with regard to operating materials and supplies and the same conclusion was reached. 113. severalrespondentsopposedidentifying',
7021:'the holdingcostsassociated with inventoryheld in reserve for future sale. they indicated that the information hasno apparent utilityvalue, that it was',
7022:'virtually impossible to compute and maintain incremental holding costs for the reserve, and that disclosure would not provide managers with',
7023:'useful information to make relevant decisions. they also indicated that this requirement would be too subjective and difficult to audit.',
7024:'the board discussed this issue and concluded that the identification of holding cost was a broad issue and deserving of',
7025:'more detailed treatment than could be afforded in the inventory standard. the board agreed to drop the disclosure requirement page',
7026:'31 sffas 3 fasab handbook, version 20 06/21 sffas 3 and to defer this issue until a later project on',
7027:'cost issues. the same issue was raised with regard to operating materials and supplies and the same conclusion was reached.',
7028:'114. in the exposure draft, the board requested opinions on two presentation formats for cost of goods sold and the',
7029:'change in the allowance for holding gains and losses under latest acquisition cost lac par. 87. the following two cost',
7030:'of goods sold computations under the latest acquisition cost method where presented: proposed presentation: alternative presentation: appendix a appendix b',
7031:'cost of goods sold: beginning inventory at lac purchases cost of goodsavailable for sale less: ending inventory at lac cost',
7032:'of goods sold cost of goods sold: beginning inventory at lac less:allowance purchases cost of goodsavailable for sale less: ending',
7033:'inventory at lac less:allowance cost of goods sold nonoperating change change in the allowance for unrealized holding gain/loss on inventory',
7034:'115. most respondents to the question regarding the two alternative cost of goods sold computations indicated a preference for the',
7035:'alternative presentation fromappendix b. these respondents stated that changes in cost were “operating” in nature and should be included in',
7036:'the operating results. it was also noted that comparability would be improved under the alternative treatment since cost of goods',
7037:'sold would approximate historical cost. two respondents provided examples of the “distortion of cost of goods sold” that may result',
7038:'under the proposed presentation. the examples showed that cost of goods sold as calculated under the first proposed treatment appendixaof',
7039:'the ed might actually be less than it would have been under historical cost. 116. in reviewing the responses, it',
7040:'was noted that the “nonoperating change” seems to have been confused by some respondents with the “unrealized holding gain/loss” for',
7041:'the period. the full title, “nonoperating change change in the balance of theallowance for unrealized holding gains/losses” is, although cumbersome,',
7042:'more descriptive. the change in the balance is made up of decreases, due to liquidation of inventory or cost decreases,',
7043:'and increases, due to holding more inventory or cost increases. the net change should not be confused with the “unrealized',
7044:'holding gain/loss” for the period. 117. the board, after much discussion, decided to adopt the alternative presentation appendix b of',
7045:'the ed. this would avoid 1 confusion as to the significance of the “nonoperating change” and 2 distortion of the',
7046:'cost of goods sold. in addition, for those who wish to know page 32 sffas 3 fasab handbook, version 20',
7047:'06/21 sffas 3 the change in the allowance account, the board decided that line items should be included in the',
7048:'calculation of the cost of goods sold to show the beginning and ending balances. 118. some respondents believed that the',
7049:'board should adopt the lower of cost or market lcm rule traditional underaccounting research bulletin arb 43 for valuing inventory.',
7050:'respondents supporting the lcm rule stated that: it provides a basis for measuring the utility of inventory, and the operating',
7051:'performance financial reporting objective seems to require that matching or assigning revenues and expenses to the appropriate period be a',
7052:'primary concern. 119. in evaluating the lcm rule the board considered some of the unique facets of the federal environment:',
7053:'pricingisoftenbasedonfullcostrecoveryregardlessofchangesinmarketpricing,and managers are often required to stock inventory based on legislative or mission concerns that are not driven by profit',
7054:'maximization therefore, cost fluctuations are not as relevant to performance measurement. 120. the board concluded that there was no need',
7055:'to include the lcm rule in the inventory standards. 121. the board requested comments on the impact of historical cost',
7056:'accounting on performance measurement, and the costs and benefits of market value accounting. the majority of respondents that addressed these',
7057:'questions expressed a preference for historical cost accountingduetoitsverifiability andunderstandability. they alsobelievedthat market value methods were too costly to implement and',
7058:'subjective. another said that for most government operations, the goal is cost recovery and market value has little relevance. 122.',
7059:'one board member believes that market value information is more relevant to decision makers than historical cost information. this opinion',
7060:'is shared by many in the academic community. however, the board devoted considerable resources to the issue of measuring and',
7061:'reporting on holding gains and losses, an essential component of market value accounting, and was unable to resolve the issues',
7062:'that arose in a manner that would have been costeffective. the boardhas decided torely primarily on historicalcost accountingfor inventory. 123.',
7063:'the board also requested comments on the standard cost using replacement cost method. the method was described in detail inappendix',
7064:'c to the exposure draft. “standard costs” are defined as predetermined or budgeted perunit costs. standard costs are commonly used',
7065:'in manufacturing concerns and are being adopted in service industries as well. page 33 sffas 3 fasab handbook, version 20',
7066:'06/21 sffas 3 124. in a standard cost system, variances between the actual perunit cost and the standard per unit',
7067:'rate areidentified. variancesaretypicallycalculated fortheindividualcost components, such as materials or labor, included in the overall perunit rate. 125. standard costs also',
7068:'provide managers useful information for managing inventory costs. as an agency purchases inventory during the year and incurs operating costs,',
7069:'the actual costs are compared with the standard costs to identify why the cost variances occurred. since inventory and operating',
7070:'managers are evaluated against the standard, the managers have an incentive to meet the standard, which, in turn, provides for',
7071:'effective inventory cost control. 126. the distinction between the traditional standard cost system and that outlined in the exposure draft',
7072:'relates to replacement cost information. the method on which comments were requested would require standard costs based on the next',
7073:'period’s expected replacement costs and overhead rates. further, no adjustment to historical cost amounts would have been required for external',
7074:'reporting purposes. 127. the majority of the respondents cited substantially the same problems for this method as theycited formarket value',
7075:'accountingingeneral. the calculationswereviewed ascomplex, costly and subjective. 128. one board member is concerned that this method would be excluded under',
7076:'the recommended standard. the board does not believe that this is true. standard cost systems, including replacement cost, are used',
7077:'internally in private industry to generate valuablemanagement information. standardcost informationisthenrevisedtoapproximate costs under historical cost bases because it is generally accepted',
7078:'accounting practices for financial reporting purposes. therefore, a managerial costing system employing standards or replacement cost information that improves management’s',
7079:'decision making could be entirely consistent with the standard so long as externally reported information approximates historical cost. further, the',
7080:'board expects to take up the issue of costing systems in a future project on cost measurement. 129. with regard',
7081:'to inventory held in reserve for future sale, one respondent indicated that the phrase “either reported or disclosed” par. 39',
7082:'implies offbalance sheet reporting. the respondent believes that this category should be reported on the balance sheet rather than disclosed.',
7083:'the board concluded that the decision as to the level of detail shown on the balancesheet should be left to',
7084:'preparersand/orauditors. while the board did not revise the standard to require reporting on the face of the financials, the language',
7085:'describing the reporting and disclosure options was clarified. 130. one respondent suggested that the standard be revised so that excess,',
7086:'obsolete and unserviceable inventory would be valued at the lower of cost or net realizable value rather page 34 sffas',
7087:'3 fasab handbook, version 20 06/21 sffas 3 than at net realizable value. the respondent indicatedthat anygainson excess, obsolete or',
7088:'unserviceable inventory due to valuation at net realizable value should be recognized only upon disposal of such inventory and not',
7089:'when identified as such or upon periodic revaluations. private sector gaap, perarb 43, requires that losses be recognized prior to',
7090:'disposal of inventory but that gains not be recognized until realized. this onesided treatment has been criticized over the years',
7091:'but has survived based on the principle of conservatism that has prevailed. 131. since the federal government does not operate',
7092:'in a “forprofit” environment and does not seek financing from investors who rely on audited financial statements to make decisions,',
7093:'the conservative position taken in the past is not asrelevant. however, the board concluded that no change to the standard',
7094:'was required. 132. some respondents commented on the absence of the lastin, firstout cost flow lifo method under acceptablecost flowassumptions;',
7095:'statingthat lifo should be includedasan acceptable option under historical cost since it tends to match current costs with current revenues.',
7096:'theboard did not include lifo asan acceptable cost flowassumption due to the stale inventory values reported on the balance sheet',
7097:'as a result. however, the board did permit use of any method that reasonably approximates historical cost under one of',
7098:'the acceptable cost flow assumptions. therefore, lifo could be acceptable for an entity whose inventoryturns over rapidly since there maybe',
7099:'little difference between lifo and any other cost flow assumption. 133. one respondent requested that the standard specifically address goods:',
7100:'a held on consignment, b acquired through barter, c donated, d that must be maintained by statute but have no',
7101:'market value, or e that will not be sold or consumed but which must be held e.g., weights and measures.',
7102:'the board concluded that goods held on consignment were not within the scope of this standard. goods maintained by statute',
7103:'but having no market value, and goods that will not be sold or consumed but must be held would presumably',
7104:'be categorizedasstockpilematerialsandthereforenochangetothestandardswaswarranted. the board did decide that valuation of goods acquired through barter or donated should be addressed under the',
7105:'inventory, operating materials and supplies, and stockpile materials standards. operating materialsand supplies 134. respondents suggested that if a valuation method',
7106:'such as latest acquisition cost lac is acceptable for inventory it should also be acceptable for operating materials and supplies.',
7107:'the board agreed with this proposal since lac approximates historical cost. further, the board believesthatanymethod that approximateshistorical cost should beacceptable.',
7108:'the standard was revised accordingly. page 35 sffas 3 fasab handbook, version 20 06/21 sffas 3 stockpile materials 135. respondents',
7109:'indicated that the definition of stockpile materials would encompass routinely heldreservesaswell asmajor stockpilesof materials. itwasthe board’sintentionto include only those items',
7110:'specificallyidentified by law as being “stockpiled.” items routinely used but held in unusually large quantities would not be included in',
7111:'this category but would remain components of inventory or operating materials and supplies; possibly categorized as held in reserve for',
7112:'future sale or use. 136. in addition, one respondent identified helium reserves as being mandated by law for “conservation” purposes.',
7113:'the board concluded that it would be consistent to include these reserves in stockpile materials. the definition has been clarified',
7114:'to limit stockpile materials to items held in order to comply with legal requirements established for purposes of defense, emergency',
7115:'or conservation. 137. as was the case for operating materials and supplies, respondents indicated that use of lac would be',
7116:'appropriate for stockpile materials. the board reached the same conclusion for this standard; that any method that approximates historical cost',
7117:'should be acceptable. the standard was revised accordingly. 138. one respondent suggested that an exception to permit market valuation for',
7118:'items that are interchangeable, have a ready market, and for which the unit cost is not determinable be added to',
7119:'the standard. the inventory standard provides this exception and the respondent suggested that it be available for stockpile material so',
7120:'that items such as strategic petroleum reserves could be valued at market value. the board concluded that since these items',
7121:'are not routinely sold in large quantities the recognition of holding gains/losses may have an adverse impact on measurement of',
7122:'operating performance. therefore, the exception was not added to the standard for stockpile materials. seizedand forfeitedassets 139. arespondent explained at',
7123:'the public hearing that a good portion of the forfeited assets are seizedandvalued underconditionswhichmakeaccurate appraisalsextremelydifficult.asa result, there have been values',
7124:'reported for assets well in excess of what is eventually realized. the determination of the market value prior to the',
7125:'actual sale of the item is very difficult. the respondent has found that when the best estimate of market value',
7126:'is made on an item by item basis, the total value is still found to be overstated. 140. to avoid',
7127:'overstating deferred revenue, the respondent recommended that a valuation allowance be created to adjust the reported value of assets in',
7128:'the financial statements. the page 36 sffas 3 fasab handbook, version 20 06/21 sffas 3 valuation allowance would be based',
7129:'on historical trends or other relevant information; in a manner similar to that used to establish an allowance for uncollectible',
7130:'receivables. for example, information over the last six months may show sale proceeds were 5% to 10% less than appraised',
7131:'values. further, the respondent believes that use of the valuation allowance would recognize the inherent difficulties in estimating market values',
7132:'and would present better financial information. 141. although the proposal isnot without merit, it may be an unnecessaryexercise. market value',
7133:'is an estimate of the amount to be realized upon disposal of the property and should take into account the',
7134:'marketplace in which the property is expected to be disposed of e.g., auction, fire sale, retail or wholesale markets, etc..',
7135:'the use of valuation allowances against any asset category is not prohibited. however, the board does not believe it necessary',
7136:'to require the use of a valuation allowance in this circumstance. 142. one respondent requested that the standard require that,',
7137:'in addition to recording deferred revenue, deferred distributions be recorded. arespondent at the public hearing explained that historically as much',
7138:'as 50% of the forfeited property is eventually distributed to federal, state, and local law enforcement entities which participated in',
7139:'the case. it was further explained that once property has been forfeited, a participating state, local, or federal agency may',
7140:'have already applied to receive that asset because of its participation in the case. therefore, the recording of deferred revenue',
7141:'could be accompanied, where appropriate, by the recording of an estimate of deferred distributions. the intent of this is to',
7142:'avoid reporting misleading information in the financial statements. 143. the deferred distribution would represent another level of estimates related to',
7143:'forfeited property. in discussions with representatives from other agencies that handle seized and forfeited property, the board has been told',
7144:'that no reasonable estimate of deferred distributions was available. 144. in addition to the difficulty in estimating distributions, the board',
7145:'notes that there is no legal requirement to make a specific distribution until an application has been approved. this is',
7146:'similar in a sense to dividendsdeclared by forprofit enterprises. there isno legalobligation to makea payment untilthe actualdeclarationbytheboard of directors; andthe',
7147:'entitydoes not record dividends payable until that time. therefore, the board has not revised the standard as suggested. however, the',
7148:'board has added a disclosure requirement for any reasonable estimate of future distributions. 145. the comment letters also included proposals',
7149:'for miscellaneous changes to this standard: 1 in that the government does not have ownership, seized monetary instruments should be',
7150:'disclosed rather than reported on the face of the financials. page 37 sffas 3 fasab handbook, version 20 06/21 sffas',
7151:'3 2 seized property other than monetary instruments should be reported as assets, like monetary instruments, with a liability for',
7152:'possible remittance of equal value recorded. 3 fornonmonetaryforfeitedassetsthedisclosurerequirementsareadequatetoensure information is available to users. therefore, nonmonetary forfeited assets should not be',
7153:'reported on the face of the financial statements. 4 atthetimethatforfeiturejudgementisobtained,ownershipofthepropertyiseffectively transferred to the federal agency and the government should recognize',
7154:'the revenue earned at that time rather than deferring it. 146. thefirst twosuggestionsrelatetoseizedproperty. theboard consideredthesesuggestions during its discussions of seized',
7155:'property. the board did not revise the standard; this was based on 1 the desire to establish strong controls over',
7156:'monetary instruments and 2 the difficulties in valuing and uncertainties regarding disposition associated with seized non monetary property. 147. the',
7157:'third and fourth items relate to forfeited property. the suggestion to disclose forfeited nonmonetary instruments, item 3, would result in',
7158:'understatement of the entity’s assets. disclosure requirements should emphasize that the value reported is merely an “estimate” of the property’s',
7159:'value. the suggestion to recognize revenue upon forfeiture, item 4, while theoretically correct was not adopted bythe board. due to',
7160:'the difficultiesin valuing forfeited property and the risk of overstating the revenue the board decided to defer revenue recognition until',
7161:'the property was sold. 148. onerespondentrequested that thestandard addressvaluationof propertyforwhich there is no value, which cannot be legally sold, but',
7162:'which can be donated to museums or other nonprofit organizations e.g., stuffed endangered species or destroyed e.g., narcotics. the standard',
7163:'was revised to clarify the disclosure requirements and to indicate that no financial valueneedbereportedfortheseitems. entitiesarenotprohibitedfromreporting information regardingthedollar value of illegalassetsseized',
7164:'if theyso chose. the standard onlyrelates to financial recognition and disclosure. 149. one respondent indicated that the analysis of change',
7165:'in seizures disclosure requirement is very detailed and should not be required for agencies with only incidental seizure activity. the',
7166:'board has indicated that the standard is not intended to be applied to immaterial items. 150. onerespondent notedthatthedefinitionsofseizedandforfeitedpropertyseemtobelimited to monetary',
7167:'instruments, real property and tangible personal property. the respondent asked that this definition be extended to intangible assets e.g., savings',
7168:'and loan charters. the board did broaden the definition to address intangible property. page 38 sffas 3 fasab handbook, version',
7169:'20 06/21 sffas 3 151. one respondent explained that the exposure draft can be interpreted to advise agencies to account',
7170:'for the assets through the seizing agency’s property records and financial statements. however, in most cases, the seizing agency is',
7171:'different from the custodial agency which may take possession of seized property. in addition, there may be a central fund',
7172:'created to support activities of multiple agencies. it was recommended that the standard be modified to recognize the distinction among',
7173:'“seizing agencies”, “custodial agencies”, and the “central fund” responsible for accounting and reporting for the seized property; and, to remind',
7174:'seizing agencies of their responsibilities to maintain sufficient internal records to carry out their stewardship responsibilities. 152. the exposure draft',
7175:'had defined “seized property” as being “in the actual or constructive possession of the seizing agency.” the respondent has correctly',
7176:'pointed outthat this is not always the case since custodial agencies frequently take possession and/or responsibility for seized property. depending',
7177:'on the circumstances, each party may have a need to maintain property records regarding seized property. for example, a seizing',
7178:'agency may wish to track property that may be ultimately distributed to it. in addition, seizing agencies may maintain physical',
7179:'possession of the property during the forfeiture process. the board has modified the definition to include seized property held by',
7180:'custodial agencies. 153. with regard to the request for a clear statement of which agency is to maintain records on',
7181:'seizedproperty, theboardbelievesthatcentralfundwould beresponsibleforaccounting for and reporting seized property, but that seizing agencies or custodial agencies may have a need for',
7182:'property records related to seized property and does not wish to preclude them from doing so. however, in preparing consolidated',
7183:'financial statements care should be taken to avoid double counting these items. with regard to forfeited property, ownership should be',
7184:'the determinant for an entity’s recognition of an asset. however, an agency that maintains physical custody, but not ownership, of',
7185:'forfeited property is not precluded from maintaining property records although no asset should be recognized. foreclosed property 154. many respondents',
7186:'objected to the requirement to value post1991 foreclosed property at net present value npv. the primary objections to the use',
7187:'of npv were: npv is not a more accurate valuation basis than net realizable value nrv npv does not improve',
7188:'the information presented difference between npv and nrv is immaterial loss of comparability with commercial enterprises maintenance of two systems',
7189:'to value foreclosed property pre1992 and post1991 is costly and unnecessary changes in existing systems would be complicated and expensive',
7190:'page 39 sffas 3 fasab handbook, version 20 06/21 sffas 3 cash flows may not be forecast with sufficient accuracy',
7191:'to measure npv 155. in proposingpresent value accounting, the board’sprimaryconsiderationswere to carryout the intent of the federal credit reformact of',
7192:'1990 theact and to make financial reporting compatible with the budget. since foreclosed property is a result of the original',
7193:'loan transaction or loan guarantee, reporting on this activity should be guided by the provisions of theact. 156. an extensive',
7194:'discussion of the board’s overall decision to require present value accounting ispresented in recommendedaccountingstandardno. 2, accounting for direct loans and',
7195:'loan guarantees seeappendixa. one of the objectives of financial reporting is to enable the reader to determine the status of',
7196:'budgetary resources, and whether those resources were acquired and used in accordance with the enacted budget.11 the board believes that',
7197:'onlybyusing thesamebasiscanfinancialinformationbeused tocomparethe actualresults of operations with the budget. 157. however, the board wishes to acknowledge that respondents may be',
7198:'correct in stating that in certain cases there may be only immaterial differences between net realizable value or other methods',
7199:'and npv. the standard has been revised to indicate that if no material difference results, other valuation methods may be',
7200:'used as an approximation of the net present value of foreclosed property. 158. one respondent currently values foreclosed vessels at',
7201:'their acquisition price based on its own bid at the foreclosure sale. following acquisition, the value is depreciated at one',
7202:'percent per month. gainsorlosses are recognized upon sale. the respondent believes that the current practice is more appropriate because: 1',
7203:'the price paid at foreclosure sale representsthe best valuation, 2estimating future netcash flows requires assumptionsand this would be less prudent',
7204:'than utilizing existing specific valuations, and 3 the entity has had to establish the value of the vessels in legal',
7205:'proceedings and has relied on the acquisition price to do so utilizing a different value in financial records could jeopardize',
7206:'the entity’s position in legal proceedings. the board has not revised the standard as a result of this request. the',
7207:'board believes that there are no unique circumstances in this case which would preclude conformance to the standard. 11fasab exposure',
7208:'draft, objectives of federal financial reporting, vol. 1, par. 13. page 40 sffas 3 fasab handbook, version 20 06/21 sffas',
7209:'3 goods held under price supportand stabilization programs 159. the proposed standard required that nonrecourse loans be adjusted at time',
7210:'of disbursement to recognize a loss if the market rate is lower than the loan rate. this constituted a departure',
7211:'from current practice that is to adjust the loan values to their expected net realizable value at report date. respondents',
7212:'expressed concern that the proposed method would result in recognizing losses without consideration of the underlying economic transaction i.e., will',
7213:'the loans be repaid. 160. based on two respondents’ comments, the board found that the approach originally proposed ignored the',
7214:'“probability” component in recognizing unrealized losses; these losses have typically been recognized only if they are “probable and measurable. nonrecourse',
7215:'loans, being shortlived, are similar in nature to notes or accounts receivable. therefore, the board referred to its recommended standard',
7216:'for accounts receivable. that standard states that: losses on receivables should be recognized when it is more likely than not',
7217:'that the receivables will not be totally collected. the phrase “more likely than not” means more than a 50 percent',
7218:'chance of loss occurrence. an allowance for estimated uncollectible amounts should be recognized to reduce the gross amount of receivables',
7219:'to its net realizable value. the allowance for uncollectible amounts should be reestimated on each financial reporting date and when',
7220:'information indicates that the latest estimate is no longer correct. fasab, recommended accounting standard 1, paragraphs 44 and 45 161.',
7221:'in addition, one respondent indicated that the originally proposed standard would have excluded loss recognition due to factors other than',
7222:'fluctuations in the market rates. losses can occur due to 1 farmers’ misuse or handling of the pledged commodities, or',
7223:'2 fraud. clearly the concept of loss recognition should be broadened in order to recognize these events. the board modified',
7224:'the standard for nonrecourse loans to be more consistent with the accounts receivable standard and to encompass the board’s current',
7225:'thinking on the liability project. 162. one respondent argued that purchase agreements constitute a contingent liability. the proposed standard would',
7226:'require recognizing a liability and a loss if the contract price exceeded the expected net realizable value of the commodities.',
7227:'it is clear that at any giventime themarket pricemaybe lowerthanthe contract price but that duetocyclesinthe harvest and postharvest market this',
7228:'may not be an indication that the contract will be executed and a lossrealized. theboard revised the standard to provide',
7229:'for loss recognition in connection with purchase agreements if the loss is both probable and measurable. page 41 sffas 3',
7230:'fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards4: managerial costaccounting standards and concepts status issued july 31, 1995 effective date for fiscal',
7231:'years beginning after september 30, 1996. subsequently modified to be for years beginning after september 30, 1997. affects none. affected',
7232:'by sffas 9, deferral of implementation date of sffas no. 4. sffas 30, interentity cost implementation, rescinds par. 110 and',
7233:'amends par. 111 of sffas 4. sffas 55, amending interentity cost provisions, rescinds sffas 30whichrestoredpar. 110and111. sffas 55thenamendspar. 110 and',
7234:'111 and also added new disclosures in par. 113a. related guidance interpretation2, accounting for treasury judgment fund transactions tr 1,',
7235:'audit legal letter guidance interpretation 6, accounting for imputed intradepartmental costs: an interpretation of sffas no. 4. summary the managerial',
7236:'cost accounting concepts and standards contained in this statement are aimed at providing reliable and timely information on the full',
7237:'cost of federal programs, their activities, and outputs. the concepts of managerial cost accounting contained in this statement describe the',
7238:'relationship among cost accounting, financial reporting, and budgeting. the five standards set forth the fundamental elements of managerial cost accounting.',
7239:'managerial costaccounting concepts managerial cost accounting should be a fundamental part of the financial management system and, to the extent',
7240:'practicable, should be integrated with other parts of the system. managerial costing should use a basis of accounting, recognition, and',
7241:'measurement appropriate for the intended purpose. cost information developed for different purposes should be drawn from a common data source,',
7242:'and output reports should be reconcilable to each other. managerial costaccounting standards requirement for cost accounting each reporting entity should',
7243:'accumulate and report the costs of its activities on a regular basis for management information purposes. costs may be page',
7244:'1 sffas 4 fasab handbook, version 20 06/21 sffas 4 accumulated eitherthrough the use of cost accounting systemsor through the',
7245:'use of cost finding techniques. responsibility segments management of each reporting entity should define and establish responsibility segments. managerial cost',
7246:'accounting should beperformedto measure and report the costs of each segment’s outputs. special cost studies, if necessary, should be performed',
7247:'to determine the costs of outputs. full cost reporting entities should report the full costs of outputs in general purpose',
7248:'financial reports. the full cost of an output produced by a responsibility segment is the sum of 1 the costs',
7249:'of resources consumed by the segment that directly or indirectly contribute to the output, and 2 the costs of identifiable',
7250:'supporting services provided by other responsibility segments within the reporting entity, and by other reporting entities. interentity costs each entity’s',
7251:'full cost should incorporate the full cost of goods and services that it receives from other entities. the entity providing',
7252:'the goods or services has the responsibility to provide the receiving entity with information on the full cost of such',
7253:'goods or services either through billing or other advice. recognition of interentity costs that are not fully reimbursed is limited',
7254:'to material items that 1 are significant to the receiving entity, 2 form an integral or necessary part of the',
7255:'receiving entity’s output, and 3 can be identified or matched to the receiving entity with reasonable precision. broad and general',
7256:'support services provided by an entity to all or most other entities generally should not be recognized unless such services',
7257:'form a vital and integral part of the operations or output of the receiving entity. costing methodology costs of resources',
7258:'consumed by responsibility segments should be accumulated by type of resource. outputs produced by responsibility segments should be accumulated and,',
7259:'if practicable, measured in units. the full costs of resources that directly or indirectly contribute to the production of outputs',
7260:'should be assigned to outputs through costing methodologies or cost finding techniques that are most appropriate to the segment’s operating',
7261:'environment and should be followed consistently. the cost assignments should be performed using the following methods listed in the order',
7262:'of preference: a directly tracing costs wherever feasible and economically practicable, b assigning costs on a causeandeffect basis, or c',
7263:'allocating costs on a reasonable and consistent basis. page 2 sffas 4 fasab handbook, version 20 06/21 sffas 4 table',
7264:'of contents page summary 1 executive summary 4 introduction 7 purposes of using cost information 11 managerial costaccounting concepts 13',
7265:'managerial costaccounting standards 20 appendixa: basis for conclusions 47 appendix b: glossary [see consolidated glossary inappendix e] 71 page 3',
7266:'sffas 4 fasab handbook, version 20 06/21 sffas 4 executive summary 1. the managerial cost accounting concepts and standards contained',
7267:'in this statement are aimed at providing reliable and timely information on the full cost of federal programs, their activities,',
7268:'and outputs. the cost information can be used by the congress and federal executives in making decisions about allocating federal',
7269:'resources, authorizing and modifying programs, and evaluating program performance. the cost information can also be used by program managers in',
7270:'making managerial decisions to improve operating economy and efficiency. 2. the concepts of managerial cost accounting contained in this statement',
7271:'describe the relationship among cost accounting, financial reporting, and budgeting. the five standards set forth the fundamental elements of managerial',
7272:'cost accounting: 1 accumulating and reporting costs of activities on a regular basis for management information purposes, 2 establishing responsibility',
7273:'segments to match costs with outputs, 3 determining full costs of government goods and services, 4 recognizing the costs of',
7274:'goods and services provided among federal entities, and 5 using appropriate costing methodologies to accumulate and assign costs to outputs.',
7275:'3. these standards are based on sound cost accounting concepts and are broad enough to allow maximum flexibility for agency',
7276:'managers to develop costing methods that are best suited to theiroperationalenvironment.also, themanagerialcost accounting standardsand practices will evolve and improve as',
7277:'agencies gain experience in using them. the following is a summary of the concepts and standards contained in this statement.',
7278:'managerial costaccounting concepts 4. managerial cost accounting should be a fundamental part of the financial management system and, to the',
7279:'extent practicable, should be integrated with other parts of the system. managerial costing should use a basis of accounting, recognition,',
7280:'and measurement appropriate for the intended purpose. cost information developed for different purposes should be drawn from a common data',
7281:'source, and output reports should be reconcilable to each other. page 4 sffas 4 fasab handbook, version 20 06/21 sffas',
7282:'4 managerial costaccounting standards requirement for cost accounting 5. each reporting entity should accumulate and report the costs of its',
7283:'activities on a regular basis for management information purposes. costs may be accumulated either through the use of cost accounting',
7284:'systems or through the use of cost finding techniques. responsibility segments 6. management of each reporting entity should define and',
7285:'establish responsibility segments. managerial cost accounting should be performed to measure and report the costs of each segment’s outputs. specialcost',
7286:'studies, if necessary, should be performed to determine the costs of outputs. full cost 7. reportingentitiesshouldreportthefullcostsofoutputsingeneralpurposefinancialreports. the fullcost of an',
7287:'output produced by a responsibilitysegment isthe sum of 1 the costs of resources consumed by the segment that directly or',
7288:'indirectly contribute to the output, and 2 the costs of identifiable supporting services provided by other responsibility segments within the',
7289:'reporting entity, and by other reporting entities. interentity costs 8. each entity’s full cost should incorporate the full cost of',
7290:'goods and services that it receives from other entities. the entity providing the goods or services has the responsibility to',
7291:'provide the receiving entity with information on the full cost of such goods or services either through billing or other',
7292:'advice. 9. recognition of interentity costs that are not fully reimbursed is limited to material items that 1 are significant',
7293:'to the receiving entity, 2 form an integral or necessary part of the receiving entity’s output, and 3 can be',
7294:'identified or matched to the receiving entity with reasonable precision. broad and general support services provided by an entity to',
7295:'all or most other entitiesgenerally should not be recognizedunlesssuch services forma vitaland integral part of the operations or output of',
7296:'the receiving entity. page 5 sffas 4 fasab handbook, version 20 06/21 sffas 4 costing methodology 10. costsofresourcesconsumedbyresponsibilitysegmentsshouldbeaccumulatedbytypeof resource. outputs',
7297:'produced by responsibility segments should be accumulated and, if practicable, measured in units. the full costs of resources that directly',
7298:'or indirectly contribute to the production of outputs should be assigned to outputs through costing methodologies or cost finding techniques',
7299:'that are most appropriate to the segment’s operating environment and should be followed consistently. 11. the cost assignments should be',
7300:'performed using the following methods listed in the order of preference: a directly tracing costs wherever feasible and economically practicable.',
7301:'b assigning costs on a causeandeffect basis, or c allocating costs on a reasonable and consistent basis. 12. these accounting',
7302:'standards need not be applied to items that are qualitatively and quantitativelyimmaterial.theboardrecommendsthatthemanagerialaccountingstandards of this statement become effective for fiscal periods',
7303:'beginning after september 30, 1996. earlier implementation is encouraged. page 6 sffas 4 fasab handbook, version 20 06/21 sffas 4',
7304:'introduction background 13. reliable information on the costs of federal programs and activities is crucial for effective management of government',
7305:'operations. in statement of federal financialaccounting concepts sffac no. 1, objectives of federal financial reporting, issued in 1993, it is',
7306:'stated that the objectives of federal financial reporting are to provide useful information to assist internal and external users in',
7307:'assessing the budget integrity, operating performance, stewardship, and systems and control of the federal government.1 14. managerial cost accounting is',
7308:'especially important for fulfilling the objective of assessing operating performance. in relation to that objective, it is stated in sffac',
7309:'no. 1 that federal financial reporting should provide information that helps users to determine: costsofspecificprogramsandactivitiesandthecompositionof,andchangesin,those costs; effortsandaccomplishmentsassociatedwithfederalprogramsandtheirchangesover time and in',
7310:'relation to costs; and efficiency and effectiveness of the government’s management of its assets and liabilities.2 15. it is further',
7311:'stated in sffac no. 1 that “the topics of costs and performance measurement are related because it isby associating cost',
7312:'with activitiesor cost objectivesthat accounting can make much of its contribution to reporting on performance.”3 “cost” is the monetary value',
7313:'of resources used or sacrificed or liabilities incurred to achieve an objective, such as to acquire orproduce a good or',
7314:'to perform an activity or service. costs incurred may benefit current and future periods. in financial accounting and reporting, the',
7315:'costs that apply to an entity’s operations for the current accounting period are recognized as expenses of that period. 1statement',
7316:'of federal financialaccounting concepts no. 1, objectives of federal financial reporting september 2, 1993, pars. 110 and 111. 2ibid., pars.',
7317:'126130. 3ibid., par. 192. page 7 sffas 4 fasab handbook, version 20 06/21 sffas 4 16. thechieffinancialofficersact of1990includes amongthefunctions of',
7318:'chieffinancial officers “the development and reporting of cost information” and “the systematic measurement of performance.”4 in july 1993, congress passed',
7319:'the government performance and resultsact gpra which mandates performance measurement by federal agencies.5 in september 1993, in his report to',
7320:'the president on the national performance review npr, vice presidental gore recommended an action which required the federalaccountingstandardsadvisoryboard to issue',
7321:'a set of cost accounting standardsfor all federal activities.6those standards will provide a method for identifying the unit cost of',
7322:'all government activities. 17. in early1994, thefederalaccountingstandardsadvisoryboardtheboardconvenedan advisory group to help develop standards for managerial cost accounting in the federal',
7323:'government. thegroupincludedmembersfromgovernment,business,and academe. their views and proposals have been considered by the board, and their work contributed greatly in developing',
7324:'this document. users of federal cost information 18. thecostofgovernmentisaconcerntothepublicaswellastothefederalgovernmentitself. most government service efforts and accomplishments cannot be measured in financial',
7325:'terms alone. unlike private business, there is no “bottom line” or profit index to help measure public sector performance. however,',
7326:'government service efforts and accomplishments can be evaluated using both financial and nonfinancial measures, and “cost” is an important financial',
7327:'measure for government programs. internal and external federal information users identified below will find these standards helpful in assessing operating',
7328:'performance, stewardship, systems, and control of the federal government. 19. government managers are the primary users of cost information. they',
7329:'are responsible for carrying out program objectives with resources entrusted to them. reliable and timely cost information helps them ensure',
7330:'that resources are spent to achieve expected results and outputs, and alerts them to waste and inefficiency. 20. congress and',
7331:'federal executives, including the president, make policy decisions on program priorities and allocate resources among programs. these officials need cost',
7332:'4104 stat. 2938 see particularly 31 u.s.c. sec 902. 5107 stat. 285 see particularly, 31 u.s.c. sections 1101, 1105, 1115,',
7333:'11161119, 9703, 9704. 6vice presidental gore, creatingagovernment that works better & costs less,accompanying report of the national performance review september',
7334:'1993, p. 59. page 8 sffas 4 fasab handbook, version 20 06/21 sffas 4 information to compare alternative courses of',
7335:'action and to make program authorization decisions by assessing costs and benefits. they also need cost information to evaluate program',
7336:'performance. 21. citizens, including news media and interest groups, are concerned with the costs and resultsof federal programs that affect',
7337:'theirinterests. theyneed programcost information to judge whether resources are allocated to programs rationally and if the programs operate efficiently and',
7338:'effectively. objectives 22. themanagerialcostaccountingconceptsandstandardspresentedhereareintendedforall the user groups identified above. these standards are aimed at achieving three general objectives: provide program',
7339:'managers7 with relevant and reliable information relating costs to outputs and activities. based on this information, program managers can respond',
7340:'to inquiries about the costs of the activities they manage. the cost information will assist them in improving operational economy',
7341:'and efficiency; providerelevantandreliablecostinformationtoassistthecongressandexecutivesin making decisions about allocating federal resources, authorizing and modifying programs, and evaluating program performance; and ensure consistency',
7342:'between costs reported in general purpose financial reports and costs reported to program managers. this includes standardizing terminology for managerial',
7343:'cost accounting to improve communication among federal organizations and users of cost information. scope of standards 23. this statement contains',
7344:'managerial cost concepts and five standards for the federal government. the five standards address the following topics: 1 requirement for',
7345:'cost accounting, 2 responsibility segments, 3 full cost, 7statement of federal financialaccounting concepts no. 1, objectives of financial reporting, defined',
7346:'“program managers” as individuals who manage federal programs, and stated that “their concerns include operating plans, program operations, and budget',
7347:'execution.” sffac no. 1, par. 85. page 9 sffas 4 fasab handbook, version 20 06/21 sffas 4 4 interentity costs,',
7348:'and 5 costing methodology. the essence of each standard is briefly stated in a box followed by detailed explanations. however,',
7349:'both the words in the boxes and the entire text of explanations constitute the requirements of the standards. 24. these',
7350:'standards are based on sound cost accounting concepts and allow sufficient flexibility for agencies to develop managerial cost accounting practices',
7351:'that are suited to their specific operating environments. also, it is expected that cost accounting standards and practices will evolve',
7352:'and improve as agencies gain experience in using them. 25. other statementsoffederalfinancialaccountingstandards sffas address recognition and measurement of assets and',
7353:'liabilities. for additional guidance, readers should consult: sffas no. 1, accounting for selected assets and liabilities; sffas no. 2, accounting',
7354:'for direct loans and loan guarantees; and sffas no. 3, accounting for inventory and related property. the board is working',
7355:'on and will soon complete other recognition and measurement projects related to revenues, liabilities, property, plant, and equipment, and other',
7356:'elements of financial statements.8 terminology 26. managerial cost accounting information, to be useful, must rely on consistent and uniform terminology',
7357:'for concepts, practices, and techniques. consistent and uniform use of terminology can help avoid confusion and miscommunication among organizations and',
7358:'individuals. 27. as a start toward developing consistent managerial cost accounting terminology within the federal government, this statement includes a',
7359:'glossary of basic cost accounting terms. materiality 28. except as otherwise noted, the accounting and reporting provisions of these accounting',
7360:'standards need not be applied to items that are qualitatively or quantitatively immaterial. 8see fasab exposure drafts, accounting for liabilities',
7361:'of the federal government november 7, 1994; accounting for property, plant, and equipment february 28, 1995; and revenue and other',
7362:'financing sources pending. page 10 sffas 4 fasab handbook, version 20 06/21 sffas 4 29. the determination of whether an',
7363:'item is material depends on the degree to which omitting information about the item makes it probable that the judgment',
7364:'of a reasonable person relying on the information would have been changed or influenced by the omission. effective date 30.',
7365:'the managerial cost accounting standards prescribed in sffas no. 4 shall be effective for fiscal periods beginning after september 30,',
7366:'1997. earlier implementation is encouraged. purposes of using cost information 31. there are many different purposes for which cost information',
7367:'may be used by the federal government. the focus of this statement is on cost information needed to improve federal',
7368:'financial management and managerial decision making. 32. in managing federal government programs, cost information is essential in the following five',
7369:'areas: 1 budgeting and cost control, 2 performance measurement, 3 determining reimbursements and setting fees and prices, 4 program evaluations,',
7370:'and 5 making economic choice decisions. each of these uses is discussed below. budgetingand cost control 33. information on the',
7371:'costs of program activities can be used as a basis to estimate future costs in preparing and reviewing budgets. once',
7372:'budgets are approved and executed, cost information serves as a feedback to budgets. using cost information, federal managers can control',
7373:'and reduce costs, and find and avoid waste. for example, with appropriate cost information, federal managers can: compare costs with',
7374:'known or assumed benefits of activities, identify valueadded and nonvalueadded activities, and make decisions to reduce resources devoted to activities',
7375:'that are not costeffective; compare and determine reasons for variances between actual and budgeted costs of an activity or a',
7376:'product; compare cost changes over time and identify their causes; identify and reduce excess capacity costs; and compare costs of',
7377:'similar activities and find causes for cost differences, if any. page 11 sffas 4 fasab handbook, version 20 06/21 sffas',
7378:'4 performance measurement 34. measuring performance is a means of improving program efficiency, effectiveness, and program results. one of the',
7379:'stated purposes of the gpraof 1993 is to “. . .improve the confidence of theamerican people in the capability of',
7380:'the federal government, by systematically holding federal agencies accountable for achieving program results.” 35. measuring costs is an integral part',
7381:'of measuring performance in terms of efficiency and costeffectiveness. efficiencyismeasured by relating outputsto inputs. it isoftenexpressed bythe cost per unitof',
7382:'output. while effectivenessin itself ismeasuredbytheoutcome orthe degree to which a predetermined objective is met, it is commonly combined with cost',
7383:'informationtoshow “costeffectiveness.” thus,theserviceeffortsandaccomplishmentsofa government entity can be evaluated with the following measures: 1 measures of service efforts which include the',
7384:'costs of resources used to provide the services and nonfinancial measures; 2 measures of accomplishments which are outputs the quantity',
7385:'of services provided and outcomes the results of those services; and 3 measures that relate efforts to accomplishments, such as',
7386:'cost per unit of output or costeffectiveness. 36. thus, as stated previously, performance measurement requires both financial and non financial',
7387:'measures. cost is a necessary element for performance measurement, but is not the only element. determining reimbursementsand setting feesand prices',
7388:'37. cost information is an important basis in setting fees and reimbursements. pricing and costing, however, are two different concepts.',
7389:'setting prices is a policy matter, sometimes governed by statutory provisions and regulations, and other times by managerial or public',
7390:'policies. thus, theprice of a good or service doesnot necessarilyequal thecost of the good or the service determined under a',
7391:'particular set of principles. nevertheless, cost is an important consideration in setting government prices. with certain exceptions, omb requires:9 9omb',
7392:'circulara25, user charges revised july 8, 1993. page 12 sffas 4 fasab handbook, version 20 06/21 sffas 4 with respect',
7393:'to goods and services that the government provides in its sovereign capacity to a particular group of individuals as a',
7394:'special benefit, user charges should be sufficient to recover the full cost of those goods and services; and with respect',
7395:'to goods and services that the government provides under businesslike conditions, user charges for those goods and services need not',
7396:'be limited to the recovery of full cost and may yield a net revenue. 38. also, cost information is important',
7397:'in calculating reimbursements for products and services provided by one government agency to another. even if fees or reimbursements do',
7398:'not recoverthefullcostsduetopolicyoreconomicconstraints, management needstobeaware of the difference between cost and price. with this information, program managers can properly inform the',
7399:'public, the congress, and federal executives about the costs of providing the goods or services. program evaluations 39. costs of',
7400:'federal resources required by programs are an important factor in making policy decisions related to program authorization, modification, and discontinuation.',
7401:'these decisions are usually subject to policy constraints, and often require the consideration of social and economic costs and benefits',
7402:'affecting different sectors of the economy and society. nevertheless, the costs of federal resources required are an important factor. information',
7403:'on program costs can be used as a basis for costbenefit considerations. economic choice decisions 40. often, agencies and programs',
7404:'face decisions involving choices among alternative actions, such as whether to do a project inhouse or contract it out; to',
7405:'accept or reject a proposal; or to continue or drop a product or service. making these decisions requires cost comparisons',
7406:'among available alternatives. managerial costaccounting concepts managerial cost accounting should be a fundamental part of the financial management system and,',
7407:'to the extent practicable, should be integrated with other parts of the system. managerial costing should use a basis of',
7408:'accounting, recognition, and measurement appropriate for the intended purpose. cost information developed for different purposes should be drawn from a',
7409:'common data source, and output reports should be reconcilable to each other. page 13 sffas 4 fasab handbook, version 20',
7410:'06/21 sffas 4 41. managerial cost accounting should be an essential element of proper financial planning, control, and evaluation for',
7411:'any organization or activity that uses resources having monetary value. managerial cost accounting is a basic part of the financial',
7412:'management system in that it supports and provides data to the budgetary and financial accounting functions and, by itself, provides',
7413:'useful information for both internal and external users. role of managerial costaccounting in financial management 42. managerial cost accounting is',
7414:'the process of accumulating, measuring, analyzing, interpreting, and reporting cost information useful to both internal and external groups concerned with',
7415:'the way in which the organization uses, accounts for, safeguards, and controls its resources to meet its objectives. managerial cost',
7416:'accounting, therefore, is the servant of both budgetary and financial accounting and reporting because it assists those systems in providing',
7417:'information. also, it provides useful information directly to management. these relationships are shown in figure 1. figure1:financialmanagementinformationframework 􀀀  ',
7418:'   􀀀         common data source 43. the information flow within',
7419:'a financial management system begins with a basic information pool or common data source. this data source consists of all',
7420:'financial and programmatic information used by the budgetary, cost, and financial accounting processes. it includes all page 14 sffas 4',
7421:'fasab handbook, version 20 06/21 sffas 4 financial and much nonfinancial data, such as environmental data, that are necessary for',
7422:'budgeting and financial reporting.10 the common data source also includes evaluation and decision information developed as a result of prior',
7423:'reporting and feedback. other types of data may be included based upon perceived needs and purposes related to the ultimate',
7424:'users of the information. 44. the common data source may include many different kinds of data. it is far more',
7425:'than the information about financial transactions found in the standard general ledger, although that is a significant part of the',
7426:'data source. few organizations or entities maintain all these data in any one system or location. furthermore, the use of',
7427:'the term “data source” is not meant to imply the use of computerized systems for source information. instead, the term',
7428:'is used in a broad way to include many sources of information. 45. managerial cost accounting, financial accounting, and budgetary',
7429:'accounting draw informationasneeded from thecommon datasource. the dataobtained byeach ofthese is processed to attain specific objectives by reporting useful information.',
7430:'relationship to financialaccounting 46. as shown in figure 1 by their overlap, managerial cost accounting and financial accounting are closely',
7431:'related or integrated. to some degree, this is due to the historical development of cost accounting as a method for',
7432:'more detailed scorekeeping with the requirement to provide inventory values for external financial reporting purposes.11 in part, it is because',
7433:'cost information generally originates with transactions recorded for financial accounting purposes. 47. while inventory valuation is still part of the',
7434:'fundamental relationship, managerial cost accounting serves financial accounting in several other ways. fundamentally, managerial cost accounting should assist financial accounting',
7435:'in determining the results of operations during a fiscal period by providing relevant data that are accumulated to produce operating',
7436:'expenses. these data include theallocationofcapitalizedcoststoperiodsoftime orunitsof usage. 48. traditionally, managerial cost accounting information pertaining to financial accounting has involved costs',
7437:'of past transactions and the assignment of transaction value to fiscal periods 10the makeup of core data and environmental data',
7438:'is discussed in statement of federal financialaccounting concepts no. 1, objectives of federal financial reporting, chapter 7, and, therefore, a',
7439:'detailed discussion is not provided here. 11coulthurst, nigel and john piper, “the state of cost and managementaccounting,” managementaccounting,april 1986. page',
7440:'15 sffas 4 fasab handbook, version 20 06/21 sffas 4 and outputs. these purposes and uses are closely aligned with',
7441:'the financial accounting activity and traditional external financial reporting. this past cost aspect has been acknowledged in objectives of federal',
7442:'financial reporting which states that “financial accounting is largely concerned with assigning the value of past transactions to appropriate time',
7443:'periods.”12 relationship to budgetary accounting 49. managerialcostaccountingshouldalsoprovidebudgetaryaccountingwithcostinformation. however, the two are not as closely aligned as is the case with',
7444:'financial accounting see figure 1. mostly, thisis because costsare usually recorded, accumulated, and allocated by managerial cost accounting on an',
7445:'accrual basis of accounting which is different from the obligation or cash basis generally used in budgetary accounting. 50. still,',
7446:'managerial cost accounting does provide cost information to budgetary accounting for use in preparing yearly and longterm budgets for required',
7447:'materials, supplies, equipment, human resources, and other resources needed to produce different levels of outputs. managerial cost accounting also helps',
7448:'in making many budgetary decisions such as those concerning future capital expenditures and purchase/lease alternatives. 51. it is important to',
7449:'note that the board’s authority does not extend to recommending budgetary standards or budgetary concepts, and that is not the',
7450:'purpose of this statement.13 however, the board is committed to providing relevant and reliable cost accounting information that supports budget',
7451:'planning, formulation, and execution. cost information for management purposes 52. managerial cost accounting produces information directly for management use, sometimes',
7452:'employing data produced by the budgetary and financial accounting processes. cost information is used for many different purposes which can',
7453:'be generally classified into five types: performance measurement; cost reduction and control; determination of reimbursements and fee or price setting;',
7454:'program authorization, modification, and discontinuation decisions; and decisions to contract out work or make other changes in the methods of',
7455:'production. 53. to meet these needs, managerial cost accounting should use basic cost data and non financial or programmatic data.',
7456:'for example, it tracks units of output produced and input 12statement of federal financialaccounting concepts no. 1, objectives of federal',
7457:'financial reporting, par. 168. 13memorandum of understanding establishing the fasab, october 10, 1990. page 16 sffas 4 fasab handbook, version',
7458:'20 06/21 sffas 4 used including the amount of labor in terms of employees or employeehours. sometimes, information from cost',
7459:'analysis is used to compare actual to predetermined or anticipated costs. an organization may use cost estimates, cost studies, and',
7460:'cost finding techniques. 54. while managerial cost accounting is concerned not only with past costs and future costs, one of',
7461:'its most important features is the use of present costs to assist management. this current cost aspect of managerial cost',
7462:'accounting is referred to in the objectives of federal financial reporting where is states that “accounting data may be further',
7463:'assigned, allocated, or associated with units of activity or production, segments of organizations, etc., within the same time period. these',
7464:'kinds of intraperiod allocations are developed most extensively in the branch of accounting called cost accounting. neither the fasb nor',
7465:'the gasb has devoted much attention to this branch of accounting, but the fasab, because of its unique mission, will',
7466:'need to do so.”14 managerial cost accounting information pertaining to present costsismost often usedforcontrolling andreducing thosecosts, controlling work processes, and',
7467:'measuring current performance. reporting relationships 55. proper financial management requires that the three accounting processes work closely together to provideusefulreporting',
7468:'tobothinternaland externalusers. the internalexternal dual focus of federal reporting has been established in the objectives of federal financial reporting. it',
7469:'states that “the fasab and itssponsorsbelieve that anydescription of federal financial reporting objectives should consider the needs of both internal',
7470:'and external users and the decisions they make.” in addition, it says that “the fasab considers the information needs of',
7471:'both internal and external users. in part, this is because the distinction between internal and external users is in many',
7472:'ways less significant for the federal government than for other entities.” it goes on to classify the users of financial',
7473:'information into four major groups: program managers, executives, the congress, and citizens.15 these categories include both internal and external users.',
7474:'56. federal financial reporting encompasses general and special purpose reports to meet the needsofthefourusergroups. informationproducedbymanagerialcostaccountingappears in or influences both types',
7475:'of reports.16 as discussed above, managerial cost accounting should provide information for use by both financial accounting and budgetary accounting.',
7476:'14statement of federal financialaccounting concepts no. 1, objectives of federal financial reporting, par. 174. 15ibid., pars. 23, 25, and par.',
7477:'75. 16the types of general purpose and special purpose reports are discussed in statement of federal financial accounting concepts no.',
7478:'1, objectives of federal financial reporting, chapter 7. page 17 sffas 4 fasab handbook, version 20 06/21 sffas 4 that',
7479:'information is used by those processes in producing both general purpose and special purpose reports. 57. managerial cost accounting also',
7480:'results in reports of its own. most often these are special purpose reports designed for internalusers, typicallyprogramand line managers. however,',
7481:'they may be for groups generally considered external users. 58. oneofthemostimportantaspectsofreportinginwhichmanagerialcostaccountingplaysa large role is that of performance reporting. measuring and',
7482:'reporting actual performance against established goals is essential to assess governmental accountability. cost information is necessary in establishing strategic goals,',
7483:'measuring service efforts and accomplishments, and relating efforts to accomplishments. the importance of cost information in relation to performance measurement',
7484:'and performance reporting has been recognized in the objectives of federal financial reporting, which said “one reason for performing cost',
7485:'accounting isto assist in performance measurement” and it also stated that “the topics of cost and performance measurement are related',
7486:'because it is by associating cost with activities or ‘cost objectives’ that accounting can make much of its contribution to',
7487:'reporting on performance.”17 basis ofaccountingand recognition/measurement methods 59. costs maybemeasured,analyzed,andreportedin manyways.aparticular cost measurement has meaning only when considering its purpose.',
7488:'the measurement of costs can vary depending upon the circumstances and purpose for which the measurement is to be used.',
7489:'in objectives of federal financial reporting, it is stated that “the board’s own focus is on developing generally accepted accounting',
7490:'standards for reporting on the financialoperations, financialposition, andfinancialconditionof thefederalgovernment and its component entities and other useful financial information. this implies',
7491:'a variety of measures of costs and other information that complements the information available in the budget [emphasis added].”18 60.',
7492:'in addition, it is stated that “in defining the proper measurement, assignment, and allocation of costfora givenpurpose, selectingtheappropriateaccounting methodandwhethertouse full',
7493:'costing should be carefully considered.”19 further, it added that “the accrual basis of 17ibid., par. 174 and par. 192. 18ibid.,',
7494:'par. 191. 19ibid., par. 196. page 18 sffas 4 fasab handbook, version 20 06/21 sffas 4 accounting generally provides a',
7495:'better matching of costs to the production of goods and services, but its use and application for any given purpose',
7496:'must be carefully evaluated.”20 61. therefore, managerial cost accounting should provide cost information using a basis of accounting and recognition/measurement',
7497:'standards that are appropriate for the intended use of the information. when managerial cost accounting is used to supply information',
7498:'for use by financial accounting and financial reporting, that information should be consistent with the basis of accounting and recognition/measurement',
7499:'standards required by federal accounting principles. traditionally this has meant the use of accrual accounting and historical cost measurement, particularly',
7500:'in general purpose reports. 62. when managerial cost accounting is used to supply information for the preparation and review of',
7501:'budgets, cost data should be consistent with the basis of accounting and recognition/measurement used in financial reporting, but may be',
7502:'adjusted to meet the budgetary information needs. 63. special purpose cost studies and analyses are sometimes performed for decision making.',
7503:'in those studies and analyses, management may need to develop cost data beyond those currently reported in general purpose financial',
7504:'reports. for example, in making planning decisions, management may develop replacement costs and capital costs. however, the basis and methods',
7505:'used should be appropriate for the circumstances and consistent with the intended purposes. reconciliation of information 64. different bases of',
7506:'accounting will produce different costs for the same item, activity, or entity. this can confuse users of cost information. therefore,',
7507:'reports that use different accounting bases or different recognition and measurement methods should be reconcilable, and should fully explain those',
7508:'bases and methods. regardless of the type of report in which it is presented, cost information should ultimately be traceable',
7509:'back to the original common data source. 65. to be reconcilable, the amount of the differences in the information reported',
7510:'should be ascertainableand the reasons forthedifferencesshould be explainable. in some situations, informational differences may be clearly understandable without further explanation.',
7511:'however, other cases may require a narrative statement concerning the differences. in complicated situations, a schedule or table may be',
7512:'required to fully explain the differences. 20ibid., par. 197. page 19 sffas 4 fasab handbook, version 20 06/21 sffas 4',
7513:'66. financialreportinghaslongrecognizedthenecessityforreconciliationbetweeninformation reported on different accounting bases. reconciliations have been required in federal financial reports to show and explain significant',
7514:'differences between budget reports and financial statements prepared in accordance with generally accepted accounting principles. managerial costaccounting standards requirement for',
7515:'costaccounting each reporting entity21 should accumulate and report the cost of its activities on a regular basis for management information',
7516:'purposes. costs may be accumulated either through the use of cost accountingsystems or through the use of cost finding techniques.',
7517:'67. cost information is essential to effective financial management and should play an important role in federal financial reporting. managerial',
7518:'cost accounting processes are the means of providing cost information in an efficient and reliable manner on a continuing basis.',
7519:'need for consistent costaccounting onaregular basis 68. to perform managerial cost accounting on a “regular basis” means that entities should',
7520:'establish procedures to accumulate and report costs continuously, routinely, and consistently for management information purposes. consistent and regular cost accounting',
7521:'is needed to meet the second objective of federal financial reporting which states information should be provided to help the',
7522:'user determine the costs of providing specific programs and activities and the composition of, and changes in those costs. that',
7523:'objective also requiresthe reporting of performance information of federal programsand the changes over time in that performance in relation to',
7524:'the costs. 69. the requirement for managerial cost accounting on a regular and consistent basis supports recent legislative actions. the',
7525:'cfoact of 1990 states that agency cfos shall provide for the development and reporting of cost information and the periodic',
7526:'measurement of performance. in addition, the gpraof 1993 requires each agency, for each program, to establish performance indicators and measure',
7527:'or assess relevant outputs, service levels, and outcomes of each program as a basis for comparing actual results with established',
7528:'21the term “reporting entity” as used in this document conveys the same meaning as defined in fasab statement of recommendedaccounting',
7529:'concepts no. 2, entity and display may 1995. page 20 sffas 4 fasab handbook, version 20 06/21 sffas 4 goals.',
7530:'the nature of these legislative mandates requires reporting entities to develop and report cost information on a consistent and regular',
7531:'basis. 70. the managerial cost accounting processes consist of collecting data from the common data source, processing that data, and',
7532:'reporting cost and output information in general purpose and special purpose reports. appropriate procedures and practices should also be established',
7533:'to enable the collection, measurement, accumulation, analysis, interpretation, and communication of cost information. this can be accomplished through the use',
7534:'of a cost accounting system or the use of cost finding techniques and other cost studies and analyses. acost accounting',
7535:'“system” is an organized grouping of methods and activities designed to consistently produce reliable cost information. basic costaccounting processes 71.',
7536:'regardless of whether a reporting entity uses a cost accounting system or cost finding techniques, the methods and procedures followed',
7537:'should be designed to perform at least a certain minimum level of cost accounting and provide a basic amount of',
7538:'cost information necessary to accomplish the many objectives associated with planning, decision making, control, and reporting. the more important of',
7539:'these minimum criteria forcost accountingare associated with the standards in the remainder of this statement. others are also important. responsibility',
7540:'segments cost information should be collected by responsibility segments which have been identified by management and outputs should be defined',
7541:'for each responsibility segment.22 full costing each reporting entity should measure the full cost of outputs so that total operational',
7542:'costsand totalunit costsof outputs can be determined. “full cost” includes the cost of goods or services provided byother entities when',
7543:'the applicable criteria are met.23 costingmethodology thecostingmethodologyusede.g.,activitybasedcosting,job order costing, standard costing, etc. should be appropriate for management’s needs and the',
7544:'operating environment.24 performance measurement cost accounting should provide information needed to determine and report service efforts and accomplishments and information',
7545:'necessary to meet the requirements of the gpraor interface with a system that provides such 22see standard in this statement',
7546:'concerning responsibility segments. 23see standard concerning full costs and standard concerning interentity costing. 24see standard concerning costing methodology. page 21',
7547:'sffas 4 fasab handbook, version 20 06/21 sffas 4 information. this includes the quantity of inputs and outputs and other',
7548:'nonfinancial information needed in the measurement of performance. reporting frequency cost information should be reported in a timely manner and',
7549:'on a regular basis consistent with the needsof management and the requirements of both budgetary and financial reporting. standard general',
7550:'ledger managerial cost accounting should be integrated with general financial accounting. both depend on the standard general ledger for basic',
7551:'financial transaction data. precision of information cost information supplied to internal and external users should be reliable and useful in',
7552:'making evaluations or decisions. at the same time, unnecessary precision and refinement of data should be avoided. special situations the',
7553:'managerial cost accounting processes should be designed to accommodateanyof management’sspecialcost information needsthat mayarisedue to unusualorspecialsituationsor circumstances. if such cost information',
7554:'isneeded on a regular basis, appropriate procedures to provide it should be developed. documentation allmanagerial costaccountingactivities,processes,andprocedures should be documented by',
7555:'a manual, handbook, or guidebook of applicable accounting operations. this reference should outline the applicable activities, provide instructions for procedures',
7556:'and practices to be followed, list the cost accounts and subsidiary accounts related to the standard general ledger, and contain',
7557:'examples of forms and other documents used. complexity of costaccounting processes 72. while each entity’s managerial cost accounting should meet',
7558:'the basics discussed above, this standard does not specify the degree of complexity or sophistication of any managerial cost accounting',
7559:'process. each reporting entity should determine the appropriate detail for its cost accounting processes and procedures based on several factors.',
7560:'these include the: nature of the entity’s operations; precision desired and needed in cost information; practicality of data collection and',
7561:'processing; availability of electronic data handling facilities; cost of installing, operating, and maintaining the cost accounting processes; and any specific',
7562:'information needs of management. 73. some entities may find that they can purchase basic “offtheshelf” cost accounting programs, systems, or',
7563:'processes, or adapt those of other federal agencies. all entities should consider using similar or compatible cost accounting processes throughout',
7564:'their component units to facilitate comparison and consolidation of cost information. page 22 sffas 4 fasab handbook, version 20 06/21',
7565:'sffas 4 cost findings, studies,andanalyses 74. acostaccountingsystem is acontinuous andsystematic cost accountingprocess which may be designed to accumulate and assign',
7566:'costs to a variety of objects routinely or as desired by the management. such a system may be best for',
7567:'some reporting entities. 75. some entities may not need a sophisticated system to perform detailed cost accumulation and assignment. they',
7568:'need to accumulate and report costs regularly as required by this standard, but they may determine and analyze costs through',
7569:'special cost studies and analyses. also, some entities may use a combination of a system supplemented by cost studies. 76.',
7570:'cost information may be developed and savings achieved in some cases by the use of special cost studies or cost',
7571:'analyses to develop information helpful in certain decision making situations. in addition, cost finding techniques may be used to determine',
7572:'the cost of products or services. cost finding is a method for determining the cost of producing goods or services',
7573:'using appropriate procedures. cost finding techniques may also be useful for computing costs in cases where the information is not',
7574:'needed on a recurring basis. responsibility segments management ofeachreportingentityshoulddefineandestablishresponsibilitysegments. managerial costaccounting should be performed to measure and report the costs',
7575:'of each segment’s outputs. special cost studies, if necessary, should also be performed to determine the costs of outputs. 77.',
7576:'the standard states that the management of each reporting entity should define and establish responsibility segments. this section explains the',
7577:'concept of responsibility segment, purposes of segmentation, and how responsibility segments can be structured. defining responsibility segments 78. aresponsibility segmentis',
7578:'acomponentofareporting entity25 thatisresponsiblefor carrying out a mission, conducting a major line of activity, or producing one or a group of',
7579:'related products or services. in addition, responsibility segments usually possess the following characteristics: 1 their managers report to the entity’s',
7580:'top management directly; 25theterm “reportingentity” referredto in this documentconveys the same meaning asdefined in fasab statement of recommendedaccounting concepts no.',
7581:'2, entity and display may 1995. page 23 sffas 4 fasab handbook, version 20 06/21 sffas 4 2 their resources',
7582:'and results of operations can be clearly distinguished from those of other segments of the entity.26 79. aresponsibility segmentis aunitfor',
7583:'whichmanagerial costaccountingisperformed. entities may use a centralized accounting system or segmentbased systems to provide cost information for each segment. for',
7584:'each segment, managerial cost accounting should: 1 define and accumulate outputs, and if feasible, quantify each type of output in',
7585:'units; 2 accumulate costs and quantitative units of resources consumed in producing the outputs; and 3 assign costs to outputs,',
7586:'and calculate the cost per unit of each type of output. 80. some reporting entities may have only one responsibility',
7587:'segment, if they perform one single mission or one type of service. other reporting entities may have several responsibility segments.',
7588:'also, a suborganization of the federal government may be a reporting entity in itself and, at the same time, it',
7589:'may also be a responsibility segment of a higher level reporting entity to which it belongs. the forest service, for',
7590:'example, may be a reporting entity because it may meet the reporting entity criteria.as such, it may establish responsibility segments',
7591:'for itself. at the same time, the forest service may be regarded as a responsibility segment of the department ofagriculture,',
7592:'of which it is a component. 81. however, for a given reporting entity, its management should establish one or more',
7593:'responsibility segments to perform managerial cost accounting functions. purposes of segmentation 82. abasic purposeofdividingan entityintosegmentsistodetermineand reportthecosts of servicesand productsthat each',
7594:'segment producesand delivers. many federal departments and agencies manage programs that produce a variety of goods and services. accounting for',
7595:'entitywide revenues and expenses in aggregate would serve financial reporting for the entity, but would not serve costing purposes. in',
7596:'order to determine the cost of each type of service or product, it is necessary to divide an entity into',
7597:'segments such that each segment is responsible for certain types of services or products. each segment can then be used',
7598:'as a vehicle for accumulating costs incurred by the segment to match with its outputs. each segment can use a',
7599:'cost methodology that is best suited to its operations. 26these two characteristics make responsibility segments, as the term is used',
7600:'in this document, differ from cost centers.acost center can be at any level of an organization and may not report',
7601:'to the top management directly.as will be explained later, a responsibility segment can contain cost centers in itself. page 24',
7602:'sffas 4 fasab handbook, version 20 06/21 sffas 4 83. another important purpose of segmentation is to facilitate cost control',
7603:'and management. cost information provided for each segment helps managers to examine costs of specific resourcesconsumedand activitiesperformed in each segment.',
7604:'managers can analyze cost variances in both dollars and the units of resources consumed against budgets or standards. since each',
7605:'segment performs a particular pattern of processes and activities to produce its output, managers can analyze those processes and activities',
7606:'to compare their costs with the value they contribute to the output. 84. for entities that consist of components engaging',
7607:'in diverse lines of activities, it is desirable to provide financial reports that display information for significant components individually and',
7608:'of the entity in its entirety.27 some entities may find costs accumulated by segments useful in support of financial reporting',
7609:'by components. 85. for internal management, segmentation could also facilitate performance measurement. since each segment is responsible for a mission,',
7610:'or a line of activity to produce a certain type of output, performance goals can be set for each segment',
7611:'based on its specific tasks and operating patterns. information on costs, outputs, and outcomes related to each segment can be',
7612:'used to measure its performance against the goals. the results of the segment performance measurement could also support external reporting',
7613:'on performance measures for the entire reporting entity or its major programs. structuring responsibility segments 86. reporting entity management should',
7614:'define and structure its responsibility segments. the designation of responsibility segments should be based on the following factors: a the',
7615:'entity’s organization structure, b its lines of responsibilities and missions, c its outputs goods or services it delivers, and d',
7616:'budget accounts and funding authorities. however, the predominant factor is the reporting entity’s organization structure and its existing responsibility components,',
7617:'such as bureaus, administrations, offices, and divisions within a department. 87. theu.s. generalservicesadministration, for example,providesfivedistinctservices:1 managing public buildings, 2 distributing',
7618:'supplies, 3 providing travel and transportation services, 4 managing information resources including communication and data processing services, and 5 disposal',
7619:'of real properties. each of those service areas could be designated asa responsibilitysegment. thedepartment of veteransaffairsva, among its other services,',
7620:'provides health care to veterans, pays veterans’ compensation and 27this point is discussed in fasab statement of recommendedaccountingconcepts no. 2,',
7621:'entity and display, pars. 7576. page 25 sffas 4 fasab handbook, version 20 06/21 sffas 4 pension benefits, and provides',
7622:'home loansand home loan guarantees to veterans. each of these program areas could constitute a responsibility segment. 88. since responsibility',
7623:'segments are major parts of an entity, some segments may carry more than one program. some programs may be jointly',
7624:'managed by two or more segments. thus, each segment must accumulate costs for each type of output produced for various',
7625:'programs. to accomplish this, a network of cost centers can be established within a segment to accumulate costs. managers of',
7626:'each cost center will be provided with information to control and manage costs within their area of responsibility. depending on',
7627:'operational patterns and cost methods, cost centers can be structured along different dimensions, such as organizational units, operating processes, and',
7628:'activities. full cost reporting entities should report the full costs of outputs in general purpose financial reports. the full cost',
7629:'of an output produced by a responsibility segment is the sum of 1 the costs of resources consumed bythe segment',
7630:'that directly or indirectly contribute to the output, and 2 the costs of identifiable supporting services provided by other responsibility',
7631:'segments within the reporting entity, and by other reporting entities. 89. this standard states that reporting entities should measure and',
7632:'report the full costs of their outputs in general purpose financial reports. “outputs” means products and services generated from the',
7633:'consumption of resources. the full cost of a responsibility segment’s output is the total amount of resources used to produce',
7634:'the output. this includes direct and indirect costs that contribute to the output, regardless of funding sources. it also includes',
7635:'costs of supporting services provided by other responsibility segments or entities. the standard does not require full cost reporting in',
7636:'federal entities’ internal reports or special purpose cost studies. entity management can decide on a casebycase basis whether full cost',
7637:'is appropriate and should be used for internal reporting and special purpose cost studies. direct costs 90. directcosts arecosts thatcan',
7638:'bespecificallyidentifiedwithanoutput. alldirectcosts should be included in the full cost of outputs. typical direct costs in the production of an output',
7639:'include: a salaries and other benefits for employees who work directly on the output; b materials and supplies used in',
7640:'the work; page 26 sffas 4 fasab handbook, version 20 06/21 sffas 4 c various costs associated with office space,',
7641:'equipment, facilities, and utilities that are used exclusively to produce the output; and d costs of goods or services received',
7642:'from other segments or entities that are used to produce the output see discussions and explanations in the next section',
7643:'on “inter entity costs”. indirect costs 91. indirect costs are costs of resources that are jointly or commonly used to',
7644:'produce two or more types of outputs but are not specifically identifiable with any of the outputs. typical examplesofindirectcostsincludecostsofgeneraladministrativeservices,generalresearch and',
7645:'technical support, security, rent, employee health and recreation facilities, and operatingandmaintenancecostsforbuildings, equipment, andutilities.there aretwolevels of indirect costs: a indirect costs',
7646:'incurred within a responsibility segment. these indirect costs should be assignedto outputsona causeandeffect basis, if suchanassignment iseconomically feasible, or through',
7647:'reasonable allocations. see discussions on cost assignments in the “costing methodology” section. b costs of support services that a responsibility',
7648:'segment receives from other segments or entities. the support costs should be first directly traced or assigned to various segments',
7649:'that receive the support services. they should then be assigned to outputs. 92. areportingentity andits responsibility segments mayincur general managementand',
7650:'administrative support costs that cannot be traced, assigned, or allocated to segments and theiroutputs. theseunassigned costsare part of the organizationcosts,',
7651:'andtheyshould be reported on the entity’s financial statements such as the statement of net costs as costs not assigned to',
7652:'programs.28 certain cost elements costs of employees’ benefits 93. employee benefits include: 28asimilar explanation is provided in fasab statement of',
7653:'recommendedaccounting concepts no. 2, entity and display, par. 95. page 27 sffas 4 fasab handbook, version 20 06/21 sffas 4',
7654:'a health and life insurance benefits for current employees covered in part by the government’s contribution to health and life',
7655:'insurance premiums; b pension benefits for employees, their survivors, and dependents, covered by defined pension plans such as civil service',
7656:'retirement system csrs, federal employees retirement plan fers, and military retirement system mrs; c health and life insurance benefits for',
7657:'retired employees, their survivors and dependents, covered in part by the government’s contribution to health and life insurance premiums, and',
7658:'referred to as “other retirement benefits” orb in this document; d other postemployment benefits opeb for terminated and inactive employees,',
7659:'which include severance payments, training and counseling, continued health care, and unemployment and workers compensation. 94. most of the employee',
7660:'benefit programs are covered by trust funds administered by the office of personnel management opm and the department of defense',
7661:'dod. contributions to the trust funds come from three sources: current and retired employees, employing agencies, and direct appropriations. the',
7662:'management expenses of the trust funds are paid with the funds’ receipts. 95. federal financial accounting standards require that the',
7663:'employing entity accrue the costs to the federalgovernment of providing pension and orb benefitsto employees and recognize the costs as',
7664:'an expense when the benefits are earned.29 the employing entity should recognize those expenses regardless of whether the benefits are',
7665:'funded by the reporting entity or by direct appropriations to the trust funds. this principle should also be applied to',
7666:'healthandlife insurancebenefitsforcurrent employeesandcomparablebenefitsformilitary personnel. the costs of employee benefits incurred by responsibility segments should be directly traced or assigned to',
7667:'outputs. 96. opebcostsincludeseverancepayments,counselingandtraining,healthcare,andworkers compensation benefitspaid to former or inactive employees. opeb costs are often incurred asa result of sucheventsasreductionsin force',
7668:'or onthejob injuriesof employees. federal financial accounting standards require that opeb costs be reported as an expense for the period',
7669:'during which a future outflow or other sacrifice of resources is probable and measurable on the basis of events occurring',
7670:'on or before the accounting date.30 29fasab exposure draft, accounting for liabilities of the federal government november 7, 1994, pars.',
7671:'6299. 30ibid., pars. 100102. page 28 sffas 4 fasab handbook, version 20 06/21 sffas 4 97. since the recognition of',
7672:'opeb costs is linked to the occurrence of an opeb event rather then the production of output, in many instances,',
7673:'assigning opeb costs recognized for a period to output of that period would distort the cost of output. in special',
7674:'purpose cost studies or cost findings, management may distribute opeb costs over a number of years in the past to',
7675:'determine the costs of the outputs that the opeb recipients helped to produce. costs of publicassistance and social insurance programs',
7676:'98. majorcostsofwelfare,insurance,andgrantprogramsarethecostsofresourcestransferred from the federal government to individuals and state and local governments. some of them are referred to as',
7677:'“transferpayments.” the following are some typical public assistance and insurance programs: grants, such as aid to state and local governments;',
7678:'subsidies, such as agricultural commodity price support and stabilization programs; credit and insurance costs, such as the family education loan',
7679:'program and savings association insurance; welfarepayments suchasaidtofamilieswithdependentchildrenafdc; and, socialinsurance,suchas theoldage,survivors,anddisabilityinsuranceprogram. 99. the full cost of such a program includes: a',
7680:'the costs of federal resources that have been or will be transferred to individuals and state/local governments, and b the',
7681:'costs of operating the programs. these two types of costs should be recognized on a basis of accounting that isprescribed',
7682:'within the federal financialaccounting standards. these two types of costs should be separately identified so that each can be used',
7683:'for different analytic purposes. 100. the costs resulting from transfer payments are determined bythe level of grants, subsidies, entitlement benefits,',
7684:'credit subsidies, or loss payments made under insurance and guarantee agreements. they are also determined by the number of eligible',
7685:'persons who receive the transfer payments. the program cost ofafdc, for example, depends on the average payment per family, the',
7686:'number of eligible families, and the federal government’s share in the payments some payments are made by state and local',
7687:'governments. information on this type of cost is useful for making policy decisions about levels of subsidiesorbenefits,eligibilityof recipients, andhowtransferpaymentsaremade. thiscost',
7688:'information is also useful for measuring the costeffectiveness of a transfer payment program. 101. program operating costs, on the other',
7689:'hand, are costs of managing the program and delivering the payments. they include the costs of personnel, supplies, equipment, and',
7690:'offices. the costs are related to such activities as screening benefit recipients for eligibility, page 29 sffas 4 fasab handbook,',
7691:'version 20 06/21 sffas 4 keeping their accounts, making payments and collections, answering inquiries, etc. information on this type of',
7692:'cost is useful in measuring the efficiency of program operations. costs related to property, plant and equipment 102. depreciation expense.',
7693:'general property, plant, and equipment are used in the production of goods and services. their consumption is recognized as depreciation',
7694:'expense. the depreciation expense incurred by responsibility segments should be included in the full costs of the goods and services',
7695:'that the segments produce. 103. recognizing property acquisition costs as expenses. the costs of acquiring or constructing federalmissionand heritage property,',
7696:'plant, and equipment may be chargedto expenses at the time the acquisition costs are incurred.31 since the recognition of these',
7697:'expenses is linked to property acquisition rather than production of goods and services, those expenses should not be included in',
7698:'the full costs of goods and services. however, they are part of the costs of the entity or the program',
7699:'that makes the property acquisitions. nonproduction costs 104. aresponsibility segment may incur and recognize costs that are linked to events',
7700:'other than the production of goods and services. two examples of these nonproduction costs were discussed earlier: 1 opeb costs',
7701:'that are recognized as expenses when an opeb event occurs, and 2 certain property acquisition costs that are recognized as',
7702:'expenses at the time of acquisition. other nonproduction costs include reorganization costs, and nonrecurring cleanup costsresulting from facilityabandonmentsthat arenot accrued.',
7703:'since these costs are recognized for a period in which a particular event occurs, assigning these costs to goods and',
7704:'service produced in that period would distort the production costs. in specialpurpose cost studies, management may have reasonsto determinehistoricaloutput costs',
7705:'by distributing some of these costs to outputs over a number of past periods. such distribution may be appropriate when:',
7706:'aexperience showsthat the costs are recurring in a regularpattern, and banexuscanbeestablished between thecostsandtheproduction of outputs that may have benefited from',
7707:'those costs. 31in fasab exposure draft,accounting for property, plant, and equipment, the board proposed that the costs of acquiring or',
7708:'constructing “federal mission” and “heritage” property, plant, and equipment be recognized as expenses when the costs are incurred. see the',
7709:'ed, pars. 98117, pages 2934. page 30 sffas 4 fasab handbook, version 20 06/21 sffas 4 interentity costs each entity’s',
7710:'full cost should incorporate the full cost of goods and services that it receives from otherentities. the entity providing the',
7711:'goods or services has the responsibility to provide the receiving entity with information on the full cost of such goods',
7712:'or services either through billing or other advice. recognition of interentity costs that are not fully reimbursed is limited to',
7713:'material items that 1 aresignificanttothereceivingentity, 2 formanintegral ornecessarypart ofthereceiving entity’soutput, and 3 can be identified or matched to the receiving',
7714:'entity with reasonable precision. broad and general support services provided by an entity to all or most other entities should',
7715:'not be recognized unless suchservices form a vital and integral part of the operations or output of the receiving entity.',
7716:'105. as stated in the preceding standard, to fully account for the costs of the goods and services they produce,',
7717:'reportingentitiesshould include the cost of goodsand servicesreceived from other entities. knowledge of these costs is helpful to top level management',
7718:'in controlling and assessing the operating environment. it is also helpful to other users in evaluating overall program costs and',
7719:'performance and in making decisions about resource allocations and changes in programs. interentity activities 106. within the federal government, some',
7720:'reporting entities rely on other federal entities to help them achieve their missions. often this involves support services, but may',
7721:'include the provision of goods. sometimesthesearrangementsmaybestipulatedbylaw, butothersare established by mutual agreement of the entities involved. such relationships can be classified',
7722:'into two types depending upon funding methods. provision of goods or services with reimbursement—in this situation, one entity agrees to',
7723:'provide goods or services to another with reimbursement at an agreedupon price. the reimbursement price may or may not be',
7724:'enough to recover full costs. usually the agreement is voluntarily established through an interagency agreement. revolving funds can also be',
7725:'included in this group, because they are usually established to recover costs through sale of their outputs to other government',
7726:'entities. they are usually meant to be selfsustaining through their sales, without receiving additional appropriations. however, they do not always',
7727:'charge enough to cover full costs. provision of goods or services without reimbursement—one entity provides goods or services to another',
7728:'entity free of charge. the agreement may be voluntary, legally mandated, or inherently established in the mission of the providing',
7729:'entity. 107. recently, consideration has been given to expanding the concept of interentity support within the federal government. under this',
7730:'concept, entities could sell their outputs on a competitive basis. entitieswould have the authority to purchase goods or services from',
7731:'any federal or private provider. this is seen as a way to improve government efficiency through page 31 sffas 4',
7732:'fasab handbook, version 20 06/21 sffas 4 competition since inefficient government providers would be forced to improve or stop providing',
7733:'these goods or services. this could result in consolidating support services in fewer governmental entities. underlying this concept is the',
7734:'requirement that all costs be recognized in developing the price at which goods and services would be sold to other',
7735:'entities. accountingand implementation guidance31a 108. if an entity provides goods or services to another entity, regardless of whether full reimbursement',
7736:'is received, the providing entity should continue to recognize in its accounting records the full cost of those goods or',
7737:'services. the full costs of the goods or services provided should also be reported to the receiving entity by the',
7738:'providing entity. 109. the receiving entity should recognize in its accounting records the full cost of the goods or services',
7739:'it receives as an expense or, if appropriate, as an asset such as workinprocess inventory. the information on costs of',
7740:'nonreimbursed or underreimbursed goods or services should be available from the providing entity. however, if such cost information is not',
7741:'provided, or is partially provided, a reasonable estimate may be used by the receiving entity. the estimate should be of',
7742:'the cost of the goods or services received the estimate may be based on the market value of the goods',
7743:'or services received if an estimate of the cost cannot be made. to the extent that reimbursement is less than',
7744:'full cost, the receiving entity should recognize the difference in its accounting records as a financing source.32 interentity expenses/assets and',
7745:'financing sources would be eliminated for any consolidated financial statements covering both entities. recognition 110. implementation of thisstandardoninterentitycosting should be',
7746:'accomplishedinapractical and consistent manner by federal entities. the office of management and budget may 31a these paragraphs should be read',
7747:'in conjunction with “recognition” paragraphs 110 113 to provide a complete understanding of the implementation of standard on interentity costing',
7748:'due to different recognition requirements for certain types of activities. 32see statement of recommended federalaccounting concepts no. 2, entity and',
7749:'display, par. 65. see also, fasab exposure draft, accounting for liabilities of the federal government, pars. 6299, pages 2646, which',
7750:'addresses accounting for pensions and other retirement benefits orb. the payment of pension and orb costs for an entity by',
7751:'another entity has often been likened to providing goods and services. in the case of pensions, employees of the reporting',
7752:'entity provide services to that entity and part of the salaryrelated cost is paid by a different entity. the pension',
7753:'administering entity does not provide goods or services to the reporting entity other than normal pension administration services, but rather',
7754:'pays their costs directly. the difference is subtle but important. however, the accounting is similar. this document is consistent with',
7755:'the section of the liabilities exposure draft dealing with accounting for pensions and other retirement benefits. page 32 sffas 4',
7756:'fasab handbook, version 20 06/21 sffas 4 issue guidance identifying additional interentity costs entities should recognize. the inter entity costs',
7757:'should be specified in accordance with this standard including the recognition criteria presented in paragraphs 111 through 113. 111. recognition',
7758:'of all significant interentity costs is important when those costs constitute inputs to government goods or services provided for a',
7759:'fee or user charge. generally, the feesand userchargesshouldrecoverthe full costsof thosegoodsand services.33 thus, the cost of interentity goods or services',
7760:'needs to be recognized by the receiving entity in order to determine fees or user charges for goods and services',
7761:'sold by the federal government. recognition of interentity costs supporting businesstype activities33a and recognition of interentity costs for nonbusiness type',
7762:'activities that elect to do so should be made in accordance with implementation guidance provided by fasab through one or',
7763:'more technical releases.33b activities that are not businesstype activities are not required to recognize interentity costs other than interentity costs',
7764:'for personnel benefits and the treasury judgment fund settlements unless otherwise directed by omb. notwithstanding the absence of a requirement,',
7765:'nonbusinesstype activities may elect to recognize imputed cost and corresponding imputed financing for other types of interentity costs. 112. however,',
7766:'the situation is often different with goods or services transferred within the federal government that do not involve eventual sales',
7767:'to entities outside the federal government. the federal government in its entirety is an economic entity. therefore, it is reasonable',
7768:'to expect some flow of goods or services between reporting entities as those entities assist each other in fulfilling their',
7769:'missions and operating objectives. there are some cases in which the cost of nonreimbursed or underreimbursed goods or services received',
7770:'from otherentitiesneednot be recognized aspart of the cost of the receiving entity. the following general criteria are provided to help',
7771:'in determining the typesof interentity coststhat should or should not be recognized. materiality—as with other accounting standards, the provisions of',
7772:'this standard need not be applied to immaterial items. however, in the context of deciding which inter entity transactions are',
7773:'to be recognized, materiality, as used here, is directed to the individual interentity transaction rather than to all interentity transactions',
7774:'as a whole. under this concept, a much more limited recognition is intended than would be 33 omb circular a25',
7775:'addresses user charges by federal entities. 33a businesstype activity is defined as a significantly selfsustaining activity which finances its continuingcycle',
7776:'of operations through collection of exchange revenue as defined in sffas 7, accounting for revenueand other financing sources and concepts',
7777:'for reconciling budgetary and financial accounting. see also sffas 6, accounting for property, plant, and equipment, footnote 27. 33b technical',
7778:'release tr 8, clarification of standards relating to interentity costs provides implementation guidance. additional trs may be provided by fasab',
7779:'if needed. page 33 sffas 4 fasab handbook, version 20 06/21 sffas 4 achieved by reference to the general materiality',
7780:'concept. in this context, then, materiality should be considered in terms of the importance of the interentity transaction to the',
7781:'receiving entity. the importance of the transactions, and thereby their recognition, should be judged in light of the following factors:',
7782:' significance to the entity—the cost of the good or service is large enough that management should be aware of',
7783:'the cost when making decisions.  directnessofrelationshiptotheentity’soperations—thegoodorserviceprovided is an integral part of and necessary to the output produced by the',
7784:'entity.  identifiability—the cost of the good or service provided to the entity can be matched to the entity with',
7785:'reasonable precision. the determination of whether the cost is material requires the exercise of considerable judgment, based on the specific',
7786:'facts and circumstances of each transaction. broad, general support—some entities provide broad, general support to many, if not all, reportingentitiesin',
7787:'thefederal government. most often thistype of support involves the establishment of policies and/or the provision of general guidance. the costs',
7788:'of such broad services should not be recognized as an expense or asset by the receiving entitieswhen thereisnoreimbursement of costs.',
7789:'thusthe standard doesnot apply when support is of a general nature provided to all or most entities of the federal',
7790:'government. an example of this situation can be found in the office of management and budget which establishes policy and',
7791:'provides general guidance to all parts of the executive branch of government. the costs of omb should not be spread',
7792:'over all reporting entitiesbecause the servicesprovidedare1generaland broad inscope, 2provided to almost all reporting entities in the executive branch, and 3',
7793:'not specifically or directly tied to the receiving entity’s outputs. on the other hand, some services provided, under certain circumstances,',
7794:'should still be recognized even though they may be considered broad and general in nature if such services are integral',
7795:'to the operations of the receiving entity. such services include checkwritingbythedepartment oftreasuryorlegalactivitiesperformedbythe department of justice. for example, when the issuance',
7796:'of checks is integral to the operations of an entity e.g., the internal revenue service and the social security administration,',
7797:'the receiving entity should include the full cost of issuing checks in the full cost of its outputs. however, if',
7798:'the issuance of checks is insignificant and incidental to the operations of an entity, the entity should not normally recognize',
7799:'that cost. page 34 sffas 4 fasab handbook, version 20 06/21 sffas 4 113. the decision as to whether the',
7800:'cost of nonreimbursed or underreimbursed goods and services should be recognized requires the use of judgement. none of the criteria',
7801:'listed above are, by themselves, fully or exclusively determinative. they should be considered in combination. ultimately, inclusion or exclusion of',
7802:'the cost should be decided based on the specific facts and circumstances of each case, with consideration of the degree',
7803:'to which inclusion or exclusion would change or influence the actions and decisions of a reasonable person relying on the',
7804:'information provided. component reporting entity disclosures 113a. component reporting entities should disclose that only certain interentity costs are recognized for',
7805:'goods and services that are received from other federal entities at no cost or at a cost less than the',
7806:'full cost. an example disclosure includes: goods and services are received from other federal entities at no cost or at',
7807:'a cost less than the full cost to the providing federal entity. consistent with accounting standards, certain costs of the',
7808:'providing entity that are not fully reimbursed [by the component reporting entity] are recognized as imputed cost [in the statement',
7809:'of net cost], andare offset byimputed revenue [inthe statement of changesin net position]. such imputed costsand revenuesrelate tobusinesstype activitiesif applicable,',
7810:'employeebenefits, and claims to be settled by the treasury judgment fund.33c however, unreimbursed costs of goods and services other than',
7811:'those identified above are not included in our financial statements. accounting example 114. the following tables provide an example of',
7812:'the accounting entries to be made when the receiving entity agency r recognizes an expense for services received from a',
7813:'providing entity agency p on a nonreimbursable basis. in the example, the full costs of these services toagency p are',
7814:'$100,000. 115. agencyrrecognizesan “expenseofservicesprovidedbyagencyp” equaltothefullcost of the services received. it also recognizes a financing source, “services provided by agency p,”',
7815:'equal to the amount not reimbursed, which in this case is the full $100,000. agency p recognizes an “expense of',
7816:'services provided toagency r” equal to the full cost of the services provided with a credit to “appropriations used.” 33cfor',
7817:'simplicity, the illustration addresses only the unreimbursed costs required to be imputed by accounting standards. component reporting entities should identify',
7818:'the general nature of other imputed costs recognized in their financial statements. page 35 sffas 4 fasab handbook, version 20',
7819:'06/21 sffas 4 table 1: agency r’saccounting entries debit credit expenseof services providedbyagencyp $100,000 services providedbyagencyp $100,000 note: this example',
7820:'shows the cost recognized as an expense. however, as discussed in the text, it may be an asset. table 2:',
7821:'agency p’saccounting entries debit credit expense of services provided to agency r $100,000 appropriated capital $100,000 fund balance with treasury',
7822:'$100,000 appropriated capital used $100,000 costing methodology costs of resources consumed by responsibility segments should be accumulated by type of',
7823:'resource. outputs produced by responsibility segments should be accumulated and, if practicable, measured in units. the full costs of resources',
7824:'that directly or indirectly contribute to the production of outputs should be assigned to outputs through costing methodologies or cost',
7825:'finding techniques that are mostappropriate to the segment’s operating environment and should be followed consistently. the cost assignments should be',
7826:'performed by the following methods listed in the order of preference: a directly tracing costs wherever feasible and economically practicable,',
7827:'b assigning costs on a causeandeffect basis, or c allocating costs on a reasonable and consistent basis. 116. this standard',
7828:'addresses two aspects of costing: cost accumulation and cost assignment. each of them is explained and discussed below. costaccumulation 117.',
7829:'cost accumulation is the process of collecting cost data in an organized way. the standard requires that costs be accumulated',
7830:'by responsibility segments. the accumulation is for costs incurred within each responsibility segment, and does not involve the assignment or',
7831:'allocation of costs incurred by other supporting segments, which will be discussed in the latter part of this section. page',
7832:'36 sffas 4 fasab handbook, version 20 06/21 sffas 4 118. in the section of this document relating to “responsibility',
7833:'segments,” it was explained that: “aresponsibility segment is a component of a reporting entity, that is responsible for carrying out',
7834:'a mission, conducting a major line of activity, or producing one or a group of related products or services.” the',
7835:'accumulation of costs by responsibility segments does not mean that each responsibility segment must have its own accounting system. the',
7836:'reporting entity may have a centralized accounting system, but the system should be capable of identifying costs with responsibility segments.',
7837:'119. this standard also requires that the accumulated costs be classified by type of resource, suchascostsof employees, materials, capital, utilities,rent,',
7838:'etc. whenappropriate andcost effective, information on quantitative units related to various cost categories should be maintained. for example, staffdays may',
7839:'be reported for staff salaries and benefits, and gallons of gasoline consumed for gasoline costs. the quantitative units are useful',
7840:'for cost assignments, and are indispensable for measuring efficiency in using resources. costassignment 120. the term “cost assignment” refers to',
7841:'the process that identifies accumulated costs with reporting periods and cost objects. the assignment of costs to time periods is',
7842:'to recognize costs either as expenses or assets for each reporting period. it is governed by accounting standards on recognition',
7843:'of assets and expenses, and will not be addressed in this document. this section addresses cost assignment to cost objects.',
7844:'the word “assignment” used in this document includes various methods of attributing costs, such as direct tracing, causeandeffect basis, and',
7845:'cost allocations. 121. the term “cost object” refers to an activity or item whose cost is to be measured.34 in',
7846:'a broad sense, a cost object can be an organizational division, program, activity, task, product, service, or customer. however, the',
7847:'purpose of cost accounting by a responsibility segmentisto measurethe costsof itsoutputs. thus, the finalcost objectsof aresponsibility segment are its outputs:',
7848:'the services or products that the segment produces and delivers, the missions or tasks that the segment performs, or the',
7849:'customers or markets that the responsibility segment serves. there may be intermediate cost objects that are used in the course',
7850:'of the cost assignment process. 122. some responsibility segments of an entity may provide supporting services or deliver intermediate products',
7851:'to other segments within the same entity. the costs of the supporting services and intermediate products should be assigned to',
7852:'the segments that receive the services and products. this is referred to as the intraentity cost assignments. also, in accordance',
7853:'with the interentity cost standard discussed in the preceding section, an entity 34some literature, the casb pronouncements for example, use',
7854:'the term “cost objective” for the same meaning. page 37 sffas 4 fasab handbook, version 20 06/21 sffas 4 should',
7855:'recognize interentity costs for goods and services received from other federal entities. the interentity costs should also be assigned to',
7856:'the responsibility segments that use the interentity services and products. 123. thus, with respect to each responsibility segment, the costs',
7857:'that are to be assigned to outputs include: a direct and indirect costs incurred within the responsibility segment, b costs',
7858:'of other responsibility segments that are assigned to the segment, and c interentity costs recognized by the receiving entity and',
7859:'assigned to the segment. if a responsibility segment produces one kind of output only, costs of resources used to produce',
7860:'the output are assigned to the output. 124. this standard is intended to establish a principle, rather than a methodology,',
7861:'for cost assignment. also cost assignments may be performed in cost findings and studies or may be performed within a',
7862:'system on a regular basis. in principle, costs should be assigned to outputs in one of the methods listed below',
7863:'in the order of preference: a directly tracing costs wherever economically feasible; b assigning costs on a causeandeffect basis; and',
7864:'c allocating costs on a reasonable and consistent basis. 125. these principles apply to all levels of cost assignments including:',
7865:'1 assigning interentity costs to segments, 2 assigning the costs of support services and intermediate products among segments of an',
7866:'entity the intraentity cost assignments, and 3 assigning direct and indirect costs to outputs. directly tracing costs to outputs 126.',
7867:'direct tracing applies to resources that are directly used in the production of an output. examples of such resources include',
7868:'materials that are used in the production, employees who directly worked on the output, facilities and equipment used exclusively in',
7869:'the production of the output, and goods or services received from other entities that are directly used in the production',
7870:'of the output. 127. the method of direct cost tracing usually relies on the observation, counting, and/or recordingoftheconsumptionofresourceunits,suchasstaff hoursor daysthatarespenton',
7871:'a project or assignment, or gallons of fuel consumed in a transport mission. direct tracing also applies to specific resources',
7872:'that are dedicated to particular outputs. 128. direct cost tracing often minimizes distortion and ensures accuracy in cost assignments. however,',
7873:'it can be arelativelycostlyprocess. it shouldbeappliedonlyto itemsthataccount page 38 sffas 4 fasab handbook, version 20 06/21 sffas 4 for a',
7874:'substantial portion of the cost of an output and only when it is economically feasible. for example, it is usually',
7875:'unnecessary to trace the cost of office supplies pens, papers, computer disks, etc. to various activities or outputs. the cost',
7876:'of so doing usually outweighs the benefit of the increased accuracy in assigning the resources. assigning costs on a causeandeffect',
7877:'basis 129. for the costs that are not directly traced to outputs, it is preferable that they be assigned to',
7878:'them on a causeandeffect basis. as mentioned earlier, the ultimate cost objects of a responsibility segment are its outputs. for',
7879:'costs that are not traced to the ultimate objects outputs, intermediate objects can be established as links between resource costs',
7880:'and outputs. the links reflect a causeandeffect relationship between resource costs and outputs. costs that have a similar causeandeffect relationship',
7881:'to outputs can be grouped into cost pools. this similar relationship is referred to in some literature as the “cost',
7882:'pool homogeneity concept.” 130. activities or work elements that contribute to or support the production of outputs are commonly used',
7883:'as intermediate objects. this is based on the premise that on one hand, outputs require the performance of certain activities,',
7884:'and on the other hand the activities cause costs. thus, an activity is considered a linkage between the cause and',
7885:'the effect. see also, discussions onactivitybased costing later in this section. in its policy statement, the costaccounting standards board expressed',
7886:'a similar view: “the preferred presentation of the relationship between the pooled cost and the benefiting cost objectives is a',
7887:'measureoftheactivity input of thefunctionorfunctions representedbythepoolofcost. thisrelationship can be measuredin circumstances where thereis direct anddefinitive relationship between the function or functions',
7888:'and the benefiting cost objectives.”35 131. for example, a computer technology department provides technical support to other departments of an',
7889:'organization. the costs of the department may be assigned to other departments on a causeandeffect basis through two steps. in',
7890:'the first step, the costs are assignedto theactivitiesofthedepartment, suchashardwareinstallationandmaintenance, software designand installation, or programming adjustments. in the second step, the',
7891:'costs of these activities are further assigned to other departments based on their consumption of the technical services. 132. sometimes,',
7892:'an intermediate product, rather than an activity, can be used as a link between the costs and outputs. for example,',
7893:'a hospital laboratory’s costs can first be assigned to 35costaccounting standards board, restatement of objectives, policies and concepts, par. 2915.',
7894:'page 39 sffas 4 fasab handbook, version 20 06/21 sffas 4 various medical tests it runs. the costs of the',
7895:'tests can then be assigned to the operating units of the hospital that ordered the tests. allocating costs 133. sometimes,',
7896:'it might not be economically feasible to directly trace or assign costs on a causeandeffect basis. these may include general',
7897:'management and support costs, depreciation, rent, maintenance, security, and utilities associated with facilities that are commonly used by various segments.',
7898:'134. these supporting costs can be allocated to segments and outputs on a prorated basis. the cost allocations may involve',
7899:'two steps. the first step allocates the costs of support services to segments, and thesecondstepallocatesthosecoststotheoutputsofeachsegment.the cost allocations are usually based',
7900:'on a relevant common denominator such as the number of employees, square footage of office space, or the amount of',
7901:'direct costs incurred in segments. 135. suppose the total cost of a personnel department for a fiscal year is $500,000,',
7902:'and it is allocated to two segments based on the number of employees of the two segments: segmentahas 300 employees,',
7903:'and segment b has 200 employees. on the prorated basis, segmentashould be allocated 60 percent, or $300,000 of the personnel',
7904:'cost, and segment b should be allocated 40 percent, or $200,000 of the personnel department cost. the allocation is shown',
7905:'below: table 3: the allocation of the personnel dept. costs segment employees percent allocated amount a 300 60 $300,000 b',
7906:'200 40 $200,000 total 500 100 $500,000 136. for cost allocation purposes, indirect costs may be grouped into pools, and',
7907:'each pool is subject to one allocation base. costs grouped into one pool should have similar characteristics. the allocation base',
7908:'should be used consistently to allow cost comparison from one period to another. 137. cost allocation is a relatively simple',
7909:'method of assigning indirect costs to cost objects. users of the cost information should be aware that distortionsin product costing',
7910:'often result from arbitrary cost allocations. in most cases, there is little correlation between an indirect cost and the allocation',
7911:'base, and the allocation is arbitrary. to assist cost analyses and cost page 40 sffas 4 fasab handbook, version 20',
7912:'06/21 sffas 4 findings,costaccounting should segregate coststhat aretraced orassigned to outputsfrom costs that are allocated to outputs. assigning common costs',
7913:'138. facility and personnel resourcesmaybe shared bytwo or more activities either at the same time or in different times during',
7914:'a fiscal year. for example, a military aircraft maintained for war readiness may be used in peacetime to transport cargo.',
7915:'as another example, a plant may be used to process two or more products. 139. the cost assignment principles discussed',
7916:'in this section should apply to assigning costs to activities or outputs that share the use of resources. costs that',
7917:'can be traced to each of the activities or outputs should be assigned to them directly. these include direct operating',
7918:'costs of each of the activities. for the military aircraft used in peacetime to transport cargo, for example, the costs',
7919:'of fuel and supplies, additional personnel who worked on the cargo, and other costs incidental to the transportation should be',
7920:'directly assigned to the transportation services. 140. to determine the full cost of each of the activities or outputs that',
7921:'share resources, indirect common costs should be assigned to those activities. the term “common costs” refers to the costs of',
7922:'maintaining and operating facilities and other resources that cannot be directly traced to any one of the activities or outputs',
7923:'that share the resources.36 common costs should be assigned to activities either on a causeandeffect basis, if feasible, or through',
7924:'reasonable allocations. 141. sometimes management may find it useful to designate primary and secondary activities that share resources. primary activity',
7925:'is the primary purpose or mission for which the resources are made available. secondary activities are those activities that are',
7926:'performed only if they will not interfere with the primary activity. management can then determine two types of costs: 1',
7927:'the costs that are necessary for the primary activity and are unavoidable even without the secondary activities, and 2 the',
7928:'costs that are caused by the secondary activities and are incremental to the costs of the primary activity. this type',
7929:'of cost information can be produced through cost findings, and may help management in making resource allocation and capacity utilization',
7930:'decisions. 36this definition is adapted from statement no. 1 on managementaccounting: managementaccounting glossary, published by the nationalassociation ofaccountants montvale, new',
7931:'jersey: 1991, page 15. page 41 sffas 4 fasab handbook, version 20 06/21 sffas 4 costbenefit considerations 142. throughout the',
7932:'discussions of this section, it is stated that a cost accumulation and assignment method would be used when it is',
7933:'economically feasible. amethod is economically feasible if the benefits resulting from implementing the method outweigh its costs. it is not',
7934:'advantageous to use a costing method if it requires a large amount of resources and yet produces information of little',
7935:'value to users. 143. as a general rule, directlytracing costs and assigning costson a causeandeffect basisare more expensive than cost',
7936:'allocations, because they require detailed analyses and record keeping for costs and activities. however, they are preferable because they produce',
7937:'more reliable cost information than cost allocations. selectingacosting methodology 144. this standard does not require the use of a particular',
7938:'type of costing system or costing methodology. federal entitiesareengagedina broad rangeofdiverseoperations.acosting systemappropriate for one typeof operation maynot be appropriate for',
7939:'other operations.at many federal agencies, cost accounting practices are either relatively new or experimental. it is too early to tell',
7940:'which cost systems are best for specific types of operations.as experience and research in cost accounting progress, reporting entities and',
7941:'responsibility segments may find a preferred costing methodology for their operations. 145. agency and program management is in the best',
7942:'position to select a type of costing system that wouldmeet itsneeds. in makingtheselection,managementshouldevaluatealternative costing methods and select those that provide',
7943:'the best results under its operating environment. 146. the standard requires that a costing methodology, once adopted, be used consistently.',
7944:'consistent use provides cost information that can be compared from year to year. however, thisrequirement doesnot preclude necessaryimprovementsand refinements to',
7945:'the system or methodology, so long as the effect of any change is documented and explained. on the contrary, improvements',
7946:'are encouraged. 147. several costing methodologies have been successful in the private sector and in some government entities. four are',
7947:'brieflydescribed below for agency consideration. it should be noted in particular that activitybased costing has gained broad acceptance by manufacturing',
7948:'and service industries as an effective managerial tool. federal entities are encouraged to study its potential within their own operations.',
7949:'in the following paragraphs, activitybased costing will be introduced with other well known costing methodologies, namely job order costing and',
7950:'process costing. standard costing is also mentioned as an importantcost managementtool. itisimportanttonotethat thosecostingmethodologiesare page 42 sffas 4 fasab handbook, version',
7951:'20 06/21 sffas 4 not mutually exclusive. both activitybased costing and standard costing can be applied to job order or',
7952:'process costing systems. activitybased costing abc 148. abc focuses on the activities of a production cycle, based on the premises',
7953:'that a an output requires activities to produce, and b activities consume resources. abc systems use cost drivers to assign',
7954:'costs through activities to outputs. theabc cost assignment is a twostage procedure. the first stage assigns the costs of resources',
7955:'to activities and the second stage assigns activity costs to outputs. the procedure is illustrated in the following figure.37 figure2:theactivitybasedtwostagecostingprocedure',
7956:'􀀀  􀀀  149. implementing anabc systemrequiresfourmajorsteps: 1identify activities performed in a responsibility segment to produce outputs, 2 assign',
7957:'or map resources to the activities, 3 identify outputs for which the activities are performed, and 4 assign activity costs',
7958:'to the outputs. each of the steps is briefly explained below. 1 identifyactivities. thissteprequiresanindepthanalysisoftheoperatingprocessesof each responsibility segment. each process may',
7959:'consist of one or more activities required by outputs. activities may be classified into unitlevel, batchlevel, product 37the figure and',
7960:'the accompanying discussions are based on robin cooper, robert s. kaplan, lawrence s. maisel, eileen morrissey, and ronald m. oehm,',
7961:'implementingactivitybased cost management montvale, nj: institute of managementaccountants, 1992, pages 913. page 43 sffas 4 fasab handbook, version 20 06/21',
7962:'sffas 4 sustaining, and facility sustaining activities.38 management may combine related small activities into larger activities to avoid excessive costing',
7963:'efforts. 2 assign resource costs to activities. this step assigns resource costs to the activities identified in step 1. the',
7964:'resource costs include direct and indirect costs usually recorded in general ledger accounts. depending on feasibility and costbenefit considerations, resource',
7965:'costs may be assigned to activities in three ways: a direct tracing; b estimation based on surveys, interviews, or statistical',
7966:'sampling; or c allocations. 3 identify outputs. this step identifies all of the outputs for which activities are performed and',
7967:'resources are consumed by a responsibility segment. the outputs can be products, services, or customers persons or entities to whom',
7968:'a federal agency is required to provide goods or services. omitting any output would result in overcharging costs to other',
7969:'outputs. 4 assignactivitycoststooutputs. inthisstep,activitycostsareassignedtooutputsusing activity drivers. activity drivers assign activity costs to outputs based on individual outputs’ consumption or demand',
7970:'for activities. for example, a driver may be the number of times an activity is performed in producing a specific',
7971:'type of output the transaction driver, or the length of time an activity is performed the duration driver. 150. abc',
7972:'can be used in conjunction with job order costing or process costing. for example, making direct loans to the public',
7973:'involves a series of processes, such as loan origination, credit review for individual applicants, preparing loan documents, valuation of collateral,',
7974:'making loan disbursements, computing fees and periodic payments, keeping records, and making collections. these are the “first category” activities that',
7975:'directly affect individual loans. abc can be applied to this category of activities. 151. the direct loan operations also involve',
7976:'“second category” activities, such as those performed by loan officers to review and assess a portfolio of loans and make',
7977:'policy changes that affect an entire portfolio. ifabc is not used, the costs of the loan officers may be allocated',
7978:'to direct loans based on the number of loans disbursed, or based on the staff hours spent on processing all',
7979:'the loans. however, such an allocation tends to be arbitrary, because some loans require more of their time than others.',
7980:'underabc, the costs of loan officers would first be assigned to their portfolio review and workout activities that they perform,',
7981:'then the activity costs would be assigned to the groups of loans for which the activities are performed. 38cooper, kaplan,',
7982:'et al. page 20. page 44 sffas 4 fasab handbook, version 20 06/21 sffas 4 152. amajor advantage of usingabc',
7983:'is that it avoids or minimizes distortions in product costing that result from arbitrary allocations of indirect costs. by tracing',
7984:'costs through activities, abc provides more accurate service or product costs. experience in the private sector shows that by providing',
7985:'accurate cost measures,abc has helped improve product costing, strategic pricing, and profit planning. 153. also important is thatabc encourages management',
7986:'to evaluate the efficiency and cost effectiveness of activities. someabc systems rank activities by the degree to which they addvaluetotheorganizationoritsoutputs.',
7987:'managersusesuchvalue rankingstofocustheir cost reduction programs. abc encourages management to identify and examine a what activities are really needed valueadded activities',
7988:'in order to accomplish a mission, deliver a service, or meet customer demand, b how activities can be modified to',
7989:'achieve cost savings or product improvements, and c what activities do not actually add value to services or products nonvalueadded',
7990:'activities. abc integrates with cycle time analysis and valueadded analysis. job order costing 154. job order costing is a costing',
7991:'methodology that accumulates and assigns costs to discrete jobs.theword “jobs” referstoproducts,projects, assignments, oragroupof similaroutputs. 155. eachjobhasa numberorcodetoaccumulatecosts. resourcesspentareidentifiedwiththe job code.',
7992:'costs are traced to individual jobs to the extent economically feasible. costs that cannot be directly traced are assigned to',
7993:'jobs either on a causeandeffect basis or allocation basis. 156. job order costing is appropriate for responsibility segments that produce',
7994:'special order products, or perform projects and assignments that differ in duration, complexity, or input requirements. typical situations in the',
7995:'federal government in which job order costing would be appropriate are legal cases, audit assignments, research projects, and repair work',
7996:'for ships, aircraft, or vehicles. process costing 157. process costing is a method that accumulates costs by individual processing divisions',
7997:'organization divisions that perform production processes. these processing divisions are involved in a continuous production flow, with each division contributing',
7998:'towards the completion of the end products. the output of a processing division either becomes the input of the next',
7999:'processing division or becomes a part of the end product. 158. each division accumulates costs, assigns the costs to its',
8000:'outputs, and calculates the unit cost of its output. for each period, divisions prepare a cost and production report, showing',
8001:'page 45 sffas 4 fasab handbook, version 20 06/21 sffas 4 the costs, the completed units, and the workinprocess volume.',
8002:'when a certain number of completed units are transferred from a division to the next division, the costs of those',
8003:'units are also transferred and are eventuallyincorporated into the costs of the end product. thus, the cost flow follows the',
8004:'physical flow of the production. the unit cost of the end product is the sum of the unit costs of',
8005:'all the divisions. 159. process costing is appropriate for production of goods or services with the following characteristics: a the',
8006:'production involves a regular pattern of process, b its output consists of homogeneous units, and c all units are produced',
8007:'through the same process procedures. in the private sector, process costing is used by such industries as flour mills, steel',
8008:'foundries, oil refineries, and chemical processing plants. in government, it may be used by some activities that involve repetitive process',
8009:'procedures to deliver a large volume of similar goods or services. an example would be making entitlement benefit payments, which',
8010:'involves a series of consecutive processes for reviewing applications to establish their eligibility, computing the amount of benefits, and issuing',
8011:'checks. standard costing 160. standard costs are carefully predetermined or expected costs that can be applied to activities, services, or',
8012:'products on a per unit basis. horngren describes standard costing as follows: “aset of standards outlines how a task should',
8013:'be accomplished in nonfinancial terms minutes, board feet and how much it should cost. as work is being done, actual',
8014:'costs incurred are compared with standard costs for various tasks or activities torevealvariances. this feedback helps discover better ways of',
8015:'adhering to standards, of altering standards, and of accomplishing objectives.”39 161. many organizations frequently review and update the standards to',
8016:'assure that they encourage improvements in efficiency and are within an attainable range. 162. standard costing helps managers to formulate',
8017:'budgets, control costs, and measure performance. it can be used in conjunction with job order costing, process costing, and activitybased',
8018:'costing. it can be applied to specific outputs or activities, and it can also be applied to a responsibility segment',
8019:'in aggregate by comparing total actual costs with total standard costs based on outputs produced within a certain time period.',
8020:'typical situations in the federal government in which standard costing would be appropriate are operations that produce services or products',
8021:'on a consistentlyrepetitivebasis.agencies are encouraged to use standard costing in those situations. 39horngren, charles t. and george foster, costaccounting,amanagerial emphasis,',
8022:'7th ed. prentice hall, englewood cliffs: new jersey, 1991, page 222. page 46 sffas 4 fasab handbook, version 20 06/21',
8023:'sffas 4 appendixa: basis for conclusions this statement may be affected by later statements. the fasab handbook is updated annually',
8024:'and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text of the',
8025:'statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the',
8026:'reader can review the basis for conclusions of the amending statement for the rationale for each amendment. the nature of',
8027:'concepts and standards 163. the difference between accounting concepts and standards is significant. statements of concepts are more general than',
8028:'statements of standards. standards are intended to be specific guidance and authoritative in nature. concepts generally do not contain specific',
8029:'recommendations that would, when issued by the board’s sponsors, become authoritative requirements for federal agencies. concepts, instead, provide general guidance',
8030:'both to the board and others. they are also intended to help preparers and users of financial information better understand',
8031:'federal accounting and financial reporting. while the differences can be easily stated, in reality the line between concepts and standards',
8032:'is often broad and presents many gray areas for interpretation. 164. when the board began the project on managerial cost',
8033:'accounting, it anticipated the issuance of a recommended statement of concepts. given the meager use of cost accounting within many',
8034:'federal agencies, a statement of concepts would provide both the board and preparers of federal financial reports with overall guidance',
8035:'in the area and an indication of the future direction the board might take in developing standards. however, as the',
8036:'board and staff began working on the project, it became clear that action was needed to recommend standards for the',
8037:'development of cost information. 165. cost accounting standards were needed because users of financial information, especially taxpayers and members of',
8038:'congress, began putting more emphasis on the cost of government programs, products, and activities. the effortsto reduce government spending, control',
8039:'the deficit, and improve government functions necessitated information about the true costs of government. in addition, passage of the cfoact',
8040:'and the gprarequired agencies to provide cost information as a part of improving their financial management and reporting. furthermore, the',
8041:'npr issued a recommendation that the board move rapidly to recommend cost accounting standards. 166. the board established the costaccounting',
8042:'task force to provide advise and guidance on the cost accounting project. on the task force were many individuals knowledgeable',
8043:'about page 47 sffas 4 fasab handbook, version 20 06/21 sffas 4 cost accounting in the private sector as well',
8044:'as the limited federal cost accounting activities. the task force also recommended the establishment of cost accounting standards. 167. theboardissuedtheexposuredraftasarecommendedstatementofstandards.theboard',
8045:'knew, however, that since cost accounting is relatively new in the federal environment, the final statement necessarily would contain some',
8046:'conceptual material.although the exposure draft did not present any direct questions concerning whether parts of the draft should be viewed',
8047:'as concepts, the issue did arise in public hearings held in november 1994, and january 1995. in addition, a few',
8048:'respondents who mailed in their comments addressed the point. 168. most of those commenting on the issue stated that they',
8049:'viewed the exposure draft as being somewhat conceptual in nature. many of those thought that this was appropriate and supported',
8050:'the document and the conceptual material it presented. afew respondents were concernedabout theabilitytoauditsomeofthe standardsbecauseoftheconceptualnature of the document. several suggested that',
8051:'the final statement be segregated into concepts and standards and both be issued in one statement. 169. the board decided',
8052:'that some parts of the final statement would contain information that should be presented as concepts while other parts would',
8053:'be better presented asstandards. therefore, the final statement should be a “hybrid” issuance containing both concepts and standards. the title',
8054:'of the document was changed to “managerial costaccounting conceptsandstandardsforthefederalgovernment.” the board decided that thematerial presented in the exposure draft as',
8055:'the first standard that addressed the relationship among managerial cost accounting, financial reporting, and budgeting should be presented as concepts.',
8056:'the other materials were more in the nature of standards. relationshipamong costaccounting, financial reporting,and budgeting 170. the board considers it',
8057:'important for financial preparers and users of financial reports to understand the relationship of cost accounting to the more traditional',
8058:'areas of general financial accounting, financial reporting, and budgeting. it views cost accounting as a basic and integral part of',
8059:'an entity’s financial management system. therefore, the board included a standard on this relationship within the exposure draft. 171. the',
8060:'standard addressed the role of managerial cost accounting in financial management and explained how it provides cost information relevant to',
8061:'budgeting, financial reporting, management control, and many decision making processes. the standard discussed the use of a common data source',
8062:'for cost accounting, financial accounting, and budgeting. it explained how the costs may be determined using different bases of accounting',
8063:'and different recognition and measurement methods depending upon the intended use of the page 48 sffas 4 fasab handbook, version',
8064:'20 06/21 sffas 4 information. it also emphasized the need for reconciliation of cost data which may be presented differently',
8065:'in various financial reports. the standard stated that all cost information, regardless of how presented, should be traceable back to',
8066:'the original common data source. 172. most exposure draft respondents who provided comments on this standard stated that the level',
8067:'of detail presented was about right given the desire of the board to address cost accounting at a high level.',
8068:'most respondents agreed with the need to draw cost accounting data from a common data source that is also the',
8069:'source of financial and budgetary data. some respondents were concerned that the use of the term “data source” was too',
8070:'closely allied with automated or computerized operations and that the term may be misinterpreted. the board, however, believes that the',
8071:'term is adequately explained. in fact, the exposure draft clearly stated that this term was not meant to imply the',
8072:'use of computerized systems for source information. 173. data reconciliation for reports containing cost information developed on different bases of',
8073:'accounting or using different recognition or measurement methods received overwhelming support from respondents to the exposure draft. they said that',
8074:'the ability to reconcile differing costinformation isnecessarytoensure data integrity, avoidconfusionon thepart of financial statement users, and support stewardship responsibilities. 174.',
8075:'many who commented on whether the exposure draft should be viewed as a statement of conceptsorastatement of standardsimpliedthat thisparticularstandardonrelationshipsof costaccountingtootherfinancialmanagementfunctionswasbasicallyconceptualinnature.',
8076:'the board agreed and concluded that this section ismore in the nature of an explanation of how cost accounting provides',
8077:'useful information and how it fits in with the overall financial management system as opposed to a standard which places',
8078:'a requirement on an entity. the board decided that this material would be better presented in the final statement as',
8079:'recommended concepts. requirement for costaccounting 175. the cost accounting task force recommended that a standard be included in the exposure',
8080:'draftrequiringeachreporting entityto establishcost accountingsystemsandproceduresfor its activities. they believed this was necessary to ensure the generation of required cost information. 176.',
8081:'the board agreed to include the standard in the exposure draft. the standard defined “system” in a broad way as',
8082:'simply an organized grouping of methods and activities designed to consistently produce reliable cost information. the explanations and discussions section',
8083:'of the exposure draft contained information on several factors that page 49 sffas 4 fasab handbook, version 20 06/21 sffas',
8084:'4 would help managers decide how complex and sophisticated their cost accounting system should be. it noted that the system',
8085:'could be constrained by the 1 nature of the entity’s operations, 2 precision needed in cost information, 3 practicality of',
8086:'data collection and processing, 4 availabilityof electronicdata handling, 5 expected cost of the system itself, and 6 any specific management',
8087:'information needs. 177. the exposure draft also listed ten minimum criteria that should be met by all managerial cost accounting',
8088:'systems. four of these were related directly to the other standards in the exposure draft responsibility segments, full costing, costing',
8089:'methodology, and unused capacity costs. the six remaining criteria were concerned with ensuring that the cost data produced was reliable,',
8090:'consistent, and useful. these criteria were 1 ensuring the ability to assist in measurement of performance, 2 reporting information on',
8091:'a timely and consistent basis, 3 integrating cost accounting with the standard general ledger, 4 determining a reasonableand useful level',
8092:'of data precision, 5accommodatingspecialinformation needs of management, and 6 documenting the system through a manual or handbook. the standard also',
8093:'allowed for the use of cost finding techniques and special cost studies or analyses. 178. alarge number of respondents to',
8094:'the exposure draft supported the requirement for cost accounting systems. they stated that such a requirement is necessary to ensure',
8095:'that appropriate cost data are recorded. they also said that having a requirement for cost systems will help agencies to',
8096:'more easily meet the requirements of the cfoact and the gpra. some qualified their support by stating that the standard',
8097:'should allow an exemption for small entities since establishment of a full cost accounting system may not be cost beneficial',
8098:'to them. the board decided that such an exemption would be inappropriate since the standards should apply to all federal',
8099:'activities. furthermore, it should be far easier for small entities to perform managerial cost accounting in most cases. 179. those',
8100:'who were negative toward the standard provided several reasons. several expressed concern about whether accounting standardsetting bodies should require or',
8101:'determine how accounting data are produced. they noted that other accounting standard setting organizations have stated only what information isrequired',
8102:'and howthat information is displayed in financial statements, not how the information is developed. 180. the board believes that it',
8103:'should not be constrained by what other standardsetters do. other standardsetters so far have concerned themselves mainly with entities’ external',
8104:'reporting. this is understandable because their mission is to assure that the financial position and results of operations are presented',
8105:'in a fair, reliable, and consistent manner to financial statement users who are external to the reporting entity. 181. fasab',
8106:'is different in that it has determined that some of the users of federal government financial reports are internal to',
8107:'the government. given the nature and size of the federal page 50 sffas 4 fasab handbook, version 20 06/21 sffas',
8108:'4 government, internal users often do not have the same type of access to cost information that may be available',
8109:'in commercial enterprises. in addition, the board views cost accountinginformationasvitaltobothinternalandexternalusers. theboardhaspreviously determined in its objectives of financial reporting that cost',
8110:'information should be reported to meet the needs of congress, federal executives, and others. 182. some respondents to the exposure',
8111:'draft were concerned that the requirement for a cost accounting system, along with the system criteria, would not allow management',
8112:'enough flexibility. they seemed to consider the requirement for a system to mean that cost accounting activities had to be',
8113:'automated with computers and that software had to be developed and employed in a “fullblown” system, as one put it.',
8114:'they believe that such an elaborate system may not be needed in some cases where informalprocedures or methods would suffice.',
8115:'183. the board doesnot intend toprescribe an elaborate managerial costaccounting system for every federal organization. it believed that the standard',
8116:'proposed in the ed was sufficiently broad to allow managerial flexibility in the system design. however, the board does recognize',
8117:'that the term “system” may connotate to some a requirement for computerization and sophisticated methodologies. 184. othersstatedthatestablishingthe requirementforcostsystemsshouldbetheresponsibility of omb',
8118:'or jfmip. some of the respondents were concerned about the degree to which the standard may overlap with jfmip’s responsibility',
8119:'to set requirements for cost accounting systems. the npr recommends setting requirements for cost accounting systems as a responsibility of',
8120:'jfmip, while asking the board to provide the cost accounting standards.40 185. the board proposed the requirement for systems to',
8121:'ensure that cost information is produced and reported in a reliable and consistent manner, and emphasized that this was the',
8122:'intent. the point is not whether the information is produced through the use of a system or through other techniques.',
8123:'the board believes that, in many cases, cost accounting systems will be established as a natural consequence of requiring cost',
8124:'information. many government agenciesare very large and complex organizations, and it isunrealisticto think that they can develop cost data without',
8125:'relying on a system to do so. other small agencies or reporting entities may not need a system to develop',
8126:'cost data in a regular, consistent, and reliable manner. 186. the board, therefore, changed the standard to emphasize producing cost',
8127:'accounting information in a reliable and consistent manner. this can be done through the use of cost 40office of the',
8128:'vice president, improving financial management,accompanying report of the national performance review september 1993, page 24. page 51 sffas 4 fasab',
8129:'handbook, version 20 06/21 sffas 4 accounting systems or cost finding techniques. in either case, the main intent of the',
8130:'original standard ispreserved. in addition, the concernsexpressed overwhether the board orsome other organization should establish the requirement for cost “systems”',
8131:'are solved. responsibility segments 187. as stated in the ed, a responsibility segment is a component of a reporting entity',
8132:'that is responsible for carrying out a mission, conducting a major line of activity, or producing one or a group',
8133:'of related products or services. 188. the proposal for using responsibility segments in the ed was based on the view',
8134:'that most federal departments and agencies are engaged in more than one line of activity, or producing more than one',
8135:'type of service or product. furthermore, the activities that an agency performs may differ from each other significantly in required',
8136:'resources and operations. the edused the department of veteransaffairsva as an example.among its activities, vaadministers hospitals and nursing homes to',
8137:'provide health care to veterans, and it also administers direct home loan and loan guarantee programs. these lines of activities',
8138:'are significantly different in operation patterns. the board believes that for entities that are engaged in diverse activities, identifying responsibility',
8139:'segments is necessary for identifying resources consumed by a distinct line of activity with the outputs of that activity. 189.',
8140:'amajority of respondents supported the requirement for responsibility segments and agreed with the advantages of the requirement. theyexpressed the view',
8141:'that segmentation provides a basic framework to trace and assign costs to outputs. they also believed that segmentation provides management',
8142:'with the flexibility of choosing a costing methodology that is best suited for a line of activity. the respondents also',
8143:'stated that information generated by responsibility segments can be used to measure performance and to assess accountability. 190. severalrespondents, however,presentedargumentsagainstusingresponsibilitysegments.',
8144:'onesuchargumentwasthatresponsibilitysegmentswouldconstituteanunnecessarylayer that conflicts with financial reporting and budgeting systems. the board disagrees with this view. aresponsibility segment is not, and',
8145:'should not be, an additional layer to the organization and the budget structure. it is an accounting mechanism to capture',
8146:'data generated in operations by various components of an organization in its existing structure. organization and budget structures can be',
8147:'changed for better management but not for the sake of accounting. accounting may influence but cannot dictate such changes. 191.',
8148:'the board believes that accounting by segment will help provide information useful to program managers and otherusers of financial reports.',
8149:'entitywide financialreportsprovide information on the overall financial position and operating results of an entity in aggregate. page 52 sffas 4',
8150:'fasab handbook, version 20 06/21 sffas 4 such reports, although useful for many purposes, are not sufficient for cost management.a',
8151:'fundamentalundertaking of managerial cost accounting isto match costswith activities and outputs. the purpose of segmentation is to segregate entitywide data',
8152:'by major lines of activities and their outputs. information related to each segment should tell managers and other users of',
8153:'financial reports about the segment’s specific outputs, the activities performed, and resources consumed to produce the outputs. 192. furthermore, segmentbased',
8154:'reporting need not be in conflict with entitywide financial reporting. theycan use a common source of data, such asaccounting data',
8155:'collected bythe standard general ledger or the budget execution reports. to perform segmentbased accounting and reporting, the general accounting or',
8156:'budget execution data can be traced and assigned to segments. the statement of federal financialaccounting conceptsno. 2, entity and display,discussesareportingapproachsimilartothesegmentbasedaccounting',
8157:'and reporting: “with some organizations, and even suborganizations, the activities of one or more programs or other components are as',
8158:'important to the readers of financial statements as are activities of the entity as a whole. this would be particularly',
8159:'truefor adepartment composedof many bureaus, administrations, agencies,services, etc., and particularly if their programs are dissimilar. in those instances, consideration should',
8160:'be given to the preferability of reporting the assets, liabilities, revenues, expenses, etc., of both the significant components individually and',
8161:'of the entity in its entirety.”41 193. another argument against requiring responsibility segments was that the requirement is overly prescriptive',
8162:'and would constrain agency management from selecting among various cost collection methods. the board believes the standard gives management adequate',
8163:'flexibility in structuring cost accounting. as the standard states, it is for the management of each entity to decide how',
8164:'segments should be defined, and how similar products and services can be grouped into one segment. 194. furthermore, segments are',
8165:'the largest components of an entity. management has the flexibility to use any cost collection method within each segment. within',
8166:'a segment, management may define subunits, functions, projects, business processes, activities, or a combination of them as cost centers to',
8167:'accumulate costs. the costs accumulated at lower levels can then be aggregated to the segment level. 195. in fact,a segmentmaycontain',
8168:'multiple levelsofresponsibility or costcenters. for example, if veterans health care is defined as one of the dva’s responsibility segments, this',
8169:'segment may define itshospitals, clinics, and nursing homesasresponsibilitycenters. each hospital, clinic, and nursing home may further define their functional units,',
8170:'activities, or business processes as cost centers. 41fasab statement of recommendedaccounting concepts 2, entity and display, par. 75. page 53',
8171:'sffas 4 fasab handbook, version 20 06/21 sffas 4 196. somerespondentscorrectlypointed outthatrequiring broad responsibilitysegments,rather than prescribing traditional cost centers, provides',
8172:'opportunity for entities to use activity based costing or any other costing methods that they may find appropriate. 197. several',
8173:'respondents who supported the use of responsibility segments interpreted the wording of the proposed standard as requiring that each segment',
8174:'perform managerial cost accounting. they pointed out that for some entities, it is more effective and economical to perform centralized',
8175:'managerial cost accounting. such centralized accounting is capable of accumulating costs by segments and assigning costs among them. the respondents',
8176:'requested that the wording be revised to provide this flexibility. 198. the board agrees with this request. the board believes',
8177:'that entity management should have the discretion to decide whether managerial cost accounting is performed at the entity or segment',
8178:'level, so long as the segment cost information is provided to managers and other users. thus, the standard recommended in',
8179:'this statement does not require that responsibility segments perform managerial cost accounting. full cost 199. as stated in the ed,',
8180:'the full cost of an output produced by a responsibility segment is the sum of direct and indirect costs that',
8181:'contribute to the output, including the costs of supporting services provided by other segments and entities. 200. the outputs of',
8182:'a responsibility segment are considered as cost objects.42 however, in most circumstances, the full costs of intermediate objects, such asactivities,',
8183:'processes, projects, programs, or organization units, must also be measured in order to derive the full costs of their outputs.',
8184:'see ed par. 173 the full cost information related to outputs as well as those intermediate objects are useful in',
8185:'measuring efficiency and costeffectiveness. usefulness of full cost information 201. program evaluation and authorization. most respondents supported the full cost',
8186:'standard. they recognized that it is particularly important to determine and report the full cost of a program. information on',
8187:'full costs of programs can be used in program evaluations. such evaluations typically relate the full costs of programs to',
8188:'their outputs and outcomes. decisionmakersinthe congressand thefederalgovernment at alllevelsaswell 42“cost object” is defined as an activity, output, or item whose',
8189:'cost is to be measured. in a broad sense, a cost object can be an organizational division, a function, task,',
8190:'product, service, or a customer. see glossary. page 54 sffas 4 fasab handbook, version 20 06/21 sffas 4 as the',
8191:'public should be provided with information on the full costs of programs and their outputs. the full cost information, when',
8192:'used with information on program outputs and outcomes, can aid the congress and federal executives in making decisions on program',
8193:'authorization and modifications. 202. cost awareness. most respondents also agreed that the standard has the advantage of promoting cost awareness.',
8194:'entityand segment managers should be aware of the costs that are incurred or assigned to their operations. without the awareness,',
8195:'managing and controlling costsare impossible. the full cost information has not been availableand will not likely to be without an',
8196:'accounting standard requiring it. 203. setting fees and prices for government goods and services. many respondentsagreed that full cost should',
8197:'be considered as a primary basis for setting fees and reimbursements for government goods and services.as pointed out in the',
8198:'ed, it is a federal policy that, with certain exceptions, user charges prices or fees should be sufficient to recover',
8199:'the full cost of goods, services, and resources provided by the federal government as sovereign.43 the policyfurtherstatesthat when the government',
8200:'sellsgoodsand servicesunderbusinesslike conditions rather than in a sovereign capacity, user charges should be based on market pricesand may yield a',
8201:'net revenueinexcessof the fullcost. the objectives of the policyare to: 1 ensure that government goods and services are provided on',
8202:'a selfsustaining basis, 2 promote efficient allocation of national resources, and 3 allow fair competition with comparable goods and services',
8203:'provided by the private sector. 204. to implement the policy, full cost information is necessary. only with reliable full cost',
8204:'information can management ensure that user charges fully recover the costs.44 even in some exceptional cases in which user charges',
8205:'are exempted or restricted by law, agencies that provide the goods and services would nevertheless need the full cost information',
8206:'to assess the extent to which costs are not recovered. 205. making cost comparisons. respondents agreed that the full cost',
8207:'of outputs provides a valid basisforcost comparisons. one of thememphasized the importance of calculating the unit cost of output on',
8208:'the full cost basis. the board agrees with his view. if an output can be measured in units, its unit',
8209:'cost should be calculated on the full cost basis. 43omb circular no.a25, user charges. 44thestandard of determining full cost discussed',
8210:'in this document, however, should not be construed as a standard for setting fees, prices, and reimbursements. federal entities should',
8211:'comply with laws and regulations related to pricing policies ingeneral and for specific types of goods and services. those laws',
8212:'and regulations including omb circulara 25 may prescribe costingrequirements other than the full cost standard discussed in this document. full',
8213:'cost defined by this standard can serve as a point of reference for managerial decisions. however, it is not intended',
8214:'to supersede any costing concept that management is required or permitted by law to use in pricing goods and services.',
8215:'page 55 sffas 4 fasab handbook, version 20 06/21 sffas 4 206. the unitcost ofa serviceor product,calculated on a fullcost',
8216:'basis, can be compared with a similar service or product produced by other entities either in the federal government or',
8217:'in the private sector. the comparison would not be valid if it is not conducted on a full cost basis.',
8218:'207. oneoftheavailable costmanagementtoolsistrendanalysis. intrend analysis,unitcostsof a service or product over a number of consecutive periods are examined to find a',
8219:'trend of increases or decreases. this analysis can be valid only when the unit costs of all periods are measured',
8220:'on a consistent basis, such as the full cost basis. when the full cost basis is used, the analyst can',
8221:'further examine the components of the unit cost, such as direct labor and material costs, overhead costs, and costs of',
8222:'services received from other segments or entities. through examining the variouscomponentsof the full unit cost, program managers can pinpoint specific',
8223:'areas that contributed to cost increases or decreases. 208. if activitybased costing is used, the cost components would be associated',
8224:'with activities. the trendanalysisfor activitybased costcomponentscan provide informationrelatedtothe efficiencyof the activities. managerscanalsoanalyzethe extent that theindividualactivities add value to program outputs',
8225:'and objectives. limitations of full cost information 209. several respondents cautioned the board against “uncritical advocacy” of full costs. they',
8226:'pointed outthat fullcost isnot relevanttoalldecisionmaking situations. theyexplained that some decisions require other cost concepts such as variable, differential, or incremental',
8227:'costs. thus, some of them said that the board should not singularly emphasize full cost. 210. the board is aware',
8228:'of the notion that different cost concepts should be used for different purposes so that the use of a cost',
8229:'concept is relevant to a particular decisionmaking purpose. for this reason, the board discussed the limitations and usefulness of full',
8230:'cost in theedatlength. seeedpars 133through146. quotingfromanthony andyoung, the edpointedout that fullcostsarenotappropriate foralternativechoicedecisionssuchasthe decision to 1 add ordropaproduct orservice, 2performworkinhouse orcontract',
8231:'out for it, and 3 accept or reject a special request. for these decisions, the appropriate information is differential costs.45',
8232:'211. however, the full cost standard is an accounting standard, rather than a cost analysis or decisionmaking standard. it requires',
8233:'that full cost information be compiled and reported through cost accounting. in no way does it limit cost analysts and',
8234:'decisionmakers to the 45robert n.anthony and david w. young, management control in nonprofit organizations, 5th ed. burr ridge, illinois: richard',
8235:'d. irwin co., 1994 page 235. page 56 sffas 4 fasab handbook, version 20 06/21 sffas 4 use of full',
8236:'cost alone in all situations. the board believesthat when the full cost information, instead of any portion of it, is',
8237:'made available, analysts and decisionmakers will have a comprehensive data source to develop the cost concepts that they need in',
8238:'their analyses. 212. some respondents pointed out that full cost requires a complex process of cost assignments and allocations. the',
8239:'board believes that the assignment of indirect costs is a necessary procedure to obtain full cost. it can be performed',
8240:'through an appropriate costing methodology. as discussed in the costing methodology section of the ed, some modern costing methodologies are',
8241:'available to make rational and reliable cost assignments. however, the board must caution that the full cost information, like any',
8242:'other accounting information, can only be as good as how it is prepared. for example, it can be unreliable or',
8243:'inaccurate, if arbitrary or irrational cost allocations are used excessively. thus, the board recommended a costing methodology standard. program managers',
8244:'should critically review costing methodologies and techniques used to derive the cost information. inclusion or exclusion of certain costs 213.',
8245:'anumber of respondents were opposed to the inclusion of accrued employee benefit costs and costs of services provided by other',
8246:'entities that are not reimbursed. the subject of interentitycostswillbe discussed in the next section.theyargued that these costsare not funded with',
8247:'their budgetary resources and are beyond their control. alarge portion of employee benefit costs, including accrued retirement benefit costs, are',
8248:'funded through appropriations to trust funds managed by opm and dod. the board believes that as a principle, full cost',
8249:'should include the costs of all resources applied to a program, activity, and its outputs, regardless of funding sources. for',
8250:'financial reporting, the board has stated its position that the full costs of employee pension and other retirement benefits determined',
8251:'on an actuarial basis, including the amounts that are funded to the trust funds directly, should be recognized as an',
8252:'expense in the employer entity’s financial reports.46 the board does not find a good rationale to depart from this principle',
8253:'in managerial costing. 214. the ed states that some costs should be recognized as a period expense rather than the',
8254:'costs of goods and services output costs. examples include the costs of “other post employment benefits” opeb, reorganization costs, and',
8255:'acquisition costs of federal “mission” and “heritage” property, plant, and equipment which are recognized as expenses at the time of',
8256:'acquisition.47 these costs will be recognized as expenses for the period in which the related events take place, and are',
8257:'referred to as “period expenses.” the ed 46fasab exposure draft,accounting for liabilities of the federal government nov. 1994, pars. 8099,',
8258:'pages 3246. 47“federal mission pp&e” and “heritage assets” are explained in fasab exposure draft,accounting for property, plant, and equipment february',
8259:'28, 1995, pars. 98115, pages 2933. page 57 sffas 4 fasab handbook, version 20 06/21 sffas 4 explained that since',
8260:'these expenses do not contribute to the outputs of the period in which they are incurred, they should not be',
8261:'included in the output costs. 215. the opeb costs, for example, may be recognized as expenses for a period in',
8262:'which a reduction in force or an employee injury takes place.48 it is not appropriate to attribute the entire opeb',
8263:'costs to the output costs of that period. several respondents expressed the view that opeb costs should be included in',
8264:'full cost. there is no doubt that opeb costs, as well as other period expenses, are part of the full',
8265:'cost of an entity or a program. they may also be part of the full costs of outputs over many',
8266:'years in which the employees contributed to the production of the outputs. however, they are not the production costs for',
8267:'the period during which they are incurred. thus, the board concluded that in cost studies, management may distribute some of',
8268:'the period expenses, such as opeb costs, to outputs over a number of past periods if a experience shows that',
8269:'the opeb costs are recurring in a regular pattern , and b a nexus can be established between the opeb',
8270:'costs and the outputs produced in those past periods. the board finds no reason to change this position. 216. some',
8271:'respondentscontended thatfullcost should include unused capacity costs.aswillbe explained in a later section on unused capacity costs, the board has decided',
8272:'not to recommend a standard on measuring unused capacity costs. thus, to assure valid cost comparisons, full costs should not',
8273:'exclude unused capacity costs. controllable and uncontrollable costs 217. some respondents believed that the managers of a responsibility segment should',
8274:'be held accountable only for costs that they can control, and their performance should not be evaluated for costs beyond',
8275:'their control. they found that the full cost reporting would obscure the distinction between controllable and uncontrollable costs. for performance',
8276:'measurement or other purposes, some entities may want to make a distinction between controllable and uncontrollable costs with respect to',
8277:'an individual responsibility segment or a cost center. the full cost information need not interfere with this distinction. this standard',
8278:'does not require the use of full cost for internal reports. if some entities choose full cost for internal reporting,',
8279:'the internal reports can provide a distinction between controllable and uncontrollable costs with respect to individual segments. 218. ultimately,mostcosts are',
8280:'controllable ata certain level ofthe entity. ifsome ofthem are not controllable at a lower level of the organization, they may',
8281:'very well be controllable at a higher level. each segment should concern itself with the costs that are assigned to',
8282:'it on a causeandeffectbasis. thesecostsareoftenincurredbecauseofasegment’sdemandand 48fasab exposure draft,accounting for liabilities of the federal government nov. 7, 1994, pars. 100102, pages',
8283:'4748. page 58 sffas 4 fasab handbook, version 20 06/21 sffas 4 use of servicesfromothersegmentsorentities.although theservicereceiving segment has no controloverthe',
8284:'efficiencyin producing theservice, it can influencethe costsbychanging the demand for the service. for an entity’s top management, full cost reporting',
8285:'provides it with an overview of how the entity’s various costs, including the general and administrative costs,areincurred andassignedtothe entity’ssegments. thefullcost',
8286:'reportingalsomakes the entity’s top management aware of the costs of services that it receives from other entities. the management can',
8287:'closely review those costs and determine whether actions are needed to control them. centralizedaccounting 219. the proposed standardintheedstatesthat “responsibilitysegmentsshouldbe capableof',
8288:'measuring the full costs of their outputs.” several respondents stated that the full costs of segments, programs, and their outputs',
8289:'can be more effectively measured by entities through centralized accounting, rather than by individual segments. they further stated that it',
8290:'would not be costbeneficial for segments to measure and report the full costs of their activities and outputs on a',
8291:'regular basis such as monthly basis. the board agrees that many entities may find it more economical and effective to',
8292:'measure full costs through centralized accounting. moreover, the board believes that it should be for entity management to decide as',
8293:'to how frequently the full cost information should be made available in its internal reports. thus, the wording of the',
8294:'standard has been changed. the full cost requirement is now limited to external reporting via general purpose financial reports. costs',
8295:'of outcomes 220. arespondent suggested that in addition to the full cost of outputs, the standard should also require reporting',
8296:'the full cost of program outcomes. as discussed in the ed, the board believes that performance measurement of a program',
8297:'requires three major elements: the full cost of the program, its outputs, and itsoutcomes. see ed pars37 and 38thefullcost of',
8298:'a program and its outputs, once measured according to this standard can be related to the outcome of the program',
8299:'to measure its cost effectiveness. 221. this standard does not require a direct measurement of the cost of outcomes because',
8300:'in most instances, program outcomes need to be measured with methodologiesbeyond those discussed in this document. gpradefined “outcome measure” as',
8301:'an “assessment of the results of a program activity compared to its intended purpose.”49 many programs’ policy objectivesandintendedresultsaresocioeconomicorscientificinnature, orinvolvenational 49the',
8302:'government performance and resultsact of 1993, pl10362, sec 4. page 59 sffas 4 fasab handbook, version 20 06/21 sffas 4',
8303:'defense. the assessment of the program results require expert knowledge in those areas. thus, unlike costs and outputs, outcomes are',
8304:'not always measured in quantitative or monetary terms. 222. moreover, unlike costs and outputs that are measured for each accounting',
8305:'and reporting period, such as a quarter or a year, outcome measurement may be longterm in nature. for example, the',
8306:'senate report on gprastates that “outcome measurement cannot be done until a program or project reaches a point of maturity',
8307:'usually at least several years of full operation for programscontinuing indefinitely or at completion.” although all programscost money, some of',
8308:'them may produce positive results, while others may produce no results or negative results. 223. because of the complexities in',
8309:'measuring outcomes, the costing principles and methodologies discussed in this document cannot be used to measure the cost of outcomes.',
8310:'the board believes that the full cost of a program and its outcome should be measured independently, using methodologies appropriate',
8311:'to costs and to outcomes. once each of them is measured, they can then be related to review the costeffectiveness',
8312:'of the program. interentity costs 224. it is not unusual in the federal government for one agency to provide goods',
8313:'or services to another agency. sometimes this may be required by law, and often it is a very efficient method',
8314:'of conducting business for the agencies involved and for the government as a whole. in many cases, the agency receiving',
8315:'such goods or services will reimburse the providing agency in accordance with some agreedupon price. often, however, there is no',
8316:'charge, or there is a charge that is not sufficient to cover the providing agency’s full cost. when such “free”',
8317:'or lowerthancost items are used in the production of the receiving agency’s outputs, the result can be an understatement of',
8318:'the full cost of final outputs by the receiving agency. survey of nonreimbursed costs 225. the board recognized that these',
8319:'nonreimbursed or underreimbursed goods and services could distort the determination of a reporting entity’s full cost of outputs, but it',
8320:'was uncertain of the extent to which this occurs. to identify examples of nonreimbursed interentity costs, the board conducted a',
8321:'limited survey of federal agencies. of the 22 agencies responding to the survey request, 13 indicated that they provide some',
8322:'type of service or good that is not reimbursed. these covered a wide range of activities, but most of the',
8323:'costs involved were for salaries and salaryrelated benefits of those employees performing the work. in most cases, the costs were',
8324:'funded through direct appropriations to the providing agencies; page 60 sffas 4 fasab handbook, version 20 06/21 sffas 4 however,',
8325:'those agencies could not specifically identify the total amounts involved. several providedestimates,whichrangedfrom$360thousanddollarsperyearto about $180million per year. several examples of nonreimbursed',
8326:'interentity activities identified in the survey are listed below by providing entity: department ofagriculture provides marketdata, pesticidedata, foodspecification information, water',
8327:'supply forecasts, and other agricultural information. thirtysix federal agencies regularly receive all or some of this information. department of commerce',
8328:'provides accounting and grant administration services, computer access and reports, and consultation services to several agencies. department of state provides',
8329:'space and facilities for other agencies in its buildings in the u.s. and overseas. generalservicesadministration insome cases, itprovides policy andregulatory',
8330:'development services, property management services, and contract award and administration to other agencies without reimbursement. nationalsciencefoundation administersaresearchgrantprogramonengineeringand computer science for',
8331:'the department of defense. 226. the board noted that the survey was restricted to nonreimbursed costs between different agencies. as',
8332:'such, the results did not necessarily represent all of the kinds and amounts of transactions and costs between different reporting',
8333:'entities. the survey was also limited to those nonreimbursed costs which the agencies could easily identify in order to respond',
8334:'quickly to the questionnaire. nevertheless, there were indications that some non reimbursed costs may be significant in amount. usefulness of',
8335:'recognition 227. some respondents to the exposure draft stated that recognition of interentity50 costs would have limited usefulness for managers',
8336:'since they cannot control the cost of items provided by other agencies. in some circumstances, they cannot control the amounts',
8337:'of interentity goods or services that must be used in the production of their outputs. 50full cost, as discussed in',
8338:'the full cost standard, contemplates both intraentity costs and interentity costs applicable to aresponsibility segment. this standard elaborates on interentity',
8339:'costs. intraentity costing is accomplished through thecosting methodology selected for usewithin the reporting entity since these costs are passed among',
8340:'responsibility segments. page 61 sffas 4 fasab handbook, version 20 06/21 sffas 4 228. the board realizes that recognition of',
8341:'nonreimbursed or underreimbursed interentity costs will not always have the same degree of usefulness for all levels of management. however,',
8342:'as stated in the standard on full costs, to fully account for the costs of the goods and services they',
8343:'produce, reporting entities will need to include the cost of goods and services received from other entities. cost reduction and',
8344:'control, performance evaluation, and process improvement depend on knowledge of the full costs of producing outputs, includingproductioncostsincurred byotherfederalentities. these costsare',
8345:'most important for use by the entity’s toplevel management and to a lesser degree by line managers in controlling and',
8346:'assessing the operating environment and in making decisions about how best to acquire those goods and services. knowledge of full',
8347:'cost, including the extent of interentitycosts,isalsoimportanttoexternalusers,especiallythecongressandtaxpayers, in making decisions concerning various programs and allocating resources throughout the government. 229. in',
8348:'addition, the board believes that, without the recognition of nonreimbursed and under reimbursed interentity costs, the receiving entity has little',
8349:'incentive to control the use of these resources. while they may appear to be “free” to the receiving entity, the',
8350:'costs are absorbed somewhere in the government. if the receiving entity were charged for these costs, toplevel management would then',
8351:'have more incentive to economize and control the use of these resources as well as make better decisions concerning how',
8352:'and where to acquire them. this would help reduce overall costs to the taxpayer and provide the other benefits associated',
8353:'with fullcosting by responsibility segment. 230. the recognition of all interentity costs is also important when an entity produces goods',
8354:'or services that are sold outside of the federal government. for the entity to recover the government’s full cost on',
8355:'the sale, knowledge of the total cost, including costs incurred by other federal entities, is vital to the establishment of',
8356:'an appropriate price. the use of estimates 231. the standard places the responsibility on the providing entity to supply the',
8357:'receiving entity with information on the full costs of nonreimbursed or underreimbursed interentity goods and services. this is appropriate since',
8358:'only the providing entity is likely to have such information. implementation of the standard on full costing should make this',
8359:'requirement fairly easy for the providing entity to fulfill. if, for some reason, the providing entity cannot or does not',
8360:'supply the cost information, the receiving entity has no way to recognize the costs other than through estimation. 232. the',
8361:'board anticipated this possibility,and requiresthe receiving entityto use an estimate of the cost of those goods and services if the',
8362:'actual cost information is not provided. the estimate must be reasonable and shouldbe aimed at determining realistic costsincurred by page',
8363:'62 sffas 4 fasab handbook, version 20 06/21 sffas 4 the providing entity. however, if such a cost estimate cannot',
8364:'be made, the receiving entity may base the estimate on the market value of the goods or services. 233. some',
8365:'respondents to the exposure draft stated that the use of estimates would be too problematic and unreliable and that the',
8366:'receiving entity would not have enough information to make the estimate. some were concerned that the use of estimates would',
8367:'cause arguments between reporting entities over the cost. others were concerned that some entities do not have experienced personnel to',
8368:'make such estimates.afew were concerned about the audit implications of using an estimate. 234. somerespondentsexpressed concernoverthe possibleuseofmarketvaluesinmakingthe estimate. some of',
8369:'these respondents stated that governmenttype goods and services are not often produced outside government and, therefore, such market values may',
8370:'not exist. others stated that market value does not always bear a direct relationship to true cost or that market',
8371:'values change too rapidly to be of any use. 235. the board realizes the problems associated with the use of',
8372:'estimates. however, implementation of the other managerial cost accounting standards in this statement by the providing entities should considerably lessen',
8373:'the need for receiving entities to make estimatesof interentitycosts. the board alsobelievesthat, if the interentitycostsmeet the recognition criteria established by',
8374:'the standard, and cost information is not received, then use of a reasonable estimate of cost is preferable to no',
8375:'recognition at all. 236. estimates are often used in accounting and financial reporting. the recognition of cost based on estimation',
8376:'is not new and can be reliable so long as the estimate is reasonable and based on a rational and',
8377:'systematic method. the board also realizes that the use of estimation necessarily implies the use of professional judgement. this does',
8378:'not negate the value of the estimate to users of the financial information and should not present a problem in',
8379:'relation to audit requirements. 237. the board realizes that market values may not always be available for many kinds of',
8380:'inter entity goods and services. nevertheless, if such values are available, they can be a good basis for estimating cost',
8381:'if no other basis can be established. although market values may not be directly related to costs of production and',
8382:'they may fluctuate, they may also be viewed as a fairly reliable guide to the costs an entity might have',
8383:'to incur to obtain inter entity goods and services from a nongovernmental source.as with the determination of all estimates, use',
8384:'of market values as an estimation basis requires the use of judgement and professional care. 238. the board also realizes',
8385:'that there may be some implementation problems such as disagreements with providing entities over an estimated cost or with the',
8386:'lack of trained personnelto make estimates. these problemsareof a practical nature and can beresolved page 63 sffas 4 fasab handbook,',
8387:'version 20 06/21 sffas 4 by management. in that regard, they are not unlike other problems faced when implementing any',
8388:'new or changed accounting standard such as making changes to systems and methods and training personnel on the new requirements.',
8389:'both providing and receiving entities should work closely with each other to resolve any costing problems just as they would',
8390:'to solve any nonaccounting related situations. recognition criteria 239. it is clear to the board that the recognition of each',
8391:'and every nonreimbursed or under reimbursed interentity cost is not possible. the federal government is a very large and complex',
8392:'entity and it is normal to expect some flow of goods and services between its activities as a natural and',
8393:'reasonable method of completing missions and objectives. the board decided that only certain nonreimbursed or underreimbursed interentity costs should be',
8394:'addressed. the standard, therefore, includes criteria for recognition which will limit the application of the standard to only those items',
8395:'deemed most significant and important. 240. the criteria address the materiality of the nonreimbursed interentity cost, whether it is a',
8396:'part of broad and general support for all entities, and whether it is needed to help determine a price to',
8397:'nongovernmental entities. the materiality criterion considers materiality in the context of the importance of the item to the receiving entity.',
8398:'under this criterion, whether an item of interentity cost is recognized depends upon three points. the first of these is',
8399:'significance to the receiving entity, i.e. whether the item is important enough that management should be aware of its cost',
8400:'in decision making circumstances. the second is the degree to which the goods or services are an integral and necessary',
8401:'part of the receiving entity’s output. the third is the degree to which the good or service can be matched',
8402:'to the specific receiving entity with reasonable precision. 241. the criterion of broad and general support recognizes that some entities',
8403:'provide support to all or most other federal entities, generally as a matter of their mission. the costs of broad',
8404:'and general services should not be recognized by the receiving entity when no reimbursement has been made. however, if the',
8405:'service is an integral and necessary part of the receiving entity’s operations and outputs, those costs should be recognized. 242.',
8406:'the criteria also recognize thatthere are certain casesin which interentity costsneed to be recognized because there could be an effect',
8407:'upon a resulting price to a nongovernmental entity. if a federal entity sells outputs to a nonfederal entity, it is',
8408:'usually required to recover the full cost of those goods or services. while cost is not the sole determinant of',
8409:'final price, knowledge of the actual full cost of production to the government asa whole isnecessaryto ensure that the price',
8410:'is appropriately established at a level that will recover all costs. page 64 sffas 4 fasab handbook, version 20 06/21',
8411:'sffas 4 243. mostofthe respondents to the exposure draftagreed with the recognition criteria. however, a few were concerned about how',
8412:'the criteria might be interpreted and whether the standards were too general in nature. the board realizes that considerable judgement',
8413:'is required to apply these criteria and notes that the specific facts and circumstances in each case must be considered.',
8414:'this concern, along with other implementation concerns, led the board to make certain decisions about implementation discussed below under “implementation',
8415:'issues.” consolidation 244. thestandardrequiresthat,whennonreimbursedorunderreimbursedinterentitycostsare recognized, the receiving entity should recognize the full costs of the goods or services received as',
8416:'an expense or asset and, to the extent that reimbursement is less than full cost, the difference is to be',
8417:'recognized as a financing source. at the same time, of course, the providing entity would continue to recognize the full',
8418:'costs of goods and services provided, and any offsetting reimbursements, in its accounting records. several respondentsto the exposure draft were',
8419:'concerned about the possibilityof “doublecounting” of costs and others raised concerns about the ability to eliminate these transactions in consolidations.',
8420:'245. both the providing entity and the receiving entity are separate reporting entities. each should recognize in its accounting records',
8421:'and financial reports the true costs of operations and any revenues received. the providing entity incurs a cost in providing',
8422:'the goods or services even though they are sent to another entity. it may also receive a partial payment or',
8423:'reimbursement. these transactionsand events should be reflected in itsaccounting. the receiving entity, as a separate reporting entity, should also recognize',
8424:'its total cost of production. the full cost of nonreimbursed or underreimbursed goods or services ultimately contributing to its outputs',
8425:'should be reflected in the costs of production. to the extent that reimbursement is not made for those costs, the',
8426:'receiving entity is utilizing a separate source of financing, namely the providing entity. again, this fact is reflected in the',
8427:'accounting. the result is that costs recognized but not actually paid are offset by the imputed financing source. while the',
8428:'entity’s financial position is not affected, the real costs of production are reflected. 246. the only possibility for “doublecounting” of',
8429:'costs occurs when consolidated financial reports are prepared for a reporting entity that includes both the providing entity and the',
8430:'receiving entity. in preparing such statements, the standard calls for elimination of the inter entity transactions. in effect, this isno',
8431:'different fromthe elimination of transactionsfor which full reimbursement has been made. the only additional transaction to be eliminated is the',
8432:'recognition of the imputed financing source by the receiving entity. the recognition of costs by both the providing entity and',
8433:'the receiving entity and any actual reimbursements would be eliminated anyway if payment for the interentity costs were made. page',
8434:'65 sffas 4 fasab handbook, version 20 06/21 sffas 4 247. the board realizes that identification and tracking of transactions',
8435:'that must be eliminated for consolidated reports can become complex and difficult. however, this is a practical implementation problem that',
8436:'management should be able to overcome through the use of transaction coding or some other identification method. it likely will',
8437:'require changes in methods and systems currently in use and may require additional training of personnel. the board has decided',
8438:'upon a method to ease implementation problems as discussed below. implementation issues 248. as discussed above, the board realizes that',
8439:'there may be problems in implementing the standard on interentity costing. recognition of nonreimbursed or underreimbursed inter entity costs is',
8440:'a new concept to federal entities and involves a new way of thinking about costs. there is concern that application',
8441:'of the standard may be inconsistent among federal entities. in addition, there could be problems, particularly at first, in developing',
8442:'estimates of costs; in revising accounting systemsand procedurestoaccommodate these requirements; and in training personnel to accomplish the task. furthermore, the',
8443:'board recognizes the concern that some have about the elimination of interentity cost transactions for consolidated reporting since the accounting',
8444:'procedures may be complicated. 249. as a result of these problems and concerns, the board has expressed the need to',
8445:'take a measured, stepbystep, practical approach to implementation of this standard. therefore, the board has decided that, in implementing the',
8446:'standard, it recommends that omb, with assistance from the fasab staff, should identify the specific interentity costs for entities to',
8447:'begin recognizing and omb should then issue guidance identifying those costs. omb should consider the requirements of the standard including',
8448:'the recognition criteria in developing the guidance and it should also consider suggestions and information provided by treasury, gao, and',
8449:'other agencies. the board anticipates the largest and most important interentity costs will be identified first, followed by others as',
8450:'entities gain experience in the application of the standard. this approach is seen as a practical way to ensure uniformity',
8451:'in the application and implementation of the standard and to provide time and experience in overcoming any other practical problems',
8452:'which may arise. also, the board may recommend specific interentity costs for recognition in possible future recommended standards. costing methodology',
8453:'250. the ed discussed cost accumulation and assignment principles. the ed states that costs should be accumulated by responsibility segments,',
8454:'and the accumulated costs should be classified by type of resource such as costs of employees, material, capital, utilities, rent,',
8455:'etc. the ed states that “the accumulation of costs by responsibility segments does not mean that each responsibility segment must',
8456:'have its own accounting system. the reporting page 66 sffas 4 fasab handbook, version 20 06/21 sffas 4 entity may',
8457:'have a centralized accounting system, but the system should be capable of identifying costs with responsibility segments.” see ed par.',
8458:'170 251. the ed discussed three cost assignment principles: a directly tracing costs wherever feasible and economically practical, b assigning',
8459:'costs on a causeandeffect basis, or c allocating costs on a reasonable and consistent basis. these principles apply to costs',
8460:'of services provided by a segment to other segments, as well as assigning costs to ultimate outputs of a segment.',
8461:'252. the ed then provided brief descriptions of available costing methodologies: activitybase costing abc,job order costing, processcosting, andstandard costing. the',
8462:'edpointed out that these costing methodologies are not mutually exclusive. for example, standard costing can be used withinabc. abc and',
8463:'standard costing combined can then be used with either job order costing or process costing. 253. most respondents believed that',
8464:'the requirement for cost accumulation by responsibility segment is appropriate. some of them stated that costs are accumulated at levels',
8465:'lower than segments such as cost centers, processes, or activities within a segment. such accumulation is consistent with the standard',
8466:'so long as the costs will be aggregated at the segment level. some of the respondents stated that the requirement',
8467:'is currently feasible because their systemsare designed to accumulate expensesbysegmentsand byresource types. others, however, stated that they must upgrade their',
8468:'general accounting systems in order to meet the standard requirement. 254. all the respondents agreed with the cost assignment principles.',
8469:'one respondent, while supporting the principles, stated that the principles should be explicitly ranked by preference. the board intended to',
8470:'express an preference among the principles. it stated in the proposed standard that direct cost tracing should be used “wherever',
8471:'it is feasible and economically practical.” the board further stated in the ed that “for the costs that are not',
8472:'directly traced to outputs, it is preferable that they be assigned to them on a causeandeffect basis.” seeedpar. 182however,forcostbenefit considerations,assigningcostsby',
8473:'allocations cannot be avoided. the board emphasized that cost allocations should be performed on a rational basis. it also cautioned',
8474:'that allocations can be arbitrary and thus may result in distortions. see ed par. 190 to make the intent of',
8475:'preference more explicit, the board has added words to the standard to indicate that the principles are listed by preference.',
8476:'255. all the respondents approved the descriptions of available costing methodologies. some of them stated that the materials included are',
8477:'clear and provide adequate guidance. the respondents agreed with the board’s position that because federal activities are highly diverse, it',
8478:'is not practical to require a particular costing method for a particular type of page 67 sffas 4 fasab handbook,',
8479:'version 20 06/21 sffas 4 activity at this time. however, it is appropriate to require that each entity select a',
8480:'costing methodology that is best suited to its operations and use that methodology consistently. 256. the board encouraged government entities',
8481:'to study the potential use ofabc in their operationsedpar. 200. thiswas well receivedbythe respondents. eighteenrespondents supportedabc. most of themsaid thatabccanbe',
8482:'effectivewhen combined withany of the other costing methodologies. seven respondents from federal agencies stated that they believedabc isappropriate fortheiractivitiesand were',
8483:'consideringusing it. inaddition, two respondents stated that the use of standard costing should also be encouraged. the board continues to',
8484:'believe that as federal agencies are going through stages in the development of their managerial costing, more sophisticated and refined',
8485:'costing methods, such asabc and standard costing, should be considered and used to minimize arbitrary cost allocations and to improve',
8486:'full cost information. 257. the board considered whether the costing methodology section should be recommended as a concept or a',
8487:'standard. it concluded that it should be a standard. the board believes that cost accumulation andassignment principlescontained in thissection are',
8488:'definitiveand should be followed by federal entities. only by adhering to the principles and by continuous refinement of costing methodologies,',
8489:'can reliable full cost information be achieved. unused capacity costs 258. the ed proposed a standard, which, if adopted, would',
8490:'have required that entities measure the cost of unused operating capacityand report it as aseparate expense. for thispurpose, some entities,',
8491:'such as dod, must separate operating capacity from “readiness capacities” which are reserved for war and emergency mobilization rather than',
8492:'normal operations. the operating capacity can be measured in terms of “practical capacity” which is the maximum units of output',
8493:'that the available capacity can produce taking the normal stoppage and interruptions into consideration. unused capacity is the excess of',
8494:'practical capacity over actual outputs. 259. anumber of respondents appreciated the importance of the proposed requirement. they stated that capacitycost',
8495:'informationwould be veryuseful inimproving thecostand capacity management of federal agencies. several respondents from the private sector urged that the proposal',
8496:'be adopted immediately. 260. most respondents from federal agencies, however, stated that capacity measurements involve very complex issues and are',
8497:'not feasible to implement at this time. if the proposed requirement were adopted, agencies would encounter two major types of',
8498:'difficulties. first, they lack guidance on defining and measuring various types of capacity. for example, respondents from dod stated that',
8499:'it is difficult to develop criteria that can be used to page 68 sffas 4 fasab handbook, version 20 06/21',
8500:'sffas 4 differentiate defense operating capacity costs from mobilization capacity costs. civilian agencies engaging in administrative, policy making, and regulatory',
8501:'activities also indicated difficulties in defining their practical capacities. second, respondents of many agencies stated that theydo nothave theaccounting capabilitytoprovidereliable',
8502:'capacitymeasures. without such capability, unused capacity costs could be improperly estimated and the resulting information could be misleading. 261. manyrespondentswere',
8503:'also opposed totheproposed standard on the basisofcostbenefit considerations. they estimated that accounting for capacity costs would require substantial time and',
8504:'efforts to implement. this would require the use of their limited accounting personneland equipment. respondentsfromsome agenciesdonot perceivethat theyhave an overcapacity',
8505:'problem. thus, it is very uncertain whether capacity accounting results, if produced, could be used to improve their operations. 262.',
8506:'after considering the responses to the ed, the board is convinced that it is premature to recommend capacity accounting either',
8507:'as a standard or as a concept. the board is aware that federal agencies have limited personneland other resourcesforaccounting. theymust',
8508:'devote those limited resources to improving general financial reporting and to establishing the more fundamental elements of managerial cost accounting.',
8509:'thus, it would not be cost beneficial to implement capacity costing at this time. 263. managing capacity costs is a',
8510:'part of cost management.although this document does not recommend a standard for measuring capacity costs, the full cost information required',
8511:'by the full cost standard will help management in identifying capacity utilization problems. some respondents stated that the capacity accounting',
8512:'concepts would be useful to capital intensive, industrialtype activities and activities that deliver repetitive services that are measurable in units.',
8513:'the board is aware that there are ongoing research efforts on the subject in the private accounting communities. thus, the',
8514:'board may reconsider capacity accounting in the future. effective date 264. the board holds the view that managerial cost accounting',
8515:'has been needed across the federal government for a long time. since the standards are quite general and address only',
8516:'the highest levels of cost accounting, the board felt that they should be implemented quickly. the earlier managerial cost accounting',
8517:'is started, the earlier the benefits will be seen in managing and controlling federal programs and activities. the board also',
8518:'believes that an effective date far into the future would not serve to quickly change the government’s tendencyto neglectcostaccounting. therefore,',
8519:'in theexposure draft, the effectivedatewas set for fiscal periods beginning after september 30, 1995 i.e., beginning in fiscal year 1996.',
8520:'page 69 sffas 4 fasab handbook, version 20 06/21 sffas 4 265. amajority of respondents to the exposure draft commented',
8521:'that this date was too earlyand said that theyforesee problems with implementation at september 30, 1995. many reasons were given',
8522:'for a delay in implementation. chief among these were 1 difficulty in obtaining funding to make necessary changes in financial',
8523:'systems before september 30, 1995, 2 a lack of trained accounting personnel and equipment, and 3 a need for time',
8524:'to develop or modify appropriate cost accounting methodologies and systems and develop management awarenessand support. respondentssuggested implementationdates ranging from one',
8525:'to five years after the fiscal year 1996 date given in the exposure draft. 266. the board recognized the validity',
8526:'of the concerns of many respondents over funding, training, and development of costing activities. however, it also recognized that federal',
8527:'agencies must be able to develop cost information very soon to meet the requirements of the gpra. it also noted',
8528:'that reporting entities do not have to possess sophisticated cost accounting systems to meet the requirements in these standards. federal',
8529:'agencies can take a gradual approach to the development of cost systems, if necessary, while developing basic cost information through',
8530:'other means in the short term. 267. nevertheless, the board agreed that the implementation date in the exposure draft may',
8531:'be a problem formany federalagenciessince cost accounting isrelativelynew to most of them and the recommended implementation date is very near.',
8532:'the board decided, therefore, to delay the implementation date by one additional year and make the standards effective for periods',
8533:'beginning after september 30, 1996, with earlier implementation encouraged. glossary 268 early on in the development of the managerial cost',
8534:'accounting project, the task force determined that many problems can result in cost accounting from the use of similar terms',
8535:'to mean different things. it concluded that the use of consistent cost accounting terminology is necessary to avoid confusion and',
8536:'miscommunication. therefore, it recommended that the board attach a glossary to the exposure draft which would define many of the',
8537:'cost accounting terms used. 269. the board agreed with this recommendation. it also decided that the establishment of uniform cost',
8538:'accounting terminology within the federal government is so important that the glossary should contain not only definitions for terms used',
8539:'in the statement, but also definitions for other important cost accounting terms even if those terms are not used directly',
8540:'in the text of the statement. this glossarywould serve as the beginning of a uniform and consistent cost accounting terminology',
8541:'for use within the federal government. 270. comments were received from only one respondent to the exposure draft concerning the',
8542:'glossary. that respondent did not suggest changing any of the definitions provided in the page 70 sffas 4 fasab handbook,',
8543:'version 20 06/21 sffas 4 glossary, but only suggested some additions. the board decided that the glossary is sufficient for',
8544:'the time being and should be retained in the final statement as an appendix. however, it also decided that it',
8545:'may issue additions to the glossary at a later date as more federal agencies gain experience in the development of',
8546:'cost information, and as the need for additional standard definitions becomes apparent. appendix b: glossary see consolidated glossary in “appendix',
8547:'e: consolidated glossary.” page 71 sffas 4 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards5: accounting for liabilities of the federal government',
8548:'status issued december 20, 1995 effective date for fiscal years beginning after september 30, 1996. affects sffas 1, by amending',
8549:'the definition of “liability”. affected by sffas 7, paragraph 36b, affects sffas 5, paragraphs 3542. sffas 8, paragraphs 116 &',
8550:'117 affect sffas 5,paragraphs 6, 104 and 105. sffas 12 affects sffas 5, paragraphs 33 and 36. sffas 17 affects',
8551:'sffas 5, paragraphs 6, 104, and 105. interpretation 3 affects sffas 5, paragraphs 5676. interpretation 4 affects sffas 5, paragraphs',
8552:'71, 74, and 75. sffas 25, paragraph 4, affects sffas 5, paragraph 106. the executive summary is also affected. sffas',
8553:'32 amends paragraphs 117 and 121. sffas 33 amends paragraphs 65, 66, 83, 95 and 157. sffas 39 amends footnote',
8554:'17. sffas 51 rescinded paragraphs 97121. tb 20171 clarifies sffas 5. related guidance interpretation 2, accounting for treasury judgment fund',
8555:'transactions interpretation 3, measurement date for pension and retirement health care liabilities interpretation 4, accounting for pension payments in excess',
8556:'of pension expense interpretation 9, cleanup cost liabilities involving multiple component reporting entities tr 1, audit legal letter guidance tr',
8557:'2, environmental liabilities guidance tr 12, accrual estimates for grant programs page 1 sffas 5 fasab handbook, version 20 06/21',
8558:'sffas 5 summary this statement establishes accounting standards for liabilities of the federal government not covered in statement of federal',
8559:'financialaccounting standards 1, accounting for selected assets and liabilities, and in statement of federal financialaccounting standards number 2, accounting for',
8560:'direct loans and loan guarantees.this statement defines “liability” as a probable future outflow or other sacrifice of resources as a',
8561:'result of past transactions or events.1 this statement defines the recognition points for liabilities associated with different types of events',
8562:'and transactions see figure 1 on page 6.2 aliability arisingfromreciprocal or “exchange” transactionsi.e., transactionsinwhich each party to the transaction sacrifices',
8563:'value and receives value in return should be recognized when one party receives goods or services in return for a',
8564:'promise to provide money or other resources in the future e.g., a federal employee performs services in exchange for compensation.',
8565:'aliability arisingfromnonreciprocaltransfers or “nonexchange” transactions i.e., transactions in which one party to the transaction receives value without directly giving or',
8566:'promising value in return, such as grant and certain entitlement programs should be recognized for any unpaid amounts due as',
8567:'of the reporting date. the liability includes amountsduefromthefederalentitytopayforbenefits, goods, orservices3providedunder the terms of the program, as of the federal entity’s',
8568:'reporting date, whether or not such amounts have been reported to the federal entity e.g., estimated medicaid paymentsdue to health',
8569:'providers for service that has been rendered and that will be financed by the federal entity but have not yet',
8570:'been reported to the federal entity. governmentrelated events are nontransactionbased events that involve interaction between federal entities and their environment.',
8571:'the event may be beyond the control of 1liabilities recognized according to the standards in this statement include both liabilities',
8572:'covered by budgetary resources and liabilities not covered by budgetary resources. liabilities covered by budgetary resources are liabilities incurred that',
8573:'will be covered by available budgetary resources encompassing not only new budget authority but also other resources available to cover',
8574:'liabilities for specified purposes in a given year. liabilities not covered by budgetary resources include liabilities incurred for which revenues',
8575:'or other sources of funds necessary to pay the liabilities have not been made available through congressional appropriations or current',
8576:'earnings of the reporting entity. notwithstanding an expectation that the appropriations will be made, whether they in fact will be',
8577:'madeis completely at thediscretionof thecongress. adapted from omb bulletin no. 9401, “form and content of agency financial statements.” 2recognition means',
8578:'reporting a dollar amount on the face of the basic financial statements. 3goods or services may be provided under the',
8579:'terms of the program in the form of, for example, contractors providing a service for the government on the behalf',
8580:'of the disaster relief beneficiaries. page 2 sffas 5 fasab handbook, version 20 06/21 sffas 5 the entity. aliability is',
8581:'recognized for a future outflow of resources that results from a governmentrelated event when the event occurs if the future',
8582:'outflow of resources is probable and measurable see paragraphs 33 and 34 for the definitions of probable and measurable, respectively',
8583:'or as soon thereafter as it becomes probable and measurable. events, such as a federal entity accidentally causing damage to',
8584:'private property, would create a liability when the event occurred, to the extent that existing law and policy made it',
8585:'probable that the federal government would pay for the damage and to the extent that the amount of the payment',
8586:'could be estimated reliably. governmentrelated eventsalsoinclude hazardous waste spills on federal property caused by federal operations or accidents and catastrophes',
8587:'that affect governmentowned property. governmentacknowledged events are events that are of financial consequence to the federal government because it chooses',
8588:'to respond to the event. aliability is recognized for a future outflowof resourcesthat resultsfroma governmentacknowledged event when and to the',
8589:'extent that the federal government formally acknowledges financial responsibility for the event and a nonexchange or exchange transaction has occurred.',
8590:'the liability for a nonexchange transaction should be recognized for any unpaid amounts due as of the reporting date and',
8591:'the liability for the an exchange transaction should be recognized when goods or services have been provided. the liability includes',
8592:'amounts due from the federal entity to pay for benefits, goods, or services provided under the terms of the program,',
8593:'as of the federal entity’s reporting date, whether or not such amounts have been reported to the federal entity examples',
8594:'of governmentacknowledged events include toxic waste damage caused by nonfederal entities and damage from natural disasters. in addition to discussing',
8595:'the general liability recognition principle, the statement includes several specific federal liability accounting standards which are summarized below. contingencies—acontingency is',
8596:'an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an entity that',
8597:'will ultimately be resolved when one or more future events occur or fail to occur. contingent future outflows or other',
8598:'sacrificesof resourcesasaresultof past transactionsor eventsmaybe recognized,maybe disclosed4, or may not be reported at all, depending on the circumstances.5 contingencies should',
8599:'be recognized as a liability when a past transaction or event has occurred, a future outflow or other sacrifice of',
8600:'resources is probable, and the related future outflowor sacrifice 4“disclosure” in this document refers to information in notes regarded as',
8601:'an integral part of the basic financial statements. 5inthe caseof governmentacknowledged events giving rise to nonexchange or exchange transactions, there',
8602:'must be a formal acceptance of financial responsibility by the federal government, as when the congress has appropriated or authorized',
8603:'i.e., through authorization legislation resources. furthermore, exchange transactions that arise from governmentacknowledged events would be recognized as a liability when',
8604:'goods or services are provided. for nonexchange transactions, a liability would then be recognized at the point the unpaid amount',
8605:'is due. therefore, governmentacknowledged events do not meet the criteria necessary to be recognized as a contingent liability. page 3',
8606:'sffas 5 fasab handbook, version 20 06/21 sffas 5 of resources ismeasurable.acontingent liability should be disclosedif anyof theconditions for liability',
8607:'recognition are not met and there is a reasonable possibility that a loss or an additional loss may have been',
8608:'incurred. disclosure should include the nature of the contingencyandanestimateof thepossibleliability, an estimateof the range of the possible liability, or a',
8609:'statement that such an estimate cannot be made. capital leases—see sffas 54.6 federal debt—federal debt transactions are recognized as a',
8610:'liability when there is an exchange between the involved parties. fixedvalue securities are securities that have a known maturity or',
8611:'redemption value at the time of issue. these securities should be valued at their original face par values net of',
8612:'any unamortized discount or premium. amortization of the discount or the premium should normally follow the interest method; in certain',
8613:'cases, the straight line method is permitted see page 16. variablevalue securities should be originally valued and periodically revalued at',
8614:'their current value on the basis of the regulations or offering language. the related interest cost of the federal debt',
8615:'includes the accrued prorated share of the nominal interest incurred during the accounting period, the amortization amounts of discount or',
8616:'premium of each accounting period, and the amount of change in the current value for the accounting period for variablevalue',
8617:'securities. pensions, other retirement benefits, and other postemployment benefits—the liability and associated expense for pensions and other retirement benefits included',
8618:'health care should be recognized at the time the employee’s services are rendered. the expense for postemployment benefits should be',
8619:'recognized when a future outflow or other sacrifice of resourcesisprobable andmeasurable based on eventsoccurring on or before the reporting date.',
8620:'any part of that cost unpaid at the end of the period is a liability. the aggregate entry age normal',
8621:'actuarial cost method should be used to calculate the expense and the liability for the pension and other retirement benefits',
8622:'for the administrative entity financial statements, as well as the expense for the employer entity financial statements. the employer entity',
8623:'should recognize an expense and a liability for postemployment benefits when a future outflow or other sacrifice of resources in',
8624:'probable and measurable on the basis of events that have occurred as of the reporting date. 6see sffas 54. page',
8625:'4 sffas 5 fasab handbook, version 20 06/21 sffas 5 insurance and guarantee programs—all federal insurance and guarantee programs7 except',
8626:'social insurance and loan guarantee programs8 should refer to sffas 51 for guidance. 7social insurance inconsideredto beaseparate program type not',
8627:'included within insurance and guarantee programs. see social insurance discussion in [sffas no. 17,accounting for social insurance]. 8accounting for federal',
8628:'loan guarantee programs should follow the statement of federal financialaccounting standards number 2,accounting for direct loans and loan guarantees august',
8629:'23, 1993. page 5 sffas 5 fasab handbook, version 20 06/21 sffas 5 figure 1: liability recognition summary external events',
8630:'that have occurred and are of consequence to the government exchange transaction nonexchange transaction transaction based government related event government',
8631:'acknowledged event other than transaction based liability recognition payment is due and payable future outflow of resources or other sacrifice',
8632:'is probable and measurable government assumes financial responsibility exchange transaction nonexchange transaction payment is due and payable page 6 sffas',
8633:'5 fasab handbook, version 20 06/21 sffas 5 table of contents page summary 2 purpose 8 scope 8 liability standards',
8634:'13 definition and general principles for recognition of a liability 13 contingencies 17 capital leases 19 federal debt and related',
8635:'interest cost 21 pensions, other retirement benefits, and other postemployment benefits 25 insurance and guarantees 40 appendixa: basis for conclusions',
8636:'41 appendix b: liability recognitionand measurement matrix 58 appendix c: glossary [see consolidated glossary inappendix e] 60 page 7 sffas',
8637:'5 fasab handbook, version 20 06/21 sffas 5 purpose 1. the purpose of this statement is to establish accounting standards',
8638:'to recognize and measure liabilities in general purpose federal financial reports, which are issued for both internal and external users.',
8639:'appendixes provide background, rationale, and examples of how to apply this standard to liabilities associated with federal programs’ transactions and',
8640:'events. scope 2. this statement articulates a general principle that should guide preparers of general purpose federal financial reports. it',
8641:'also provides more detailed guidance regarding liabilities resulting from deferred compensation, insurance and guarantees except social insurance, certain entitlements, and',
8642:'certain other transactions. the statement addresses liabilities not covered in statement of federal financialaccounting standards sffas number 1, accounting for',
8643:'selected assets and liabilities, and in statement of federal financialaccounting standards number 2, accounting for direct loans and loan guarantees.',
8644:'3. the concept of a liability in this document is consistent with those in statements number 1 and 2. the',
8645:'definition amends the stated definition of a liability in sffas number 1. this statement establishes accounting for liabilities not covered',
8646:'in sffas no. 1 and 2. statement number 1 addresses only those selected liabilities that routinely recur in normal operations',
8647:'and are due within a fiscal year. the liabilities covered in statement number 1 are accounts payable, interest payable, and',
8648:'other current liabilities, such as accrued salaries, accrued entitlement benefits payable, and unearned revenue.1 4. statement number 2 addresses liabilities',
8649:'specifically arising from direct loans and loan guarantees. loanguaranteesare “anyguarantee,insurance,or otherpledgewithrespect to the payment of all or part of the',
8650:'principal or interest on any debt obligation of a nonfederal borrower to a nonfederal lender, but they do not include',
8651:'the insurance of deposits, shares, or other withdrawable accounts in financial institutions.”2 1adapted from statement of federal financialaccounting standards sffas',
8652:'number 1, accounting for selected assets and liabilities march 30, 1993, par. 96. 2omb circular no. a11 as cited in',
8653:'statement of federal financialaccounting standards number 2, accounting for direct loans and loan guarantees august 23, 1993, p. 46. page',
8654:'8 sffas 5 fasab handbook, version 20 06/21 sffas 5 5. the general conceptual definition of “liability” underlying this statement',
8655:'is similar in some respects to that articulated by the financialaccounting standards board fasb but the fasab madecertain modificationsto theprivate',
8656:'sector conceptto applyit within the federal context. also, as is explained in the basis for conclusions, the specific standards dealing',
8657:'with pensions, other retirement benefits, and postemployment benefits differ from those the fasb has published. 6. this statement requires certain',
8658:'disclosures about existing liabilities. the statement, however, does not fully address information about stewardship responsibilities, including social insurance,3 related to',
8659:'future financial reporting periods. such information may be reported in a supplementary stewardship report, pursuant to standards now being developed',
8660:'see fasab’s ed, supplementary stewardship reporting. information about projected future outflows is vital to making informed decisions about public policies,',
8661:'including the level of benefits promised under current law and the level of revenues/premiums required to liquidate the liability if',
8662:'any. 7. the recognition of social insurance programs4 presented the board with significant theoretical and practical problems. the exposure process',
8663:'for the draft liability standard brought forth strongly held positions about social insurance. upon reconsideration of the issues the board',
8664:'concluded that, regardless of the technical merits of the arguments concerning the nature of social insurance programs, it was questionable',
8665:'whether adequate information concerning social insurance could be presented by means of a single, pointintime number on a balance sheet.',
8666:'the board modified the draft standard so it would require several measures of social insurance to be presented. the board',
8667:'decided that, given the sensitivity and magnitude of social insurance, the new proposal should receive additional exposure to allow users',
8668:'to review it and comment. the board felt that the concepts and alternatives had not yet been presented to the',
8669:'user community in sufficient detail. hence, the discussion of social insurance has been withdrawn from the liability standard and presented',
8670:'in the supplementary stewardship reporting exposure draft. for more details see the basis for conclusions. objectives of federal financial reporting',
8671:'8. when developing accounting standards for the federal government, the significant environmental differences between the federal government and the private',
8672:'sector must be 3stewardship responsibilities are further discussed in supplementary stewardship reporting. 4social insurance programs are income transfer programs financed',
8673:'by compulsory earmarked taxes and in certain cases also include general revenues of the federal government. page 9 sffas 5',
8674:'fasab handbook, version 20 06/21 sffas 5 keptinmind. statementoffederalfinancialaccountingconceptsnumber1, objectives of federal financial reporting, discusses the federal accounting and financial',
8675:'reporting environment. it notes the following: the federal government is unique, when compared with any other entity in the country,',
8676:'because it is the vehicle through which the citizens of the united states exercise their sovereign power. the federal government',
8677:'has the power through law, regulation, and taxation to exercise ultimate control over many facets of the national economy and',
8678:'society. all other entities within the nation, both public and private, operate within the context of laws, oversight, and accountability',
8679:'established by the national government. the federal government is accountableonly toits citizens. it is politically accountable totheelectorate, but no higher',
8680:'agency has the power to demand an accounting from the government. 9. theobjectivesoffederalfinancialreportingweredesignedtoguidetheboardindeveloping accounting standards to enhance the financial information',
8681:'reported by the federal government. the four objectives are discussed under the headings 1 budgetary integrity, 2 operating performance, 3',
8682:'stewardship, and 4 systems and control. these objectives were used as a basis to develop the liability statement. the board',
8683:'believes that the operating performance objective has special relevance to decisions about recognition and measurement of liabilities in general purpose',
8684:'federal financial reports. that objective reads as follows: federal financial reporting should assist report users in evaluating the service efforts,',
8685:'cost, and accomplishments of the reporting entity; the manner in which these efforts and accomplishments have been financed; and the',
8686:'management of the entity’s assets and liabilities.5 10. at the same time, the board recognizes that the third objective, dealing',
8687:'with stewardship, is equally important. federal financial reportingshouldassist report users in assessing the impact on the country of the government’s',
8688:'operations and investments for the period and how, as a result, the government’s and the nation’s financial conditions have changed',
8689:'and may change in the future. federal financial reporting should provide information that helps the reader to determine: whether the',
8690:'government’s financial position improved or deteriorated over the period; whether future budgetary resources will likely be sufficient to sustain public',
8691:'services and to meet obligations as they come due; and whether government operations have contributed to the nation’s current and',
8692:'future wellbeing. examples of information relevant to this objective include: 5statement of federal financialaccounting concepts number 1, objectives of federal',
8693:'financial reporting sept. 2, 1993. page 10 sffas 5 fasab handbook, version 20 06/21 sffas 5 the amount of assets,',
8694:'liabilities, and net assets or net position; an analysis of government debt, its growth, and debt service requirements; changes in',
8695:'the amount and service potential of capital assets; and the amount of contingent liabilities and unrecognized obligations6 such as the',
8696:'probable cost of deposit insurance. accordingly, information about projected future responsibilities and resources is as important as information about assets,',
8697:'liabilities, revenues, and expenses. entityand display 11. sffac number 2, entity and display, is a concept statement that provides a',
8698:'framework for defining the meaningful reporting units for general purpose federal financial reports with consideration of the relationships among the',
8699:'budgetary, organizational, and programmatic units. the concepts statement also describes in general terms the nature of general purpose federal financial',
8700:'reports, including their names and formats. agreement on the concepts of entity and display is necessary to establish standards for',
8701:'presenting general purpose federal financial reports. 12. the entity and display and liability statements are interrelated in several ways. decisions',
8702:'on each affected the other. for example, the entity and display concept statement suggests what reporting units should report liabilities',
8703:'and, in general terms, how these liabilities should be displayed. the provisions of the concept statement that contemplate presentation of',
8704:'information about future stewardship responsibilities as well as information about events and transactions that have occurred are related to the',
8705:'selection of events and transactions to be recognized.7 effective date 13. the accompanying standards presented in this statement become effective',
8706:'for fiscal periods beginning after september 30, 1996. earlier implementation is encouraged. structure of this document 14. this document has',
8707:'three sections, two appendixes, and a glossary. the first section, the executive summary, precedes this section. this introduction constitutes the',
8708:'second section. the remaining section and appendixes are described below. liability standards 6the term “obligation” is used in its everyday',
8709:'or generic sense, not as it is used in federal budgetary accounting. 7 see statement of federal financialaccounting concepts sffac',
8710:'number 2, entity and display april 20, 1995. page 11 sffas 5 fasab handbook, version 20 06/21 sffas 5 15.',
8711:'this section presents a definition and criteria for recognizing a liability and related disclosure requirements. it also provides specific standards',
8712:'for contingencies, capital leases, federal debt, pensions, other postemployment and retirement benefits, and insurance other than social insurance and guarantees.',
8713:'appendixa: basis for conclusions 16. thisappendixsummarizesconsiderationsthatmembersoftheboarddeemedsignificantin reaching the conclusions in the statement. appendix b: liability recognition and measurement matrix 17.',
8714:'the liability recognition and measurement matrix illustrates the measurement attributes and recognition points for several transactions and events. appendix c:',
8715:'glossary glossary [omitted see consolidated glossary in “appendix e: consolidated glossary” on page 1] 18. the glossary defines various terms',
8716:'used in this statement. page 12 sffas 5 fasab handbook, version 20 06/21 sffas 5 liability standards definitionand general principle',
8717:'for recognition ofaliability 19. aliabilityfor federal accountingpurposes isaprobablefutureoutflow or other sacrificeof resources as a result of past transactions or events.',
8718:'general purpose federal financial reports should recognize8 probable and measurable future outflows or other sacrifices of resources arising from 1',
8719:'past exchange transactions, 2 governmentrelated events, 3 governmentacknowledged events, or 4 nonexchange transactions that, according to current law and applicable',
8720:'policy, are unpaid amounts due as of the reporting date.9 events and transactions 20. the existence of a past event',
8721:'which includes transactions is essential for liability recognition. an event is a happening of financial consequence to an entity.10 an',
8722:'event may be an internal event that occurs within an entity, such as transforming raw materials into a product. an',
8723:'event may also be an external event that involves interaction between an entity and its environment, such as a transaction',
8724:'with another entity, an act of nature, a theft, vandalism, an injury caused by negligence, or an accident. 21. as',
8725:'the term is used in this statement, a transaction involves the transfer of something of value. transactionsmaybeeitherexchangetransactionsornonexchangetransactions. the distinctionbetweenexchangeandnonexchangetransactionsisimportantindeterminingthe point',
8726:'of liability recognition in federal accounting. 22. an exchange transaction arises when each party to the transaction sacrifices value and',
8727:'receives value in return. there is a twoway flow of resources or of promises to provide resources. in an exchange',
8728:'transaction, a liability is recognized when one party receives goodsor servicesin returnfora promise to providemoneyor otherresourcesinthefuture.11 23. anexampleofanexchangetransactionoccurswhenafederalemployeeperformsservices in exchange',
8729:'for compensation. the compensation includes current salary and future 8recognition means reporting a dollar amount on the face of the',
8730:'basic financial statements . 9this document uses theterm “nonexchange transaction” in a way similar to fasb’s “nonreciprocaltransfer.” that is, it',
8731:'implies a oneway flow of resources, services, or promises between two parties. “transaction” in the phrase “nonexchange transaction” does not',
8732:'include reclassification, closing, and similar “internal” entries to the accounting records, though some accountants use the term in that broader',
8733:'sense. “probable” means more likely than not. “measurable” means reasonably estimable. 10 “consequence” is defined as something of importance or',
8734:'significance. 11executory contracts where goods and services have not been received are not generally recognized as liabilities in financial accounting,',
8735:'although they are generally recognized as obligations in governmental budgetary accounting. page 13 sffas 5 fasab handbook, version 20 06/21',
8736:'sffas 5 retirement benefits. an exchange transaction occurs because both parties the employee and the employer receive and sacrifice value.',
8737:'the expense is recognized in the period that the exchange occurs. the compensation liability includes unpaid salary amounts earned and',
8738:'the cost of future retirement benefits related to current period services. 24. a nonexchange transaction arises when one party to',
8739:'a transaction receivesvalue without directly giving or promising value in return. there is a oneway flow of resources or promises.',
8740:'for federal nonexchange transactions, a liability should be recognized for any unpaid amounts due as of the reporting date. this',
8741:'includes amounts due from the federal entitytopayforbenefits, goods, orservices12 providedunderthetermsoftheprogram, as of the federal entity’s reporting date, whether or not',
8742:'such amounts have been reported to the federalentityforexample, estimatedmedicaidpaymentsduetohealthprovidersforservice that has been rendered and that will be financed by the',
8743:'federal entity but have not yet been reported to the federal entity . 25. many grant and certain entitlement programs',
8744:'are nonexchange transactions. when the federal government creates an entitlement program or gives a grant to state or local governments,',
8745:'the provision of the payments is determined by federal law rather than through an exchange transaction. 26. an event is',
8746:'defined as a happening of financial consequence to an entity. for federal financialreporting, some eventsmaybe otherthantransaction basedand these eventsmay be',
8747:'classified in one of two categories: 1 governmentrelated events or 2 government acknowledged events. 27. governmentrelated events are nontransactionbased events',
8748:'that involve interaction between the federal government and its environment. the event may be beyond the control of the federal',
8749:'entity. in general, a liability is recognized in connection with government related eventsonthe samebasisasthosethatariseinexchangetransactions. events,such as a federal entity accidentally',
8750:'causing damage to private property, would create a liability when the event occurred, to the extent that existing law and',
8751:'policy made it probable that the federal government would pay for the damages and to the extent that the amount',
8752:'of the payment could be estimated reliably.13 12goods or services may be provided under the terms of the program in',
8753:'the form of, for example, contractors providing a service for the government on the behalf of the disaster relief beneficiaries.',
8754:'13the vast majority of claims against the united states government stemming from tortious government conduct are adjudicated under the federal',
8755:'tort claimsact ftca, which provides for both administrative and judicial resolution. administrative awards under the established threshold are paid from',
8756:'agency appropriations. administrative awards in excess of the established threshold are paid from the judgment appropriation. court judgments and compromise',
8757:'settlements by the department of justice are paid from the judgment appropriation regardless of amount. thisact means that, for certain',
8758:'types of events it is not necessary for the government to acknowledge financial responsibility separately for each individual event as',
8759:'is the case for events described in paragraph 30. page 14 sffas 5 fasab handbook, version 20 06/21 sffas 5',
8760:'28. governmentrelated events include: 1 cleanup from federal operations resulting in hazardous waste that the federal government is required by',
8761:'statutes and/or regulations, that are in effect as of the balance sheet date, to clean up i.e., remove, contain, or',
8762:'dispose of;14 2 accidental damage to nonfederal property caused by federal operations; and 3 otherdamage to federalpropertycausedbysuch factorsasfederaloperationsornatural forces.15 29.',
8763:'governmentrelated events resulting in a liability should be recognized in the period the event occurs if the future outflow or',
8764:'other sacrifice of resources is probable and the liability can be measured, or as soon thereafter as it becomes probable',
8765:'and measurable. 30. governmentacknowledged events are those nontransactionbased events that are of financial consequence to the federal government because it',
8766:'chooses to respond to the event. the federal government has broad responsibility to provide for the public’s general welfare. the',
8767:'federal government has established programs to fulfill many of the general needs of the public and often assumes responsibilities for',
8768:'which it has no prior legal obligation. 31. consequently, costs from many events, such as toxic waste damage caused by',
8769:'nonfederal entities and natural disasters, may ultimately become the responsibility of the federal government. but these costs do not meet',
8770:'the definition of a “liability” until, and to the extent that, the government formally acknowledges financial responsibility for the cost',
8771:'from the event and an exchange or nonexchange transaction has occurred. in other words, the federal entity should recognize the',
8772:'liability and expense when both of the following two criteria have been met 1 the congress has appropriated or authorized',
8773:'i.e., through authorization legislation resources and 2 an exchange occurs e.g., when a contractor performs repairs or nonexchange amounts are',
8774:'unpaid as of the reporting date e.g., direct payments to disaster victims, whichever applies. 32. the following example illustrates the',
8775:'liability recognition of governmentacknowledged events. atornado damages a u.s. town and the congress appropriates funds in response to the disaster.',
8776:'this event is of financial consequence to the federal government because thefederalgovernment choosesto provide disasterrelief tothe town. transactionsresulting from this',
8777:'appropriation, including disaster loans, outright grants to individuals, and work performed by contractors paid by the federal entities, are recognized',
8778:'as exchange or 14see sffas no. 6, accounting for property, plant, and equipment, for a detailed discussion of cleanup cost.',
8779:'15the subjects of valuing assets and of measuring asset impairmentsthus measuring the loss to be recognizedare beyond the scope of',
8780:'this statement. see sffas no. 6, accounting for property, plant, and equipment, for a discussion on the impairment or loss',
8781:'of federal property. page 15 sffas 5 fasab handbook, version 20 06/21 sffas 5 nonexchange transactions. in the case of',
8782:'exchange transactions, amounts payable for goods and services provided to federal entities are recognized when the goods are delivered or',
8783:'the work is done. in the case of nonexchange transactions, a liability should be recognized for any unpaid amounts due',
8784:'as of the reporting date. the liability includes amounts due from the federal entity to pay for benefits, goods, or',
8785:'services provided under the terms of the program, as of the federal entity’s reporting date, whether or not such amounts',
8786:'have been reported to the federal entity. probable future outflow or other sacrifice of resources 33. “probable” refers to that',
8787:'which can reasonably be expected or is believed to be more likely than not on the basis of available evidence',
8788:'or logic with the exception of pending or threatened litigation and unasserted claims.15a the probability of a future outflow or',
8789:'other sacrifice of resources is assessed on the basis of current facts and circumstances. these current facts and circumstances include',
8790:'the law that provides general authority for federal entity operations and specific budget authority to fund programs. if budget authority',
8791:'has not yet been provided, a future outflow or other sacrifice of resources might still meet the probability test if',
8792:'1 it directly relates to ongoing entity operations and 2 it is the type for which budget authority is routinely',
8793:'provided. therefore, the definition applies both to liabilities covered by budgetary resources and to liabilities not covered by budgetary resources.16',
8794:'measurability 34. “measurability” means that an item has a relevant attribute that can be quantified in monetaryunitswith sufficient reliabilitytobe reasonablyestimable.',
8795:'liabilitiesreportedinthe financial report are measured by different attributes specified by various accounting standards. several different measurement attributes are used for',
8796:'different items in present practice e.g., fair market value, current cost, present value, expected value, settlement value, and historical cost.',
8797:'15athe concept of probability is imprecise and difficult to apply with respect to most legal matters. the more likely than',
8798:'not phrase suggests greater precision than is attainable when assessing the outcome of matters in litigation. accordingly, in the context',
8799:'of assessing the outcome of matters of pending or threatened litigation and unasserted claims, and recognizing an associated liability, probable',
8800:'refers to that which is likely, not to that which is more likely than not. note that the remaining two',
8801:'criteria for recognizing a liabilitythat is, a past event or exchange transaction has occurred and the future outflow or sacrifice',
8802:'of resources is measurablealso must be met before recognizing a contingent liability in matters involving litigation. 16seestatement of federal financialaccounting',
8803:'standards number 1, accounting for selected assets and liabilities, march 30, 1993, app. a, par. 95. page 16 sffas 5',
8804:'fasab handbook, version 20 06/21 sffas 5 contingencies 35. acontingencyisanexistingcondition,situation,or set of circumstances involving uncertaintyasto possiblegain orlosstoanentity. theuncertaintywillultimatelyberesolved when one',
8805:'or more future events occur or fail to occur. resolution of the uncertainty may confirm a gain i.e., acquisition of',
8806:'an asset or reduction of a liability or a loss i.e., loss or impairment of an asset or the incurrence',
8807:'of a liability.17 36. thisstatementdoesnotdealwithgaincontingenciesormeasurementofcontingenciesthat involveimpairmentofnonfinancialassets. when alosscontingencyi.e.,contingentliability exists, the likelihood that the future event or events will confirm the',
8808:'loss or the incurrence of a liability can range from probable to remote. the probability classifications are as follows: probable:',
8809:'the future confirming event or events are more likely than not to occur, with the exception of pending or threatened',
8810:'litigation andunasserted claims. forpending or threatened litigation and unasserted claims, the future confirming event or events are likely to occur.',
8811:'reasonably possible: the chance of the future confirming event or events occurring is more than remote but less than probable.',
8812:'remote: the chance of the future event or events occurring is slight. 37. the following are some examples of loss',
8813:'contingencies: collectability of receivables, pending or threatened litigation, and possible claims and assessments. 17contingencies are different from “subsequent events.” subsequent',
8814:'events are events or transactions that affect the basic informationor required supplementary information rsi and occur subsequent to the end',
8815:'of the reporting period but before the financial report is issued. some of those transactions and events referred to as',
8816:'recognized events require adjustments to the basic information or rsi while others referred to as nonrecognized events may require disclosure',
8817:'in the basic information or rsi. asubsequent event may affect a contingency by providing information that resolves an uncertainty related',
8818:'to a contingent liability and confirm the impairment of an asset or incurrence of a liability as of the end',
8819:'of the reporting period. page 17 sffas 5 fasab handbook, version 20 06/21 sffas 5 criteria for recognition ofacontingent liability',
8820:'38. acontingentliability shouldberecognizedwhen all ofthese three conditionsaremet:18 apasteventorexchangetransactionhasoccurrede.g.,afederalentityhasbreached a contract with a nonfederal entity.19 afutureoutflow or other sacrificeofresources isprobablee.g.,thenonfederal entity',
8821:'has filed a legal claim against a federal entity for breach of contract and the federal entity’s management believes the',
8822:'claim is likely to be settled in favor of the claimant. the future outflow or sacrifice of resources is measurable',
8823:'e.g., the federal entity’s management determines an estimated settlement amount. [see sffas 12.] 39. the estimated liability may be a',
8824:'specific amount or a range of amounts. if some amount within the range is a better estimate than any other',
8825:'amount within the range, that amount is recognized. if no amount within the range is a better estimate than any',
8826:'other amount, the minimumamount in the range isrecognized andtherangeand adescription of the nature of the contingency should be disclosed. criteria',
8827:'for disclosure ofacontingent liability 40. acontingentliability shouldbedisclosedif anyofthe conditionsfor liability recognitionare not met and there is at least a reasonable',
8828:'possibility that a loss or an additional loss may have been incurred. “disclosure” in this context refers to reporting information',
8829:'in notes regarded as an integral part of the basic financial statements. 18the unit of analysis for estimating liabilities can',
8830:'vary according to the reporting entity and the nature of the transaction or event. the liability recognized may be the',
8831:'estimation of an individual transaction or event; or a group of transactions and events. for example, sffas number 2, “applies',
8832:'to direct loans and loan guarantees on a group basis, such as a cohort or a risk category of loans',
8833:'and loan guarantees. present value accounting does not apply to direct loans or loan guarantees on an individual basis, except',
8834:'for a direct loan or loan guarantee that constitutes a cohort or a risk category.” statement of federal financialaccounting standards',
8835:'number 2, accounting for direct loans and loan guarantees. par. 21. see the standard on insurance and guarantees in this',
8836:'document for a description of incurred but not reported ibnr claims. 19inthecase of governmentacknowledged eventsgiving rise to nonexchange orexchange transactions,theremustbe',
8837:'a formal acceptance of financial responsibility by the federal government, as when the congress has appropriated or authorized i.e., through',
8838:'authorization legislation resources. furthermore, exchange transactions that arise from governmentacknowledged events would be recognized as a liability when goods or',
8839:'services are provided. for nonexchange transactions, a liability would then be recognized at the point the unpaid amount is due.',
8840:'therefore, governmentacknowledged events do not meet the criteria necessary to be recognized as a contingent liability. page 18 sffas 5',
8841:'fasab handbook, version 20 06/21 sffas 5 41. disclosure should include the nature of the contingency and an estimate of',
8842:'the possible liability, an estimate of the range of the possible liability, or a statement that such an estimate cannot',
8843:'be made. 42. insomecases,contingenciesmaybeidentifiedbutthedegreeofuncertaintyissogreatthat no reporting i.e., recognition or disclosure is necessary in the general purpose federal financial reports. specifically,',
8844:'contingencies classified as remote need not be reported in general purpose federal financial reports, though law may require such disclosures',
8845:'in special purpose reports. if information about remote contingencies or related to remote contingencies is included in general purpose federal',
8846:'financial reports e.g., the total face amount of insurance and guarantees in force, it should be labeled in such a',
8847:'way to avoid the misleading inference that there is more than a remote chance of a loss of that amount.',
8848:'see sffas 7, par. 36b, for guidance on losses on contracts for goods made to order or services produced to',
8849:'order capital leases 43. capital leases are leases that transfer substantially all the benefits and risks of ownership to the',
8850:'lessee. if, at its inception, a lease meets one or more of the following four criteria, the lease should be',
8851:'classified as a capital lease by the lessee: the lease transfers ownership of the property to the lessee by the',
8852:'end of the lease term. the lease contains an option to purchase the leased property at a bargain price. the',
8853:'lease term is equal to or greater than 75 percent of the estimated economic life of the leased property. the',
8854:'present value of rental and other minimum lease payments, excluding that portion of the payments representing executory cost, equals or',
8855:'exceeds 90 percent of the fair value of the leased property. the last two criteria are not applicable when the',
8856:'beginning of the lease term falls within the last25percent of the totalestimatedeconomiclife of theleasedproperty. if alease doesnot meet at least',
8857:'one of the above criteria it should be classified as an operating lease. page 19 sffas 5 fasab handbook, version',
8858:'20 06/21 sffas 5 44. the amount to be recorded by the lessee as a liability under a capital lease',
8859:'is the present value of the rental and other minimum lease paymentsduring the lease term, excluding that portion of the',
8860:'payments representing executory cost to be paid by the lessor.20 however, if the amount so determined exceeds the fair value',
8861:'of the leased property at the inception of the lease, the amount recorded as the liability should be the fair',
8862:'value. if the portion of the minimum lease payments representing executory cost is not determinable from the lease provisions, the',
8863:'amount should be estimated. 45. the discount rate to be used in determining the present value of the minimum lease',
8864:'payments ordinarily would be the lessees incremental borrowing rate unless 1 it is practicableforthelesseetolearnthe implicit ratecomputedbythelessorand 2theimplicit rate computed by',
8865:'the lessor is less than the lessees incremental borrowing rate. if both these conditions are met, the lessee shall use',
8866:'the implicit rate. the lessees incremental borrowing rate shall be the treasury borrowing rate for securities of similar maturity to',
8867:'the term of the lease. 46. during the lease term, each minimum lease payment should be allocated between a reduction',
8868:'of the obligation and interest expense so as to produce a constant periodicrate of interest on the remaining balance of',
8869:'the liability.21 sffas 54, leases, as amended by sffas 58, will replace the requirements for lease accounting established in sffas',
8870:'5 paragraphs 4346 and the related footnotes, 2021. sffas 5 paragraphs 4346 will be rescinded for reporting periods beginning after',
8871:'september 30, 2023. 20the cost of general property, plant, and equipment acquired under a capital lease shall be equal to',
8872:'the amount recognized as a liability for the capital lease at its inception. see sffas no. 6,accounting for property, plant,',
8873:'and equipment. 21omb circular no.a11, preparation and submission ofannual budget estimates, explains the measurement of budget authority, outlays, and debt',
8874:'for the budget in the case of leasepurchases and other capital leases. circulara94, guidelines and discount rates for benefitcostanalysis of',
8875:'federal programs, provides the requirements under which a leasepurchase or other capital lease has to be justified and the analytical',
8876:'methods that need to be followed. page 20 sffas 5 fasab handbook, version 20 06/21 sffas 5 capital leases 43.',
8877:'[see sffas 54 for revised standards regarding leases]. 44. [see sffas 54 for revised standards regarding leases]. 45. [see sffas',
8878:'54 for revised standards regarding leases]. 46. [see sffas 54 for revised standards regarding leases]. 20,21 20 [footnote 20 rescinded',
8879:'by sffas 54.] 21 [footnote 21 rescinded by sffas 54.] federal debtand related interest cost 47. this standard applies to',
8880:'all securities or other debt instruments issued by the u.s. treasury or other federal agencies. it encompasses debt issued to',
8881:'the public and debt issued to federal accounts by other federal accounts.22 48. accountingforthefederaldebtshouldidentifytheamountoftheoutstandingdebtliabilityof the federal government at any given',
8882:'time and the related interest cost for each accounting period. this entails valuing securities initially at their sales price or',
8883:'proceeds, ultimately at the amount paid to the holder at maturity, and in the intervening period in a way that',
8884:'fairly expresses the federal government’s liability. accounting for federal debt securities 49. federal debt securities23 fall into two major categories',
8885:'for accounting purposes: fixed value securities and variable value securities. 22this includes but is not limited to debt issued by',
8886:'the u.s. treasury to trust funds, agency borrowings from treasury, and trust fund borrowings from other trust funds. 23figure 2',
8887:'lists various categories and examples of federal debt securities. page 21 sffas 5 fasab handbook, version 20 06/21 sffas 5',
8888:'fixed value securities 50. fixed value securities have a known maturity or redemption value at the time of issue. these',
8889:'securities should be valued at their original face par value net of any unamortized discount or premium. securities sold at',
8890:'face par have no discount or premium and should be valued at face par. securities sold at a discount will',
8891:'increase in value between sale and maturity; securities sold at a premium will decrease in value.amortization of the discount or',
8892:'premium may follow the straight line method or the interest method.24 either method is acceptable in the cases of shortterm',
8893:'securities that have a maturity of 1 year or less, and longerterm securities for which the amount of amortization under',
8894:'the straightline method would not be materially different from the amount of amortization under the interest method. 51. in all',
8895:'other cases, the interest method for amortizing any discount or premium should be used. variable value securities 52. variable value',
8896:'securities have unknown redemption or maturity values at the time of issue. values of these securities can vary on the',
8897:'basis of regulation or specific language in the offering. these securities should be originally valued and periodically revalued at their',
8898:'current value, on the basis of the regulations or offering language. related interest cost 53. the related interest cost of',
8899:'the federal debt include: the accrued prorated share of the nominal interest incurred during the accounting period, theamortizationamountsofdiscountorpremiumforeachaccountingperiodbasedon the same',
8900:'amortization method used to account for the related debt liability for fixed value securities, and the amount of change in',
8901:'the current value for the accounting period for variable value securities. 24for an explanation and an example of the interest',
8902:'method of amortization, seeappendix b of sffas no. 1. page 22 sffas 5 fasab handbook, version 20 06/21 sffas 5',
8903:'retirement prior to maturity 54. for those securities that are retired prior to the maturity date due to a call',
8904:'feature of the security, or because they are eligible for redemption by the holder on demand, the difference between the',
8905:'reacquisition price and the net carrying value of the extinguished debt should be recognized currently in the period of the',
8906:'extinguishment as losses or gains. old currencies issued by the federal government25 55. pursuant to federal law, old currencies issued',
8907:'by the federal government and not yet redeemed or written off are identified as a federal debt liability at face',
8908:'value and do not bear any interest. 25old currencies include national and federal reserve bank notes, old demand notes, old',
8909:'series currency, and silver certificates classified as public debt pursuant to 31 u.s.c. 5119. page 23 sffas 5 fasab handbook,',
8910:'version 20 06/21 sffas 5 figure 2: various categoriesand examples of federal debt securities26 federal debt instruments debt category subcategory',
8911:'term redeemable accounting method marketable treasury bills up to 1 at maturity liability at face value net of unamortized discount',
8912:'debt yr straight line method of amortization of discount treasury notes 2 to 10 at maturity liability at face value',
8913:'net of unamortized discount yrs and premium straight line method of amortization of discount and premium treasury bonds 10 to',
8914:'30 at maturity liability at face value net of unamortized discount yrs and premium straight line method of amortization of',
8915:'discount and premium nongovernmentaccount marketable series: debt par values various on demand par value, no discount or premium to be',
8916:'amortized market based various on demand liability at face value net of unamortized discount and premium interest method of amortization',
8917:'of discount and premium u.s. savings bonds: e/ee bonds 10 to 40 on demand current value yrs after 6 months',
8918:'h/hh bonds 10 to 30 on demand par value, no discount or premium to be yrs after 6 months amortized',
8919:'state & local various on demand par value, no discount or premium to be government securities amortized domestic series zerocoupon',
8920:'bonds 20 to 40 at maturity liability at face value net of unamortized discount yrs interest method of amortization of',
8921:'discount foreign series treasury bills up to 1 on demand liability at face value net of unamortized discount yr straight',
8922:'line method of amortization of discount zerocoupon bonds 20 to 30 at maturity liability at face value net of unamortized',
8923:'discount yrs 1 bond interest method of amortization of discount current value. on demand 2 bonds 26these tables are intended',
8924:'to illustrate current practice only and are not to be considered authoritative. page 24 sffas 5 fasab handbook, version 20',
8925:'06/21 sffas 5 pensions, other retirement benefits,and other postemployment benefits 56. employeebenefitsoffederalcivilianandmilitarypersonnelandveterans27 includepensions and postemployment and retirement benefits other than',
8926:'pensions. pension plans28 provide benefits upon retirement and may also provide benefits for death, disability, or other termination of employment',
8927:'before retirement. pension plans may also include benefits to survivors and dependents, and they may contain early retirement or other',
8928:'special features. the actuarially determined liability and expense of the plan, including all its provisions, is part of the pension',
8929:'plan’s liability and expense estimate. 57. in addition to or in lieu of pension benefits, a liability for postemployment and',
8930:'other retirement benefits may be incurred outside the pension plan. postemployment benefits other than pensions opeb include all types of',
8931:'benefits provided to former or inactive but not retired employees, their beneficiaries, and covered dependents.29 inactive employees are those who',
8932:'are not currently rendering services to their employers and who have not been terminated, but who are not eligible for',
8933:'an immediate annuity, including those temporarily laid off or disabled. opeb include salary continuation, severance benefits, counseling and training, continuation',
8934:'of health care or other benefits, and unemployment and workers’ compensation benefits paid by the employer entity.30 58. retirement benefits',
8935:'other than pensions orb are all forms of benefits to retirees or their beneficiariesprovidedoutsidethepensionplan. examplesinclude healthandlifeinsurance. retirement health care benefits',
8936:'are the primary orb expense. they present unique measurement problems. 27veterans’ compensation included in this category is a measurable program',
8937:'benefit that directly relates to a veteran’s prior military service and is not the type of benefit included in general',
8938:'fund benefit programs. for example, compensatory income payments for injuries sustained in the line of duty i.e., vadisability compensation benefits',
8939:'are employee benefits, while entitlement benefits i.e., vapension are accounted for as general fund benefits. also see appendixa: basis for',
8940:'conclusions. 28this standard addresses “defined benefit plans,” which define the future benefits that will be paid in terms of such',
8941:'factors as age, years of service, or compensation. the amount of benefit depends on a number of future events incorporated',
8942:'in the plan’s benefit formula. 29special termination benefits such as specially authorized separation incentive programs are considered other postemployment benefits',
8943:'and should be recognized as such. 30the terms “employer entity” and “administrative entity” are used in this document to distinguish',
8944:'between entities that employ federal workers and thereby generate the employee costs, including pension cost, and those that are responsible',
8945:'for managing and/or accounting for the pension or the other employee plan. for example, entities that receive “salaries and expense”',
8946:'appropriations are employer entities, while the office of personnel management is an administrative entity because it administers the civilian retirement',
8947:'benefit plans. page 25 sffas 5 fasab handbook, version 20 06/21 sffas 5 59. pension benefits, opeb, and orb are',
8948:'exchange transactions because the employee performs service in part to receive the deferred compensation provided by the plans such as',
8949:'future pension and medical care benefits. forpension and other retirement benefits, the expense is recognized at the time the employees’',
8950:'services are rendered. for opeb, the expense is recognized at the time the accountable event occurs. any part of that',
8951:'cost unpaid at the end of the period is a liability. 60. this statement is intended to specify the accounting',
8952:'objectives. with regard to pensions and orb, if estimates, averages, or such devices can reduce the cost of applying this',
8953:'statement, their use is appropriate provided the results do not materially differ from a detailed application of the standard. pensions',
8954:'61. pension benefits include all retirement, disability, and survivor benefits financed through a pensionplan, including unfunded pension plans. federalcivilian and',
8955:'militaryemployeesare covered primarily under the following three defined benefit retirement plans: civil service retirement system csrs, federal employees retirement system',
8956:'fers, and military retirement system mrs. to the extent that federal employees are covered by social insurance programs such as',
8957:'social security, the taxes they pay to the program and the benefits they will eventually receive are to be accounted',
8958:'for on the same basis used to account for other program participants. however, the payments to social insurance plans that',
8959:'agenciesmust makeareoperatingcosts. similarly, to the extent that federalemployees are covered bydefined contribution plansi.e., thethrift savingsplan, which islikea 401k plan, federal',
8960:'payments to the plan are expenses, but the plan itself is not covered under this standard. 62. this statement establishes',
8961:'standards of accounting for pension expense and related pension liability for federal government employers and administrative agencies. accounting for the',
8962:'pension plan 63. this section covers federal pension plans. the entity that administers the plan i.e., the “administrative entity” should',
8963:'account for and report the plan in accordance with this standard.31 asubsequent section covers federal employer entities. 31in addition to',
8964:'the requirements of this standard, which deals with general purpose financial reports, federal plans report annually pursuant to p.l. 95595,',
8965:'which calls for statements of net assets available for benefits, a statement of accumulated benefits, and other statements. the reporting',
8966:'requirements of public law 95595 were rescinded by public law 105362, federal reports eliminationact of 1998. page 26 sffas 5',
8967:'fasab handbook, version 20 06/21 sffas 5 64. attribution methods—the “aggregate entry age normal” actuarial cost method should be used',
8968:'to calculate the pension expense, the liability for the administrative entity financial statements, and the expense for the employer entity',
8969:'financial statements. the aggregate entry age normal method is one under which the actuarial present value of projected benefits is',
8970:'allocated on a level basis over the earnings or the service of the group between entry age and assumed exit',
8971:'ages; and it should be applied to pensions on the basis of a level percentage of earnings. the portion of',
8972:'this actuarial present value allocated to a valuation year iscalled the “normal cost.” the portion not provided for at a',
8973:'valuation date by the actuarial present value of future normal cost is called the “actuarial accrued liability.”32 the plan, however,',
8974:'may use other actuarial cost methods if it explains why aggregate entry age normal is not used and if the',
8975:'results are not materially different. 65. assumptions—for financial reports prepared for the three primary federal plans csrs, fers, and mrs,',
8976:'actuarial estimates of assumptions should be used to calculate the pension expense and liability. the selection of all actuarial assumptions',
8977:'should be guided byactuarial standards of practice no. 4, measuring pension obligations, as revised from time to time by theactuarial',
8978:'standards board.33 accordingly, actuarial assumptions should be on the basis of the actual experience of the covered group, to the',
8979:'extent that credible experience data are available, but should emphasize expected longterm future trends rather than give undue weight to',
8980:'recent past experience. although emphasis should be given to the combined effect of all assumptions, the reasonableness of each actuarial',
8981:'assumption should be considered independently on the basis of its own merits and its consistency with each other assumption. 66.',
8982:'in addition to complying with the guidance in the preceding paragraph, the discount rate assumption for present value measurementsof pension',
8983:'liabilities should be the interest rate on marketable treasurysecuritiesof similar maturitiesto the cash flowsof the payments for which the estimate',
8984:'is being made. the discount rates should be matched with the expected timing of the associated expected cash outflow. thus,',
8985:'each year for which cash flows are projected should have a separate discount rate associated with it. however, a single',
8986:'average discount rate may be used for all projected future payments if the resulting present value is not materially different',
8987:'than the resulting present value using multiplerates. the underlying inflation rate and the other economic assumptions should be consistent. the',
8988:'discount rates should reflect average historical rates on marketable treasury securities rather than give undue weight to recent past experience',
8989:'with such rates. historical experience should be the basis for expectations about future trends in marketable treasury 32adapted fromactuarial standards',
8990:'of practice no. 4, measuring pension obligations jan. 1990, p. 31. 33theactuarial standards board is aboard withintheamericanacademy ofactuaries that sets',
8991:'professional standards of actuarial practice. page 27 sffas 5 fasab handbook, version 20 06/21 sffas 5 securities. in developing the',
8992:'average historical treasury rates, a minimum of five historical rates as of the appropriate reporting dates should be used for',
8993:'each maturity. the historical ratesused to calculatethe averageshould be sequentiale.g. 20032007. for example, for an average historicaltreasuryrate tobe used asthe',
8994:'discount rateasof theend of thefiscal year 2007 for a payment due in 10 years, i.e., in 2017, a minimum of',
8995:'five 10year treasury rates should be used. thus, the rate on 10year treasury securities as of the end of fiscal',
8996:'year 2007 would be one rate, the rate on 10year treasury securities as of the end of fiscal year 2006',
8997:'would be another rate, etc., until, at a minimum, the rates on 10year treasury securities for the years 2003 through',
8998:'2007 were included in the average. the number of historicalratesused forthe average, e.g., fiveyearlyrates, should be consistent from period to',
8999:'period. the entity should explain that its accounting policy is to be consistent in this regard from period to period.',
9000:'for cash flows that are projected to occur in future years for which treasury securities are not available or that',
9001:'extend beyond the maturities for which treasury securities are available, e.g., beyond the 30year security, the preparer should incorporate in',
9002:'the assumed discount rate expected refinancing rates extrapolated from historical treasury borrowing rates. 67. theadministrativeentity shoulddisclosethe assumptionsused.administrative entitiesare encouraged to',
9003:'consult with one another to achieve the maximum consistency among assumptions used for financial reports. smaller federal administrative entities may',
9004:'employ the assumptions used by any of the three primary plans where appropriate or their own assumptions. if they use',
9005:'assumptions that differ from all of the primary plans, a footnote should explain how and why the assumptions differ from',
9006:'one of those plans. 68. assets should be reported separately from the pension liability rather than reporting only a net',
9007:'liability. assets of federal pension plans should be carried at their acquisition cost, adjusted for amortization, if appropriate. for investments',
9008:'in marketbased and marketable securities, the market value of the investment should be disclosed.34 69. past service cost, prior service',
9009:'cost, and actuarial gains and losses—past service costs result from retroactive benefits granted when a new plan is initiated. prior',
9010:'service costs result from retroactive benefits granted in a plan amendment.aplan amendment may also reduce benefits attributed to prior service.',
9011:'this results in a gain to the extent that previously recognized benefits are reduced. as explained in the next paragraph,',
9012:'the accounting for such gains should be consistent with accounting for retroactive benefit increases.actuarial gains and lossesare changes in the',
9013:'balance of the pension liability that result from 1 deviations between actual experience and the actuarial assumptions used or 2',
9014:'changes in actuarial assumptions. 34see sffas number 1, accounting for selected assets and liabilities. page 28 sffas 5 fasab handbook,',
9015:'version 20 06/21 sffas 5 70. the administrative entity should recognize all past and prior service costs or gains immediately,',
9016:'without amortization. similarly, the administrative entity should recognize all actuarial gains and losses immediately, without amortization. 71. accounting by theadministrative',
9017:'entity— the administrative entity should account for and report the pension liability in its financial report, using the aggregate entry',
9018:'age normal actuarial method. the liability is the actuarial present value of all future benefits, based on projected salaries and',
9019:'total projected service, less the actuarial present value of future normal cost contributions that would be made for and by',
9020:'the employees under the plan. projected salaries should reflect an estimate of the future compensation levels of the individual employeesinvolved,',
9021:'includingfuture changesattributed tothegeneralprice level, productivity, seniority, promotion, and other factors. 72. the administrative entity should report a pension expense for',
9022:'the net of the following components: normal cost; interest on the pension liability during the period; prior and past service',
9023:'cost from plan amendments or the initiation of a new plan during the period, if any; and actuarial gains or',
9024:'losses during the period, if any. the individual components should be disclosed. 73. the administrative entity should report revenue for',
9025:'the sum of amounts received from the employer entity representing contributions from: the employer entity and its employees.35 the employer',
9026:'entity’s contribution represents intragovernmental revenue.36 an illustration of the accounting for the administrative entity and the employer entity is explained',
9027:'in the following section entitled “accounting illustration.” 35the administrative entity may also receive financing from the general fund to cover',
9028:'prior service or other cost for which contributions from employer entities are not provided. 36intragovernmental revenue should be eliminated for',
9029:'governmentwide consolidated financial statements. page 29 sffas 5 fasab handbook, version 20 06/21 sffas 5 employer entityaccounting 74. the federal',
9030:'employer entity should recognize a pension expense in its financial report that equals the service cost37 for its employees for',
9031:'the accounting period, less the amount contributed by the employees, if any. the measurement of the service cost should require',
9032:'the use of the plan’s actuarial cost method and assumptions, and therefore the factor to be applied by the employer',
9033:'entities must be provided by the plan and/or the administrative entity. 75. the employer entity’s pension expense should be balanced',
9034:'by: a a decrease to its “fund balance with treasury” for the amount of its contribution to the pension plan,',
9035:'if any; and if this does not equal the full expense, by b an increase to an account representing an',
9036:'intragovernmental imputed financing source entitled, for example, “imputed financing expenses paid by other agencies.” the latter represents the amount being',
9037:'financed directly through the pension plan’s administrative entity. 76. in special instances when an employer entity is also the administrative',
9038:'entity, that is, when there is no separate pension plan e.g., the coast guard, the employer entity should report the',
9039:'liability and recognize the pension expense for all components of cost. the liability and the expense should be accounted for',
9040:'as described in the preceding section for the administrative entity without reference to transactions with external employer entities. accounting illustration',
9041:'77. tables 14 provide an example in which the employer entity recognizes an “employer’s pensionexpense” inanamountequalto theservicecostattributable toitsemployeesduring the accounting',
9042:'period, less the employees’ own contributions. the expense in this example is more than the contribution that the employer entity',
9043:'is required by law to pay. the difference between the employer’s pension expense and the employer’s contribution is credited to',
9044:'the employer entity as a financing source “imputed financingexpenses paid by otherentities”. theemployerentitytransfersitscontributionandthatofitsemployeestothe administrative entity. 78. the administrative entity recognizes',
9045:'revenue for: 1 contributions from the employer entity, 2 contributions from the employees, and 3 interest on the plan’s investments.',
9046:'the administrative entity recognizes expense for the net of the pension cost components. assumptions are as follows: total normal cost',
9047:'of employees for the accounting period is $160,000. the employer’s pension expense is $100,000. the employer entity would calculate its',
9048:'pension expense on the basis of information received from the plan and/or the 37“service cost” is defined as the actuarial',
9049:'present value of benefits attributed by the pension plan’s benefit formula to services rendered by employees during an accounting period.',
9050:'the term is synonymous with “normal cost.” page 30 sffas 5 fasab handbook, version 20 06/21 sffas 5 administrative entity.',
9051:'its pension expense is equal to its share of the service cost of its employees’ pensions. according to current law,',
9052:'the employer entity is authorized in its appropriation to pay $60,000 for employee pensions. the employees contribute $60,000 to the',
9053:'pension fund. nogeneralfundappropriationsmadedirectlytotheadministrativeagencyareinvolved in these transactions, as they could be under actual operations. entry 1 employer entity’s entry to record',
9054:'pension expense: debit credit employer’s pension expense $100,000 appropriations used $60,000 imputed financing expenses paid by other entities $40,000 table',
9055:'1 employer entity’s other financing sources as they shouldappear on its statement of changes in net position financing sources:38 appropriations',
9056:'used $60,000 imputed financing $40,000 note: imputed financing covers the difference between 1 the employer entity’s contribution transferred to the',
9057:'administrative entity pursuant to law exclusive of the employees’ contributions and 2 the employer’s pension expense calculated on the basis',
9058:'of information received from the administrative entityas shown immediately below. employer entity’s cost as it shouldappear on the statement of',
9059:'net cost cost : employer’s pension cost $100,000 note: this is the employer entity’s service cost of employee pensions. the',
9060:'employer entity would calculatethisamount usingfactors provided by theplanand/orthe administrativeentity.also to be transferred to the administrative entity is the amount withheld',
9061:'from employees’ wages, as called for under the terms of the plan. the employees’ contribution is not an expense of',
9062:'the employer entity. note: the above table and those that follow in the sections on pensions and orb are presented',
9063:'for illustrative purposes only; the responsibility for defining the form and 38sffac no. 2, entity and display, presents a change',
9064:'in the way revenue and other financing sources are reported. this illustration reflects the new concepts. page 31 sffas 5',
9065:'fasab handbook, version 20 06/21 sffas 5 content of a financial statement prepared pursuant to the chief financial officersact, as',
9066:'amended, is the responsibility of the office of management and budget. entry 2 administrative entity’s entry to record revenue received',
9067:'from employer entity: debit credit fund balance with treasury $120,000 retirement program revenue contribution received from employer entity $60,000 retirement',
9068:'program revenue contribution received from employees $60,000 entry 3 administrative entity’s entry to record revenue from interest on investments in',
9069:'treasury securities: debit credit fund balance with treasury $xxx,xxx interest revenue $xxx,xxx table 2 administrative entity’s revenue as it shouldappear',
9070:'on the statement of net cost less other earned revenues: contributions receivedfrom employerentities $60,000 contributions receivedfrom employees 60,000 interest on',
9071:'investments xx,xxx total other earned revenues $ xxx,xxx note: contributions are amounts transferred to the administrative entity from the employer',
9072:'entity representing its contributionand that of its employeesfor the employees’ pensions. entry 4 administrative entity’s entry to record its pension',
9073:'expense: debit credit pension expense $xxx,xxx pension liability $xxx,xxx page 32 sffas 5 fasab handbook, version 20 06/21 sffas 5',
9074:'table 3 administrative entity’s pension expense normalcost $160,000 interest onpensionliability xxx prior serv. costs gains if any xxx actuarial gains',
9075:'losses if any xxx totalpensionexpense $xxx,xxx note: the $160,000 represents 100 percent of the normal cost—as calculated by plan actuaries—for',
9076:'the one employer entity in this example.according to law, $60,000 of this amount is tobecontributedby theemployer entity and$60,000istobe contributed by',
9077:'the employees themselves. the remaining $40,000 is a liability of the pension plan covered by future financing sources. the pension',
9078:'expense is reported on the statement of net cost in accordance with paragraph 72. table 4 administrative entity’s pension liability:',
9079:'beginning balance $ xx,xxx,xxx add: additional pension expense incurred as calculated in table3 xxx,xxx less: payments made to beneficiaries xxx,xxx',
9080:'ending liability balance $ xx,xxx,xxx note: the liability balance should be reported on the administrative entity’s balance sheet. page 33',
9081:'sffas 5 fasab handbook, version 20 06/21 sffas 5 other retirement benefits orb 79. orbincludeall retirementbenefits other than pension planbenefits.39',
9082:'orbare provided outside the pension plan by an employer to a former employee or the employee’s beneficiary upon retirement. the',
9083:'predominant orb in the federal government is retirement health care benefits, and they are the focus of this section.40 80.',
9084:'future health care benefits present unique measurement problems. they are more uncertain than pensions since they depend on the changing',
9085:'patterns of health care delivery and utilization, on the price trends for medical care, and on the benefits provided by',
9086:'social insurance programs like medicare parta. also, medical plans do not vest like pensions in which, after a fixed numberof',
9087:'yearsof service, an employee hasa right to receive payment. to receive orb benefits the employee must retire with health care',
9088:'benefits provided by the organization. 81. this statement establishes standards of accounting for orb expense and related orb liability for',
9089:'federal government employers and administrative agencies. accounting for the orb plan 82. attribution method—the aggregate entry age normal actuarial cost',
9090:'method should be used to calculate the orb expense and liability for the administrative entity’s financial statements, and the expense',
9091:'for the employer entity’s financial statements.as indicated in the pension section, aggregate entry age normal is a method under which',
9092:'the actuarial present value of projected benefits is allocated on a level basis over the earnings or the service of',
9093:'the group between entry ageand assumedexit ages. it shouldbe applied to orb on the basis of service rendered by each',
9094:'employee. the portion of this actuarial present value allocated to a valuation year is called the normal cost. the portion',
9095:'not provided for at a valuation date by the actuarial present value of future normal cost contributions is called the',
9096:'actuarial accrued liability.41 unlike federal pensions, retiree health care benefits do not depend on future salary levels of individual employees',
9097:'but rather are allocable to each employee on a per person basis. plansmayuse other actuarial cost methodsif theyexplain why aggregate',
9098:'entry age normal is not used and if the results are not materially different. 39seeappendixa: basis for conclusions, for a',
9099:'discussion of reporting medical costs for veterans. 40accounting for life insurance is described in a separate section of the liability',
9100:'standard. however, to the extent that premiums paid by covered individuals and employer entities do not fully cover the retirement',
9101:'life insurance cost of employees, the employer entities would account for the additional cost as described in this section. 41adapted',
9102:'fromactuarial standards of practice no. 4, p. 31. also seeactuarial standard of practice no. 6, measuring and allocating actuarial present',
9103:'values of retiree health care and death benefits,actuarial standards board 1988. page 34 sffas 5 fasab handbook, version 20 06/21',
9104:'sffas 5 83. assumptions—amounts calculated for financial reports prepared for orb plans should reflect 1 general actuarial and economic assumptions',
9105:'that are consistent with those used for federal employee pensionsand 2 a longterm health care cost trend assumption that is',
9106:'consistent with medicare projections or other authoritative sources appropriate for the population covered by the plan. the discount rate assumption',
9107:'for present value measurements of orb liabilities should be developed in accordance with paragraph 66 of this standard. the administrative',
9108:'entity should disclose the assumptions used. 84. the accrual period should be based on expected retirement age rather than the',
9109:'age when the employee first becomes eligible. 85. assets shouldbereportedseparatelyfromtheorb liabilityratherthanmerelyreportingthe net liability. assets of federal orb plansshould be carried',
9110:'at their acquisition cost, adjusted for amortization, if appropriate.42 for investments in marketbased and marketable securities, the market value of',
9111:'the investment should be disclosed. 86. past service cost, prior service cost, and actuarial gains and losses—the standard for orb',
9112:'is the same as that for pensions. past service costs result from retroactive benefits granted when a new plan is',
9113:'initiated. prior service costs result from retroactive benefits granted in a plan amendment. aplan amendment may also reduce benefits attributed',
9114:'to prior service resulting in a gain to the plan to the extent that previously recognized benefits are reduced. the',
9115:'accounting for such gains should be consistent with accounting for retroactive benefit increases. actuarial gains and losses are changes in',
9116:'the balance of the orb liability that result from 1 deviations between actual experience and the actuarial assumptions used or',
9117:'2 changes in actuarial assumptions. 87. the administrative entity should recognize all past and prior service costs or gains immediately,',
9118:'without amortization. similarly, the administrative entity should recognize all actuarial gains and losses immediately, without amortization. 88. accounting by theadministrative',
9119:'entity—the orb plan should be accounted for in a way that is very similar to that described above for pensions.',
9120:'the administrative entity should account for and report the orb liability in its financial report, using the aggregate entryage normalmethod.',
9121:'the liabilityisthe actuarialpresentvalue of allfuturebenefitsless theactuarialpresent valueof future normalcostcontributionsthat wouldbemadeforand by the employees under the plan. the administrative entity should',
9122:'report an orb expense for the net of the following components: normal cost, 42see sffas no. 1, accounting for selected',
9123:'assets and liabilities. page 35 sffas 5 fasab handbook, version 20 06/21 sffas 5 interest on the orb liability during',
9124:'the period, prior and past service costs from plan amendments or the initiation of a new plan during the period,',
9125:'if any, any gains/losses due to a change in the medical inflation rate assumption; and other actuarial gains or losses',
9126:'during the period, if any. the individual components should be disclosed. 89. the administrative entity should report revenue for the',
9127:'sum of amounts received, if any, from the employer entity representing contributions from: the employer entity and its employees. the',
9128:'employer entity’s contribution represents intragovernmentalrevenue.43 an illustration of the accounting for the administrative entity and employer entity is provided in',
9129:'the following section entitled “accounting illustration”. employer entityaccounting 90. the federal employer entity should account for and report the orb',
9130:'expense in its financial report in a manner similar to that used for pensions. the employer’s orb expense should be',
9131:'recognized in an amount equal to the total service cost44 for its employees for the accounting period, less the amount',
9132:'contributed by its employees, if any. the measurement of the service cost requires use of the plan’s actuarial cost method',
9133:'and assumptions. the cost factor should be provided to the agencies on a per employee basis by the administrative entity',
9134:'and/or the plan. 91. the employer entity’s orb expense should be balanced by a a decrease to the employer entity’s',
9135:'“fund balance with treasury” for the amount of its contributions to the orb plan, if any; and, if this does',
9136:'not equal the full expense, b by an increase to an account representing an intragovernmental financing source entitled, for example,',
9137:'“imputed financing expenses paid by other entities.” the latter represents the amount being financed directly through the orb plan. 43intragovernmental',
9138:'revenue should be eliminated for governmentwide consolidated financial statements. 44“service cost” is defined as the actuarial present value of benefits',
9139:'attributed to services rendered by employees during an accounting period. the term is synonymous with “normal cost”. page 36 sffas',
9140:'5 fasab handbook, version 20 06/21 sffas 5 92. in special instances when an employer entity is also the administrative',
9141:'entity, the employer entity should report the liability and recognize the orb expense for all components of cost. for example,',
9142:'the entity is paying its retirees’ orb on a payasyougo basis. the liability and the expense should be accounted for',
9143:'as described in the preceding section for the administrative entity accounting without reference to transactions with external employer entities. accounting',
9144:'illustration 93. tables 58 provide an example where the employer entity recognizes an “employer’s orb expense” in an amount equal',
9145:'to the service cost attributable to its employees during the accounting period. in this example, neither the employer entity nor',
9146:'its employees contribute to the plan. the employer’s orb expense is offset by a credit to the employer entity as',
9147:'a financing source “imputed financingexpenses paid by other entities”. the administrative entity recognizes a revenue and other financing source for',
9148:'contributions from the general fund. the administrative entity recognizes an expense for the total orb expense. assumptions are as follows:',
9149:'total normal cost of employees for the accounting period is $10,000.45 the employer’s orb expense is $10,000. the employer entity',
9150:'should calculate its expense on the basis of factors received from the plan and/or the administering entity. for example, the',
9151:'plansupplied factor is $100 per employee or fulltime equivalent; if the employer has 100 employees, the expense would be $10,000.',
9152:'the employer’s orb expense equals the service cost of its employees’ retirement health care. the employer and employees do not',
9153:'make contributions to a fund. the cost of retirement health care is paid for by general fund appropriations directly to',
9154:'the administrative entity on a payasyougo basis. entry 5 employer entity’s entry to record orb expense: debit credit employer’s orb',
9155:'expense $10,000 imputed financingexpenses paid by other $10,000 entities 45this is the amount attributable to the government for its share',
9156:'of future medical care costs for future retirees. although this simplified illustration does not show contributions other than those from',
9157:'the general fund, current retirees pay premiums for their health insurance that partially defray the cost of the program. federal',
9158:'civilian retirees pay approximately 2530 percent of the total health benefit premium. page 37 sffas 5 fasab handbook, version 20',
9159:'06/21 sffas 5 table 5 employer entity’s other financing sources as they shouldappear on the statement of changes in net',
9160:'position financing sources: imputed financing expenses paid by other entities $10,000 note: imputed financing “expenses paid by other entities” covers',
9161:'the annual expense for the employer entity’s employees as shown immediately below. employer entity’s cost as it shouldappear on the',
9162:'statement of net cost cost : employer’s orb cost $10,000 note: this is the annual orb service cost of the',
9163:'employer entity’s employees. the employer entity would calculate this amount using factors provided by the administrative entity. table 6 administrative',
9164:'entity’s other financing sources as it shouldappear on the statement of changes in net position financing sources: appropriations used $',
9165:'xx,xxx note: since, in this example, contributions are not required from the employer entity or its employees, all benefits must',
9166:'be paid with appropriations from the general fund. entry 6 administrative entity’s entry to record its orb expense. debit credit',
9167:'orb expense $xx,xxx orb liability $xx,xxx page 38 sffas 5 fasab handbook, version 20 06/21 sffas 5 table 7 administrative',
9168:'entity’s orb expense normal cost $ 10,000 interest on orb liability xx,xxx prior service costs gains if any xx actuarial',
9169:'gains losses if any xx total orb expense $ xx,xxx note: the $10,000 represents 100% of the service cost attributable',
9170:'to the employer entity in this example, as calculated by plan actuaries. the orb expense as calculated above would be',
9171:'reported on the statement of net cost in accordance with paragraph 88. table 8 administrative entity’s orb liability beginningbalance $x,xxx,xxx',
9172:'add: additional orb expense incurred as calculated in table7 xx,xxx less: payments made on behalf of beneficiaries xx,xxx ending liability',
9173:'balance $ x,xxx,xxx note: the liability balance should be reported on the administrative entity’s balance sheet. other postemployment benefits opeb',
9174:'94. opeb are provided to former or inactive employees, their beneficiaries, and covered dependents outside pension or orb plans. inactive',
9175:'employees are those who are not currently rendering services to the employer but who have not been terminated, including those',
9176:'temporarily laid off or disabled. postemployment benefits can include salary continuation, severance benefits, counseling and training, continuation of health care',
9177:'or other benefits, and unemployment, workers’ compensation, and veterans’ disability compensation benefits paid by the employer entity. 95. the employer',
9178:'entity should recognize an expense and a liability for opeb when a future outflow or other sacrifice of resources is',
9179:'probable and measurable on the basis of events page 39 sffas 5 fasab handbook, version 20 06/21 sffas 5 occurring',
9180:'on or before the reporting date. for example, a reduction in force may require an employer entity to make severance',
9181:'payments, unemployment reimbursements, or other payments in future periods. similarly, an injury on the job may require the employer entity',
9182:'to make shortor longterm reimbursements to the federal workers’ compensation program. a longterm opeb liability should be measured at the',
9183:'present value of future payments. this will require the employer entities to estimate the amount and timing of future payments,',
9184:'and to discount the future outflow using the interest rate on marketable treasury securities of similar maturity to the period',
9185:'over which the payments are to be made. the discount rate assumption for present value measurements of opeb liabilities should',
9186:'be developed in accordance with paragraph 66 of this standard. 96. most opeb liabilities should be shortterm because the benefits',
9187:'will be paid in the near future. some opeb, however, could be longer term. for example, a liability for workers’',
9188:'compensation or veterans’ disability compensation might be longterm for some injuries since federal employer entities might be required to reimburse',
9189:'the program for many years.46 also, certain specially authorized separation incentive programs could provide for payments that extend over many',
9190:'future years. insuranceand guarantees [paragraphs 97121 rescinded by sffas 51.4754] the provisions of this statement need not be applied to',
9191:'immaterial items. 46both the federal employee unemployment program and the federal workers’ compensation program are financed by direct reimbursements from',
9192:'federal employers. 4754footnotes rescinded by sffas 51, insurance programs. page 40 sffas 5 fasab handbook, version 20 06/21 sffas 5',
9193:'appendixa: basis for conclusions this statement may be affected by later statements. the fasab handbook is updated annually and includes',
9194:'a status section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the',
9195:'authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can',
9196:'review the basis for conclusions of the amending statement for the rationale for each amendment. 122. this appendix summarizes considerations',
9197:'deemed significant by the board in reaching the conclusions in this statement. it includes reasons for accepting certain approaches and',
9198:'rejecting others. individual members gave greater weight to some factors than to others. 123. thisstatementaddressesrecognitionand measurementofliabilitiesin the generalpurpose financial reports',
9199:'of federal reporting entities. the unique circumstances of the federal government, most notably its role as the vehicle through which',
9200:'citizens express their sovereign power, meant that the board had to resolve some new issues in order to define exactly',
9201:'how to apply accrual concepts in federal financial reports. 124. the board’s deliberations on liabilities were based on certain ideas',
9202:'about the distinction between exchange and nonexchange transactions, the importance of reporting cost of services provided by the federal government,',
9203:'and the impact of information on decisionmakers. these ideas are explained in the following paragraphs. 125. many users of federal',
9204:'financial reports are familiar with accounting concepts and standards published by the financialaccounting standards board fasb for private sector entities,',
9205:'and the governmentalaccounting standards board gasb for state and local government entities. because such users might assume that identical concepts',
9206:'and standards are used by the federal government if differences are not explained clearly, this appendix compares certain concepts underlying',
9207:'the federal standard with concepts that govern recognition and measurement of liabilities in financial reports of private sector entities and',
9208:'state and local governments in the united states. finally, this appendix also explains the basis for specific conclusions regarding social',
9209:'insurance, contingencies, federal employee pensions, other retirement benefits, other postemployment benefits, and insurance and guarantee programs. exchangeand nonexchange transactions 126.',
9210:'as noted in sffac no. 1, objectives of federal financial reporting: “the accounting process begins with recording information about transactions',
9211:'between the government or oneof its component entities and other entities,that is, inflowsandoutflows of resourcesor page 41 sffas 5 fasab',
9212:'handbook, version 20 06/21 sffas 5 promises to provide them.”55 in some transactions, consideration of value is exchanged: there is',
9213:'a reciprocal or twoway flow. other transactions, such as grants and other transfer paymentsarenonexchangetransactionsi.e., thereisa nonreciprocal transactionnormally a oneway flow.',
9214:'127. the federal government is the vehicle through which citizens of the nation exercise their sovereign power. in this role,',
9215:'the federal government is responsible for taking collective action at the national level “to promote the general welfare.” thus the',
9216:'government undertakesmanyprogramsthatdonotinvolve reciprocaltransfersbetweenthegovernment asan entityanditscounterparties. examplesincludedisaster relief,grantstostate andlocal governments, subsidies, and other transfer programs for individuals. the federal government has',
9217:'a propensity to assume such burdens because it is the agent by which the society, through its elected officials, accomplishes',
9218:'transfers between groups of citizens to enhance their wellbeing. 128. ataxpayeror a donormay,in fact,receive a benefitofsome sort,such as the opportunityto',
9219:'live in a safe, secure environment; to improve one’s standard of living; and to receive specific benefits, such as visits',
9220:'to national parks and travel over highways. but it is not ordinarily said that the benefit to the individual taxpayer',
9221:'or donor is of value comparable to that of the consideration given. therefore, these are classified as nonexchange transactions. for',
9222:'this statement, the significance of the distinction between exchange and nonexchange transactions arises from the nature of the obligation that',
9223:'is created when one party to a transaction provides a product or service to the other party in return for',
9224:'a promise that something of value will be exchanged for it. 129. obligations become legally enforceable claims against the federal',
9225:'government in different ways and at different points within transaction cycles that relate to various programs. an important factor in',
9226:'distinguishing between various programs is whether an exchange is involved. for example, the federal government may not contract for and',
9227:'receive goods or services and then arbitrarily decide not to honor the contract. similarly, under existing law, the federal government',
9228:'may be financially responsible for certain damage and injury it causes. 130. in other cases, the obligation may be more',
9229:'a matter of what is perceived as equitable and good public policythan a legallyenforceable claim.althoughthere may be ahigh probability that',
9230:'a grant, a subsidy, or an income transfer will be made or will continue in future years, the recipients of',
9231:'such grants, subsidies, or transfers do not have a right to receive such payments in the future from the federal',
9232:'government as do those who receive payments in exchange for service they have performed. 55sffac no. 1, paragraph 16c. page',
9233:'42 sffas 5 fasab handbook, version 20 06/21 sffas 5 131. however, it is possible to make meaningful estimates of',
9234:'the future amounts required to continue present policies regarding such programs. these estimates are relevant to certain decisions and should',
9235:'be disclosed or otherwise reported, as discussed further in supplementary stewardship reporting. in the context of the board’s definition, however,',
9236:'estimates of future nonexchange payments should not be recognized as a current period liability. on the other hand, any payments',
9237:'due as a result of past events but unpaid at the end of the period constitute a liability. 132. in',
9238:'the case of federal liabilities, some future outflows of resources are so likely that they should be recognized as accounting',
9239:'liabilities in general purpose federal financial reports before all the other events necessary to create a legally enforceable claim against',
9240:'the government exists.56 two important examples of such substantive accounting liabilities are the pensions and retirement health care promised federal',
9241:'workers in return for their service. 133. an exchange can in substance be said to have occurred in such cases,',
9242:'even if the government has not yet made an outlay of cash or other financial resources. service has been exchanged',
9243:'for a promise of future payment or health care. such charges are properly assignable to the current period in financial',
9244:'reports. this exchange implies, for example, that general purpose federal financial reports should recognize the financial effects of the promise',
9245:'to provide health care to retired federal workers as that obligation accrues during their years of service, regardless of whether',
9246:'the budget includes a provision for this item. this is true even though unfunded liabilities of the federal government reported',
9247:'on the financial statements cannot be liquidated without the enactment of an appropriation. also, as a sovereign entity, the payment',
9248:'of all liabilities other than for contracts can be abrogated by the federal government. conclusion on social insurance 134. the',
9249:'recognition, measurement and display of obligations for social insurance programs presented the board with significant theoretical andpracticalproblems. fromthetheoretical perspective, the',
9250:'boardconsidered whether socialinsurance programsresulted in exchange or nonexchange transactions, or whether they contained both exchange and nonexchange features. the board',
9251:'also considered the problems of articulation between the operating statement and the balance sheet, specifically whether the process of reporting',
9252:'a yeartoyear change in a balance sheet liability might affect the usefulness of an operating statement measure of performance. finally,',
9253:'the board considered the difficulty of 56notwithstanding an expectation that the appropriations will be made, whether they in fact will',
9254:'be made is completely at the discretion of the congress. page 43 sffas 5 fasab handbook, version 20 06/21 sffas',
9255:'5 determining an appropriate measure of the obligation assumed, whether such a measure were to be presented on the face',
9256:'of the balance sheet or in the notes. 135. in the exposure draft accounting for liabilities of the federal government,',
9257:'the majority of the board concluded that social insurance programs were entitlement programs developed to carry out the sovereign responsibilities',
9258:'of the government, financed primarily by compulsory earmarked taxes. the board favored characterizing social insurance obligations as nonexchange transactions, and',
9259:'limiting recognition of a liability to any unpaid amounts due as of the reporting date. asignificant majority of the respondents,',
9260:'however, agreed with an alternative view, which expressed the notion that social insurance programs contained both exchange and nonexchange features,',
9261:'and that there was a need for recognizing a liabilityatleast equalto thepresent value of futurepaymentsdueto recipients currently eligible for benefits.',
9262:'136. upon reconsideration of the issues, the board concluded that the most appropriate approach from both the balance sheet and',
9263:'statement of net cost perspectives would be: 1 to include a line item entitled “social insurance obligations” in a separate',
9264:'section of the balance sheet following the liability section and before the equity section; 2 to make note disclosure of',
9265:'supplementary data resulting from several approaches for measuring the obligation, and 3 to report the annual financial outflows of current',
9266:'financial resources on the statement of net cost. the board also decided that, given the sensitivity and magnitude of social',
9267:'insurance, this new position should receive additional exposure, to allow users to review it and comment. the board felt that',
9268:'the concepts and alternativeshad not yet been presented to the user community in sufficient detail. hence, the discussion of social',
9269:'insurance has been withdrawn from the liability standard and consolidated in supplementary stewardship reporting. impact of communicating information in general',
9270:'purpose federal financial reports 137. fasab recognizes that extensive information about probable and possible future federal outlays is available now',
9271:'in many special purpose reports on various federal programs. in that sense, the financial reports prepared pursuant to this statement',
9272:'are not likely to reveal information that is new in an absolute sense. analysts working for the various executive agencies,',
9273:'congressional committees, private interest groups, “think tanks” and universities are, collectively, aware of thisinformationandmuchmore. nevertheless, theboardbelieves that presenting liabilities and',
9274:'stewardship responsibilities in the general purpose federal financial reports can be valuable in several ways. there are at least four',
9275:'reasons for this belief. page 44 sffas 5 fasab handbook, version 20 06/21 sffas 5 138. first, analysts typically know',
9276:'a lot about certain programs, but only those programs. currently it is difficult, if not impossible, to assemble comprehensive information',
9277:'prepared on a comparable basis for the federal government as a whole. in many cases, this is also true for',
9278:'significant component units. general purpose federal financial reports attempt to provide a way of presenting comprehensive information. 139. second, much',
9279:'of this information has no impact on individual decisionmakers, such as program managers, unless it is conveyed in a way',
9280:'that facilitates, or even requires, suitable attention to it. for example, information about federal pension plans and retirement benefits conveyed',
9281:'in an actuarial report or in the narrative section of the budget of the united states government may have an',
9282:'impact on certain congressional decisions, but is unlikely to influence managers’ decisions about whether to use federal employees, invest in',
9283:'laborsaving equipment, or contract out to accomplish a given task. if the information is to have such an impact, it',
9284:'must be reported in a way more directly associated with the activities the manager is responsible for. associating the expenses',
9285:'and liabilities reported in the general purpose federal financial report with the outputs of responsibility centers is able to accomplish',
9286:'this direct association. 140. third, the mere requirement to assemble and report these data will, in some cases, affect federalmanagers,',
9287:'who,likeeveryone,tendtomanagewhat theymeasure. someobservers believe, for example, that the prospect of having to comply with fasb’s statement 106, employers’ accounting for',
9288:'postretirement benefits other than pensions, caused corporate managers and others to focus increased attention on the need to manage the',
9289:'cost of promises they had made to provide health care to retirees, even before the statement became effective. 141. fourth,',
9290:'financial reports prepared and audited pursuant to federal accounting standards may reasonably be expected to possess a certain credibility and',
9291:'to command a certain amount of attention from various users, sufficient to affect decisions about federal government public policy. they',
9292:'will provide a source of information that should complement what is provided by the budget of the united states government.an',
9293:'important collateral benefit arises from the processes of preparing, auditing, and publishing annual financial statements. experience demonstrates that these processes',
9294:'improve the reliability of information and of control systems, thereby enhancing both decisionmaking and accountability in general. page 45 sffas',
9295:'5 fasab handbook, version 20 06/21 sffas 5 relationship to liability recognition principles used by nonfederal entities 142. fasb definesthe',
9296:'basicprinciplesthatgovernliabilityrecognitionbyprivate sectorentitiesin the united states.57 government corporations follow those standards in their separately issued financial statements. probably most readers of',
9297:'this statement are familiar with these principles. probably most users of federal financial reports are accustomed to seeing other financial',
9298:'reports prepared according to these principles. 143. fasab’sprinciple forliabilityrecognitiondiffersfrom fasb’s.thedifference canbeseen as a modification made necessary by the sovereign nature',
9299:'of the federal government. fasab contemplates a liability standard within the context of a reporting model that provides much greater',
9300:'emphasis on publicly reporting certain stewardship responsibilities than does the reporting model used by private sector organizations. this kind of',
9301:'reporting model is necessary because of the federal government’s responsibility for the general welfare of the nation and its resulting',
9302:'willingness to take on obligations. conclusion on contingencies 144. in the exposure draft the board asked the following question. “when',
9303:'an estimated [contingent] liability is a range of amounts and no amount within the range is a better estimate than',
9304:'any other amount, should either the midpoint or, alternatively, the ’expected value’ as the term is used in statistics be',
9305:'recognized as a liability instead of the minimum amount?” the majority of respondents preferred the expected value and the second',
9306:'preference was the minimum amount. 145. the board further considered all of the options. based on the board discussions it',
9307:'was noted that it wouldbedifficult to use “expectedvalue” to pinpoint anestimate within a range. the expected value method would assign',
9308:'a probability percentage to each of the numbers within the range, but these probabilities would usually be difficult to estimate.',
9309:'146. after much discussion the majority of the board preferred the minimum amount because of its established use in other',
9310:'accounting standards. the board decided that liabilities arising from nonexchange transactions would be recognized for any unpaid amounts due as',
9311:'of the reporting date. this includes amounts payable from the federal entity to pay for benefits, 57the governmentalaccounting standards board',
9312:'gasb has not published a concept statement on financial statement elements as fasb has done in concept statement number 6',
9313:'and has not defined “liability” per se. in the current state and local governmental accounting model, a fund liability is',
9314:'“the amount left unpaid at the end of the reportingperiodthat normally would be liquidated with expendable availablefinancial resources. the remainder',
9315:'of the liability should be reported in the general longterm debtaccount group gltdag.” national council on governmentaccountingstatementncgasnumber4,par. 17. seegasb codification',
9316:'of governmental accounting and financial reporting standards, section 1500. page 46 sffas 5 fasab handbook, version 20 06/21 sffas 5',
9317:'goods, or services58 provided under the terms of the program, as of the federal entity’s reporting date, whether or not',
9318:'such amounts have been reported to the federal entity for example, estimated medicaid payments due to health providers that will',
9319:'be financed by the federal entity but have not yet been reported to the federal entity. 147. in the case',
9320:'of governmentacknowledged events giving rise to nonexchange or exchange transactions, there must be a formal acceptance of financial responsibility by',
9321:'the federal government, as when the congress has appropriated or authorized i.e., through authorization legislation resources. furthermore, exchange transactions that',
9322:'arise from governmentacknowledged events would be recognized as a liability when goods or services are provided. for nonexchange transactions a',
9323:'liability would then be recognized at the point the amount is due. therefore, governmentacknowledged events do not meet the recognition',
9324:'criteria necessary to be recognized asa contingent liability. the government is acting in its sovereign capacity when it assumes financial',
9325:'responsibility and makes income transfer payments or provides other nonexchange benefits. the board does not believe that accounting recognition should',
9326:'anticipate sovereign actions in advance of occurrence. conclusion on pensions, other retirement benefitsand other postemployment benefits pensions projected salary levels',
9327:'148. aprimary objective for federal financial reporting is to measure accurately the full cost of employerentityservicestothepublic. themethodsusedtoaccountforpensions,orb, and opeb in',
9328:'general purpose financial reports should accurately measure the full cost of an employer entity’s services. since federal pension benefits are',
9329:'based on final salaries, whatever method is used for the annual cost and accrued liability of federal pensions must include',
9330:'projected future salaries that reflect an estimate of the compensation levels of the individual employees involved including future changes attributable',
9331:'to the general price level, seniority, promotion, and other factors. theyare part of the obligation that the federal government is',
9332:'incurring. 58goods or services may be provided under the terms of the program in the form of, for example, contractors',
9333:'providing a service for the government on the behalf of disaster relief beneficiaries. page 47 sffas 5 fasab handbook, version',
9334:'20 06/21 sffas 5 accounting for the pension plan attribution methods 149. the major federal pension plans use an actuarial',
9335:'cost method for funding purposes known as aggregate entry age normal aean. various actuarial cost methods exist. all the methods',
9336:'regarded as acceptable methods for advance funding of private pension plans recognize the cost of an employee’s pension benefits during',
9337:'the employee’s years of service,but thedifferent actuarialmethodsrecognizethecost indifferent patternsovertime. theaean method is intended to produce a periodic pension cost that',
9338:'is a level percent of payroll. 150. that is,aean is a method under which the present value of projected benefits',
9339:'of each employee is allocated on a level basis such as a constant percentage of salary over the service of',
9340:'the employee between entry age and assumed exit age. the portion of this present value allocated to each year is',
9341:'called the normal cost. the portion of this present value not provided for at a valuation datebythe present value of',
9342:'future normal cost is called the actuarial accrued liability. 151. fasab considered the method used by the financialaccounting standards board',
9343:'in statement of financialaccounting standards sfas no. 87, employer accounting for pensions the projected unit credit, or puc, as well',
9344:'asaean. fasb concluded that puc gave a better measure of the employer’s obligation for the benefits earned by the employees',
9345:'at a particular point in time. it therefore said that pucprovides a bettermeasure of the value of the benefits that',
9346:'accrue during the year. however, fasab heard testimony from an opm actuary that results from these two methods were similar',
9347:'for federal plans. fasab concluded thataean is a sound measure of the accruing expense. 152. fasab concluded that any method',
9348:'of assigning the value of benefits that are earned over the entire career to particular years of service involves a',
9349:'process of estimation. it is, of course, reasonable to assume that the benefits accrue in some sort of systematic and',
9350:'uniform fashion and not, for example, all at once when the employee becomes eligible. assuming that the benefits accrue as',
9351:'a uniform percentage of salary each year as is done withaean for pensions is a reasonable approach. aean is particularly',
9352:'useful within an organization when measuring costs over time because it provides that a dollar of salary always equals a',
9353:'fixed percent of pension, regardless of the year involved. thus, inflation is factored into the calculation automatically. 153. fasab specified',
9354:'theaean for several reasons. first, as stated,aean is a reasonable and systematic way of allocating costs evenly over the service',
9355:'lives of employees. second, the major federal retirement systems [the military retirement system mrs, the civil service retirement system csrs,',
9356:'and the federal employees retirement system fers] use page 48 sffas 5 fasab handbook, version 20 06/21 sffas 5 aean,',
9357:'and in two cases fers and mrs charge “full cost” in the budget under a statutory requirement.59 finally, exact comparability',
9358:'with privatesector entities is not relevant. minor differences in the size of the pension liability and expense calculated pursuant to',
9359:'this statement and sfas 87 clearly would not have a material impact on investor’s assessment of the creditworthiness of the',
9360:'u. s. government. 154. since there are several acceptable attribution methods and several small pension plans in addition to the',
9361:'three major plans, fasab decided that the use of methods other thanaean was permitted provided the results were not materially',
9362:'different from those ofaean. a material difference between the expenses and the liabilities for federal plans based solely on the',
9363:'choice of attribution method would destroy the comparability and impair the usefulness of the information for users other than investors.',
9364:'155. fasab recognizes also that other attribution methods might be useful for other purposes. for example, amethod that calculatesthevestedbenefitsaccrued byemployeestodate,at',
9365:'current salary levels, would be useful as a measure of the accumulated amount the plan wouldowe if it were toterminate.',
9366:'such calculationswould be forspecialpurposereportsnot covered by this statement. assumptions 156. there are three objectives for actuarial assumptions. first, fasab considers',
9367:'it extremely useful to have consistent assumptions among accounting, budgeting, and actuarial statements to the extent it is possible to',
9368:'do so while attaining the objectives of federal financial reporting. 157. second, assumptions ought to be consistent across federal employee',
9369:'pension, other retirement benefit, and other postemployment benefit systems. assumptions need not be identical because the conditions facing each plan',
9370:'may objectively differ, but they should be rationallyrelated thus, the standardcallsforfinancial reports to be prepared on the basisof reasonable estimates',
9371:'for actuarial assumptions. also, the standard allows the smaller plans to use the assumptions provided by any of the three',
9372:'primary plans or to use their own assumptions if they explain how and why they are different from one of',
9373:'the major plans. 59the csrs statute calls for procedures that are generally construed as entry age normal. “full cost,” of',
9374:'course, depends on the method selected. for example, prior service cost is amortized in fers over 30 years pursuant to',
9375:'the funding method; it would be recognized over a shorter period years of expected future service of the group or',
9376:'15 years under sfas 87. it shouldberecognizedinfullimmediately under theterms ofthis standard,but only in financial reports of the agency that administers',
9377:'the pension plan and in the consolidated financial statements of the united states, not in the employer agency’s financial statements.',
9378:'thus, “full cost” in this sentence must be read in a generic way, that is, as a statement of the',
9379:'general intent underlying the law. page 49 sffas 5 fasab handbook, version 20 06/21 sffas 5 158. third, assumptions ought',
9380:'to reflect the underlying economic substance of the transaction. they should reflect the entity’s past experience and current expectations regarding',
9381:'cost trends. they should reflect the similarities of and differences between two sets of economic phenomena rather than forcing artificial',
9382:'uniformity. 159. fasab concluded also that the discount rate should reflect the longterm expected return on plan assets rather than',
9383:'a current market rate on debt of comparable maturity the discount rate called for bysfas 87. the longterm expected rate',
9384:'reduces volatility, reflects the actual experience and expectations of the primary federal plans, and is consistent with the assumptions used',
9385:'in the budget. the governmentalaccounting standards board uses a similar approach for the discount rate for state and local government',
9386:'pensions for similar reasons. prior service cost 160. prior service costs or gains are the costs or gains of retroactive',
9387:'benefits granted or reduced in a plan amendment. under the current budgetary system, prior service costs are funded in the',
9388:'budget through general fund appropriations over 30 years. the employer entities under mrs and ferswhich are intended to be fully',
9389:'fundedare not charged in their budgets for prior service cost nor are they credited for gains, but rather the general',
9390:'fund is charged for these costs.60 161. as stated in the statement, fasab believes that prior service costs, interest on',
9391:'the pension or orbliability, and actuarial gainsand losses are expenses of the federal government as a whole and are best',
9392:'accounted for by the administrative entity. some respondents did not agree that employer entities should recognize only the “normal” or',
9393:'“service” cost element. the respondents suggested that the employer entity should recognize all elements of the pension or orb expense:',
9394:'service costs, prior service costs, actuarial gains and losses, and interest on the pension liability. in general, these respondents believe',
9395:'that the full cost of productsand services produced by the employer entityincludes these elements, and that the full cost thus',
9396:'defined is relevant to various decisions such as comparing the cost of outputs and services with alternative providers. 162. the',
9397:'board considered these views, but it continues to believe that employer component entities of the u. s. government should usually',
9398:'recognize only the service cost element of pensionand orbexpensein theirgeneralpurpose financialreports. exceptionswill arise in cases such as the coast guard,',
9399:'where the employer entity is also the administrative 60csrs also receives general fund appropriations for this purpose, but the appropriations',
9400:'are based on statutory provisions and are less than they would be under a fully funded approach. because of this,',
9401:'the csrs funding approach is not being used as an example of budgetary treatment to be contrasted with the accounting',
9402:'treatment. page 50 sffas 5 fasab handbook, version 20 06/21 sffas 5 entity for the plan. the board is aware',
9403:'that its approach may appear to differ from the approaches taken by fasb and gasb in this regard. however, neither',
9404:'of those boards focused, in their standards on pensions and other retirement benefits, on reporting by component entities of a',
9405:'larger reporting entity comparable to the government of the united states.all elements of pension and orb expense should be recognized',
9406:'in the consolidated financial statements of the united states government; however, the board believes that prior service cost and other',
9407:'nonservice cost are not useful for most managerial or policy decisions at the program level. they are sunk costs or',
9408:'sunk gains attributable to services rendered in prior years, or otherwise are not under the control of program management. fasab',
9409:'continues to believe that having nonservice elements of cost reported by the administrative entity best reflects the federal environment and',
9410:'organizational structure. 163. the board recognizes that some analysts might, for some purposes, want to consider an alternative measure of',
9411:'compensation cost, e.g., one that includes interest on the part of the pension or orb liability that relates to current',
9412:'workers, or one that recognizes some non service costs over the workers’ years of expected service. special analyses and reports',
9413:'will always be necessary for special purposes. general purpose financial reports must, by definition, focus on the most common needs',
9414:'of users of those reports. 164. for similar reasons, fasab also continues to believe that prior service costs or gains',
9415:'should be recognized immediately, without amortization, by the administrative entity, and in federalgovernmentwide financialreports. fasab seesnobenefit todelaying recognition of a',
9416:'cost and a liability or to reducing volatility in the general purpose financial report of the administrative entity. fasab was',
9417:'not persuaded that the benefit or the cost derived in future periods from increased or deceasedpension benefits was sufficientlytangible in',
9418:'the federalcontext to warrant delayedrecognitionbymeans of amortizationover future periods. examples of plausible future benefits or costs would be, increased decreased',
9419:'employee productivity or reduced increased turnover. 165. fasab recognizes that, for funding purposes, prior service costs for csrs, fers, and',
9420:'mrs are amortized through appropriations over a number of years. funding decisions, however, shouldnot be determinative for accountingrecognitionof cost. deciding',
9421:'whenand how to fund an obligation is not an accounting issue. actuarial gains and losses 166. actuarial gains and losses',
9422:'result from 1 deviations between actual experience and the actuarial assumptions used and 2 changes in actuarial assumptions. actuarial assumptions',
9423:'are essentially longrange estimates about future events and necessarily vary from actual experience. 167. actuarial gains and losses and prior',
9424:'service costs or gains have similar characteristics. they are both determined after the accounting period in question has concluded, and',
9425:'both relate to the past either prior service or prior experience. the difference between actuarial page 51 sffas 5 fasab',
9426:'handbook, version 20 06/21 sffas 5 gains and lossesand prior service costsor gains is that the former are the normalresult',
9427:'of actuarial estimation and may occur annually, while prior service costs are incurred only when the plan is amended.also, actuarial',
9428:'gainsand losses maytend to even out over time, unlike prior service costs. 168. fasab concluded that actuarial gains and losses',
9429:'should receive the same treatment as prior service costs or gains. they should be charged to the administrative entity. the',
9430:'employerentitiesshouldrecognizeanexpenseonlyfortheservicecost61 of theiremployees for the period less the amount contributed bythe employees, if any. like prior service costs, the actuarial',
9431:'losses are sunk costs or sunk gains attributable to services rendered in prior years and therefore should be excluded from',
9432:'data used for managerial or policy decisions. 169. for the same reasons as were given for prior service costs, actuarial',
9433:'gains and losses should be recognized immediately by the administrative entity. there is no benefit in delaying recognition or reducing',
9434:'volatility in the cost measures and the financial reports of the administrative entity. recognition and measurement 170. the board’s conclusions',
9435:'discussed immediately above are reflected in the accounting treatment ofpensions. the employerentityshouldrecognize an annualpensionexpenseas a cost of operations. when the',
9436:'employer entity’s contributions are less than its pension expense, the employer entity should recognize an imputed financing source for the',
9437:'expenses paid by other entities. to the extent that it receives contributions from the employer entity, the administrative entity should',
9438:'recognize an intragovernmental revenue. 171. these transactions are intragovernmental. for purposes of federal governmentwide consolidated financial reports, the employer’s pension',
9439:'expense should be offset against 1 the administrative entity’s contributions received from employer entities and 2 the employer entity’s imputed',
9440:'financing source, if applicable. 172. the administrative entity should report the pension liability.an increase in the liabilityduring the accounting period',
9441:'is an expense to the administrative entity. the liability is increased by the net total of the pension cost components',
9442:'[normal cost, interest on the pension obligation, prior service costs gains, and actuarial gainslosses]. thus, the administrative entity should be',
9443:'providing information not only about the actuarial liability but also about the relationship between the full cost and the revenue',
9444:'from employees, employer entities, interest, and treasury contributions. 61“servicecost” is definedas the actuarialpresent value of benefits attributed by the plan’s',
9445:'benefits formula to services rendered by employees during an accounting period. the term is synonymous with “normal cost”. page 52',
9446:'sffas 5 fasab handbook, version 20 06/21 sffas 5 173. recognizing the pension cost components in the administrative entity and',
9447:'also the normal cost in the employer entities accomplishes two objectives. first, the full cost and actuarial liability are summarized',
9448:'and presented in one place, i.e., in the administrative entity’s operating results and balance sheet. second, each employer entity reports',
9449:'its respective normal cost as a cost of providing service. this is essential to report properly the cost of delivering',
9450:'federal government services. these entries are eliminated during consolidation for federal governmentwide financial statements and, thus, no double counting occurs.',
9451:'other retirement benefits 174. fasabconcluded that orbaresimilartopensionbenefitsandshouldbeaccountedforin a similar way unless differences in substance dictate otherwise. the predominant other retirement',
9452:'benefit in the federal government is health care benefits for retirees. these are longterm and require actuarial estimation. 175. fasab',
9453:'recognizes that future health care benefits present unique measurement problems. they are more uncertain than pensions since they depend on',
9454:'the changing patterns of health care delivery and utilization, on the price trends for medical care, and on the benefits',
9455:'provided by social insurance programs like medicare. 176. also, some federal retiree health benefits are provided directly in federal government',
9456:'hospitals and domiciliary facilities. the liability in these cases also depends on the amount that the congress will appropriate in',
9457:'the future to pay for the benefits, so the expense and liabilityaremoredifficult tomeasure. notwithstandingthemeasurement difficulties,because of the importance of approximating',
9458:'the cost of services rendered at the time the service is rendered, fasab believes that in most cases, the orb',
9459:'costs and liabilities should be measuredforfederalprograms. however,asnotedinthediscussionstartingwithparagraph 182, vamedical care cost would be recognized in the period medical care service',
9460:'is rendered. accounting for the other retirement benefits plan attribution method 177. unlike the situation regarding federal pension plans, there',
9461:'is no established attribution method for federal retirement medical care. although there are current proposals to do so, the costs',
9462:'are not currently being funded. 178. for retirement health care, fasab found no compelling reason to prefer an approach other',
9463:'than the aggregate entry age normal used for pensions. the employer’s service cost however, should be calculated differently for health',
9464:'care than for pensions. for the pensions, costs are calculated as a percent of payroll, but retirement health care benefits',
9465:'page 53 sffas 5 fasab handbook, version 20 06/21 sffas 5 are paid for each individual retiree regardless of prior',
9466:'salary. cost, therefore, should be calculated on a per person basis because that accurately represents how the cost is incurred.',
9467:'assumptions 179. although the general assumptions employed for orb should be the same as those for pensions, the health care',
9468:'cost trend assumption is unique. the standard gives general guidance regarding the use of “medicare projections or other authoritative sources”',
9469:'for the trend assumption in order to achieve consistency and set broad guidelines for the estimates. the health care cost',
9470:'assumption should reflect these sources adjusted for any factors unique to the organization. other postemployment benefits 180. opeb represent operating',
9471:'expenses of the federal employer entity. some might argue that opeb, like pensions and orb, should be accrued as employees',
9472:'perform services, as a cost of operations, because 1 they believe the event is occurring as the employees perform service,',
9473:'2 future opeb payments are probable, and 3 they can be measured. fasab was not persuaded that there was an',
9474:'adequate nexus between these cost and the employee’sdaily, ongoing service; orthat these costswere sufficientlyprobable at that point to warrant accrual.',
9475:'181. fasab believes that an accrual based on the occurrence of an actual event, such as a job related injury',
9476:'or a decision to reduce the entity’s workforce generally, is a reasonable approach. such an event makes the future outflow',
9477:'of resources probable and measurable, may involve longterm accruals in some cases, and provides an accurate measure of expense in',
9478:'a way that is the least burdensome to the reporting entities.62 vamedical care cost 182. although it might appear that',
9479:'medical benefits provided by the department of veterans affairs should be treated like other retirement or medical benefits, there are',
9480:'significant differences between the two. most often retiree medical benefits are provided through a 62the federal workers’ compensation and unemployment',
9481:'insurance programs are different from the programs applicable to nonfederal workers. the benefits for federal employees under these programs are',
9482:'financed by direct reimbursement from employer entities. usually the reimbursement period for workers’ and unemployment compensation is shortterm, but under',
9483:'certain conditions, workers’ compensation may extend for many years. page 54 sffas 5 fasab handbook, version 20 06/21 sffas 5',
9484:'health insurance provider, which receives premium payments from the former employer. but, with vamedical benefits, the former employer the government',
9485:'provides the medical services through vafacilities to veterans on an “as needed” and an “as available” basis versus payment of',
9486:'health insurance premiums for each veteran. 183. eligibility for vahospital care and nursinghome care is divided into mandatory and discretionary',
9487:'categories. vamust provide hospital care to veterans with serviceconnected disabilitiesandothersin themandatorycategory. hospitalcareisconsidered discretionaryif the veteran has income above a specified',
9488:'limit and a nonserviceconnected injury. veterans in the discretionary category may be required to pay fees to receive vahospital care.',
9489:'in addition, vamedical care is financed by annual appropriations. the entitlement to receive care does not guarantee any particular level',
9490:'of care. the congress decides annually how adequately vamedical care will be funded. 184. the board believes that vamedical benefits,',
9491:'for both mandatory and discretionary programs, are best measured by the annual cost incurred rather than by actuarially determined chargesduringthe',
9492:'veteran’smilitaryservice. medicalcareforveteransdoesnot satisfytheprobabilityorreasonablymeasurablecriteria inthisstandard at earlier dates,and therefore future medical benefits do not constitute a longterm liability to be recognized',
9493:'in the balance sheet. the board believes vamedical benefit liability and related expenses should be recognized in the period medical',
9494:'care service is rendered. the entity should consider, however, what disclosures would be appropriate for these costs under the contingency',
9495:'standard. conclusion on insuranceand guarantees 185. the board considered two possible bases for recognizing the liability of federal insurance programs.',
9496:'onewouldrecognize asaliabilitythe unpaid expected present value pv cost of insured events that had occurred. the second would recognize as a',
9497:'liability the unpaid expected pv cost of risks that had been assumed i.e., the unpaid expected pv cost inherent in',
9498:'insurance extended or in force. this second approach would be similar to that taken by the congress in budgeting for',
9499:'direct loans and loan guarantees and by fasab in accounting for these transactions. see statement of federal financialaccounting standards number',
9500:'2, accounting for direct loans and loan guarantees. 186. several board members believe that this second approach has merit from',
9501:'a conceptual standpoint. however, the board has concerns about the measurability of the risk assumed, particularly in the context of',
9502:'pension guarantees. there may also be some question as to the exact nature or categorization of some assumed risks in',
9503:'the absence of written contracts. the board concluded that it would continue the traditional practice of recognizing the effect of',
9504:'events that had occurred on the face of the financial statements. however, it page 55 sffas 5 fasab handbook, version',
9505:'20 06/21 sffas 5 also decided to require reporting as rssi the estimated pv cost of the risk assumed for',
9506:'all programs, except social insurance, life insurance, and loan guarantee programs. 187. accrual accounting for insurance programs attempts to report',
9507:'the expenses of operations for each period and the unpaid liability at the end of the period. projections of future',
9508:'claims, including renewed, expanded, and new business, also provide important information for policy decisions about what rates should be charged',
9509:'to cover all expected future losses, what additional insurance should be extended, and similar decisions. management of reporting entities may',
9510:'wish to include such projections in financial reports as other accompanying information, and may do so on a voluntary basis,',
9511:'but the board is not presently making any specific recommendations about this, beyond those required by this statement and those',
9512:'to be further considered in supplementary stewardship reporting. 188. during the exposure draft stage of the liability standard, the board',
9513:'asked respondents whether the standard provided sufficient guidance on how the risk assumed amount should be measured. two of the',
9514:'fifty five respondents asked for additional guidance but did not mention measurement possibilities. 189. at the discussion stages of the',
9515:'final statement the board contemplated two possible measurement perspectives for reporting the risk assumed. the statement requires that all federal',
9516:'insurance programs except social insurance, life insurance, and loan guarantee programs report the risk assumed amount as supplementary information. the',
9517:'risk assumed calculation aspresented in the exposure draft measured the cost of the coverage outstanding during the reporting year. for',
9518:'annual term insurance programs, under this approach the risk assumed amount might not be significantly different from the sum of',
9519:'recognized liabilities and contingent liabilities reported on the balance sheet. however, the board believes that requiring disclosure or supplementary reporting',
9520:'of a risk assumed number that is similar in concept and amount to the liability recognized could be confusing and',
9521:'would not add informational value. 190. in the second perspective, the risk assumed amount would be a broader and longer',
9522:'term measure of the government’s potential cost for ongoing insurance programs. under some measures, this second approach to risk assumed',
9523:'could be regarded as an indicator of the “fair” or “full cost” premium that should be charged if taxpayers are',
9524:'not to subsidize the program. thismeasure would be a probabilistic estimate of the expected cost under certain assumed economic factors.',
9525:'the board found merits in this calculation, and believes it can provide important additional information beyondthat contained in the accrual.although',
9526:'they believe the measure to be important, proponents of this approach acknowledge that the measure may be difficult to measure',
9527:'precisely.accordingly, they would treat it as rssi. the board currently has a project at the exposure draft stage, supplementary stewardship',
9528:'reporting, that will provide further details on the measurement and reporting of “risk assumed” in its final statement. page 56',
9529:'sffas 5 fasab handbook, version 20 06/21 sffas 5 191. the board also considered the liability recognition of whole life',
9530:'insurance programs. the federal government has a small number of whole life insurance programs that are administered by federal entities.',
9531:'the most significant programs mutual enterprisetype whole life insurance are through the department of veteranaffairs va. 192. at the time',
9532:'the exposure draft on liabilities was issued, there were no established accounting standards for mutual enterprisetype whole life insurance within',
9533:'the federal government, state and local government, or the private sector. therefore vafollowed the statutory requirements for accounting purposes as',
9534:'well as statutory insurance reporting. 193. in january 1995, the fasb andaicpaissued a standard and a statement of position, respectively,',
9535:'that specified accounting for mutual whole life insurance enterprises. due to the similarities between the federal programs and the insurance',
9536:'enterprises covered in the fasb andaicpadocuments, the board decided that the private sector standards would be appropriate for the applicable',
9537:'federal programs. therefore the board concluded that federal entities with whole life insurance programs would follow the standards as prescribed',
9538:'in the private sector standards and as these private sector standards are amended when reporting the liability for future policy',
9539:'benefits, along with the additional disclosures prescribed by this statement. the board further concluded that disclosure of the componentsoftheliabilitywasnecessarytoadequatelyinformthefinancialstatementusers of',
9540:'the projected use and any other potential uses of the liability components and associated assets. page 57 sffas 5 fasab',
9541:'handbook, version 20 06/21 sffas 5 appendix b: liability recognitionand measurement matrix federal program categories expense liability general fund aid',
9542:'to families with benefit programs— dependent children financed by general medicaid revenues food stamps special disabled coal miner recognize expenses',
9543:'when payments are made or unpaid amounts are due as of the reporting date. this includes amounts due from the',
9544:'federal recognize any unpaid amounts due as of the reporting date. this includes amounts due from the federal entity as',
9545:'of the benefits vapension63 entity as of the federal entity’s reporting date, whether or not such amounts have been federal',
9546:'entity’s reporting date, whether or not such amounts have been reported to the federal entity. reported to the federal entity.',
9547:'employee benefits federal employee pension and orb benefits military pension and orb benefits recognize expense as employee services are performed.',
9548:'recognizeactuarialaccrued liability. vadisability compensation64 feca—workers’ compensation opeb recognize expense when relevant event occurs and program participant is determined eligible for',
9549:'compensation. recognize any amount due or the present value of future payments due, which ever is applicable. 63this program is',
9550:'an entitlement program that veterans may be eligible for if they have limited income when they have 90 days or',
9551:'more of active military service, at least one day of which was during a period of war. their discharge from',
9552:'activeduty musthavebeenduringaperiod of war. their discharge fromactive duty musthave been underconditions other than dishonorable. they must be permanently and totally',
9553:'disabled for reasons neither traceable to military servicenortowillfulmisconduct. [departmentofveteransaffairs,federalbenefitsforveterans and dependents, 1993 edition]. 64disability compensation is paid to veterans who',
9554:'are disabled by injury or disease incurred or aggravated during activemilitaryserviceinthelineofduty. theservice ofthe veteransmusthavebeenterminatedthrough separationor discharge under conditions that were',
9555:'other than dishonorable. monetary benefits are related to the residual effects of the injury or disease. [department of veteransaffairs, federal',
9556:'benefits for veterans and dependents, 1993 edition]. page 58 sffas 5 fasab handbook, version 20 06/21 sffas 5 federal program',
9557:'categories expense liability insurance and guarantees fixed period—annual: federal crop insurance corp. national flood insurance fund federal deposit insurance corp.',
9558:'fixed period—multiyear: overseas investment noncancelable or renewable: pension benefit guaranty corp. recognize an expense for recognize liability for claims of',
9559:'the period, including unpaid claims of the period, ibnr, i.e., insured events that including ibnr, i.e., insured occur. events that',
9560:'occur. noncancelableor renewable: recognize expense on the recognizeliabilitybasedon veteranslifeinsurancetrust basis of risk assumed. risk assumedplus cash fund surrender value if',
9561:'relevant employees’ life insurance fund capital leases recognize interest expense as recognize a liability the lease payments are made. presentvalueoffuturelease',
9562:'payments when there is agreement between the federal government and the lessor. federal debt treasury debt to federal agencies federal',
9563:'agency debt to the treasury federal debt to the public recognize accrued prorated recognize a liability at the share of',
9564:'the nominal interest par value of the security net incurredduringthe accounting ofanyunamortizeddiscount period, amortized discount or or premium. premium, and',
9565:'the amount of any change in current value for the accounting period for variablevalue securities. page 59 sffas 5 fasab',
9566:'handbook, version 20 06/21 sffas 5 appendix c: glossary see consolidated glossary in “appendix e: consolidated glossary” on page 1.',
9567:'page 60 sffas 5 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards6: accounting for property, plant, and equipment status issued november 30,',
9568:'1995 effective date for periods beginning after september 30, 1997. affects none. affected by sffas 10 rescinds paragraphs 2728. sffas',
9569:'14 rescinded affects paragraphs 7980, and 8384. sffas 16 rescinded amends paragraphs 59 and 6063. sffas 23 affects paragraphs 21',
9570:'and 35 and rescinds paragraphs 4656. sffas 29 rescinds paragraphs 5776 and amends paragraph 21. sffas 32 amends paragraphs 45',
9571:'and 107111. sffas 35 rescinded amends paragraphs 40 and 45. sffas 42 rescinds paragraphs 7784 andappendix c. sffas 50 amends',
9572:'paragraphs 25, 26, and 40. sffas 59 transitionally amends paragraphs 2526, 35, 40, 4445 and inserts paragraphs 20a20d, 34a, and',
9573:'45a45b. tb 20061. tb 20172. sig 6.1. related guidance interpretation 9, cleanup cost liabilities involving multiple component reporting entities tr',
9574:'2, determining probable and reasonable estimate for environmental liabilities in the federal government tr 7, clarification of standards relating to',
9575:'the national aeronautics and space administrations space exploration equipment tr 10, implementation guidance on asbestos cleanup costs associated with facilities',
9576:'and installed equipment tr 11, implementation guidance on cleanup costs associated with equipment tr 13, implementation guide for estimating the',
9577:'historical cost of general property, plant, and equipment tr 14, implementation guidance on the accounting for the disposal of general',
9578:'property, plant & equipment tr 15, implementation guidance for general property, plant, and equipment cost accumulation, assignment and allocation tr',
9579:'17, conforming amendments to technical releases for sffas 50, establishing opening balances for general property, plant, and equipment tr 18,',
9580:'implementation guidance for establishing opening balances page 1 sffas 6 fasab handbook, version 20 06/21 sffas 6 summary this statement',
9581:'contains accounting standards for federally owned property, plant, and equipment pp&e; and cleanup costs. property, plant,and equipment the federal government’s',
9582:'investment in pp&e exceeds $1 trillion1 and includes many types of pp&e used for many different purposes. “pp&e” is defined',
9583:'as follows: tangible assets that 1 have an estimated useful life of 2 or more years, 2 are not intended',
9584:'for sale in the ordinary course of business, and 3 are intended to be used oravailable for use by the',
9585:'entity. the diversity among federal pp&e creates a need for meaningful categories of pp&e with different accounting standards for each',
9586:'category. the categories of pp&e are: general pp&e are pp&e used to provide general government services or goods; heritageassetsarethoseassetspossessingsignificanteducational,cultural,ornaturalcharacteristics; and',
9587:'stewardship land2 i.e., land other than that included in general pp&e. complete accounting standards for general pp&e are included in',
9588:'this document. general pp&e the general pp&e category consists of items that: could be used for alternative purposes e.g., by',
9589:'other federal programs, state or local governments, or nongovernmental entities but are used by the federal entity to produce goods',
9590:'or services, or to support the mission of the entity; or 1department of thetreasury, financial management service, consolidated financial statements',
9591:'of the united states government, prototype1993, p. 23. the prototype statements provide gross historical cost investment amounts for all pp&e',
9592:'recorded by government entities. these amounts have not been audited. 2land acquired for or in connection with general pp&e would',
9593:'be included in that category. land not associated with general pp&e would be considered stewardship land. page 2 sffas 6',
9594:'fasab handbook, version 20 06/21 sffas 6 are used in businesstype activities;3or are used by entities in activities whose costs',
9595:'can be compared to other entities e.g., federal hospitals compared with other hospitals. general pp&e includes land acquired for or',
9596:'in connection with other general pp&e.4 general pp&e shall be reported in the basic financial statements: the balance sheet,5and the',
9597:'statement of net cost.6the acquisition cost of general pp&e shall be recognized7 as an asset. subsequently, except for land which',
9598:'is a nondepreciable asset, that acquisition cost shall be charged to expense through depreciation.8the depreciation expense shall be accumulated in',
9599:'a contra asset account—accumulated depreciation. the standards addressing internallydeveloped software have been amended by sffas 10, accounting for internal use',
9600:'software.9 in addition, the standard addresses donations, transfers, and retirements of general pp&e as well as disclosure10 requirements. 3businesstype activity',
9601:'is defined as a significantly selfsustaining activity which finances its continuing cycle of operations through collection of exchange revenue as',
9602:'defined in the board’s exposure draft on revenue and other financing sources. 4“acquiredfororinconnectionwithothergeneralpp&e”isdefinedas landacquiredwiththeintenttoconstructgeneral pp&e and land acquired in combination',
9603:'with general pp&e, including not only land used as the foundation, but also adjacent land considered to be the general',
9604:'pp&e’s common grounds. 5“balancesheet” refers tothestatement thatreports onassets,liabilities, and net position of the entity at the end ofthe reporting period.',
9605:'this statement is referred to in omb bulletin 9401, form and content of agency financial statements, as the statement of',
9606:'financial position. 6“statement of net cost” refers to the statement providing information on the entity’s flows of exchange revenues, expenses,',
9607:'gains, and losses. the board presented this new statement in its statement of federal financial accounting concepts 2, entity and',
9608:'display. in addition, the board has exposed for comment a standard for reporting net costs andhas provided anillustrativestatement which might',
9609:'give effect to this standard in the ed on revenue and other financing sources, july, 1995. 7“recognize” means to record',
9610:'an amount in entity accounts and to report a dollar amount on the face of the statement of net costs',
9611:'or the balance sheet either individually or so that the amounts are aggregated with related amounts. 8“depreciation” is thesystematic andrationalallocation',
9612:'of the acquisition cost of an asset, lessits estimated salvageor residual value, over its estimated useful life. 9see sffas 10.',
9613:'10“disclosure” refers to reporting information in notes regarded as an integral part of the basic financial statements. page 3 sffas',
9614:'6 fasab handbook, version 20 06/21 sffas 6 federal mission pp&e the requirements contained herein have been rescinded because the',
9615:'federal mission pp&e category was replaced by the national defense pp&e term in sffas 11, but then nd pp&e was',
9616:'rescinded by sffas 23.11, 12 heritageassets and stewardship land the requirements contained herein have been rescinded and replaced by ssfas',
9617:'29, heritage assets and stewardship land. deferred maintenance the deferred maintenance requirement contained herein have been rescinded and replaced by',
9618:'sffas 42, deferred maintenance and repairs,amending sffas 6, 14, 29, and 32. information related to the condition and the estimated',
9619:'cost to remedy deferred maintenance of pp&e is to be reported as required supplementary information. cleanup costs cleanup costs are',
9620:'the costs associated with hazardous waste removal, containment, or disposal. in some instances, the federal government incurs liabilities13 for cleaning',
9621:'up hazardous waste at sites or facilities it operates or has operated. generally, cleanup cannot be, or is not, done',
9622:'until permanent or temporary closure or shutdown of sites or facilities. the board has completed accounting standards for liabilities which',
9623:'address liabilities for environmental cleanup resulting from an accident, natural disaster, or other onetime 11footnotes 11 and 12 were rescinded',
9624:'with the removal of language relating to federal mission pp&e. 12footnotes 11 and 12 were rescinded with the removal of',
9625:'language relating to federal mission pp&e. 13fasab’s statement of federal financialaccounting standards 5,accounting for liabilities of the federal government, recommends',
9626:'the following definition for liability: a probable future outflow or other sacrifice of resources as a result of past transactions',
9627:'or events. the standards require recognition, in general purpose federal financial reports, of probable and measurable liabilities arising from past',
9628:'exchange transactions; governmentrelated injuries or damage; or nonexchange amounts that, according to current law and applicable policy, are due and',
9629:'payable to the ultimate recipient. the standards also provide guidance for disclosures related to liabilities that are not both probable',
9630:'and measurable at the balance sheet date. page 4 sffas 6 fasab handbook, version 20 06/21 sffas 6 occurrence. those',
9631:'liability standards do not address interperiod cost allocation when cleanup relates to operations that span many periods. therefore, the board',
9632:'chose to provide additional guidance relative to cleanup costs in this standard. the additional standards in this statement provide for',
9633:'the timing of recognition of the liability and related operating expense. for cleanup costs associated with generalpp&e, probable14 and measurable',
9634:'cleanup costs shall be allocated to operating periodsbenefiting from operationsof the general pp&e. this allocation shall be based on a',
9635:'systematic and rational method. for example, the estimated cost could be allocated to operating periods based on the expected physical',
9636:'capacity of the pp&e and the amount of capacity used each period. in addition, disclosure of the total estimated cost',
9637:'is required. for cleanup costs associated with stewardship pp&e, probable and measurable liabilities shall be recognized when the stewardship pp&e',
9638:'is placed in service. simultaneous to recognizing the liability, the related expense for cleanup cost shall be recognized. 14the term',
9639:'“probable” means that which can reasonably be expected or believed to be more likely than not on the basis of',
9640:'available evidence or logic but which is neither certain nor proven. for example, cleanup costs would be probable if 1',
9641:'laws and regulations that have been approved as of the balance sheet date, regardless of the effective dateof those laws',
9642:'and regulations, requirecleanup or 2 compliance agreements e.g., agreements with state orlocal authorities relating to the extent and the timing',
9643:'of remedial action had been entered into by a federal entity. page 5 sffas 6 fasab handbook, version 20 06/21',
9644:'sffas 6 table of contents page summary 2 chapter 1: introduction 7 chapter 2: property, plant,and equipment 10 definitions 10',
9645:'standards & categories 14 general property, plant, and equipment 14 heritageassets 24 stewardship land 24 chapter 3: deferred maintenance 24',
9646:'chapter 4: cleanup costs 25 definition 25 scope 25 recognition and measurement 26 implementation guidance 28 disclosure requirements 29 appendixa:',
9647:'basis for conclusions 30 appendix b: illustrations of categories 48 appendix c: deferred maintenance illustration 52 appendix d: illustration of',
9648:'cleanup cost 53 appendix e: glossary [see consolidated glossary inappendix e] 62 page 6 sffas 6 fasab handbook, version 20',
9649:'06/21 sffas 6 chapter 1: introduction purpose 1. the purpose of this statement is to provide accounting standards for federally',
9650:'owned property, plant, and equipment pp&e; deferred maintenance; and cleanup costs. this introduction provides information on: the scope of the',
9651:'standards, consideration of reporting objectives, applicability of the standards, capitalization threshold, materiality, and effective date. 2. chapters 2, 3, and',
9652:'4 present the accounting standards for pp&e, deferred maintenance, and cleanup costs, respectively. 3. appendixapresents thebasis for conclusions. thisappendix providestheboard’s',
9653:'rationale for the decisions made and responds to the major issues raised in comment letters. 4. appendix b presents illustrations',
9654:'to aid in categorizing pp&e. 5. appendix c provides an example of a deferred maintenance disclosure. 6. appendix d illustrates',
9655:'cleanup cost accounting. 7. appendix e is a glossary of terms used in this statement [omitted. see consolidated glossary in',
9656:'“appendix e: consolidated glossary” on page 1.] scope 8. this statement identifies and defines categories of pp&e and addresses recognition',
9657:'and measurement of, and disclosure requirements associated with property, plant, and equipment as well as land, including accounting for deferred',
9658:'maintenance and cleanup costs. this statement does not address natural resources. however, the board is undertaking a project to address',
9659:'accounting for natural resources. page 7 sffas 6 fasab handbook, version 20 06/21 sffas 6 reporting objectives 9. in drafting',
9660:'accounting standards for pp&e, the board relied on the statement of federal financialaccounting concepts number 1, objectives of federal financial',
9661:'reporting. ultimately, all accounting standards taken as a whole will help meet the four reporting objectives expressed in the objectives',
9662:'statement: budgetary integrity, operating performance, stewardship, and systems and controls. the focus of these standards is on the two reporting',
9663:'objectives most relevant to pp&e—operating performance and stewardship. these objectives and how they could be met through pp&e accounting are',
9664:'discussed under the headings 1 operating performance, and 2 stewardship. operating performance 10. the board believes that it can contribute',
9665:'to meeting the operating performance objective15 by measuring the cost associated with using property, plant, and equipment and including that',
9666:'cost in entity operating results. the board first sought to identifypp&e costs that would be appropriateto include inoperatingexpense. then,fromconsiderationofcostinformation required,',
9667:'the board determined what balance sheet information would have to be reported. 11. to meet the operating performance objective, the',
9668:'board seeks to provide accounting standards that will result in: relevant and reliable cost information for decisionmaking by internal users',
9669:'e.g., program managers, budget examiners and officials, comprehensive, comparable cost information for decisionmaking and program evaluation by congress and the',
9670:'public, and informationtohelpassesstheefficiencyandeffectivenessofassetmanagemente.g., condition of assets including deferred maintenance. 15federal financial reporting should assist report users in evaluating the service',
9671:'efforts, costs, and accomplishments of thereportingentity;themanner inwhichthese efforts andaccomplishmentshavebeenfinanced;and themanagement of the entity’s assets and liabilities. federal financial reporting should',
9672:'provide information that helps the reader to determine: a. the costs of providing specific programs and activities and the composition',
9673:'of, and changes in, these costs. b. the efforts and accomplishments associated with federal programs and the changes over time',
9674:'and in relation to costs. c. the efficiency and effectiveness of the government’s management of its assets and liabilities. page',
9675:'8 sffas 6 fasab handbook, version 20 06/21 sffas 6 stewardship 12. the board believes that federal financial reporting can',
9676:'fulfill the stewardship objective16 if the board provides standards that will result in reporting information on: asset condition; changes in',
9677:'the amount and service potential of property, plant, and equipment; cost of property, plant, and equipment where applicable; and spendingforacquisitionofproperty,plant,andequipmentversusnoncapitalspending.',
9678:'capitalization thresholds 13. the board believes that capitalization thresholds should be established by federal entities rather than centrally by the',
9679:'board. because federal entities are diverse in size and in uses of pp&e, entities must consider their own financial and',
9680:'operational conditions in establishing an appropriate capitalization threshold or thresholds. once established, this thresholds should be consistently followed and disclosed',
9681:'in the financial reports. applicability 14. for guidance on the general applicability of this standard and all other federal financial',
9682:'accounting standards please refer to statement of federal financialaccounting concepts no. 2, entity and display. materiality 15. the provisions of',
9683:'this statement need not be applied to immaterial items. 16federal financial reporting should assistusers in assessing the impacton the country',
9684:'ofthe government’s operations and investments for the period and how, as a result, the government’s and the nations’s financial condition',
9685:'have changed and may change in the future. federal financial reporting should provide information that helps the reader to determine:',
9686:'a. whether the government’s financial position improved or deteriorated over the period. b. whether the future budgetary resources will likely',
9687:'be sufficient to sustain public services and to meet obligations as they come due. c. whether government operations have contributed',
9688:'to the nation’s current and future wellbeing. page 9 sffas 6 fasab handbook, version 20 06/21 sffas 6 effective date',
9689:'16. the board recommends that the accounting standards presented in this proposed statement become effective for periods beginning after september',
9690:'30, 1997. earlier implementation is encouraged. in addition, under earlyimplementation individual provisions of the accounting standards may be implemented before',
9691:'other provisions. for example, provisions for stewardship pp&e may be implemented before provisions for general pp&e. chapter 2: property, plant,and',
9692:'equipment definitions 17. property, plant, and equipment consists of tangible assets, including land, that meet the following criteria: they have',
9693:'estimated useful lives17 of 2 years or more; they are not intended for sale in the ordinary course of operations;',
9694:'and they have been acquired or constructed with the intention of being used, or being available for use by the',
9695:'entity. 18. property, plant, and equipment also includes: assets acquired through capital leases see paragraph 20, including leasehold improvements; property',
9696:'owned by the reporting entity in the hands of others e.g., state and local governments, colleges and universities, or federal',
9697:'contractors; and land rights.18 17useful life is the normal operating life in terms of utility to the owner. adapted from',
9698:'kohler’s dictionary for accountants 18“land rights” are interests and privileges held by the entity in land owned by others, such',
9699:'as leaseholds, easements, water and water power rights, diversion rights, submersion rights, rightsofway, and other like interests in land. page',
9700:'10 sffas 6 fasab handbook, version 20 06/21 sffas 6 19. property, plant, and equipment excludes items 1 held in',
9701:'anticipation of physical consumption such as operating materials and supplies19 and 2 the federal entity has a reversionary interest in.20',
9702:'20. capitalleases areleasesthattransfersubstantiallyallthebenefitsandrisksofownershipto the lessee. if, at its inception, a lease meets one or more of the following four criteria,',
9703:'21 the leaseshouldbeclassified asa capitallease bythelessee. otherwise, it shouldbeclassified as an operating lease.22 the lease transfers ownership of the property',
9704:'to the lessee by the end of the lease term. the lease contains an option to purchase the leased property',
9705:'at a bargain price. theleasetermisequaltoorgreaterthan75percentoftheestimatedeconomiclife23 of the leased property. the present value of rental and other minimum lease payments, excluding',
9706:'that portion of the payments representing executory cost, equals or exceeds 90 percent of the fair value24 of the leased',
9707:'property. the last two criteria are not applicable when the beginning of the lease term falls within the last 25',
9708:'percent of the total estimated economic life of the leased property. 21note that the criteria for identifying capital leases for',
9709:'financial reporting purposes differ from omb criteria for budget scoring of leases. omb circular no.a11, preparation and submission of budget',
9710:'estimates, includes criteria for identifying operating leases inappendix b. omb provides four additional criteria which relate to the level of',
9711:'private sector risk involved in a leasepurchase agreement. this is necessary because, for budget purposes, there is a distinction between',
9712:'leasepurchases with more or less risk. this distinction is not made in the financial reports and, therefore, fasab does not',
9713:'include the four criteria related to risk levels. 22operating leases of pp&e are leases in which the federal entity does',
9714:'not assume the risks of ownership of the pp&e. multiyear service contracts and multiyear purchase contracts for expendable commodities are',
9715:'not capital leases. 23estimatedeconomic life of leased property is the estimated remaining period during which the property is expected tobeeconomically',
9716:'usableby oneor moreusers,with normalrepairs and maintenance,for the purpose for whichitwas intended at the inception of the lease, without limitation by',
9717:'the lease term. 24fair value is the price for which an asset could be bought or sold in an armslength',
9718:'transaction between unrelated parties e.g., between a willing buyer and a willing seller. adapted from kohlers dictionary foraccountants 19accounting for',
9719:'operating materials and supplies is addressed in statement of federal financialaccounting standards no. 3 accounting for inventory and related property.',
9720:'20the federal government sometimes retains an interest in pp&e acquired with grant money. in the event that the grant recipient',
9721:'no longer uses the pp&e in the activity for which the grant was originally provided the pp&e reverts to the',
9722:'federal government. page 11 sffas 6 fasab handbook, version 20 06/21 sffas 6 sffas 54, leases, as amended by sffas',
9723:'58, will replace the requirements for lease accounting established in sffas 6 paragraphs 20 and 29 and the related footnotes,',
9724:'2124 and 35. sffas 6 paragraph 20 will be rescinded for reporting periods beginning after september 30, 2023. early adoption',
9725:'is not permitted. 20 [see sffas 54 for revised standards regarding leases. ]21,22, 23,24 21 [footnote 21 rescinded by sffas',
9726:'54.] 22 [footnote 22 rescinded by sffas 54.] 23 [footnote 23 rescinded by sffas 54.] 24 [footnote 24 rescinded by',
9727:'sffas 54.] 20a. acres of land held for disposal or exchange include land for which the entity has satisfied the',
9728:'statutory disposal authority requirements specific to the land in question.24.1 disposal includes conveyances of federal land to nonfederal entities not',
9729:'limited to sale, transfer, exchange, lease, publicprivate partnership, and donation or any combination thereof. 20b. commercialuse land subcategory includesland or',
9730:'land rights that are predominantly used to generate inflows of resources such inflows may be derived from the land itself',
9731:'or activities performed on the land and regardless of whether the use or activity is intended to produce a profit',
9732:'from nonfederal third parties, usually through special use permits, rightof way grants, and leases. such inflows may arise from exchange',
9733:'or nonexchange activities and may or may not be considered dedicated collections. examples include revenue or inflows derived from concession',
9734:'arrangements; grants for a specific project such as electric transmission lines, communication sites, roads, trails, fiber optic lines, canals, air',
9735:'rights, flumes, pipelines, reservoirs and dams; land sales or land exchanges; leases; 24.1 entity decisions to identify and classify land',
9736:'as held for disposal or exchange often require public participation and diverse clearances, such as environmental and economic impact studies,',
9737:'surveys, and appraisals. page 12 sffas 6 fasab handbook, version 20 06/21 sffas 6 permits for public use such as',
9738:'commercial filming and photography, advertising displays, agriculture, recreation residences and camping, recreation facilities, temporary use permits for construction equipment storage',
9739:'and assembly yards, well pumps, and other such uses; forest product sales such as timber, or sales arising from national',
9740:'forests and grasslands; and/or publicprivate partnerships. 20c. conservation and preservation land subcategory includes land or land rights that are predominantly',
9741:'used for conservation or preservation purposes. conservation and preservation, although closely linked, are distinct terms. each term involves a certain',
9742:'type or degree of protection. specifically, conservation is generally associated with the protectionandproperuseofnaturalresources, whereaspreservationisassociatedwiththe protection of buildings, objects, and landscapes',
9743:'from use. examples of land conserved or preserved for significant natural, historic, scenic, cultural, and recreational resources include the following:',
9744:'national parks geological resource sites wildlife and plant life refuges archeological resource sites localnativeamericanor ethnicculturalsites 20d. operational land subcategory includes',
9745:'land or land rights predominantly used for general or administrative purposes. for example, the following functions performed by entities would',
9746:'be included in this subcategory: military functions include preparing for the effective pursuit of war and military operations short of',
9747:'war; conducting combat, peacekeeping, and humanitarian military operations; and supporting civilian authorities during civil emergencies. scientific functions include conducting and',
9748:'managing research, experimentation, exploration, and operations including the development of commercial capabilities. broad scientific fields of study generally include 1',
9749:'physical sciences physics, astronomy, chemistry, geology, metallurgy, 2 biological sciences zoology, botany, genetics, paleontology, molecular biology, physiology, and 3 social',
9750:'sciences psychology, sociology, anthropology, economics. nuclear functions include managing or regulating the use of nuclear energy, power plants, radioactive materials,',
9751:'radioactive material shipments, nuclear storage, and nuclear reactor decommissioning. other related functions include those that are administrative or other mission',
9752:'related in nature. for example, land used for readiness and training, office building locations, storage, or vacant properties fall under',
9753:'this category. page 13 sffas 6 fasab handbook, version 20 06/21 sffas 6 standardsand categories 21. the following paragraphs provide',
9754:'recognition and measurement principles, and disclosurerequirements for general pp&e. for standards relating to heritage assets, multiuse heritage assets and stewardship',
9755:'land, see sffas 29, heritage assets and stewardship land. 22. in determining which category pp&e should be placed in, it',
9756:'will be necessary to identify the“base unit”25 of pp&e against which the category definitions will be applied. for example, units',
9757:'as large as entire facilities or as small as computers could be categorized. in determining the level at which categorization',
9758:'takes place, an entity should consider the cost of maintaining different accounting methods for property and the usefulness of the',
9759:'information, the diversityin the pp&e to be categorized e.g., useful lives, value, alternativeuses, the programs being served by the pp&e,',
9760:'and future disposition of the pp&e e.g., transferred to other entities or scrapped.26 general property, plant, and equipment 23. general',
9761:'property, plant, and equipment is any property, plant, and equipment used in providing goods or services. general pp&e typically has',
9762:'one or more of the following characteristics: itcouldbeusedforalternativepurposese.g.,byotherfederalprograms,stateorlocal governments, or nongovernmental entities but is used to produce goods or services,',
9763:'or to support the mission of the entity, or it is used in businesstype activities,27 or 25“base unit” refers to',
9764:'the level of detail considered in categorizing pp&e. generally, the base unit is the smallest or least expensive item of',
9765:'property to be categorized. the term “base unit” may be used by others to have a different meaning—the meaning intended',
9766:'in this standard is limited to that specified above. 26the concept described here is intended for pp&e categorization purposes only.',
9767:'however, for the purpose of record keeping, greater detail may be necessary to maintain accountability for pp&e so that assets',
9768:'can be safeguarded against loss, theft, misappropriation, etc. categorizing pp&e with less detail considered does not necessarily mean that 1',
9769:'accounting systems or 2 property records must follow the same level of detail. 27businesstype activity is defined as a significantly',
9770:'selfsustaining activity which finances its continuing cycle of operations through collection of exchange revenue as defined in the board’s exposure',
9771:'draft on revenue and other financing sources. page 14 sffas 6 fasab handbook, version 20 06/21 sffas 6 it is',
9772:'used by entities in activities whose costs can be compared28 to those of other entities performing similar activities e.g., federal',
9773:'hospital services in comparison to other hospitals. 24. for entities operating as businesstype activities, all pp&e shall be categorized as',
9774:'generalpp&e whether or not it meets the definition of any other pp&e categories. 25. land and land rights acquired for',
9775:'or in connection with other general pp&e29 shall be included in general pp&e unless the reporting entity made the election',
9776:'to implement the provisions of paragraph 40.f.i in some instances, general pp&e may be built on existing federallands. in this',
9777:'case, theland cost would often notbeidentifiable. intheseinstances, general pp&e shall include only land and land rights with an identifiable cost',
9778:'that was specifically acquired for or in connection with construction of general pp&e. asset recognition 26. all general pp&e shall',
9779:'be recorded at cost. although the measurement basis for valuing general pp&e remains historical cost, reasonable estimates may be used',
9780:'to establish thehistorical cost of general pp&e, in accordance with the asset recognition andmeasurementprovisionsherein. costshallincludeallcostsincurredtobringthe pp&e toaform and location suitable',
9781:'for its intended use. for example, the cost of acquiring property, plant, and equipment may include: amounts paid to vendors;',
9782:'transportation charges to the point of initial use; handling and storage costs; labor and other direct or indirect production costs',
9783:'for assets produced or constructed; engineering, architectural, and other outside services for designs, plans, specifications, and surveys; acquisition and preparation',
9784:'costs of buildings and other facilities; an appropriate share of the cost of the equipment and facilities used in construction',
9785:'work; fixed equipment and related installation costs required for activities in a building or facility; direct costs of inspection, supervision,',
9786:'and administration of construction contracts and construction work; 28the boardisnot making a recommendation that cost comparisons actually be made. nor',
9787:'is it suggesting that costs can be easily compared for a federal and nonfederal entity. if the activities are somewhat',
9788:'comparable then one should presume that a cost comparison could be made. 29“acquired for or in connection with other general',
9789:'pp&e” is defined as land acquired with the intent to construct general pp&e and land acquired in combination with general',
9790:'pp&e, including not only land used as the foundation, but also adjacent land considered to be the general pp&e’s common',
9791:'grounds. page 15 sffas 6 fasab handbook, version 20 06/21 sffas 6 legal and recording fees and damage claims; fair',
9792:'value of facilities and equipment donated to the government; and material amounts of interest costs paid.30 27. [see sffas 10',
9793:'for revised standards regarding internallydeveloped software]31, 32, 33 28. [see sffas 10 for revised standards regarding internallydeveloped software]34 29. the',
9794:'cost of general pp&e acquired under a capital lease shall be equal to the amount recognized as a liability for',
9795:'the capital lease at itsinception i.e., the net present value of thelease payments calculated as specified in the liability standard35',
9796:'unless the net present value exceeds the fair value of the asset. 35see statement of recommendedaccounting standards no. 5, accounting',
9797:'for liabilities of the federal government. sffas 54, leases, as amended by sffas 58, will replace the requirements for lease',
9798:'accounting established in sffas 6 paragraphs 20 and 29 and the related footnotes, 2124 and 35. sffas 6 paragraph 29',
9799:'will be rescinded for reporting periods beginning after september 30, 2023. early adoption is not permitted. 29. [see sffas 54',
9800:'for revised standards regarding leases. ]35 35 [footnote 35 rescinded by sffas 54.] 30. the cost of general pp&e acquired',
9801:'through donation, devise,36 or judicial process excluding forfeiture see paragraph 33 shall be estimated fair value at the time acquired',
9802:'by the government. 30“interest costs” refers to any interest paid by the reporting entity directly to providers of goods or',
9803:'services related to the acquisition or construction of pp&e. 31footnote 31 was rescinded by sffas 10. 32footnote 32 was rescinded',
9804:'by sffas 10. 33footnote 33 was rescinded by sffas 10. 34footnote 34 was rescinded by sffas 10. 36awill or clause',
9805:'of a will disposing of property. page 16 sffas 6 fasab handbook, version 20 06/21 sffas 6 31. the cost',
9806:'of general pp&e transferred from other federal entities shall be the cost recorded by the transferring entity for the pp&e',
9807:'net of accumulated depreciation or amortization. if the receiving entity cannot reasonably ascertain those amounts, the cost of the pp&e',
9808:'shall be its fair value at the time transferred. 32. the cost of general pp&e acquired through exchange37 shall be',
9809:'the fair value of the pp&e surrendered at the time of exchange.38 ifthe fair value ofthe pp&e acquired is more',
9810:'readily determinable than that of the pp&e surrendered, the cost shall be the fair value of pp&e acquired. ifneitherfairvalueisdeterminable thecostofthe',
9811:'pp&e acquiredshall bethecost recorded for the pp&e surrendered net of any accumulated depreciation or amortization. any difference between the net',
9812:'recorded amount of the pp&e surrendered and the cost of the pp&e acquired shall be recognized as a gain or',
9813:'loss. in the event that cash consideration is included in the exchange, the cost of general pp&e acquired shall be',
9814:'increased by the amount of cash consideration surrendered or decreased by the amount of cash consideration received. 33. the cost',
9815:'of general pp&e acquired through forfeiture shall be determined in accordance with statement of federal financialaccounting standards no. 3, accounting',
9816:'for inventory and related property sffas3.39 amountsrecorded forforfeitedassetsbased on sffas 3 shall be recognized as the cost of general pp&e',
9817:'when placed into official use. 34. pp&e shall be recognized when title passes to the acquiring entity or when the',
9818:'pp&e is delivered to the entity or to an agent of the entity.40 in the case of constructed pp&e, the',
9819:'pp&e shall be recorded asconstructionworkin process until it isplacedin service, at which time the balance shall be transferred to general',
9820:'pp&e. expense recognition 35. depreciationexpenseiscalculatedthroughthesystematicandrationalallocationofthecost of general pp&e, less its estimated salvage/residual value, over the estimated useful life of 37this',
9821:'paragraph applies only to exchanges between a federal entity and a nonfederal entity. exchanges between federal entities shall be accounted',
9822:'for as transfers see paragraph 31. 38if entity enters into an exchange in which the fair value of the pp&e',
9823:'acquired is less than that of the pp&e surrendered, the pp&e acquired shall be recognized at its cost as described',
9824:'in paragraph 32 and subsequently reduced to its fair value. aloss shall be recognized in an amount equal to the',
9825:'difference between the cost of the pp&e acquired and its fair value. 39sffas 3 requires that forfeited real and personal',
9826:'property be valued at market value less an allowance for any liens or claims from a third party. 40delivery or',
9827:'constructive delivery shall be based on the terms of the contract regarding shipping and/or delivery. for pp&e acquired by a',
9828:'contractor onbehalf of the entity e.g., the entity will ultimately holdtitletothe pp&e, pp&e shall also be recognized upon delivery or',
9829:'constructive delivery whether to the contractor for use in performing contract services or to the entity. page 17 sffas 6',
9830:'fasab handbook, version 20 06/21 sffas 6 the general pp&e. depreciation expense shallbe recognized on all generalpp&e,41 except land and',
9831:'land rights of unlimited duration.42 estimates of useful life of general pp&e must consider factors such as physical wear and',
9832:'tear and technological change e.g., obsolescence. variousmethodscanbeusedtocomputeperiodicdepreciationexpensesolongasthe method is systematic, rational, and best reflects the use of the pp&e. any',
9833:'changes in estimated useful life or salvage/residual value shall be treated prospectively. thechangeshallbeaccountedfor inthe period of the change and future',
9834:'periods. no adjustments shall be made to previously recorded depreciation or amortization. acompositeor groupdepreciationmethodology,42a wherebythecosts ofpp&e are allocated using the',
9835:'same allocation rate, is permissable. 36. depreciation expense shall be accumulated in a contra asset43 account—accumulated depreciation. amortization expense shall',
9836:'be accumulated in a contra asset account— accumulated amortization. 37. costs which either extend the useful life of existing general',
9837:'pp&e, or enlarge or improve its capacity shall be capitalized and depreciated/amortized over the remaining useful life of the associated',
9838:'general pp&e. 38. in the period of disposal, retirement, or removal from service, general pp&e shall be removed from the',
9839:'asset accounts along with associated accumulated depreciation/amortization.anydifferencebetweenthebookvalueof thepp&e andamounts realized44 shall be recognized as a gain or a loss in',
9840:'the period that the general pp&e is disposed of, retired, or removed from service. 41softwareandland[see sffas 10for standardregardinginternally developed software]',
9841:'rights,whileassociated with tangible assets, may be classified as intangible assets by some entities. in this event, they would be subject',
9842:'to amortization rather than depreciation. “amortization” is applied to intangible assets in the same manner that depreciation is applied to',
9843:'general pp&e—tangible assets. 42land rights that are for a specified period of time shall be depreciated or amortized over that',
9844:'time period. 42athe composite methodology is a method of calculating depreciation that applies a single average rate to a number',
9845:'of heterogeneous assets that have dissimilar characteristics and service lives. the group methodology is a method of calculating depreciation that',
9846:'applies a single, average rate to a number of homogeneous assets having similar characteristics and service lives. 43acontra asset account',
9847:'is an account which partially or wholly offsets an asset account. on financial statements they may be either merged or',
9848:'appear together. 44for example, amounts realized may include cash received for scrap materials or fair value of items received in',
9849:'exchange for pp&e removed from service. page 18 sffas 6 fasab handbook, version 20 06/21 sffas 6 39. general pp&e',
9850:'shall be removed from general pp&e accounts along with associated accumulated depreciation/amortization, if prior to disposal, retirement or removal from',
9851:'service, it no longer provides service in the operations of the entity. this could be either because it has suffered',
9852:'damage, becomes obsolete in advance of expectations, or is identified as excess. it shall be recorded in an appropriate asset',
9853:'account at its expected net realizable value. any difference in the book value of the pp&e and its expected net',
9854:'realizable value shall be recognized as a gain or a loss in the period of adjustment. the expected net realizable',
9855:'value shall be adjusted at the end of each accounting period and any further adjustments in value recognized as a',
9856:'gain or a loss. however, no additional depreciation/amortization shall be taken once such assets are removed from general pp&e in',
9857:'anticipation of disposal, retirement, or removal from service. implementation guidance 40. alternative methods for establishing opening balances.44a the following guidance',
9858:'is applicable for the reporting period when the reporting entity is presenting financial statements, or one or more line items',
9859:'addressed by this statement, following generally acceptedaccounting principlesgaappromulgatedbyfasab either1for thefirst timeor 2 aftera period during which existing systemscould not provide',
9860:'the information necessary for producing such gaapbased financial statements without use of the alternative methods. the following should be considered',
9861:'in establishing opening balances: a. the alternative methods for establishing opening balances may be applied for the reporting period in',
9862:'which the reporting entity, taken as a whole, makes an unreserved assertion44b that its financial statements, or one or more',
9863:'line items addressed by this statement, are presented fairly in accordance with gaap. the alternative methods provided in this statement',
9864:'should also be applied to correct subsequently discovered errors in general pp&e that were valued under an alternative method. b.',
9865:'the application of these alternative methods based on the second condition specified in paragraph 40 is available to each reporting',
9866:'entity only once per line item. c. areportingentitythatmeetseitherconditioninparagraph40andelectstoapplyanyof the alternative methods available in establishing opening balances is subject to the',
9867:'reporting requirements under paragraph 13 of statement of federal financial 44a opening balances are account balances that exist at the',
9868:'beginning of the reporting period. opening balances are based upon the closing balances of the prior period and reflect the',
9869:'effects of transactions and events of prior periods and accounting policies applied in the prior period. opening balances also include',
9870:'matters requiring disclosure that existed at the beginning of the period, such as contingencies and commitments. 44b an unreserved assertion',
9871:'is an unconditional statement. page 19 sffas 6 fasab handbook, version 20 06/21 sffas 6 accounting standards 21, reporting corrections',
9872:'of errors and changes in accounting principles, amendment of sffas 7, accounting for revenue and other financing sources. d. alternative',
9873:'valuation method. deemed cost44c is an acceptable valuation method for opening balances of general pp&e. because the reporting entity may',
9874:'have multiple component or subcomponent reporting entities44d using various valuation methods simultaneously, deemed cost should be based on one, or',
9875:'a combination, of the following valuation methods:44e i. replacement cost44f ii. estimated historical cost initial amount. reasonable estimates may be',
9876:'based on: 1. cost of similar assets at the time of acquisition; 2. current cost of similar assets discounted for',
9877:'inflation since the time of acquisition that is, deflating current costs to costs at the time of acquisition by general',
9878:'price index; or 3. otherreasonablemethods,includinglatestacquisitioncostandestimation methods based on information such as, but not limited to, budget, appropriations, engineering documents, contracts,',
9879:'or other reports reflecting amounts to be expended. iii. fair value44g e. establishing inservice dates. 44c deemed cost is an',
9880:'amount used as a surrogate for initial amounts that otherwise would be required to establish opening balances. 44d sffas 47,',
9881:'reporting entity, provides that “component reporting entity” is used broadly to refer toa reporting entity within a larger reporting entity.',
9882:'examples of component reporting entities include organizations such as executive departments and agencies. component reporting entities would also include subcomponents',
9883:'that may themselves prepare general purpose federal financial reports gpffrs. one example is a bureau that is within a larger',
9884:'department that prepares its own standalone gpffr. 44e the methods are not listed in order of preference. 44f replacement cost',
9885:'is the amount required for an entity to replace the remainingservice potential of anexistingasset in a current transaction at the',
9886:'reporting date, including the amount that the entity would receive from disposing of the asset at theendof its useful lifestatementof',
9887:'federal financialaccountingconcepts sffac 7, measurement ofthe elements ofaccrualbasis financial statements in periodsafter initial recording, par. 46. 44g fair value is',
9888:'the amount at which an asset or liability could be exchanged in a current transaction between willing parties, other than',
9889:'in a forced or liquidation sale sffac 7, par. 38. page 20 sffas 6 fasab handbook, version 20 06/21 sffas',
9890:'6 i. insomecases,theinservicedatemustbeestimated. inestimatingtheyearthat the base unit was placed in service, if only a range of years can be identified,',
9891:'then the midpoint of the range is an acceptable estimate of the inservice date. ii. it is not necessary to',
9892:'separately identify the inservice date for material improvements 44h includedinthe openingbalances ofabaseunit.all improvements included in the opening balances at deemed',
9893:'cost may be treated as if they were placed inservice at the date the base unit was placed inservice. f.',
9894:'alternative methods forlandandland rights.areportingentity shouldchoose among the following alternative methods for establishing an opening balance for land and land rights.',
9895:'because a reporting entity may have multiple component or subcomponent reporting entities selecting different alternative methods, a reporting entity should',
9896:'establish an opening balance based on one, or a combination, of these alternative methods. however, application of a particular alternative',
9897:'method must be consistent within each individual subcomponent reporting entity prior to consolidation into the larger component reporting or reporting',
9898:'entity. i. the reporting entity may exclude land and land rights from the opening balance of general pp&e. if this',
9899:'alternative method is applied, the reporting entity shouldexpense future land and land right acquisitions. ii. land and land rights may',
9900:'be recognized in opening balances based on the provisions of the alternative valuation method deemed cost provided inparagraph 40.d. g.',
9901:'once established using alternative methods, opening balances are considered consistent with gaap. h. component reporting entity disclosures: i. acomponentreportingentity electingto',
9902:'applydeemedcostinestablishing opening balances for general pp&e should disclose this fact and describe the methods used in the first reporting period',
9903:'in which the reporting entity makes an unreserved assertion that its financial statements, or one or more line items, are',
9904:'presented fairlyin accordancewithgaap. financialstatementsor,asapplicable, reports on line items of subsequent periods need not repeat this disclosure, unless the financial statements',
9905:'for which deemed cost was applied inestablishing opening balances are presented for comparative purposes. no disclosure of the distinction or',
9906:'breakout of the amount of deemed cost of generalpp&e included in the opening balance is required. ii. acomponent reportingentity electingto',
9907:'applytheprovisionsofparagraph40.f.i. to land and land rights should disclose this fact and describe the alternative methods used in the first reporting',
9908:'period in which the reporting entity makes an 44h material improvements are costs whicheither extendthe useful life of existinggeneral pp&e',
9909:'or enlargeor improve its capacity. page 21 sffas 6 fasab handbook, version 20 06/21 sffas 6 unreserved assertion that its',
9910:'financial statements, or one or more line items, are presented fairly in accordance with gaap.acomponent reporting entity electing to exclude',
9911:'land and land rights from its general pp&e opening balances must disclose, with a reference on the balance sheet to',
9912:'the related disclosure, the number of acres held at the beginning of each reporting period, the number of acres added',
9913:'during the period, the number of acres disposed of during the period, and the number of acres held at the',
9914:'end of each reporting period. a reporting entity electing to exclude land and land rights from its general pp&e opening',
9915:'balance should continue to exclude future land and land rights acquisitionamountsandprovide thedisclosures. intheevent different alternative methods are applied to land',
9916:'and land rights as permitted by paragraph 40.f. by subcomponent reporting entities consolidated into a larger reporting entity, the alternative',
9917:'method adopted by each significant subcomponent should be disclosed. i. financial report of the u.s. government disclosures i. when a',
9918:'component reporting entity elects to apply deemed cost, the u.s. governmentwidefinancialstatementsshould disclosethisfact, theidentityofthe component reporting entity, and a reference to',
9919:'the component reporting entitys financial report. subsequent financial statements need not repeat this disclosure unless the financial statements for which',
9920:'deemed cost was applied in establishing opening balances are presented for comparative purposes. no disclosure of the distinction or breakout',
9921:'of the amount of deemed cost of general pp&e included in the opening balance is required. ii. when a component',
9922:'reporting entity elects to apply the provisions of paragraph 40.f.i. to land and land rights, the u. s. governmentwide financial',
9923:'statements should disclose this fact, the number of acres held at the end of each reporting period, an explanation of',
9924:'the election, the identity of the component reporting entity, and a reference to the component reporting entitys financial report. 41.',
9925:'accumulated depreciation/amortization shall be recorded based on the estimated cost and the number of years the pp&e has been in',
9926:'use relative to its estimated useful life. alternatively, the pp&e may be recorded at its estimated net remaining cost45 and',
9927:'depreciation/amortization charged over the remaining life based on that net remaining cost. 42. for general pp&e that would be substantially',
9928:'depreciated/amortized had it been recorded upon acquisition based on these standards, materiality and costbenefit should be weighed heavily in determining',
9929:'estimates. consideration should be given to: 45net remaining cost is the original cost of the asset less any accumulated depreciation/amortization',
9930:'to date. page 22 sffas 6 fasab handbook, version 20 06/21 sffas 6 recordingonlyimprovementsmadeduringtheperiodbeyondtheinitialexpecteduseful life of general pp&e, and making',
9931:'an aggregate entry for whole classes of pp&e e.g., entire facilities rather than a building by building estimate. 43. in',
9932:'recording existing general pp&e, the difference in amounts added to asset and contra asset accountsshall be creditedorchargedtonet positionof theentity. theamount',
9933:'of the adjustment shall be shown as a “prior period adjustment” in the statement of changes in net position. for',
9934:'published financial statements presenting prior year information, no prior year amounts shall be restated. 44. intheperiodthatthesestandardsareimplemented,disclosureoftheadjustments,bymajor class46 of pp&e, made',
9935:'to general pp&e and accumulated depreciation/amortization is required. disclosure requirements 45. the following are minimum gpp&e disclosure requirements: the cost,',
9936:'associated accumulated depreciation, and book value by major class; the use and general basis of any estimates used; the estimated',
9937:'useful lives for each major class; the methods of depreciation for each major class; capitalization thresholds including any changes in',
9938:'thresholds during the period; and restrictions on the use or convertability of gpp&e. the listed disclosure requirements for gpp&e and',
9939:'gpp&e land are not applicable to the u.s. governmentwide financial statements. sffas 32 provides for disclosure applicable to the u.s.',
9940:'governmentwide financial statements for these activities. [paragraphs 4656 and accompanying heading were rescinded by sffas 23, par. 9]47,48, 49,50,51 46“major',
9941:'classes” of general pp&e shall be determined by the entity. examples of major classes include buildings and structures, furniture and',
9942:'fixtures, equipment, vehicles, and land. 47[footnote 47, was rescinded by sffas 23, par. 9] 48[footnote 48, was rescinded by sffas',
9943:'23, par. 9] 49[footnote 49, was rescinded by sffas 23, par. 9] 50[footnote 50, was rescinded by sffas 23, par.',
9944:'9] 51[footnote 51, was rescinded by sffas 23, par. 9] page 23 sffas 6 fasab handbook, version 20 06/21 sffas',
9945:'6 45a. the following [rsi information: fy20222025][disclosures: fy2026]46.1 should beprovided regarding gpp&e land and permanent land rights: a. aconcisestatementdefininganentitysfederalland,andexplaininghowlandrelatesto the',
9946:'mission of the entity. b. abriefdescriptionoftheentityspoliciesforland. policies forlandarethe goals and principlesthe entityestablishedtoguideitsacquisition, maintenance,use, anddisposal of land consistent with statutory requirements,',
9947:'prohibitions, and limitations governing the entity and the land. c. land and permanent land rights should be assigned to one',
9948:'of three subcategories based on predominant use461.a and reported in estimated acres of land. the three subcategories are c ommercial',
9949:'use land; conservation and preservation land; and operational land. where land and permanent land rights have more than one use,',
9950:'the predominant use of the land should be used to subcategorize the land461.b . the following information should be presented',
9951:'by subcategory of land use: i. acresofland.theestimatednumberof acresatthebeginningof eachreporting period among the three subcategories and the estimated number of acres',
9952:'at the end of each reporting period for land and permanent land rights should be provided. d. if applicable, the',
9953:'amount of estimated acres held for disposal or exchange and their predominant use. for purposes of this statement, land is',
9954:'considered held for disposal or exchange when the entity has satisfied the statutory disposal authority requirements specific to the land',
9955:'in question. 46.1 unless otherwise noted, [rsi information: fy 20222025] [disclosure: fy 2026] requirements are limited to the gpp& e',
9956:'land category and are not required for each of the three subcategories of conservation and preservation land; operational land; and',
9957:'commercial use land. 46.1a predominant use of land. predominant use is the major or primary current use of an asset',
9958:'during the reporting period and does not include incidental or infrequent uses of the asset. moreover, predominant use can change',
9959:'betweenreportingperiods.anassetspredominant useshouldbeconsistentwiththeentitysauthorizinglegislation but may not always be consistent with the original intent or reason why the asset was initially acquired.',
9960:'46.1b aggregationandassignmentof land. thelevelofaggregationof landandpermanentlandrightsusedtodetermine predominant use should be determined by the preparer considering the entitys mission, types of land',
9961:'use and how it manages the assets. page 24 sffas 6 fasab handbook, version 20 06/21 sffas 6 e. land',
9962:'rights information should include a general description of the different types of rights acquired by the entity, whether such rights',
9963:'are permanent or temporary, and amounts paid during the year to maintain such rights. 45b. the financial statement balance sheet',
9964:'should reference a note that [presents rsi information: fy 20222025] [discloses: fy 2026] required at paragraph 45aa through e about',
9965:'gpp&e land and permanent land rights but no asset dollar amount should be shown. existing display and disclosures46.2 should continue',
9966:'during the transition period through fiscal year 2025 and cease in fiscal year 2026 when superseded by the transition of',
9967:'the rsi information to note disclosures. if general pp&e land and stewardship land are presented in separate notes to the',
9968:'financial statements, include cross references between the notes. heritageassets [paragraphs 5765 were rescinded by sffas 29, par. 11] 52,53,54 stewardship',
9969:'land [paragraphs 6676 were rescinded by sffas 29, par. 30] 55,56,57 the provisions of this statement need not be applied',
9970:'to immaterial items. 46.2for gpp&e landandlandrights, existingdisclosuresarethosethatareineffectpriortotheamendmentscontained in paragraph 45a. they include disclosures required by paragraph 40.h for those entities',
9971:'electing an alternative method for land and land rights and, if applicable, the minimum gpp&e disclosure requirements as required by',
9972:'paragraph 45. 52[footnote 52 was rescinded by sffas 29.] 53[footnote 53 was rescinded by sffas 29.] 54[footnote 54 was rescinded',
9973:'by sffas 29.] 55[footnote 55 was rescinded by sffas 29.] 56[footnote 56 was rescinded by sffas 29.] 57[footnote 57 was',
9974:'rescinded by sffas 29.] page 25 sffas 6 fasab handbook, version 20 06/21 sffas 6 chapter 3: deferred maintenance paragraphs',
9975:'77 through 84 were rescinded by sffas 4258,59,60,61,62,63,64,65 chapter 4: cleanup costs definition 85. cleanup costs are the costs of',
9976:'removing, containing, and/or disposing of 1 hazardous waste see paragraph 86 from property, or 2 material and/or property that consists',
9977:'of hazardous waste at permanent or temporary closure or shutdown of associated pp&e. 86. hazardouswasteisasolid,liquid,orgaseouswaste,orcombinationofthesewastes,which because of its quantity, concentration,',
9978:'or physical, chemical, or infectious characteristics may cause or significantly contribute to an increase in mortality or an increase in',
9979:'serious irreversible, or incapacitating reversible, illness or pose a substantial present or potential hazard to human health or the environment',
9980:'when improperly treated, stored, transported, disposed of, or otherwise managed. 87. cleanup may include, but is not limited to, decontamination,',
9981:'decommissioning, site restoration, site monitoring, closure, and postclosure costs. 58[footnote 58 was rescinded by sffas 42.] 59[footnote 59 was rescinded',
9982:'by sffas 42.] 60[footnote 60 was rescinded by sffas 42.] 61[footnote 61 was rescinded by sffas 42.] 62[footnote 62 was',
9983:'rescinded by sffas 42.] 63[footnote 63 was rescinded by sffas 42.] 64[footnote 64 was rescinded by sffas 42.] 65[footnote 65',
9984:'was rescinded by sffas 42.] page 26 sffas 6 fasab handbook, version 20 06/21 sffas 6 scope 88. this standard',
9985:'applies only to cleanup costs from federal operations known to result in hazardous waste which the federal government is required',
9986:'by federal, state and/or local statutes and/or regulations that have been approved as of the balance sheet date, regardless of',
9987:'the effective date, to cleanup i.e., remove, contain or dispose of.66 these cleanup costs meet the definition of liability provided',
9988:'in statement of recommended accounting standards no. 5, accounting for liabilities of the federal government sras no. 5. 89. however,',
9989:'due to the nature of the liability and the timing associated with cleanup costs, additional guidance is provided in this',
9990:'standard on the recognition of cleanup costsover the life of the related pp&e. guidance is required since cleanup can not',
9991:'occur until the end of the useful life of the pp&e or at regular intervals during that life. 90. this',
9992:'standard is intended to supplement the accounting requirements for liabilities in sras no. 5. sras no. 5 defines liabilities as',
9993:'a “probable future outflow or other sacrifice of resources as a result of past transactions or events.” further, sras no.',
9994:'5 requires recognition of liabilities that are probable and measurable. measurable means that an item hasarelevantattributethatcanbequantified inmonetaryunitswithsufficient reliabilitytobe reasonably estimable.',
9995:'91. the recognition and measurement standards provided in this standard are subject to the criteria for recognition of liabilities included',
9996:'in sras no. 5. that is, liabilities shall be recognized when three conditions are met: a past transaction or event',
9997:'has occurred, a future outflow or other sacrifice of resources is probable,67 and the future outflow or sacrifice of resources',
9998:'is measurable.68 66accounting for environmental liabilities such as cleanup costs is currently undergoing change—due to both improved measurement techniques and',
9999:'increased attention from the accounting community. the board will monitor these changes and revisit these standards as needed. 67probable means',
10000:'that the future confirming event or events is more likely than not to occur. 68theunit ofanalysis for estimating liabilities can',
10001:'vary based on the reporting entity and the nature of the transaction or event. the liability recognized may be the',
10002:'estimation of an individual transaction or event; or a group of transactions and events. for example, an estimate of the',
10003:'cleanup costs could be made on a facility by facility basis, or an entity by entity basis. page 27 sffas',
10004:'6 fasab handbook, version 20 06/21 sffas 6 92. sras no. 5 also provides for disclosure of liabilities that do',
10005:'not meet all of the above criteria; these standards apply to cleanup costs as well. 93. othercleanupcosts,suchasthoseresultingfromaccidentsorwherecleanupisanongoing part of operations,',
10006:'are to be accounted for in accordance with liability standardsand are not subject to the recognition guidance provided in this',
10007:'standard. this guidance does not apply to these other types of cleanup since the cleanup effort is not deferred until',
10008:'operation of associated pp&e ceases either permanently or temporarily.69 recognitionand measurement estimation methods 94. cleanupcosts,asdefinedabove,shallbeestimatedwhentheassociatedpp&eisplacedin service. the estimate shall be',
10009:'referred to as the “estimated total cleanup cost.” there are two approaches to recognizing this total—one applies to general pp&e',
10010:'and another to stewardship pp&e. 95. the estimate shall contemplate: the cleanup plan, including  level of restoration to be',
10011:'performed,  current legal or regulatory requirements,70 and  current technology; and current cost which is the amount that would',
10012:'be paid if all equipment, facilities, and services included in the estimate were acquired during the current period. 96. estimates',
10013:'shall be revised periodically to account for material changes due to inflation or deflation and changes in regulations, plans and/or',
10014:'technology. new cost estimates should be provided if there is evidence that material changes have occurred; otherwise estimates may be',
10015:'revised through indexing. 69cleanup may be deferred for other reasons, such as availability of resources. however, this type of deferral',
10016:'does not affect the recognition of the liability. 70laws and regulations approved as of the balance sheet date, regardless of',
10017:'the effective date of those laws and regulations, shall be considered. page 28 sffas 6 fasab handbook, version 20 06/21',
10018:'sffas 6 cleanup cost for general pp&e 97. aportionofestimatedtotal cleanup costsshallbe recognizedasexpenseduringeach period that general pp&e is in operation. this',
10019:'shall be accomplished in a systematic and rational manner based on use of the physical capacity of the associated pp&e',
10020:'e.g., expected usable landfill area whenever possible. if physical capacity is not applicable or estimable, the estimated useful life of',
10021:'the associated pp&e may serve as the basis for systematic and rational recognition of expense and accumulation of the liability.',
10022:'98. recognition of the expense and accumulation of the liability shall begin on the date that the pp&e is placed',
10023:'into service, continue in each period that operation continues, and be completed when the pp&e ceases operation. 99. as reestimates',
10024:'see paragraph 96 are made, the cumulative effect of changes in total estimated cleanup costs related to current and past',
10025:'operations shall be recognized as expense and the liability adjusted in the period of the change in estimate. 100. as',
10026:'cleanup costs are paid, payments shall be recognized as a reduction in the liability for cleanup costs. these include the',
10027:'cost of pp&e or other assets acquired for use in cleanup activities. cleanup cost for stewardship pp&e 101. consistentwiththe treatmentofthe',
10028:'acquisitioncostofstewardshippp&ei.e.,expensingin the period placed in service, the total estimated cleanup cost shall be recognized as expense in the period that',
10029:'the stewardship asset is placed in service and a liability established. 102. the liability shall be adjusted when the estimated',
10030:'total cleanup costs are reestimated as described in paragraph 96.adjustments to the liability shall be recognized in expense as “changes',
10031:'in estimated cleanup costs from prior periods.” 103. as cleanup costs are paid, payments shall be recognized as a reduction',
10032:'in the liability for cleanup costs. these include the cost of pp&e or other assets acquired for use in cleanup',
10033:'activities. implementation guidance 104. two implementation approaches have been provided for liabilities related to general pp&e in service at the',
10034:'effective date of this standard: page 29 sffas 6 fasab handbook, version 20 06/21 sffas 6 aliability shallberecognizedfor theportionoftheestimatedtotal cleanup',
10035:'costthatis attributable to that portion of the physical capacityused or that portion of the estimated useful life that has passed',
10036:'since the pp&e was placed in service. the remaining cost shall be allocated as provided in paragraphs 97 through 99.',
10037:'if costs are not intended to be recovered primarily through user charges, management may elect to recognize the estimated total',
10038:'cleanup cost as a liability upon implementation. in addition, in periods following the implementation period, any changesin the estimated total',
10039:'cleanup cost shall be expensed when reestimates occur and the liability balance adjusted. the provisions for cost allocation provided in',
10040:'paragraphs 97 through 99 shall not apply under this implementation method. 105. the offsetting charge for any liability recognized upon',
10041:'implementation shall be made to net position of the entity. the amount of the adjustment shall be shown as a',
10042:'“prior period adjustment” in any statement of changes in net position that may be required. no amounts shallberecognizedasexpense in theperiod',
10043:'of implementation. the amountsinvolved shall bedisclosedandtotheextent possiblethe amount associatedwith current andpriorperiods should be noted. 106. for stewardship pp&e that are',
10044:'in service at the effective date of this standard, the liability for cleanup costs shall be recognized and an adjustment',
10045:'made to the net position of the entity. the amount of the adjustment shall be shown as a “prior period',
10046:'adjustment” in any statement of changes in net position that may be required. the amounts involved shall be disclosed. disclosure',
10047:'requirements 107. the sources applicable laws and regulations of cleanup requirements. the u.s. governmentwide financial statements need not disclose the',
10048:'sources of cleanup requirements. 108. the method for assigning estimated total cleanup costs to current operating periods e.g., physical capacity',
10049:'versus passage of time. the u.s. government financial statements need not disclose the method for assigning estimated cleanup costs to',
10050:'current operating periods. 109. forcleanup costassociatedwith general pp&e,the unrecognized portion ofestimated total cleanup costs e.g., the estimated total cleanup costs',
10051:'less the cumulative amounts charged to expense at the balance sheet date. sffas 32 provides for disclosure requirements for the',
10052:'u.s. governmentwide financial statements regarding the unrecognized portion of estimated total cleanup cost associated with general pp&e. 110. material changes',
10053:'in total estimated cleanup costs due to changes in laws, technology, or plans shall be disclosed. in addition, the portion',
10054:'of the change in estimate that relates to page 30 sffas 6 fasab handbook, version 20 06/21 sffas 6 prior',
10055:'period operations shall be disclosed. the u.s. governmentwide financial statements need not disclosematerialchangesintotalestimated cleanupcostsdue tochanges inlaws, technology, plans, or the',
10056:'portion of the change in estimate that relates to prior period operations. 111. the nature of estimates and the disclosure',
10057:'of information regarding possible changes due to inflation, deflation, technology, or applicable laws and regulations. the u.s. government wide financial',
10058:'statements need not disclose the nature of estimates and information regarding possible changes due to inflation, deflation, technology, or applicable',
10059:'laws and regulations. the provisions of this statement need not be applied to immaterial items. page 31 sffas 6 fasab',
10060:'handbook, version 20 06/21 sffas 6 appendixa: basis for conclusions 112. this appendix summarizes significant considerations by the board in',
10061:'reaching the conclusions in this statement. in the following paragraphs, the board’s considerations in developing these standards as well as',
10062:'positions on specific issues raised in alternative views, comment letters, and during public hearings are explained. the board relied extensively',
10063:'on input from a task force on capital expenditures as well as a small working subgroup on physical property. these',
10064:'paragraphs include reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to',
10065:'others. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section',
10066:'directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are',
10067:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
10068:'for conclusions of the amending statement for the rationale for each amendment. 113. this appendix addresses each of the three',
10069:'standards in sequence. property, plant,and equipment background 114. before addressing specific issues resolved following issuance of the exposure draft, this',
10070:'section provides a broad basis for the main provisions of the standard on investments in pp&e. the federal government makes',
10071:'many expenditures that can be characterized as investments or investmenttype expenditures. these include expenditures for federally owned pp&e. 115. accounting',
10072:'for expenditures for pp&e as well as for the existing stock of pp&e is a significant undertaking because the federal',
10073:'government owns substantial amounts of diverse pp&e. federal pp&e includes approximately 650 million acres of land, buildings containingover1.5billionsquarefeet of floorspace,manydifferentformsofequipment,',
10074:'and military hardware. 116. these are used for a wide range of purposes; including, among others, operating, defense, conservation, and',
10075:'heritage purposes. some of these purposes relate to the federal government’s responsibility to provide for the nation’s common defense and',
10076:'general welfare. specific types of pp&e are used by the federal government to meet this page 32 sffas 6 fasab',
10077:'handbook, version 20 06/21 sffas 6 responsibility. other types of pp&e are held and used for operating purposes that are',
10078:'not unlike those of nonfederal entities. 117. some federal operations are similar to profitseeking enterprises and can be described as',
10079:'businesstype activities. however, these businesstype activities account for a small portion of the investment in pp&e. the majority of the',
10080:'investment in pp&e is used to provide government services and goods where user charges are not the primary source of',
10081:'revenues. 118. the board found that a single accounting method for such diverse federal pp&e would not meet the objectives',
10082:'established in its objectives of federal financial reporting.therefore, the board identified categories of pp&e and set different accounting methods for',
10083:'each category. categories required 119. the pp&e standards incorporate the following categories: general pp&e are pp&e used to provide general',
10084:'government services; federal mission pp&e are pp&e that are an integral part of the output of certain unique federal government',
10085:'missions; heritageassetsarethoseassetspossessingsignificanteducational,cultural,ornatural characteristics; and stewardship land71 is land other than that included in general pp&e. 120. the latter three categories',
10086:'of assets are referred to as stewardship pp&e. the term “stewardship pp&e” is used simply to refer to those categories',
10087:'of pp&e to be reported on a stewardship report. general pp&e 121. general pp&e are items used to provide general',
10088:'government services; including pp&e that: could be used for alternative purposes e.g., by other federal programs, state or local governments,',
10089:'or nongovernmental entities but is used to produce goods or services, or to support the mission of the entity, or',
10090:'is used in businesstype activities, or 71note that land acquired for or in connection with general pp&e would be included',
10091:'in that category. all other land would be subject to stewardship reporting and is referred to throughout this document as',
10092:'stewardship land. page 33 sffas 6 fasab handbook, version 20 06/21 sffas 6 is used by entities whose costs can',
10093:'be compared to other entities e.g., federal hospital services in comparison to other hospitals. 122. allocation of the cost of',
10094:'general pp&e, excluding land, among accounting periods is essential to assessing operating performance. the board’s concepts statement, objectives of federal',
10095:'financial reporting, focuses on relating cost to accomplishments in reporting an entity’s operating performance. cost information is of fundamental importance',
10096:'both to program managers in operating their activities efficiently and effectively and to executive and congressional decision makers in deciding',
10097:'on resource allocation. general pp&e will be capitalized and depreciated to provide this information. stewardship pp&e 123. for stewardship pp&e,72',
10098:'the predominant reporting objective is stewardship. this is in contrast to general pp&e, for which the board is concerned with',
10099:'providing information to assess operating performance and, therefore, provided for depreciation accounting. the most relevant information is about the existence',
10100:'of stewardship pp&e and that information can be provided through a new type of reporting—supplementary stewardship reporting. 124. for stewardship',
10101:'pp&e, the board believes that allocation of historical cost to operating expense for each period would not contribute to the',
10102:'measurement of entity operating performance. prior to issuing its objectives statement, the board conducted a user needs study and met',
10103:'with representatives of a wide variety of user groups. most users specifically indicated that depreciating stewardship pp&e such as weapons',
10104:'systems would not provide meaningful information for assessing the entity’s operating performance. the board believes that its standards should address',
10105:'the needs of users and the board has found that users do not need information which includes depreciation expense on',
10106:'this category of pp&e. 125. the board noted in its objectives statement that the government’s responsibility for the nation’s common',
10107:'defense and general welfare is unique and that, in some cases, the most relevant measures of performance are nonfinancial.73 despite',
10108:'the preference for nonfinancial performance measures for stewardship pp&e, the government must demonstrate that it is being an appropriate “steward”',
10109:'for these assets. to meet the stewardship objective, the government must be able to answer basic questions such as: what',
10110:'and where are the important assets? is the government effectively managing and safeguarding its assets? 72the term “stewardship pp&e” is',
10111:'usedto refer collectively tofederal mission pp&e, heritage assets, andstewardship land. 73objectives, paragraph 54. page 34 sffas 6 fasab handbook, version',
10112:'20 06/21 sffas 6 126. answers to these questions can be provided through supplementary stewardship reporting. the stewardship information provided',
10113:'would not necessarily have the same measurement basis as information shown on the balance sheet. information could include value, quantity,',
10114:'and capacity depending on the category being reported on. these types of information are not typically found in balance sheet',
10115:'reporting. also, see discussion of deferred maintenanceinparagraph 171through181regardingotherinformationthatusersconsider relevant. 127. the board is addressing supplementary stewardship reporting in another standard.',
10116:'the informationtobeprovidedforstewardship pp&e isproposedindetailin that standard. each of the stewardship pp&e categories are discussed further in the following paragraphs. federal',
10117:'mission pp&e 128. federal mission pp&e are specific pp&e acquired to provide a unique good or service for which there',
10118:'is not necessarily a periodic output against which to match costs. for example, theexistenceofandreadinessof weaponssystemssupportsnationaldefenseregardlessof their actual combat use on',
10119:'a period by period basis. also, space exploration equipment is used in longterm research efforts which may or may not',
10120:'produce an output each period but which nevertheless benefits the nation in the long run. 129. the standard specifically identifies',
10121:'weapons systems and space exploration equipment as federalmission pp&easwellasproviding alistofcharacteristicsoffederalmissionpp&e. the board articulated characteristics of federal mission pp&e because it',
10122:'recognizes that there are other types of pp&e, or pp&e may be developed in the future, that are similar to',
10123:'these two items. tobecategorizedasfederalmissionpp&eanitemshallmeetatleast one characteristic from each of the following two types of characteristics. 130. characteristics related to the',
10124:'use of federal mission pp&e are that it: has no expected nongovernmental alternative uses; or is held for use in',
10125:'the event of emergency, war or natural disaster; or is specifically designed for use in a program for which there',
10126:'is no other program or entity federal or nonfederal using similar pp&e with which to compare costs. 131. characteristics related',
10127:'to the useful life are that it: has an indeterminate or unpredictable useful life74 due to the manner in which',
10128:'it is used, improved, retired, modified, or maintained; or is at a very high risk of being destroyed during use',
10129:'or of premature obsolescence. 74this may be evidenced by the ability 1 to retire the pp&e and later return it',
10130:'to service, or 2 to continually upgrade the pp&e to maintain its usefulness. in addition, pp&e that is held for',
10131:'“onetime” use, such as a warhead, has an indeterminate life. page 35 sffas 6 fasab handbook, version 20 06/21 sffas',
10132:'6 132. the cost of federal mission pp&e acquired during the period be shown on the operating statement. heritage assets',
10133:'133. heritage assets are held for their cultural, architectural, or aesthetic characteristics. users have identified nonfinancial information as being relevant',
10134:'for these assets. for assessing operating performance, the board believes that relevant cost information is provided through reporting of periodic',
10135:'maintenance cost since heritage assets are intended to be preserved as national treasures. it is anticipated that they will be',
10136:'maintained in reasonable repair and that there will be no diminution in their usefulness over time. 134. in addition to',
10137:'assets held purely for heritage purposes e.g., the washington monument, the federal government uses heritage assets in its daytoday operations.',
10138:'for example, many federal office buildings, such as the old executive office building, have monumental characteristics. the board considered whether',
10139:'these multiuse heritage assets would be more appropriately categorized as general pp&e. 135. despite their heritage characteristics, these assets serve',
10140:'a function that could otherwise be served by assets that do not possess heritage characteristics. therefore, the standards provide that',
10141:'costs of reconstruction, renovation, or improvements that are directly associatedwithsupportingoperationsbetreatedinamannerconsistentwithgeneralpp&e. the board based this decision on the need to measure',
10142:'cost for operations and to compare cost between entities. stewardship land 136. the federal government owns vast amounts of land',
10143:'and its use of land is diverse. in some instances federal land is integral to the ownership of general pp&e.',
10144:'for example, the cost of land upon which an office building is sited is integral to the cost of that',
10145:'building. land acquired for or in connection with general pp&e will be recognized on the balance sheet to provide a',
10146:'more comprehensive measure of the assets devoted to general government operations. however, since land is not a depreciating asset, depreciation',
10147:'expense will not be recognized on land included in general pp&e. 137. most federal land is not directly related to',
10148:'general pp&e. for example, the national parks and forests are not used to support general pp&e. the board concluded that',
10149:'land other than that acquired for or in connection with other general pp&e should not be reported on the balance',
10150:'sheet. this is consistent with the board’s treatment of heritage assets in that much of the government’s land is held',
10151:'for the general welfare of the nation and is intended to be preserved and protected. page 36 sffas 6 fasab',
10152:'handbook, version 20 06/21 sffas 6 issues 138. following issuance of the ed, the board specifically considered several issues related',
10153:'to the pp&e standard. these issues are addressed in the sequence that they appear in the standard. definitions 139. the',
10154:'board asked respondents to comment on the appropriateness of the definitions of pp&e, general pp&e, federal mission pp&e, heritage assets,',
10155:'and stewardship land. respondents raised issues on the overall definition of pp&e including 1 internally developed software, 2 land rights,',
10156:'3 capitalization threshold, and 4 reversionary interests in property. these four issues are discussed below. an issue raised regarding the',
10157:'federal mission pp&e definition is also addressed below. internallydeveloped software 140. theedproposedthatinternallydevelopedsoftwarebeexcludedfrompp&e—ineffect,that it be expensed when incurred. in making this',
10158:'proposal, the board pointed to concerns affecting the objectivity/accuracy of any capitalized cost for internallydeveloped software in general pp&e.75 the',
10159:'board was concerned that costs could be overcapitalized thus understating expensefortheperiodandthat itwould bedifficult toprovideforthe removalor writeoff of costs related to',
10160:'unsuccessful projects and/or cost overruns. given these practicalconcernsandthe expectationthatcostsforsoftware developmenteffortswould not fluctuate dramatically since they related to continuous agency efforts,',
10161:'the board proposed that these costs be expensed.76 141. many respondents supported the board’s view. they noted that, among other',
10162:'problems, it would be difficult to distinguish new development effortsfrom ongoing system maintenance. in fact, some respondents commented that software',
10163:'undergoes continuous improvement and updating. 142. on theother hand,the majorityofrespondentsobjectedto theexclusionofthesecostsfrom pp&e. many argued that internallydeveloped software met the overall',
10164:'definition of pp&e and that accounting could accommodate the problems of cost overruns and unsuccessful efforts. many suggested that costs',
10165:'be held in a workinprocess account and any 75internallydeveloped software may be a component of general pp&e or stewardship pp&e.',
10166:'76infact, the majority ofprivatesector entities do not capitalize the cost of internallydeveloped software. the financial accounting standards board has not',
10167:'developed guidance on this issue. page 37 sffas 6 fasab handbook, version 20 06/21 sffas 6 unsuccessful efforts subsequently written',
10168:'off in the period deemed unsuccessful. in addition, many believed that cost overruns were appropriate to include in the cost',
10169:'of the asset. 143. ultimately, the board made two changes to the pp&e definitions— they removed the statement excluding internallydeveloped',
10170:'software from pp&e and they added a provision for recognition of internallydeveloped software as a component of general pp&e under',
10171:'certain circumstances. since the board’s concern was with the potential for overcapitalization of these costs, they found that it was',
10172:'not necessary to exclude the costs from the pp&e categories for which costs would not be capitalized. therefore, any internallydevelopedsoftwarecostsappropriatelyclassifiedasanitemofstewardshippp&e',
10173:'may be included in those categories. 144. for internallydeveloped software costs that would be categorized as general pp&e, the board',
10174:'placed several restrictions on the capitalization of costs. to be capitalized, it must be intended that the costs be recovered',
10175:'through charges to users. in addition, only certain costsmaybe capitalized after it hasbeen establishedthat the software project islikelyto be successful.',
10176:'once capitalized, the costs can not be amortized over a period longer than five years. 145. in addition to internallydeveloped',
10177:'software, the board discussed accounting for contractor developed software. in principle, the board’s consensus was that the same accounting should',
10178:'be provided for contractordeveloped software as for internallydeveloped software. however, the board believed that this proposal should be exposed for',
10179:'comment prior to establishing a standard to that effect. therefore, the standards do not provide specific provisions restricting the capitalization',
10180:'of contractordeveloped software. land rights 146. the board received a request to address restrictive easements acquired by a federal agency.',
10181:'this agency acquires restrictive easements limiting the use of land adjoining the agency’sownproperty.theboardconsidersthese easementsa “land right.” landrightsare interests and privileges',
10182:'held by an entity in land owned by others. 147. the board provided for the recognition of land rights as',
10183:'part of pp&e since they are generally associated with other items of pp&e actually owned by the entity. in addition,',
10184:'where land rights are for a limited period of time and are includable in the general pp&e category, the board',
10185:'provided for depreciation of the cost. page 38 sffas 6 fasab handbook, version 20 06/21 sffas 6 capitalization threshold 148.',
10186:'many respondents requested that the board provide a capitalization threshold as an element of the pp&e definition. the board addressed',
10187:'this issue in developing the ed. at that time, the board carefully considered whether to take a prescriptive approach by',
10188:'setting a threshold or to permit entities the latitude to establish a threshold suited to their particular operating environment. the',
10189:'board believes that federal entities are sufficiently diverse that one threshold would not be suitable for all entities. for example,',
10190:'title 2’s $5,000 threshold would be immaterial for defense department operations but perhaps not for a smaller entity such as',
10191:'the small businessadministration. 149. instead of setting a specific threshold, the board has adopted a materiality approach—just asisdonein privatesector accounting.',
10192:'eachentitywouldestablish itsownthreshold aswell asguidanceonapplyingthethresholdtobulkpurchases. theboardbelievesthatpermitting management discretion in establishing capitalization policies will lead to a more cost effective application of',
10193:'the accounting standards. reversionary interests in pp&e 150. the board also received a request to address reversionary interests in pp&e.',
10194:'in some instances, the federal government provides grants to state and local governments for the acquisition of pp&e. if the',
10195:'state or local government eventually decides that it no longer needs to use the pp&e for the purpose specified in',
10196:'the original grant there is often a provision that the pp&e must revert to federal ownership. in these cases, the',
10197:'federal government maintains a reversionary interest in pp&e. in essence, these are contingent assetsandshould not be recognizedonthebalancesheet. the board electedtospecifically',
10198:'exclude these items from pp&e. federal mission pp&e 151. somerespondentsindicatedthattheterm “federalmissionpp&e” hadbroaderimplications than intended by its definition. it was suggested',
10199:'that some may assume any pp&e used to meet an agency’s mission would fit this category e.g., essentially all federally',
10200:'owned pp&e. 152. the board agreed that it was possible that a mere reading of the term “federal mission pp&e”',
10201:'could lead to broader application of the category than permitted under the standard. however, the board found that there was',
10202:'no brief term that would effectively communicate the nature of the pp&e properly includable in this category. the board believes',
10203:'that the characteristics provided as well as the illustrations included inappendix b of this document will clearly establish the appropriate',
10204:'use of this category. in addition, the board has page 39 sffas 6 fasab handbook, version 20 06/21 sffas 6',
10205:'incorporated in the standard a cautionary footnote regarding loose interpretations drawn from the term “federal mission pp&e.” depreciation 153. the',
10206:'exposure draft posed several questions related to depreciation accounting for general pp&e. briefly, the questions addressed: usefulness of depreciation expense',
10207:'for the assessment of operating performance, analternativeviewsuggestingthatdepreciationaccountingbelimitedtobusinesstype activities, usefulness of the allocation of depreciation expense to responsibility segments, and cost/benefit',
10208:'of allocating depreciation expense to programs 154. overall,the respondentssupported the board’s proposal to require depreciation accounting on all general pp&e.',
10209:'many indicated that depreciation accounting would improve performance measurement by producing comprehensive, comparable cost information. in addition, operating expenses would',
10210:'not be overstated in periods that assets were purchased and understated in other periods. 155. afewrespondentssupportedthealternativeviewthat would limit depreciationaccounting to',
10211:'businesstypeactivities. theyarguedthatdepreciationwasonlynecessarywhereexpenses were to be matched to revenues. this view is contrary to the operating performance objective and would not',
10212:'support development of cost information to associate with performance measures. 156. the board did not make any changes to its',
10213:'requirements to apply depreciation accounting to general pp&e. multiuse heritage assets 157. the ed addressed renovation, reconstruction, improvement, and rebuilding',
10214:'costs for multi use heritage assets e.g., monumental style office buildings. under the ed’s proposal, any costs not directly associated',
10215:'with the heritage nature of the asset would be capitalized and depreciated as general pp&e. the ed also provided that',
10216:'abnormally high costs due to the heritage features of the assets e.g., replacement of a specialized roofing material versus a',
10217:'modern day equivalent be treated as heritage asset costs. 158. respondents indicated that it would be very difficult to apply',
10218:'the proposed standards. difficulties would include segregating the cost associated with preserving the heritage assets and supporting operations as well',
10219:'as identifying abnormal costs. in response to these concerns, the board modified the treatment of multiuse heritage assets. the page',
10220:'40 sffas 6 fasab handbook, version 20 06/21 sffas 6 standard now provides that only renovation, reconstruction, and improvement costs',
10221:'directly attributable to operations be capitalized as general pp&e. current value 159. the ed included an alternative view espousing the',
10222:'use of current value accounting for federal government pp&e. this view was not supported by the respondents. the majority of',
10223:'respondents believed that current values would be difficult and costly to obtain, and subject to manipulation. many indicated that current',
10224:'values were often useful to decision makersand shouldbe provided on an asneeded basisrather thanincorporated inthe basic financial statements. federal mission',
10225:'pp&e 160. overall, the reaction to the federal mission pp&e category was favorable. respondents indicated that they would not have',
10226:'difficulty applying the category descriptions. however, the board received the following specific requestsfor major revisions in the federal mission pp&e',
10227:'category: to retain the definition but include federal mission pp&e on the balance sheet and apply depreciation accounting to these',
10228:'assets, and to make use of the category optional e.g., managers would be free to use the general pp&e category',
10229:'for pp&e that would otherwise qualify as federal mission pp&e. depreciate federal mission pp&e 161. the board did not adopt',
10230:'the first proposal—to apply depreciation accounting to federal mission pp&e. while there may be management uses of this information, no',
10231:'persuasive examples of management uses have been identified. the board remains convinced that depreciation accounting for these unusual items of',
10232:'pp&e would not provide meaningful information—a view that is supported by the board’s 1992 user needs study. further, the board',
10233:'wishes to note that nothing precludes management from developing depreciation information through cost finding means if it desires to do',
10234:'so for particular management purposes. make the federal mission pp&e category permissive 162. it was proposed that classification of pp&e',
10235:'as federal mission be permissive rather than mandatory. two reasons were given for this proposal: some pp&e is used as',
10236:'both federal mission and general pp&e for example, office facilities located at nuclear weapons production plants, and page 41 sffas',
10237:'6 fasab handbook, version 20 06/21 sffas 6 entity management should be free to decide that depreciation information on federal',
10238:'mission pp&e is useful. 163. it was suggested that adopting this proposal would allow agencies to classify property as best',
10239:'suits their needs. the board discussed this proposal at length. some board members were favorably inclined to permit entity managers',
10240:'to exercise judgment regarding the accounting treatment of federal mission pp&e. however, the majority of the board members believed that',
10241:'making the category optional would be inappropriate. 164. these members argued that 1 the user needs study supported their belief',
10242:'that historical cost depreciation on these types of items was not useful, 2 it would not be appropriate to give',
10243:'entities the latitude to use different accounting methods for similar assets, and 3 it would not be costbeneficial to permit',
10244:'entities to make item by item judgments on appropriate accounting treatment. the membersnoted that, in connection with the proposal to',
10245:'requiredepreciationaccountingfor federalmissionpp&eseeparagraph161,theyhad not been able to identify any management uses of depreciation information on federal mission pp&e. the board was',
10246:'concerned that entities may make unsupported, and costly, decisions regarding the election to categorize items as general or federal mission',
10247:'pp&e. while entities can use cost finding to determine depreciation expense for internal purposes if they so desire, the board',
10248:'does not believe that depreciation of federal mission pp&e would be useful for general purpose financial reports. 165. theboarddecidedthatuseofthefederalmissionpp&ecategorywouldremainmandatory for',
10249:'pp&e exhibiting the designated characteristics. the board did add guidance in the standard regarding the selection of the base unit',
10250:'to be used in categorizing pp&e see paragraph . one respondent had proposed that this guidance be added and stated',
10251:'that it would aid entities in establishing the level of detail necessary to properly categorize pp&e. for example, should pp&e',
10252:'be categorized on a site by site basis or by a smaller unit such as building by building. as with',
10253:'the capitalization threshold, the board has indicated the factors that should enter into the selection of a base unit but',
10254:'has ultimately left the actual selection up to management. other pp&e meeting the characteristics 166. the board posed a question',
10255:'in the ed regarding the classification of nuclear weapons production facilities and military base facilities as federal mission pp&e.77 this',
10256:'question was posed because of a discussion among the board members as to whether these items would or would not',
10257:'meet the federal mission pp&e definition. 77fasab exposure draft, accounting for property, plant, and equipment, february 28, 1995, page 19,',
10258:'paragraph 71, item ic. page 42 sffas 6 fasab handbook, version 20 06/21 sffas 6 167. the majority of the',
10259:'respondents indicated that nuclear weapons production facilities meet the current characteristics of federal mission pp&e—confirming the initial reaction of the',
10260:'board members. one respondent did indicate that these facilities could be converted to other uses—as had munitions plants following world',
10261:'war ii—however, the board believes that the cost of such a conversion would be so great as to make it',
10262:'improbable in the near term. the board has not elected to add this as another specifically identified item that qualifies',
10263:'as federal mission pp&e because it is a good illustration of the purpose and application of the characteristics developed. in',
10264:'addition, the board prefers not to engage in an exercise of listing all items that qualify since the absence of',
10265:'certain items may lead practitioners to assume that an item was specifically excluded. 168. the majorityofrespondents indicated thatmilitary base facilitieswould',
10266:'notasa group meet the definition of federal mission pp&e and that the category should not be expanded to accommodate these',
10267:'assets. many respondents pointed out that military base facilities have alternative uses and are currently being reviewed for just that',
10268:'purpose. the board agrees with these views and has not modified the definition to permit inclusion of military base facilities',
10269:'in the category. audit of federal mission pp&e 169. several respondents expressed concern regarding the level of audit coverage applicable',
10270:'to federal mission pp&e. although the ed did not specifically address supplementary stewardship reporting for those categories of pp&e removed',
10271:'from the balance sheet, there wasconcernthat removing these categorieswould lessenthe audit coverage. respondents noted that military weapons systems and space',
10272:'exploration equipment represented a substantial investment. they were concerned that the changes could lead to poor tracking systems for these',
10273:'items as well as weak internal controls over them. other respondents pointed out that the key information is the existence',
10274:'and condition of these assets rather than the historical cost of the items. in addition, they suggested that devoting audit',
10275:'resources to verifying historical cost dollar amounts would detract from auditing more important existence and condition information. 170. the board',
10276:'responded with the following points: auditing standards are beyond the scope of the board’s responsibilities, board membersrepresentingthe governmentaccountabilityofficegao andthe office',
10277:'of management and budget omb indicated that the audit coverage would be appropriately addressed in their work on federal audit',
10278:'requirements, accounting standards should be established based on information needs not audit concerns, and page 43 sffas 6 fasab handbook,',
10279:'version 20 06/21 sffas 6 the ed on supplementary stewardship reporting will include a statement to the effect that the',
10280:'board expects that the responsible parties will produce audit requirements to satisfy concerns of the respondents. deferred maintenance 171. the',
10281:'deferred maintenance standard was well received by the majority of respondents. the board addressed the issue in part due to',
10282:'the many state and local governments as well as national groups that concerned over the deteriorating condition of government owned',
10283:'pp&e. areport of the u.s. advisory commission on intergovernmental relations acir, high performance public works,78 notes that maintenance competes for',
10284:'funding with other governmentprogramsand isoftenunderfunded. contributingtothisunderfundingisthefact that the consequences of underfunding maintenance are often not immediately reported. the consequences include',
10285:'increased safety hazards, poor service to the public, higher costs in the future, and inefficient operations. 172. theacir recommended that',
10286:'entities disclose information on: the condition of assets, the cost of unfunded maintenance, the consequences of unfunded maintenance, and the',
10287:'uncertainty in estimates of unfunded maintenance. 173. the capital expenditures task force also recognized that deferred maintenance was an issue',
10288:'for federal pp&e and requested that the board address it. the policies and initiatives relatedtodeferred maintenanceatthreefederalagencies79 werereviewed anditwasfound that federal',
10289:'agencies are developing systems to report on deferred maintenance. although the systems are different, the goals of the systems are',
10290:'consistent—to provide reliable information on the condition of pp&e and to estimate the cost of correcting deficiencies. 174. under these',
10291:'accounting standards, deferred maintenance information will be incorporated in the financial reports despite the differences in measurement among the agencies.',
10292:'the board believes that deferred maintenance is a cost—a cost that management, at whatever 78u.s.advisory commission on intergovernmental relations, high',
10293:'performance public works:anew federal infrastructure investment strategy foramerica, november 1993. 79these agencies are the department of energy, the departmentof the',
10294:'navy, and the nationalaeronautics and space administration. page 44 sffas 6 fasab handbook, version 20 06/21 sffas 6 level, has',
10295:'elected not to fund. however, the board found that deferred maintenance is not sufficiently measurable to be recognized in the',
10296:'accounting systems. 175. however,tohighlighttherealitythatthecostremainsdespitebeingunfunded,thestandards provide that deferred maintenance be disclosed by placing a line item on the statement of net',
10297:'cost with a note reference in lieu of a dollar amount on the financial statements. this recommendation is consistent with',
10298:'the findings of the board’s user needs study; that informationonthecost of deferredmaintenanceisimportant to users. in addition, due to the measurement',
10299:'differences between entities, the disclosure requirements are flexible. 176. the standards provide two alternatives for estimating amounts to be disclosed—condition',
10300:'assessment surveys and life cycle cost analyses. condition assessment surveys would provide disclosure of the estimated cost to return the',
10301:'pp&e to its desired condition. life cycle cost analyses would highlight differences between planned maintenance and actual maintenance. 177. both',
10302:'of these methods will be under the control of entity program managers since deferred maintenance is dependent on the purpose',
10303:'for which pp&e is held and on judgment regarding what condition pp&e should be in to meet that purpose. entities',
10304:'are permitted flexibility in 1 setting standards for maintenance requirements and 2 establishing cost beneficial methods to estimate the cost',
10305:'of deferred maintenance. 178. the proposed standards require disclosure of information on the condition of pp&e, estimates of the cost',
10306:'of deferred maintenance, and methods used to assess deferred maintenance. the standards apply to both pp&e reported on the balance',
10307:'sheet and the stewardship report. 179. in response to the ed, two opposing suggestions were raised—1 recognize the amounts as',
10308:'a liability, and 2 remove the information from the notes. recognition 180. afew respondents, including two appearing atthe public hearing,',
10309:'suggested that the board provide forrecognitionoftheliabilityassociatedwithdeferredmaintenance. theboarddoes not believe that deferred maintenance can or should be recognized as a liability',
10310:'because it is not sufficiently measurable to be recognized. deferred maintenance reporting is in an evolutionary phase with federal agencies',
10311:'currently developing a variety of systems to assessdeferred maintenance. measurement can not be described at thistime as consistent or comparable.',
10312:'the deferred maintenance standard will remain as drafted. however, if and when government maintenance standards e.g., minimum acceptable condition and',
10313:'page 45 sffas 6 fasab handbook, version 20 06/21 sffas 6 standard repair costs are set, the board will revisit',
10314:'the accounting and consider requiring recognition of the liability and the cost. remove from notes 181. afew respondents requested that',
10315:'the board provide for deferred maintenance information through required supplemental information to lessen the audit burden associated with the information.',
10316:'the board—as was the case with federal mission pp&e—does not believe that audit coverage should govern the placement of information',
10317:'in the annual reports. deferred maintenance information is considered important because it ensures that readers are informed of the condition',
10318:'of federally owned pp&e. if there is a need to reduce the audit coverage, the board believes that gao and',
10319:'omb can best address this need. cleanup cost 182. the board elected to address cleanup costs from longterm federal operations',
10320:'as one of the costs associated with pp&e. for example, the federal government operates nuclear facilities and is required by',
10321:'law to cleanup any hazardous materials upon closing the facilities. this obligation meets the board’s definition of liability.80 however, because',
10322:'the cleanup of these types of facilities would not occur until operations cease, additional guidance is needed to determine when',
10323:'and how to recognize these costs and liabilities. 183. the guidance in this standard builds on the accounting standards developed',
10324:'for liabilities. these standards were published in the board’s statement entitled accounting for liabilities of the federal government liabilities standard.',
10325:'the liabilities standard includes: the liability definition, recognition criteria, and disclosure requirements. 184. the liabilities standard is applicable to cleanup',
10326:'costs. for example, if cleanup costs are not both probable and measurable the disclosure requirements in the liabilities standard would',
10327:'apply. the standards in this statement address cleanup cost accounting including: allocating cleanup costs to operating periods, estimating cleanup costs',
10328:'to be paid far in the future e.g., using a current cost approach, and recognizing changes in estimates prior to',
10329:'actual cleanup. 80fasab, recommendedaccounting standard no. 5, accounting for liabilities, september 1995. page 46 sffas 6 fasab handbook, version 20',
10330:'06/21 sffas 6 185. because of the differences in accounting for the costs of general pp&e and stewardship pp&e, the',
10331:'board developed different methods for allocating cleanup costs to operating periods depending on the category of the related pp&e. cleanup',
10332:'of general pp&e 186. the board concluded that the liability for cleanup costs related to the operation of general pp&e',
10333:'would be recognized in a systematic and rational manner over the periods that the associated general pp&e is in use.',
10334:'this approach is consistent with the requirement to depreciate general pp&e. in addition, the board requires disclosure of the estimate',
10335:'of total cleanup costs. cleanup of stewardship pp&e 187. for cleanup costs related to stewardship pp&e, the board concluded that',
10336:'the total estimated liability for cleanup cost would be recognized at the time that the stewardship pp&e isplaced in service.',
10337:'thisis consistent with the treatment of the acquisition cost of the stewardship pp&e which is recognized as a cost of',
10338:'operations in the period that the pp&e is placed in service. estimating cleanup costs 188. with regard to estimating cleanup',
10339:'cost, the board concluded that the estimate would be based on the current cost to perform the cleanup. current cost',
10340:'should be based on existing laws, technology and management plans. an alternative to current cost would have been to estimate',
10341:'costs in the future, factoring in expected inflation, and discounting this amount to current dollars. the board did not believe',
10342:'that this approach offered any greater degree of accuracy in return for the additional effort involved in making the estimate.',
10343:'189. as with all estimates, the estimates of cleanup costs will change over time. these changes will be due to',
10344:'inflation as well as to changes in laws and technology. 190. for cleanup costs associated with general pp&e, changes in',
10345:'estimates related to current and prior period operations be recognized as an expense in the period of the change. for',
10346:'example, if a facilitywith a capacityto produce 100 tonsof materialhas produced 60 tonsof material, then 60% of the change in',
10347:'estimate should be recognized as expense in the year that the estimate changes. 191. for cleanup costs associated with stewardship',
10348:'pp&e, the total change in estimate be recognized in the period of the change. page 47 sffas 6 fasab handbook,',
10349:'version 20 06/21 sffas 6 cleanup cost issues 192. respondents to the ed were supportive of the board’s efforts to',
10350:'address cleanup costs. however, several suggested that the board’s treatment of the liability associated with general pp&e—recognizing it incrementally over',
10351:'the life of the pp&e—was inconsistent with its definition of a liability. in some cases, respondents argued, the cleanup liability',
10352:'is incurred at the time the pp&e is placed in service. these respondents suggested that the board provide for full',
10353:'recognition of the liability if an amount is reasonably measurable at that time. 193. the board did not adopt this',
10354:'suggestion. while the board recognizes that in fact the liability may be incurredat the datethat generalpp&eisput in service, the actualrecognitionof',
10355:'the liability is problematic in a double entry accounting system. generally, the recognition of a liability, a credit account, generates',
10356:'a concurrent recognition of either an expense e.g., accounts payable for fuel bills is offset by fuel expense or an',
10357:'asset e.g., a capital lease liability isoffset byan asset—pp&e, both typically debit accounts. in this case, the cleanup cost is',
10358:'not appropriately includable in operating expense of the period that the pp&e is placed in service. this would create a',
10359:'need for a balance sheet debit to offset the liability. 194. the board does not believe that it would be',
10360:'appropriate to recognize an asset to offset the cleanup liability. although some argue cleanup cost is a deferred cost of',
10361:'associated pp&e, the board does not believe that these costs meet the asset definition and finds that recognition of cleanup',
10362:'cost as a component of pp&e would significantly overstate assets. 195. other respondents expressed the opposite position, suggesting that it',
10363:'is not appropriate to recognize cleanup costs until they are budgeted for. this approach is not only inconsistent withthe definition',
10364:'of aliabilitybut wouldkeep usersofthefinancialstatementsinthe darkas to the magnitude of federal commitments for environmental cleanup. 196. the board believes that the',
10365:'standards it has developed will contribute to meeting the operating performance and stewardship reporting objectives of federal financial reporting. the',
10366:'cleanup cost standards have not been modified for either of these recommendations. 197. one modification that was made relates to',
10367:'implementation of the standard. implementation is a significant issue given the magnitude of the government’s existing facilities and its obligations',
10368:'for cleanup of those facilities. one board member requested that the implementation guidance related to cleanup of general pp&e provide',
10369:'an alternative method. it was suggested that provision of a second method would lower the cost of implementing the standard',
10370:'in situations where the related pp&e had been in service for a substantial portion of its estimated useful life. page',
10371:'48 sffas 6 fasab handbook, version 20 06/21 sffas 6 198. the second method would be to recognize the entire',
10372:'estimated total cleanup cost as a liability upon implementation. in periods following implementation, entities electing this method would recognize any',
10373:'changes in the estimated total cleanup cost as expense for that period in lieu of the prorata amount of the',
10374:'estimated total cleanup cost. this method could be applied only by entities not seeking to recover their costs through user',
10375:'charges. 199. the board adopted this recommendation in light of the large number of federal facilities that will be affected',
10376:'by this standard and the cost of implementing the standard. page 49 sffas 6 fasab handbook, version 20 06/21 sffas',
10377:'6 appendix b: illustrations of categories 200. in developing categories for federal mission pp&e, heritageassets and stewardship land see paragraphs',
10378:'46, 57, and 66, the board sought input from federal agencies, the standard general ledger issues resolution committee sglirc, and',
10379:'other subgroup members. the board found that there were many cases where similar assets could fit more than one category.',
10380:'201. for example, aircraft and ships are used by law enforcement agencies as well as by the department of defense.',
10381:'underthe proposedcategories, onlythoseusedbythedepartment of defense would meet the criteria for federal mission pp&e. the illustrations provided are intended to clarify',
10382:'the application of the categories to actual assets. illustration 1: federal mission property, plant,and equipment 202213 [the category federal mission,',
10383:'property, plant, and equipment was rescinded by sffas 23, par. 9]81 illustration 2: heritageassets 214. many assets are clearly heritage',
10384:'assets. for example, the national park service manages the washington monument, the lincoln memorial and the mall. however, other assets,',
10385:'particularly federal office buildings, have historical, cultural or architectural significance as well as being used for general operations. 215. the',
10386:'board has found that these multiuse heritage assets should still be categorized as heritage assets. any costs to maintain the',
10387:'assets themselves should be treated as heritage assets. however, anycoststhat are operational in nature e.g., reconfiguring of office space or',
10388:'modernized communications wiring should be classified as general pp&e. costs of these types of improvements or renovations would then be',
10389:'capitalized and depreciated— providing useful information for performance measurement. 216. for assets thatare used solelyfor heritage purposes e.g., the washington',
10390:'monument,the board believes that the cost of operation, maintenance, and other periodic expenses 81 [the category federal mission, property, plant,',
10391:'and equipment was rescinded by sffas 23, par. 9] page 50 sffas 6 fasab handbook, version 20 06/21 sffas 6',
10392:'combined with deferred maintenance disclosures, are sufficient to assess operating performance. allocating the cost of heritage assets to accounting periods',
10393:'through depreciation would not enhance the information available for performance assessment. 217. following are examples of general pp&e that exhibit',
10394:'characteristics of heritage assets. illustration 2a: major office building 218. afederal agency constructed a central office building in 1950 to',
10395:'house its headquarters personnel. the building was subsequently placed on the historical registry but continued to serve as headquarters’ office',
10396:'space. 219. public tours are available and educational exhibits are provided in the hallways. however, public access is restricted to',
10397:'guided tours. the majority of floor space is devoted to offices, meeting rooms, cafeterias, and storage. 220. the building is',
10398:'currently undergoing major renovations. the cost of these renovations should be capitalizedand depreciatedover their expected usefullivesonlyto theextent that the work',
10399:'is tied to operations rather than to preserving the building. additional information on the heritage nature of the asset would',
10400:'be provided through stewardship reporting. illustration 2b: new office building 221. afederal facility previously used for industrial purposes e.g., production',
10401:'of equipment parts is being renovated and remodeled to serve as office space. the brick facade is being preservedbecauseofitshistoricsignificance. officespaceisbeingconstructed',
10402:'insideof the brick facade. 222. the building can be viewed by visitors to the federal facility, however, access to the',
10403:'office space will be restricted. 223. the original cost of the brick facade should not be included in the cost',
10404:'of the new office building. the cost of new construction should be capitalized and depreciated as part of general pp&e',
10405:'andnoneshould be treatedasaheritage asset.additionalinformation on the heritage nature of the existing brick facade, if material, would be provided through stewardship',
10406:'reporting. illustration 2c: library of congress 224. the library of congress is undergoing restoration and renovation. this includes: page 51',
10407:'sffas 6 fasab handbook, version 20 06/21 sffas 6 restoring artwork and architectural features, installing wiring for workstations, and building',
10408:'office space. 225. expenditures for restoration of heritage aspects of the buildings should be treated as a period cost for',
10409:'heritage assets. however, expenditures for operational aspects of the renovation should be categorized as general pp&e. additional information on the',
10410:'heritage nature of the asset would be provided through stewardship reporting. illustration 3: land 226. the proposed standard provides that',
10411:'land acquired for or in connection with other general pp&e be included in that category. for example, the cost of',
10412:'land on which facilities are located would be included in general pp&e. other land would be subject to stewardship reporting.',
10413:'227. the following illustrations cover two potential issues associated with land. first, identifying land associated with general pp&e. second, identifying',
10414:'land improvements as general pp&e or pp&e subject to stewardship reporting. illustration 3a: military uses of land 228. in general,',
10415:'land used for military bases would be considered general pp&e. however, in some cases, land is used by the military',
10416:'as a site for missile silos, testing grounds or firing ranges. land used for these purposes meets the definition of',
10417:'stewardship land. the board believes that periodbyperiod cost information related to holding land for defense purposes is not relevant to',
10418:'assessing operating performance. illustration 3b: roads on public lands 229. public lands have various types of roads to provide access.',
10419:'these types include: rough dirt roads created from years of use, dirt roads created by nonfederal land users e.g., oil',
10420:'& gas exploration crews and then abandoned, and roads created by federal entities to provide access e.g., gravel & paved',
10421:'roads. 230. some of these roads are maintained while others merely exist until natural conditions overtake them. page 52 sffas',
10422:'6 fasab handbook, version 20 06/21 sffas 6 231. under private sector accounting, permanent improvements to land are included in',
10423:'the cost of land on the balance sheet. typically, the cost of clearing and establishing the road bed is considered',
10424:'a permanent improvement because, with routine maintenance, it will remain indefinitely.any pavement or gravel that must be replaced periodically would',
10425:'be considered depreciable pp&e. for a federal entity, if the road could be categorized as general pp&e this practice would',
10426:'be appropriate since the periodbyperiod cost of assets is relevant for assessing operating performance. 232. for land subject to stewardship',
10427:'reporting, the cost of establishing the roadbed would be expensed in the year incurred since the land improved by the',
10428:'roadbed is not capitalized on the balance sheet. on the other hand, the paved and gravel roads are general pp&e',
10429:'because they are operational and the periodbyperiod cost is essential for assessing operating performance. the cost of pavement or gravel',
10430:'would be capitalized and depreciated. decisions about the quality of the road conditions e.g., how often roads are repaved are',
10431:'an element of operating performance and of the cost of providing government services. page 53 sffas 6 fasab handbook, version',
10432:'20 06/21 sffas 6 appendix c: deferred maintenance illustration par. 233 and the related illustrations were rescinded by sffas 42.',
10433:'page 54 sffas 6 fasab handbook, version 20 06/21 sffas 6 appendix d: illustration of cleanup cost 234. this appendix',
10434:'illustrates one method of complying with the standards proposed for cleanup costs. the examples shown in this appendix are for',
10435:'illustrative purposes only. there are many types of cleanup that may be accounted for under this proposed standard e.g., nuclear',
10436:'facilities, landfills, or laboratories. applying this proposed standard may require consideration of estimated cost components other than those shown here.',
10437:'235. the computations are based on a formula allocating the estimated total cleanup costs i.e., the total amount to be',
10438:'spent in the future to accomplish cleanup to accounting periods. in identifying the amount to be expensed for the period,',
10439:'the formula considers the cumulative amounts: of capacity used at the end of the accounting period; and recognized as expense',
10440:'in prior accounting periods. 236. the components of the formula are defined below: a = total cleanup cost estimated as',
10441:'of end of period b = cumulative capacity used at end of period82 c = total estimated capacity83 d =',
10442:'amount previously recognized as expensebeginning of period e = cleanup expense recognized in the current period 237. to calculate the',
10443:'appropriate expense amount, the following formula is used: a x b/c d = e 238. simplyput,theendofperiod estimatedtotalcleanupcostaismultiplied bythe percentage of',
10444:'capacity usedup at the end of that period b/c to arrive at the portion of cleanup cost that has been',
10445:'generated by operations through the end of the period. theoretically, that amount of expense has been incurred and should be',
10446:'recognized. amounts recognized as expense in prior periodsd should be deducted to arrive at the current period expense amount e.',
10447:'if this is the first period, the deduction for expense recognized in prior periods d is zero. 82if recognition of',
10448:'the costs is based on the passage of time rather than physical capacity, the cumulative amount of time passed since',
10449:'the associated pp&e began operating shall be substituted. 83if recognition is based on the passage oftime, the estimated useful life',
10450:'ofthe associated asset shall be substituted.23 page 55 sffas 6 fasab handbook, version 20 06/21 sffas 6 illustration 1: hazardous',
10451:'waste disposal site operatingassumptions 239. the hazardous waste disposal site will begin accepting waste in 1995. the following assumptions apply:',
10452:'the site capacity is 100,000 cubic yards of waste it is estimated that the site will accept waste for ten',
10453:'years at an average rate of 10,000 cubic yards per year after the site is closed the following cleanup efforts',
10454:'are required by state, local and federal laws:  site closure & sealing  thirty year monitoring  remediation 1995',
10455:'cost estimates are based on current cost for 1995 1996 cost estimates are based on 1996 costs adjusted for inflation',
10456:'at a rate of 1.0% 1997 cost estimates are based on current costs for 1997 and include new technology and',
10457:'changes in monitoring requirements recognition of expenseand liabilityamounts for 1995 dollars in thousands estimated total cleanup cost84 based on current',
10458:'cost in 1995 1. site closure and sealing cost: facilities for monitoring operations $100 sealing site 750 erosion and control',
10459:'facilities 500 2. monitoring cost for a period of 30 years: inspection 3,000 sampling & testing 2,250 maintenance of facilities',
10460:'300 84this estimate includes any costs of any cleanup efforts required during the thirty year cleanup period. while these activities',
10461:'will not occur until the associated pp&e is closed, the costs are estimated at the current cost to conduct similar',
10462:'efforts. page 56 sffas 6 fasab handbook, version 20 06/21 sffas 6 3. remediation cost: projected remediation based on statistical',
10463:'studies 500 total estimated cleanup cost $7,400 calculation ofannual expense andaccrued liabilityamounts this proposed standard would require that a portion',
10464:'of the estimated total cleanup costs be recognized as an expense and as a liability each period that the site',
10465:'operates. during 1995, the site accepts 15,000 cubic yards of waste. the following calculations show the amounts required to be',
10466:'recognized: a x b/c d = e $7,400 x 15,000/100,000 0 = e $7,400 x .15 = e $1,110 =',
10467:'e where: a = total cleanup cost estimated as of end of period b = cumulative capacity used at end',
10468:'of period85 c = total estimated capacity86 d = amount previously recognized as expensebeginning of period e = cleanup expense',
10469:'recognized in the current period the following journal entry would be required: dr. cleanup expense $1,110 cr. cleanup liability $1,110',
10470:'to recognize estimated cleanup costs. recognition of expenseand liabilityamounts for 1996 dollars in thousands estimated total cleanup cost based on',
10471:'current cost in 1996 85if recognition of the costs is based on the passage of time rather than physical capacity,',
10472:'the cumulative amount of time passed since the associated pp&e began operating shall be substituted. 86if recognition is based on',
10473:'the passage of time, the estimated useful life of the associated asset shall be substituted. page 57 sffas 6 fasab',
10474:'handbook, version 20 06/21 sffas 6 1. site closure and sealing cost: facilities for monitoring operations $ 101 sealing site',
10475:'758 erosion and control facilities 505 2. monitoring cost for a period of 30 years: inspection 3,030 sampling & testing',
10476:'2,273 maintenance of facilities 303 3. remediation cost: projected remediation based on statistical studies 505 totalestimatedcleanupcost $7,475 calculation ofannual expense',
10477:'andaccrued liabilityamounts during 1996, the estimated total cleanup costs were adjusted for inflation of 1.0% and site accepted 10,000 cubic',
10478:'yards of waste. the following calculations show the amounts required to be recognized: ax b/c d = e $7,475 x',
10479:'25,000/100,000 $1,110 = e $7,475 x .25 $1,110 = e $759 = e where: a = total cleanup cost estimated',
10480:'as of end of period b = cumulative capacity used at end of period87 c = total estimated capacity88 d',
10481:'= amount previously recognized as expensebeginning of period e = cleanup expense recognized in the current period 87if recognition of',
10482:'the costs is based on the passage of time rather than physical capacity, the cumulative amount of time passed since',
10483:'the associated pp&e began operating shall be substituted. 88if recognition is based on the passage of time, the estimated useful',
10484:'life of the associated asset shall be substituted. page 58 sffas 6 fasab handbook, version 20 06/21 sffas 6 the',
10485:'following journal entry would be required: dr. cleanup expense $759 cr. cleanup liability $759 to recognize estimated cleanup costs. in',
10486:'addition,theproposedstandardwouldrequire that anymaterialchangesintheestimatedueto changes in laws, technology, or cleanup plans be disclosed. however, there is no indication that material changes',
10487:'occurred. recognition of expenseand liabilityamounts for 1997 dollars in thousands estimated total cleanup cost based on current cost in 1997',
10488:'1. site closure and sealing cost: facilities for monitoring operations $ 115 sealing site 740 erosion and control facilities 500',
10489:'2. monitoring cost for 30 years: inspection 2,250 sampling & testing 1,300 maintenance of facilities 300 3. remediation cost: projected',
10490:'remediation based on statistical studies 400 totalestimatedcleanupcost $5,605 calculation ofannual expense andaccrued liabilityamounts during 1997, a new estimate of total',
10491:'cleanup costs was prepared and the site accepted 10,000 cubic yards of waste. the following calculations show the amounts required',
10492:'to be recognized: a x b/c d =e $5,605 x 35,000/100,000 $1,110 + 759= e page 59 sffas 6 fasab',
10493:'handbook, version 20 06/21 sffas 6 $5,605 x .35 $1,869 = e $1,962 $1,869 = e $ 93 = e',
10494:'where: a = total cleanup cost estimated as of end of period b = cumulative capacity used at end of',
10495:'period89 c = total estimated capacity90 d = amount previously recognized as expensebeginning of period e = cleanup expense recognized',
10496:'in the current period the following journal entry would be required: dr. cleanup expense $93 cr. cleanup liability $93 to',
10497:'recognize estimated cleanup costs. in addition, the proposed standard would require that material changes in estimated cleanup costs be disclosed',
10498:'and that amounts attributable to prior period operations be disclosed. one means of calculating this amount is to segregate the',
10499:'amount recognized as cleanup expense for the current period between “changes in estimated cleanup cost from prior periods” and “current',
10500:'period cleanup cost.” these two amounts would be disclosed. changes in estimated cleanup costs from prior periods are: f =',
10501:'a x b1/c d f = $5,605 x 25,000/100,000 $1,110 + 759 f = $5,605 x .25 $1,869 f =',
10502:'$1,401 $1,869 f = $ 468 89if recognition of the costs is based on the passage of time rather than',
10503:'physical capacity, the cumulative amount of time passed since the associated pp&e began operating shall be substituted. 90if recognition is',
10504:'based on the passage of time, the estimated useful life of the associated asset shall be substituted. page 60 sffas',
10505:'6 fasab handbook, version 20 06/21 sffas 6 where: a = total cleanup cost estimated as of end of period',
10506:'b1 = cumulative capacity used at beginning of period91 c = total estimated capacity92 d = amount previously recognized as',
10507:'expense at beginning of period f = changes in estimated cleanup cost from prior periods current period cleanup costs are:',
10508:'g = e f g = $ 93 $ 468 g = $ 561 where: e = cleanup cost recognized',
10509:'in the current period f = changes in estimated cleanup cost from prior periods g = current period cleanup costs',
10510:'summary: financial stmt. operating expense liability 1995 $1,110 $1,110 1996 $ 759 $1,869 1997 $ 93 $1,962 illustration 2: nuclear',
10511:'facility qualifyingas general pp&e operating assumptions 240. anuclear facility was placed in operation in 1981. no recognition of cleanup cost',
10512:'wasmade under past accounting policy.at the end of 1995, the entity adopts the accounting policies presented in this proposed standard.',
10513:'91if recognition of the costs is based on the passage of time rather than physical capacity, the cumulative amount of',
10514:'time passed since the associated pp&e began operating shall be substituted. 92if recognition is based on the passage of time,',
10515:'the estimated useful life of the associated asset shall be substituted. page 61 sffas 6 fasab handbook, version 20 06/21',
10516:'sffas 6 the following assumptions apply: the entity has an expected useful life of thirty years after the site is',
10517:'closed the following cleanup efforts are required by state, local and federal laws:  site closure & sealing  thirty',
10518:'year monitoring  remediation 1995 cost estimates are based on current cost for 1995 recognition of liabilityamounts for 1995 dollars',
10519:'in thousands estimated total cleanup cost based on current cost in 1995 1. site closure and sealing cost: facilities for',
10520:'monitoring operations $1,000 sealing site 3,000 2. monitoring cost for 30 years: inspection 6,000 sampling & testing 3,000 maintenance of',
10521:'facilities 600 3. remediation cost: projected remediation based on statistical studies 2,000 totalestimatedcleanupcost $15,600 calculation of liabilityamount to be recognized',
10522:'upon implementation at the end of 1995, the estimated total cleanup costs was $15,600,000. the following calculations show the amounts',
10523:'that should have been recognized as of the end of 1995 if the proposed standard had been in effect since',
10524:'the facility began operating on october 1, 1980: a x b/c d = l $15,600 x 15/30 $0 = l',
10525:'$15,600 x .5 $0 = l $7,800 = l page 62 sffas 6 fasab handbook, version 20 06/21 sffas 6',
10526:'where: a = total cleanup cost estimated as of end of period b = number of years of operation c',
10527:'= estimated useful life d = amount previously recognized as expensebeginning of period l = liability to be recognized at',
10528:'the end of 1995 dr. net position $7,800 cr. cleanup liability $7,800 to recognize estimated cleanup liability. no expense is',
10529:'recognized in the year of implementation. summary: financialstmt. 1995 prior periodadjustment $7,800 liability $7,800 page 63 sffas 6 fasab handbook,',
10530:'version 20 06/21 sffas 6 appendix e: glossary see consolidated glossary in “appendix e: consolidated glossary”. page 64 sffas 6',
10531:'fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards7: accounting for revenue and other financing sourcesand concepts for reconciling budgetary and financial accounting',
10532:'status issued may 10, 1996 effective date for periods beginning after september 30, 1997. affects paragraph 36b affects sffas 5,',
10533:'paragraphs 3542. paragraph 53 affects sffas 1, paragraph 41. paragraphs 90102 affect sffac 2 paragraphs 64, 74, 105, andappendix 1g.',
10534:'paragraphs 264269 amend sffas 3 paragraphs 6970, 72, and 7477. affected by sffas 13 defers the effective date of paragraph',
10535:'65.2 of sffas 7. sffas 20 rescinds paragraph 65.2 and amended paragraphs 107 and 187.1. sffas 21 rescinds paragraph 76.',
10536:'sffas 22 rescinded affects paragraphs 80 and 97. sffas 27 affects paragraphs 83 through 87. sffas 31 rescinds paragraphs 8387',
10537:'and paragraph 370, and amends paragraphs 142 and 276. sffas 32 amends paragraphs 43, 46, 65.1, and 65.3. sffas 33',
10538:'amends paragraphs 67.1 and 67.2. sffas 53 amends paragraphs 8082, 9193, and 95102. tb 20022. tb 20171. tb 20201. related',
10539:'guidance interpretation 1, reporting on indian trust funds in general purpose financial reports of the department of the interior and',
10540:'in the consolidated financial statements of the united states government: an interpretation of sffas 7 rescinded interpretation 5, recognition by',
10541:'recipient entities of receivable nonexchange revenue: an interpretation of sffas 7 page 1 sffas 7 fasab handbook, version 20 06/21',
10542:'sffas 7 summary this statement containstwo separateparts. the first, on revenueand other financing sources, is composed of the introduction, accounting',
10543:'standards, and appendices. the second part of this document amends statement of federal financialaccounting concepts no. 2, entity and display,',
10544:'by adding a new concept to satisfy users’ needs for information that reconciles budgetary and financial accounting. statements of federal',
10545:'financialaccounting concepts articulate the framework within which the board considers and recommends accounting standards. classification, recognition, and measurement of revenue',
10546:'and other financing sources revenue is an inflow of resources that the government demands, earns, or receives by donation. revenue',
10547:'comes from two sources: exchange transactions and nonexchange transactions. exchange revenues arise when a government entity provides goods and services',
10548:'to the public or to another government entity for a price. another term for “exchange revenue” is “earned revenue.” nonexchange',
10549:'revenues arise primarily from exercise of the government’s power to demand payments from the public e.g., taxes, duties, fines, and',
10550:'penalties but also include donations. the term “revenue” doesnot encompassall financing sources of government reporting entities, such as most of',
10551:'the appropriations they receive. these other sources of financing do, however, provide resource inflows to government reporting entities, so this',
10552:'statement includes accounting standards for them. these accounting standards recognize exchange revenue at the time that a government entity provides',
10553:'goods or services to the public or to another government entity. the revenue is measured at the price likely to',
10554:'be received. thus, with some differences that are explained in the standard, the accounting for earned revenue is comparable to',
10555:'the private sector’s accrual accounting for earned revenue. exchange revenue includes most user charges other than taxes. nonexchange revenues include',
10556:'income taxes, excise taxes, employment taxes, duties, fines, penalties, and other inflows of resources arising from the government’s power to',
10557:'demand payments, aswell asvoluntarydonations. nonexchange revenue isrecognized whena reporting entity establishesa specificallyidentifiable, legally enforceable claim to cash or otherassets. it',
10558:'is recognized to the extent that the collection is probable i.e., more likely than not and the amount is measurable',
10559:'i.e., reasonably estimable.1 in the case of taxes and duties, inherent and practical limitations on the assessment process serve to',
10560:'delaythetime whenthe powerto demandpayment becomesa legallyenforceable claim 1as explained in para. 44 of sffas number 1,accounting for selectedassets and liabilities,',
10561:'“more likely than not” means more than a 50 percent chance. “not probable” means the converse, i.e., 50 percent or',
10562:'less. page 2 sffas 7 fasab handbook, version 20 06/21 sffas 7 to cash or other assets. for this reason,',
10563:'the method of accounting for taxes and duties can best be characterized asa modified cash basis of accounting, rather than',
10564:'an accrualbasis. this basis of accounting amends the standard for the recognition of accounts receivable for taxes and duties. budgetary',
10565:'resources are recognized from two perspectives: the proprietary accounting perspective and the budgetary perspective. from the proprietary perspective, appropriations are',
10566:'accountedfor asa financing sourcewhen used.appropriationsare used when an entity acquires goods and services or provides benefits and grants that are',
10567:'authorized to be paid by an appropriation. the remaining amount of appropriations enacted into law, but not yet recognized as',
10568:'“appropriations used,” is treated as capital, i.e., “unexpended appropriations.” this treatment parallels the recognition of expended appropriations during budgetary execution.',
10569:'to the extent that other standards require that costs not on the entity’s books be imputed to the entity, thestandardsforotherfinancing',
10570:'sourcesrequire recognition of the corresponding imputed financing. financial statements have not previously presented budget execution information needed by users of',
10571:'those reports. the standards presented in this document require the presentation and, consequently, the audit of information about budgetary resources,',
10572:'the status of those resources, and outlays. the standards also require a reconciliation of proprietary and budgetary information in a',
10573:'way that helps users relate the two. disclosures, supplementary information, and other information the different types of revenue, and the',
10574:'complexity of accounting for revenue and other financing sources, increase the importance of certain disclosures and other information. briefly, the',
10575:'standards provide for: extensive disclosures and other information about taxes and duties; certain disclosures about exchange transactions where the full',
10576:'cost of goods and services sold is not recovered; limited disclosure concerning accountability for dedicated collections; disclosures and supplementary information',
10577:'from trust funds and the entities that make the collections for these trust funds where trust funds may be overor',
10578:'underfunded in terms of applicable law; and disclosuresabouttheuseofborrowingauthorityandthestatusofbudgetaryresourcesthat may affect future spending by the entity. page 3 sffas 7 fasab',
10579:'handbook, version 20 06/21 sffas 7 concepts for reconciling budgetary and financialaccounting this statement amends statement of federal financialaccounting concepts',
10580:'2, entity and display, by adding a category of financial information to further satisfy users’ needs and the objectives of',
10581:'financial reporting. more specifically, the amendment is designed to meet users’ need to understand “how information on the use of',
10582:'budgetary resourcesrelatesto information on the cost of program operations . . . subobjective 1c. the objective of this new category',
10583:'of information is to provide an explanation of the differences between budgetary and financial proprietary accounting. this is accomplished by',
10584:'means of a reconciliation of budgetary obligations and nonbudgetary resources available to the reporting entity with its net cost of',
10585:'operations. page 4 sffas 7 fasab handbook, version 20 06/21 sffas 7 table of contents page summary 2 executive summary',
10586:'8 part i:accounting for revenue and other financing sources 11 introduction 11 background 11 accounting standards 14 scope 14 exchange',
10587:'revenue 15 recognitionandmeasurement 15 disclosuresandotheraccompanyinginformation 18 nonexchange revenue 19 recognitionandmeasurement 19 the general standard 19 taxes and duties 19 fines',
10588:'and penalties 24 donations 24 other nonexchange revenue 25 disclosures,supplementaryinformation,andotheraccompanyinginformation 25 disclosures 25 supplementary information 26 otheraccompanyinginformation 27 other financing',
10589:'sources 28 recognitionandmeasurement ofother financingsources 28 appropriations 28 financing imputed for cost subsidies 29 transfers ofassets 29 prior periodadjustments 29',
10590:'budgetary information accountability for dedicated collections part ii: concepts for reconciling budgetaryand financial accounting introduction amendments to sffac no. 2,',
10591:'entityand display reconciliation statement—budgetaryand financialaccounting statement of financing page 5 sffas 7 fasab handbook, version 20 06/21 sffas 7 continued',
10592:'from previous page page entity and display,appendix 1g appendices appendixa: basis for conclusions 38 introduction 38 exchange revenue 39 specialnatureofgovernmentexchangetransactions',
10593:'39 recognition: general considerations 40 recognition: special cases 44 measurement 51 nonexchange revenue 54 inherent limitations 54 practical limitations 54',
10594:'modified cash basis for taxes and duties 55 cash basis information needed 55 potential changes 55 entities responsible for measuring',
10595:'and recognizing revenue 56 possible overand underfunding of trust funds 56 conceptualcriteria foraccrual andlimitations ontheirapplication 56 limitations onthe scopeofaccounting 58',
10596:'some benefits of this standard 58 somethings this standarddoes notaccomplish 58 accounting systems changes 59 disclosures,supplementaryinformation,andotheraccompanyinginformation 60 tax gap 61',
10597:'tax expenditures 63 directed flows of resources 64 other financing sourcesand budgetary resources 65 general principles 65 reducing differences 66',
10598:'the budgetary process and its linkage toaccounting implications of the term “net results of operations” dedicated collections page 6 sffas',
10599:'7 fasab handbook, version 20 06/21 sffas 7 continued from previous page page appendix b: guidance for the classification of',
10600:'transactions introduction 74 table of transactions 76 transactions with the public 78 nonexchange transactions with the public 78 exchange transactions',
10601:'with the public: revenue 85 exchangetransactions withthepublic:gainsandlosses 90 other financingsources fromthepublic 93 intragovernmental transactions 93 nonexchange transactions—intragovernmental: revenue 93 nonexchangetransactions—intragovernmental:gainsandlosses',
10602:'95 exchange transactions—intragovernmental: revenue 95 exchangetransactions—intragovernmental:gainsandlosses 98 other financing sources—intragovernmental 99 revaluations 102 transactions not recognizedas revenues, gains, or other',
10603:'financing sources 103 appendix c: glossary [see consolidated glossary inappendix e] index of transactions list ofabbreviations [seeappendix f: consolidated list',
10604:'ofacronyms] page 7 sffas 7 fasab handbook, version 20 06/21 sffas 7 executive summary scope 1. this statement presents standards',
10605:'to account for inflows of resources from revenue and other financing sources. it provides standards for classifying, recognizing, and measuring',
10606:'resource inflows. these financial proprietary accounting standards differ from those used for budgetary accounting only to the extent essential to',
10607:'meet the objectives of federal financial reporting. classification, recognition,and measurement 2. revenue is an inflow of resources that the government',
10608:'demands, earns, or receives by donation. revenue comes from two sources: exchange transactions and nonexchange transactions. exchange revenues arise when',
10609:'a government entity provides goods and services to the public or to another government entity for a price. another term',
10610:'for “exchange revenue” is “earned revenue.” nonexchange revenues arise primarily from exercise of the government’s power to demand payments from',
10611:'the public e.g., taxes, duties, fines, and penalties but also include donations. the term “revenue” does not encompass all financing',
10612:'sources of government reporting entities, such as most of the appropriations they receive. these other sources of financing do, however,',
10613:'provide resource inflows to government reporting entities, so this statement includes accounting standards for them. 3. these accounting standards recognize',
10614:'exchange revenue at the time that a government entityprovidesgoodsorservicesto thepublicorto anothergovernment entity. therevenue is measured at the price likely to',
10615:'be received. thus, with some differences that are explained in the standard, the accounting for earned revenue is comparable to',
10616:'the private sector’s accrual accounting for earned revenue. exchange revenue includes most user charges other than taxes. such user charges',
10617:'include regulatory user charges, in which the exchange is not wholly voluntary but the revenue is generally, but not always,',
10618:'related to the costofprovidingservicetoidentifiablegroups. oneexampleistherevenuederivedfromthe securities and exchange commission’s registration fees. exchange transactions also include those intragovernmental transactions where the',
10619:'price serves as a full or partial reimbursement for the costs incurred. 4. distinguishing exchange revenue from nonexchange revenue and',
10620:'other financing sources enables the entity to report the net cost of operations of its programs and the cost of',
10621:'the entity to the taxpayer and provides the accounting foundation to report unit cost of output measures for performance evaluations.',
10622:'requiring that exchange revenue be matched with page 8 sffas 7 fasab handbook, version 20 06/21 sffas 7 the cost',
10623:'of outputs of goods and services sold to the public enables the entity to report the cost to the taxpayer',
10624:'of not charging the full cost of those goods and services. 5. nonexchange revenues include income taxes, excise taxes, duties,',
10625:'fines, penalties, and other inflows of resources arising from the government’s power to demand payments, as well as voluntary donations.',
10626:'nonexchange revenue is recognized when a reporting entity establishes a specifically identifiable, legally enforceable claim to cash or other assets.',
10627:'it is recognized to the extent that the collection is probable i.e., more likely than not and the amount is',
10628:'measurable i.e., reasonably estimable.1 6. in the case of taxes and duties, inherent and practical limitations on the assessment process',
10629:'serve to delay the time when the power to demand payment becomes a legally enforceable claim to cash or other',
10630:'assets. for this reason, the method of accounting for taxes and duties can best be characterized as a modified cash',
10631:'basis of accounting, rather than an accrual basis. this basis of accounting amends the standard for the recognition of accounts',
10632:'receivable for taxes and duties. cash basis tax revenue will continue to be accounted for as well, because of the',
10633:'fiscal importance of the information. the accrual accounting required will provide more accurate and complete information about receivables and refunds',
10634:'legallyreceivable and payable and about the components of the government’s revenue stream. the board may review the standard for the',
10635:'accrual of taxes and duties after severalyears. theboard has providedthat intheinterim theirs andcustomsmayon their own initiative modify this standard so',
10636:'that it reflects a fuller application of the accrual concept. 7. budgetary resources are recognized from two perspectives: the proprietary',
10637:'accounting perspective and the budgetary perspective. from the proprietary perspective, appropriations are accounted for as a financing source when used.appropriations',
10638:'are used when an entity has acquired goods and services or has provided benefits and grants that are authorized to',
10639:'be paid by an appropriation. the remaining amount of appropriations enacted into law, but not yet recognized as “appropriations used,”',
10640:'is treated as capital, i.e., “unexpended appropriations.” this treatment parallels the recognition of expended appropriations during budgetary execution. 8. to',
10641:'the extent that other standards require that costs not on the entity’s books be imputed to theentity, the standardsforotherfinancingsourcesrequire recognition',
10642:'of the corresponding imputed financing. 9. financial statements have not previously presented budget execution information needed by users of those',
10643:'reports. furthermore, concerns have been expressed about whether the 1as explained in para. 44 of sffas number 1, accounting for',
10644:'selected assets and liabilities, “more likely than not” means more than a 50 percent chance. “not probable” means the converse,',
10645:'i.e., less than a 50 percent chance. page 9 sffas 7 fasab handbook, version 20 06/21 sffas 7 budget is',
10646:'being properly executed in all cases. the standards presented in this document require the presentation and, consequently, the audit of',
10647:'information about budgetary resources, the status of those resources, and outlays. the standards also require a reconciliation of proprietary and',
10648:'budgetary information in a way that helps users relate the two. disclosures, supplementary information,and other information 10. the different types',
10649:'of revenue, and the complexity of accounting for revenue and other financing sources, increases the importance of certain disclosures and',
10650:'other information. 11. extensive disclosures and other information about taxes and duties compensate to some extent for the limited accruals',
10651:'under the modified cash basis of accounting. such disclosures and other information also provide a better basis for estimating future',
10652:'cash flows, overseeing the custodial responsibilities given to the tax collecting entities, and understanding how the tax burden is shared.',
10653:'12. certain disclosures are required about exchange transactions where the full cost of goods and services sold is not recovered.',
10654:'13. limited disclosure concerning accountability for dedicated collections is required of reporting entities responsible for administering such funds. supplementary information',
10655:'is required from those entities and the entities that make the collections in cases where trust funds may be overor',
10656:'underfunded in terms of applicable law. 14. disclosures are required about the use of borrowing authority and the status of',
10657:'budgetary resources that may affect future spending by the entity. concepts for reconciling budgetaryand financialaccounting 15. this statement amendsstatement offederalfinancialaccountingconceptsno.',
10658:'2,entity and display, by adding a category of financial information to furthersatisfy users’needs and the objectives of financial reporting. more',
10659:'specifically, the amendment is designed to meet users’ need to understand “how information on the use of budgetary resources relates',
10660:'to information on the cost of program operations subobjective 1c. the objective of this new category of information is to',
10661:'provide an explanation of the differences between budgetary and financial proprietary accounting. this is accomplished by means of a reconciliation',
10662:'of budgetary obligations and nonbudgetary resources available to the reporting entity with its net cost of operations. page 10 sffas',
10663:'7 fasab handbook, version 20 06/21 sffas 7 part i:accounting for revenueand other financing sources introduction background 16. the essential',
10664:'differences among exchange revenues, nonexchange revenues, and other financing sources affect the way they are recognized and measured under the',
10665:'accrual methodofaccounting. properlyclassifyingtheseinflowsaccordingtotheirnature,therefore, provides the basis for applying different accrual accounting principles. in addition, proper classification is essential to constructing',
10666:'financial statements that meet the federal financial reporting objectives,2as they have been described in statement of federal financial accounting concepts',
10667:'no. 2, entity and display. 17. to help meet those objectives, classifications were developed to determine what specific kinds of',
10668:'revenue should be deducted from the cost of providing goods and services by the reporting entities. only revenue classified as',
10669:'exchange revenue should be matched with costs. nonexchange revenue and other financing sources are not matched with costs because they',
10670:'are not earned in the operations process. because they are inflows that financeoperations,nonexchangerevenuesandotherfinancingsourcesshouldbeclassified in accordance with other rules and should',
10671:'be recognized only in determining the overall financial results of operations for the period. this differs from the focus used',
10672:'in the private sector, where the focus is on net income for business organizations, and on changes in net assets',
10673:'for notforprofit organizations. it is also a different focus from that used previously in reporting on u.s. government operations. under',
10674:'the old federal accounting standards, the focus was on matching all of an entity’s financing with incurred expenses to report',
10675:'“net results of operations” which generally was not useful in evaluating performance. the new focus is on costs —both gross',
10676:'and net—which are useful in evaluating performance on many levels. 18. the concept of matching costs and revenue has little',
10677:'relevance in government except where there is an exchange transaction. an exchange transaction occurs when one party sacrifices value and',
10678:'receives a valuable good or service in return. the operations of an entity engaged in exchange transactions produce the revenue',
10679:'earned as well as the associated cost incurred. therefore, financial accounting should relate the revenue to the 2statement of federal',
10680:'financialaccounting concepts no. 1, objectives of federal financial reporting. page 11 sffas 7 fasab handbook, version 20 06/21 sffas 7',
10681:'cost for these transactions. the net effect—the gross cost minus the revenue, or the net cost—generally determines the extent to',
10682:'which taxpayers bear the cost of the operations.3 19. information about the net cost of exchange transactions serves other purposes',
10683:'as well. net cost gives one indication of the extent to which people are willing to make voluntary payments to',
10684:'acquire goods or services of the kinds that are sold. it thus can give an indication of the extent to',
10685:'which people judge the products to have value. net cost also can be used in evaluating an entity’s pricing policy.',
10686:'20. most importantly of all, both net cost and gross cost can be compared with outputs and outcomes in assessing',
10687:'the effectiveness and efficiency with which resources are used to achieve results. such comparisons can be used by agency management,',
10688:'the president, and the congress in making decisions about allocating resources. these standards, together with those in sffas no. 4,',
10689:'managerial cost accounting concepts and standards, provide information essential to effective implementation of the government management reformact, which requires agencies',
10690:'to report performance measures such as unit cost. these standards, when applied in the context of applicable entity and display',
10691:'concepts, will make federal financial reporting more meaningful to those concerned with performance measurement. 21. nonexchange revenue transactions do not',
10692:'require a government entity to give value directly in exchange for the inflow of resources. the government does not “earn”',
10693:'the nonexchange revenue. the cost that nonexchangerevenue financesfallsonthose who pay the taxes and make the other nonexchange payments to the',
10694:'government. the different character of nonexchange revenues requires that they be distinguished from exchange revenues. they should, therefore, be shown',
10695:'in a way that does not obscure the entity’s net cost of operations. 22. although board members have differing views',
10696:'on whether social insurance programs result in exchange or nonexchange transactions, they agree that social insurance tax revenues should be',
10697:'shown in the same way as other tax revenues for the purposes of financial reporting.4social insurance taxes, like other taxes,',
10698:'are determined by the government’s power to compel payment. individuals and businesses that pay social insurance taxes are subject to',
10699:'them asabyproductoftheirdecisiontoenter coveredemployment orengage ina covered business. especially for the major, broadbased social insurance programs— 3the only major exception is',
10700:'for intragovernmental sales of goods and services. the extent to which taxpayers bear the costs of these goods and services',
10701:'depends on whether the goods and services are sold to entities that in turn sell goods and services to the',
10702:'public, or to entities that are financed by taxes. the net cost of operations may also be financed by other',
10703:'nonexchange revenue such as fines, forfeitures, and donations. 4see discussion of social insurance programs in fasab’s exposure draft, supplementary stewardship',
10704:'reporting. page 12 sffas 7 fasab handbook, version 20 06/21 sffas 7 social security, medicare hospital insurance, and unemployment compensation—the',
10705:'individuals and businesses have virtually no option except to pay. 23. the main sources of financing for the government as',
10706:'a whole are exchange and nonexchange revenues and borrowing from the public. for component reporting entities, however, the sourcesof financing',
10707:'are provided through the budget and are largelyfinancing sources other than revenue. appropriations and other budget authority provide an agency',
10708:'with the authority to incur obligations to acquire goods and services or to provide benefits and grants. these other financing',
10709:'sources are not earned by an entity’s operations. therefore, as with nonexchange revenue, they should be accounted for in a',
10710:'way that does not obscure the entity’s net cost. 24. budgetary resources have a different character than both exchange revenue',
10711:'and nonexchange revenue. budgetary inflows should be shown in a way that reflects two different perspectives: the proprietary effect and',
10712:'the budgetary effect. proprietary accounting treats these resources much as capital and lines of credit are treated in private sector',
10713:'accounting, and provides information about their availability in the balance sheet or in notes. appropriations are recognized as capital when',
10714:'enacted into law, while borrowing authorityisdisclosedin notes. because governmententitiesare expectedtoexpend capital from appropriations rather than maintain it, the accounting for',
10715:'the use of appropriations differs in this respect from the private sector’s accounting for capital. the accounting for “appropriations used”',
10716:'has been simplified and parallels their budgetary effect. 25. the budget provides the principal basis for planning and controlling obligations',
10717:'and expenditures by government entities. budget execution tracks the flow of budgetary resources from the congressional authorizing and appropriating process,',
10718:'to the apportionment, allotment, and obligation of thebudgetary resources, to the outlay of cashto satisfy those obligations. for the most',
10719:'part, obligations and cash, rather than accrual accounting, are the bases for budgeting and reporting on budget execution. 26. those',
10720:'who prepare financial statements have recognized that accrual accounting and the budget are complementary.accrualbasis accounting often provides better information than',
10721:'cashbasis accounting for evaluating performance. it can provide more information for planning and control of operations. accrual accounting provides an',
10722:'understanding of a reporting entity’s net position and cost of operations. u.s. government financial statements have not been used for',
10723:'planning and control as well as they might have been. in part, this is because accounting standards have not been',
10724:'fully attuned to the government’s needs and circumstances. another important reason is the continuing primacy of the budget as a',
10725:'financial planning and control tool. general purpose financial reports have not presented budget execution information with the financial statements in',
10726:'a way that helped usersrelate these two important, but different, types of financial information. the standards presented in this document',
10727:'provide the basis for reports that can deal with this problem. page 13 sffas 7 fasab handbook, version 20 06/21',
10728:'sffas 7 materiality 27. except as otherwise noted, the provisions of the accounting standards in this statement need not be',
10729:'applied to items that are qualitatively and quantitatively immaterial. 28. the determination of whether an item is material depends on',
10730:'the degree to which omitting or misstating information about the item makes it probable that the judgment of a reasonableperson',
10731:'relyingontheinformationwould have beenchanged orinfluencedbythe omission or the misstatement. effective date 29. the provisions of this statement are effective for reporting',
10732:'periods that begin after september 30, 1997. earlier application is encouraged. accounting standards scope 30. thesestandardsdeterminehowagovernmentreportingentityshouldaccountforinflowsof resourcesfrom revenueand otherfinancing sourcesin',
10733:'itsgeneral purposefinancialreports. revenue is an inflow of resources that the government demands, earns, or receives by donation. revenue comes from',
10734:'two sources: exchange transactions and nonexchange transactions. exchange revenues arise when a government entity provides goods and services to the',
10735:'public or to another government entity for a price. another term for “exchange revenue” is “earned revenue.” nonexchange revenues arise',
10736:'primarily from exercise of the government’s power to demand payments from the public, such as taxes, duties, fines, and penalties.',
10737:'nonexchange revenue also includes donations. 31. the term “revenue” does not encompass all financing sources of government reporting entities, such',
10738:'as most of the appropriations they receive. these other sources of financing do, however, provide resource inflows to government reporting',
10739:'entities, although not to the government as a whole. accordingly, standards for accounting for these inflows are also provided. 32.',
10740:'appendix b, “guidance for the classification of transactions,” provides authoritative guidance on which transactions should be classified as exchange transactions',
10741:'and which should be classified as nonexchange transactions or other financing sources. page 14 sffas 7 fasab handbook, version 20',
10742:'06/21 sffas 7 exchange revenue 33. exchangerevenueandgainsareinflowsofresourcestoagovernmententitythattheentity has earned. they arise from exchange transactions, which occur when each party to',
10743:'the transaction sacrifices value and receives value in return. that is, exchange revenue arises whenagovernmententityprovidessomething of valuetothe publicoranothergovernment entity at',
10744:'a price. recognitionand measurement of exchange revenue 34. revenue from exchange transactions should be recognized when goods or services are',
10745:'provided to the public or another government entity at a price. 35. when a transaction with the public or another',
10746:'government entity at a price is unusual or nonrecurring, a gain or loss should be recognized rather than revenue or',
10747:'expense so as to differentiate such transactions. 36. revenue from specific types of exchange transactions should be recognized as follows:',
10748:'a when services are provided to the public or another government entity except for specific services produced to order under',
10749:'a contract, revenue should be recognized when the services are performed. b whenspecificgoodsaremadetoorderunderacontracteithershortorlongterm,or specific services are produced to order under',
10750:'a contract either shortor longterm, revenue should be recognized in proportion to estimated total cost when goods and services are',
10751:'acquired to fulfill the contract. if a loss is probable more likely than not, revenue should continue to be recognized',
10752:'in proportion to the estimated total cost and costs should continue to be recognized when goods and services are acquired',
10753:'to fulfill the contract. thus, the lossshouldbe recognized in proportion to totalcost overthe life of the contract.5 c when goods',
10754:'are kept in inventory so that they are available to customers when ordered, revenue should be recognized when the goods',
10755:'are delivered to the customer. d when services are rendered continuously over time or the right to use an asset',
10756:'extends continuously over time, such as the use of borrowed money or the rental of space in a building, the',
10757:'revenue should be recognized in proportion to the passage of 5this standard is an exception to the general principle of',
10758:'sffas no. 5,accounting for liabilities of the federal government, which, but for this exception, would require a loss on a',
10759:'contract to be recognized at the time when expected costs exceeded expected revenue. however, the expected loss must be disclosed:',
10760:'see the disclosure requirement in paragraph d below. page 15 sffas 7 fasab handbook, version 20 06/21 sffas 7 time',
10761:'or the use of the asset. the interest received on money borrowed in an intragovernmental transaction is an exchange revenue',
10762:'when the source of the borrowed funds is predominantly exchange revenue and is a nonexchange revenue when the source of',
10763:'the borrowed funds is predominantly nonexchange revenue or other financing sources. e when an asset other than inventory is sold,',
10764:'any gain or loss should be recognized when the asset is delivered to the purchaser. 37. when advance fees or',
10765:'payments are received, such as for largescale, longterm projects, revenue should not be recognized until costs are incurred from providing',
10766:'the goods and services regardless of whether the fee or payment is refundable. an increase in cash and an increase',
10767:'in liabilities, such as “unearned revenue,” should be recorded when the cash is received. “unearned revenue” should also be recorded',
10768:'if an agency requests advances or progress payments prior to the receipt of cash and records the amount.6 38. the',
10769:'measurement basis for revenue from exchange transactions should be the actual price that is received or receivable under the established',
10770:'pricing arrangements. 39. when cash has not yet been received at the time revenue is recognized, a receivable should be',
10771:'recorded. an appropriate allowance for estimated bad debts should be established. 40. to the extent that realization of the full',
10772:'amount of revenue is not probable due to credit losses caused by the failure of the debtor to pay the',
10773:'established or negotiated price, an expense should be recognized and the allowance for bad debts increased if the bad debts',
10774:'can be reasonably estimated.7 the amount of the bad debt expense should be separately shown. 41. to the extent that',
10775:'realization of the full amount of revenue is not probable due to returns, allowances, price redeterminations, or other reasons apart',
10776:'from credit losses, the revenue that is recognized should be reduced by separate provisions if the amounts can be reasonably',
10777:'estimated. the amounts of such provisions should be reflected as revenue adjustments, rather than costs of operations, and should be',
10778:'separately shown. 42. therecognitionandmeasurementofrevenueandcreditlossesduetodirectloansandloan guarantees is determined by sffas no. 2, accounting for direct loans and loan 6sffas no. 1,',
10779:'para. 41, provides that suchrequest should be recordedif aclaimtocashis established based on legal provisions, such as a payment due date.',
10780:'7sffas no. 1, accounting for selected assets and liabilities, paragraphs 4052, is the standard for estimating bad debts. the standard',
10781:'is further explained in sffas no. 1’s basis for conclusions, paragraphs 116133. page 16 sffas 7 fasab handbook, version 20',
10782:'06/21 sffas 7 guarantees.appropriate allowances should be established as determined by those standards. 43. exchange revenue should be recognized in',
10783:'determining the net cost of operations of the reporting entity during the period. the exchange revenue should be recognized regardless',
10784:'of whether the entity retains the revenue for its own use or transfers it to other entities. gross and net',
10785:'cost should be calculated as appropriate to determine the costs of outputs and the total net cost of operations of',
10786:'the reporting entity. the components of the net cost calculation should separately include the gross cost of providing goods or',
10787:'services that earned exchange revenue, lessthe exchange revenue earned, and the resulting difference. the components of net cost should also',
10788:'include separately the gross cost of providing goods, services, benefit payments, or grants that did not earn exchange revenue. the',
10789:'u.s. governmentwide financial statements need not break out gross costs of providing goods, services, benefit payments, or grants that did',
10790:'not earn exchange revenue, separately from those programs that earned exchange revenue. 44. the net amount of gains or losses',
10791:'should be subtracted from or added to gross cost to determine net cost in the same manner as exchange revenue',
10792:'is subtracted. exchange revenue that is immaterial or cannot be associated with particular outputs should be deductedseparatelyincalculating the netcost of',
10793:'the program, suborganization, orreporting entity as a whole as appropriate. nonexchange revenues and other financing sources should not be deducted',
10794:'from the gross cost in determining the net cost of operations for the reporting entity. 45. under exceptional circumstances, such',
10795:'as rents and royalties on the outer continental shelf, an entity recognizes virtually no costs either during the current period',
10796:'or during past periods in connection with earning revenue that it collects. 45.1 thecollectingentityshouldnotoffsetitsgrosscostsbysuchexchangerevenuein determining its net cost of operations.',
10797:'if such exchange revenue is retained by the entity, it should be recognized as a financing source in determining the',
10798:'entity’s operating results. if, instead, suchrevenueiscollected onbehalf of otherentitiesincludingtheu.s. government as a whole, the entity that collects the revenue should',
10799:'account for that revenue as a custodial activity, i.e., an amount collected for others. 45.2 if the collecting entity transfers',
10800:'the exchange revenue to other entities, similar recognition by other entities is appropriate. a. if the other entities to which',
10801:'the revenue is transferred also recognize virtually no costs in connection with the government earning the revenue, the amounts transferred',
10802:'to them should not offset their gross cost in determining their net cost page 17 sffas 7 fasab handbook, version',
10803:'20 06/21 sffas 7 of operations but rather should be recognized as a financing source in determining their operating results.',
10804:'b. if the other entities to which the revenue is transferred do recognize costs in connection with the government earning',
10805:'the revenue, the amounts transferred to them should offset their gross cost in determining their net cost of operations. 45.3',
10806:'becausetherevenueisexchangerevenueregardlessofwhetherrelatedcostsare recognized, it should be recognized and measured under the exchange revenue standards. disclosuresand otheraccompanying information 46. each reporting entity',
10807:'that provides goods or services to the public or another government entity should disclose the following: a differences in pricing',
10808:'policy from the full cost or market pricing guidance for exchange transactions with the public as set forth in omb',
10809:'circular no. a25, user charges july 8, 1993, or in subsequent amendments in circulars that set forth pricing guidance; b',
10810:'exchange transactions with the public in which prices are set by law or executive order and are not based on',
10811:'full cost or on market price;8 c the nature of intragovernmental exchange transactions in which the entity provides goodsor services',
10812:'at a price lessthan the full cost or does not charge a price at all, with explanations of the amount',
10813:'and reason for disparities between the billing if any and the full cost; and d the full amount of the',
10814:'expected loss when specific goods are made to order under a contract, or specific services are produced to order under',
10815:'a contract, and a loss on the contract is probable more likely than not and measurable reasonably estimable. the above',
10816:'listed disclosure requirements are not applicable to the u.s. governmentwide financial statements. 47. when making the disclosures called for by',
10817:'a and b in paragraph 46, cautionary language should be added to the effect that higher prices based on full',
10818:'cost or market price might reduce the quantity of goods or services demanded and, therefore, the difference between revenue received',
10819:'and such higher prices does not necessarily provide an indication of revenue foregone. if a reasonable estimate is practicable to',
10820:'make, the entity should provide 8the pricing guidance in omb circular no. a25 does not apply to prices set by',
10821:'law or executive order. page 18 sffas 7 fasab handbook, version 20 06/21 sffas 7 as other accompanying information the',
10822:'amount of revenue foregone and should explain whether, and to what extent, the quantity demanded was assumed to change as',
10823:'a result of a change in price. nonexchange revenue recognitionand measurement of nonexchange revenue the general standard 48. nonexchangerevenuesareinflowsofresourcesthatthegovernmentdemandsor receives',
10824:'by donation. such revenue should be recognized when a specifically identifiable, legally enforceable claim to resources arises, to the extent',
10825:'that collection is probable more likely than not and the amount is reasonably estimable. nonexchange revenue should be measured by',
10826:'the collecting entities, but should be recognized by the entities legally entitled to the revenue the recipient entities. paragraphs 49',
10827:'through 63 describe the application of this general standard. taxes and duties 49. revenue measured bythecollecting entities. taxesanddutiesalsoshouldbemeasured on the',
10828:'cash basis, and the cash basis amounts should be shown in conjunction with the accrual amounts recognized. the source and',
10829:'disposition of revenue from taxes, duties which are a type of tax, and related fines, penalties and interest should be',
10830:'measured by the collecting entities in a manner that enables reporting of 1 cash collections, refunds, and the “accrual adjustment”',
10831:'necessary to determine the total revenue and 2 cash or cash equivalents transferred to each of the recipient entities and',
10832:'the revenue amounts to be recognized by each of them. the collecting entities function in a custodial capacity with respect',
10833:'to revenue transferred or transferable to the recipient entities. the collecting entities should not recognize such revenue, but should account',
10834:'for and report upon the above mentioned custodial activities. the entities that collect taxes and duties may change the general',
10835:'standard para. 48 to accrue amounts now required to be presented as supplementary information paragraphs 67.1 and 67.2 and make',
10836:'other changes that would result in a fuller and more complete application of accrual accounting. 50. cash collections should be',
10837:'based on amounts actually received during the fiscal period, including withholdings, estimated payments, final payments, and collections of receivables. cash',
10838:'collections include any amounts paid in advance of due dates unless they are deposits. 51. cash refunds should be based',
10839:'on repayments of taxes and duties during the period. refunds include refund offsets and drawbacks. refund offsets are amounts withheld',
10840:'from page 19 sffas 7 fasab handbook, version 20 06/21 sffas 7 refunds on behalf of other agencies and paid',
10841:'to such agencies. drawbacks are refunds of duties paid on imported goods that are subsequently exported or destroyed. 52. the',
10842:'“accrual adjustment,” which modifies the net of cash collections and refunds to determine the amount of revenue recognized, should be',
10843:'the net increase or decrease during the reporting period in net revenuerelated assets and liabilities. the net revenue related assets',
10844:'and liabilities include accounts receivable, the allowance for uncollectible accounts, and amounts payable for refunds. recognition standards for these accounts',
10845:'of the collecting entities are described in paragraphs 53 to 57. 53. accounts receivable should be recognized when a collecting',
10846:'entity establishes a specifically identifiable, legally enforceable claim to cash or other assets through its established assessment processes to the',
10847:'extent the amount is measurable. this definition of accountsreceivablefromnonexchange transactionsrequiresthe standardfor recognition of accounts receivable to be amended so that',
10848:'such receivables are not recognized on the basis of payment due dates but rather on the basis of the completion',
10849:'of the assessment processes.9 under such processes, assessments are enforceable claims for which specific amounts due have been determined and',
10850:'the persons or entitiesfromwhom the tax or duty is due have been identified. assessments include both selfassessments made by persons',
10851:'filing tax returns or entry documents and assessments made by the collecting entities. 54. assessmentsrecognizedasaccountsreceivableincludetaxreturnsfiledbythetaxpayeror customsdocuments filed bythe importerwithout sufficient',
10852:'payments, taxpayer agreements to assessments at the conclusion of an audit or to a substitute for a return or importer',
10853:'agreements to supplemental assessments, court actions determining an assessment, and taxpayer or importer agreements to pay through an installment agreement',
10854:'or through accepted offers in compromise. receivables determined to be currently not collectable are included, but assessments where there is',
10855:'no future collection potential such as where the taxpayer or importer has been either insolvent or deceased for specified periods',
10856:'are not included. accounts receivable, therefore, include only unpaid assessments made through the end of the period plus related fines,',
10857:'penalties, and interest. accounts receivable do not include amounts received or due with tax returns received after the close of',
10858:'the reporting period or amounts that are compliance assessments10 or preassessment work in process. 9sffas no. 1, accounting for selected',
10859:'assets and liabilities, para. 41, states that “a receivable should be recognized . . . based on legal provisions, such',
10860:'as a payment due date e.g., taxes not received by the date they are due . . . under the',
10861:'revenue standard, past due taxes are not recognized on the date they are due, but rather on the date when',
10862:'tax returns are received without sufficient payment or legally enforceable claims against noncompliant taxpayers are established through enforcement processes. 10customs',
10863:'refers to “compliance assessments” as protested assessment amounts. page 20 sffas 7 fasab handbook, version 20 06/21 sffas 7 55.',
10864:'compliance assessments and preassessment work in process. compliance assessments and preassessment work in process may or may not be legally',
10865:'assessed depending on the resolution of subsequent events. a. compliance assessments are proposed assessments by the collecting entity in definitive',
10866:'amounts, but the taxpayer or importer still has the right to disagree or object, such as in the case of',
10867:'assessments made at the conclusion of an audit or at the conclusion of a review by an import specialist or',
10868:'when a violation of applicable law isdiscovered,orthe issuance byirs of asubstitutefora return, or where assessment isinappealsorinthetaxcourt. thesecomplianceassessmentsmaybecomeaccounts receivable if thetaxpayerfilesan',
10869:'amended returnorcustoms’protest/retentionperiod lapses, oranappealorcourt action finallydeterminestheassessment,orthetaxpayer importer agrees to pay currently or through an installment agreement, or an offer in',
10870:'compromise is accepted. b. preassessment work in process is assessments not yet officially asserted by the collecting entity which are',
10871:'subject to a taxpayer’s right to conference in response to initial information notices, e.g., revenue agent reports or are unasserted',
10872:'assessments on merchandise released into commerce for which the importer did not submit an entry summary document or for projected',
10873:'revenues due as a result of customs’ compliance measurement programs. the amount or range of amounts that will ultimately be',
10874:'assessed or the duration of the notice period may be reasonably estimable, but there are no amounts for preassessment work',
10875:'in process presently included in the dollar based accounting systems. estimates of the amount or range of amounts of preassessment',
10876:'work in process that may ultimately be collectable are not presently sufficiently reliable to be recognized. 56. allowance for uncollectible',
10877:'amounts should be recognized based on an analysis of both individual accounts receivable and groups of accounts receivable, as prescribed',
10878:'by other standards.11 aprovisionto increase or decreasethe allowance willresultinanadjustmentof nonexchange revenue, rather than a bad debt expense. 57. amounts payable',
10879:'for refunds including refund offsets and drawbacks should be recognized when measurable and legally payable under established processes of the',
10880:'collecting entities. the amounts include those refunds, where returns or claims for refund have been filed by the taxpayer and',
10881:'the government has determined the specific amounts refundableandhasidentifiedthepayee. refundswithrespectto returnsor claimsfiledasof 11sffas no. 1, accounting for selected assets and liabilities,',
10882:'para. 44 to 51, provides the basis for determining this allowance. page 21 sffas 7 fasab handbook, version 20 06/21',
10883:'sffas 7 the end of the reporting period that do not require specific approval before payment are included in accounts',
10884:'payable for refunds. 58. other claims for refunds. claims filed for which specific administrative actions are required before payments can',
10885:'be made and unasserted claims for refund by taxpayers or importers that may or may not become payable depending upon',
10886:'the resolution of subsequent events. a. claims filed for refunds where required administrative actions are not yet complete as of',
10887:'the close of the reporting period are not recognized. the refunds, however, may be reasonably estimable. page 22 sffas 7',
10888:'fasab handbook, version 20 06/21 sffas 7 b. unassertedclaimsforrefundsuchasunfiledclaimsforrefundsordrawbacksforwhich no claim has been filed, are not recognized.12 these amounts may',
10889:'be reasonably estimable, but are not presently included in dollarbased accounting systems. 59. deposits.amounts voluntarily paid to the reporting entities',
10890:'as deposits, such as those made to stop the accrual of interest or those made pending settlements and judgments, are',
10891:'separately recognized as deposit liabilities. 60. revenue recognized by the recipient entities should equal the sum of a cash or',
10892:'cash equivalents transferred to them by collecting entities and b the net change in any related interentity balances between the',
10893:'collecting and receiving entities i.e., the amount to be transferred to the recipient entities from the collecting entity or vice',
10894:'versa. equivalents are normally special treasury securities issued by the treasury department acting in conjunction with the collecting entities. interentity',
10895:'balances of amounts to be transferred normally should be recognized when 1 a legally enforceable claim exists between a collecting',
10896:'entity and a recipient entity for the transfer or repayment of taxes or duties, and 2 payment of such claim',
10897:'is probable and measurable. interentity balances typically represent estimated settlements of transfers made during the period and revenue received by',
10898:'the collecting entity at year end but not yet transferred. revenue should be recognized as a financing source in calculating',
10899:'the results of operations and not as a deduction in determining net cost of operations. principles for the application of',
10900:'this standard to major groups of recipient entities are described in paragraphs 60.1 through 60.4. 60.1 trust funds legally entitled',
10901:'to excise taxes collected. certain trust funds are legallyentitledtoreceive onlyexcisetaxesthat are actuallycollected bythecollectingentity. however, transfers to such trust funds currently',
10902:'are based on assessed excise taxes, because data on the components of cash collections by type of tax are not',
10903:'currently obtained from taxpayers. this standard affirms that revenues may be recognized on the basis of assessed excise taxes in',
10904:'lieu of excise taxes actually collected. 60.2 trust funds legally entitled to receive social security taxes accrued. by law, the',
10905:'trust funds are to receive social security taxes on the basis of the earnings of participants and the applicable tax',
10906:'rates. social security taxes accrued are presently determined by the assessment processes of the internal revenue service irs. noncompliance by',
10907:'taxpayersmayresult in such amountsbeing less than taxes based on actual earnings of participants. amounts for individual participants are separately reported',
10908:'to the 12future income taxes from corporations may be reduced by more than $100 billion dollars as a result of',
10909:'net operating loss carryforwards and tax credit carryforwards. information in returns filed by corporations and in their financial statements appears',
10910:'to provide the basis for a reasonable estimate of the amount of potential reduced future income tax revenue attributable to',
10911:'these provisions of tax law. information about net operating loss carryforwards is not an unasserted claim, as defined here. page',
10912:'23 sffas 7 fasab handbook, version 20 06/21 sffas 7 social securityadministration ssa, but because of employer reporting deficiencies these',
10913:'amounts are currently even less than amounts determined by the irs. ssais legally entitled to retain the higher amounts actually',
10914:'transferred by the irs. this standard affirms that revenue shouldberecognized on the basisof thebest available information, i.e., on the basis',
10915:'of the higher of the amount determined by the irs assessment process or the individual participant amounts based on reports',
10916:'to ssaof participants’ earnings, subject to anylater adjustmentsnecessarytobring theamountstransferredto thetrust fundsuptothe amount of taxes due based on the actual earnings',
10917:'history of the participants. 60.3 collecting entities entitled to retain revenue. when legally retained by the collecting entity as a',
10918:'reimbursement of the cost of collection, revenue should be recognized as an exchange revenue and deducted in determining the collecting',
10919:'entity’s net cost of operations. 60.4 general fund. the general fund recognizes all nonexchange revenue not recognized bytrustfundsand otherrecipiententities. interest',
10920:'on delinquenttaxesshould be recognized as exchange revenue. the general fund should recognize in succeeding periods revenue adjustments for any recognized',
10921:'revenue that is determined after the books are closed for the period to have been properly transferable or improperly transferred',
10922:'to other recipient entities. fines and penalties 61. fines and penalties are monetary requirements imposed on those who violate laws',
10923:'or administrative rules. they may be imposed by the entities collecting taxes and duties, or by other government entities. the',
10924:'time when a claim to resources arises will depend on the nature of the fine and the associated legal and',
10925:'administrativeprocesses. some examples of conditions that, depending on the circumstances, could establish a legally enforceable and measurable claim include 1',
10926:'the date by which an individual may contest a court summons expires, 2 the offender pays the fine before a',
10927:'court date, or 3 the court imposes the fine. an allowance for uncollectible accounts should, as in the case of',
10928:'taxes and duties, be recognized as a revenue adjustment and determined in accordance with other standards.13 the allowance should reduce',
10929:'the gross amount of the receivable and revenue to its net realizable value, based on the criterion that losses should',
10930:'be recognized to the extent it is probable more likely than notthat some or allof the receivableswill not be totallycollected.',
10931:'donations 13sffas no. 1, para. 4451. page 24 sffas 7 fasab handbook, version 20 06/21 sffas 7 62. donations are',
10932:'contributions to the government, i.e., voluntary gifts of resources to a government entity by a nonfederal entity. donations may be',
10933:'financial resources, such as cash or securities, or nonfinancial resources such as land or buildings. revenue arising from donations should',
10934:'be recognized for those inflows of resources which meet recognition criteria for assets14 and should be measured at the estimated',
10935:'fair value of the contribution. other nonexchange revenue 63. thevarious types of nonexchangerevenuearedescribedinappendix b:guidanceforthe classificationoftransactions. someof thesearenotspecificallymentionedinthisstandard. they should be',
10936:'recognized and measured in accordance with the general rule see para. 48 except where other board standards apply. disclosures, supplementary',
10937:'information,and otheraccompanying information disclosures 64. basis ofaccounting. collecting entities should disclose the basis of accounting when the application of the',
10938:'general rule of paragraph 48 results in a modified cash basis of accounting. the disclosure should point out the specific',
10939:'potential accruals which are not made as a result of this practice and the practical and inherent limitations affecting the',
10940:'accrual of taxes and duties. the disclosure should refer to the related other required disclosures and to the supplementary information',
10941:'and should mention that other accompanying information also provides related information. if a collecting entity adopts accounting standards that embody',
10942:'a fuller application of accrual accounting concepts, as permitted in paragraph 49, then the disclosure should describe that change in',
10943:'accounting and point out how it differs from that prescribed by this standard. 65. entities that collect taxes and duties',
10944:'should disclose the following relating to future cash flows, revenuerelated transactions, and custodial responsibilities: 65.1 accounts receivable. factors affecting collectability',
10945:'and timing of categories of accounts receivable and the amounts involved. the u.s. governmentwide financial statements need not disclose factors',
10946:'affecting collectibility and timing of categories of accounts receivable and the amounts involved. 65.2 [rescinded by sffas 20.] 14for the',
10947:'recognition criteria for donated property, plant and equipment, see sffas no. 6, accounting for property, plant, and equipment, para. 30,',
10948:'62, and 71. page 25 sffas 7 fasab handbook, version 20 06/21 sffas 7 65.3 cumulative cash collections and refunds',
10949:'by tax year and type of tax. cash collectionsand refundsby taxyear and type of tax should include cash collectionsand cash',
10950:'refunds for the reporting period and for sufficient prior periods to illustrate 1 the historical timing of tax collections and',
10951:'refunds, and 2 any material trends in collection and refund patterns. sufficient prior periods for each type of tax are',
10952:'the periods which end when the statutoryperiodforcollectionends. collectingentitiesmayshortentheseperiodsifevidence for prior tax years indicates that a shorter period would reflect at',
10953:'least 99 percent of the collectible taxes. the u.s. governmentwide financial statements need not disclose cumulative cash collections and refunds',
10954:'by tax year and type of tax for the reporting period and for sufficient prior periods to illustrate 1 the',
10955:'historical timing of tax collections and refunds, and 2 any material trends in collection and refund patterns. sffas 32 provides',
10956:'for disclosures applicable to the u.s. governmentwide financial statements. 66. iftrustfundrevenuesarenotrecordedinaccordancewithapplicablelaw,boththecollecting and recipient entities should disclose the reasons. supplementary information',
10957:'67. entitiesthatcollecttaxesanddutiesshouldprovidethefollowingsupplementaryinformation relating to their potential revenue and custodial responsibilities: 67.1 the estimated realizable value, as of the end of',
10958:'the reporting period, of compliance assessments and, if reasonably estimable, preassessment work in process. the amounts furnished should represent management’s',
10959:'estimate of additional revenues reasonably expected to be collected from compliance assessments and from preassessment work in process, appropriately qualified',
10960:'as to their reliability. arange of amounts may be provided for preassessment work in process if estimable. the change in',
10961:'the totals of compliance assessments and of preassessment work in process during the reporting period also should be provided. 67.2',
10962:'if reasonably estimable, other claims for refunds that are not yet accrued but are likelyto be paid when administrative actionsare',
10963:'completed. if estimated, unasserted claims for refunds should be provided separately from claims filed and may be expressed as a',
10964:'range of amounts. the amounts furnished should represent management’s reasonable estimates, appropriately qualified as to their reliability. the change in',
10965:'the total of these amounts during the reporting period also should be provided. 67.3 the amount of assessments that the',
10966:'entity still has statutory authority to collect at the end of the period, but that have been written off and',
10967:'thus excluded from accounts receivable. page 26 sffas 7 fasab handbook, version 20 06/21 sffas 7 67.4 if reasonably estimable,',
10968:'the amounts by which trust funds may be overor underfunded in comparison with the requirements of law. 68. recipient entities',
10969:'that are trust funds should provide the same information as required for collecting entities in para. 67.4. otheraccompanying information 69.',
10970:'the following guidance for other accompanying information is intended to provide flexibility to enable preparers to present the most relevant',
10971:'information with respect to these topics, considering the needs and interests of users and the availability of data. 69.1 aperspective',
10972:'on the income tax burden. the irs should provide a perspective on the income tax burden. this could take the',
10973:'form of a summary of the latest available information on the income tax and on related income, deductions, exemptions, and',
10974:'credits for individuals by income level and for corporations by size of assets. the objective is to showthe tax burden',
10975:'borne by different classes of individuals and corporations and how that burden is affected by the tax rates, deductions, credits,',
10976:'etc., provided by the tax laws. 69.2 available information on the size of the tax gap. collecting entities should provide',
10977:'any relevant estimates of the annual tax gap that become available as a result of federal government surveys or studies.',
10978:'the tax gap is defined as taxes or duties due from noncompliant taxpayers or importers. amounts reported should be specifically',
10979:'defined, e.g., whether the tax gap includes or excludes estimates of taxes due on illegally earned revenue. appropriate explanations of',
10980:'the limited reliability of the estimates also should be provided. cross references should be made to portions of the tax',
10981:'gap due from identified noncompliant taxpayers which are shown as supplementary information, i.e., compliance assessments and preassessment work in process',
10982:'para. 67.1. 69.3 tax expenditures related to entity programs. information on tax expenditures that a reporting entity considers relevant to',
10983:'the performance of its programs may be presented, butshouldbequalified andexplainedappropriatelyto helpthereaderassessthe possible impact of specific tax expenditures on the success',
10984:'of the related programs. 69.4 directed flowsofresources related toentityprograms. information ondirected flows of resources related to an entity’s programs may',
10985:'be presented, but if this information ispresentedtheestimatedamountsshouldbeaccompaniedbyadescriptionof thebasisfor the estimates and appropriate cautionary language about their reliability. information should also',
10986:'be appropriately qualified and explained to help the reader assess the possible impact on the success of the programs. page',
10987:'27 sffas 7 fasab handbook, version 20 06/21 sffas 7 other financing sources 70. financingsources,otherthanexchangeandnonexchangerevenues,thatprovideinflowsof resources that increase results of',
10988:'operations during the reporting period include appropriations used, transfers of assets from other government entities, and financing imputed with respect',
10989:'toanycost subsidies.15 financingoutflowsmayresultfromtransfersof the reporting entity’s assets to other government entities or from exchange revenues earned by the entity but',
10990:'required to be transferred to the general fund or another government entity. unexpended appropriations are recognized separately in determining net',
10991:'position but are not financing sources until used. recognitionand measurement of other financing sources appropriations 71. unexpendedappropriations. appropriations, until used,',
10992:'are not a financing source. they should be recognized in capital as “unexpended appropriations” and among assets as “funds with',
10993:'treasury” when made available for apportionment, even if a treasury warrant has not yet been received, or the amount has',
10994:'not been fully apportioned. unexpended appropriationsshould be reduced for appropriations used and adjusted for other changes in budgetary resources, such',
10995:'as rescissions and transfers. the net increase or decrease in unexpended appropriations for the period should be recognized as a',
10996:'change in net position of the entity. 72. appropriations used. when used, appropriations should be recognized as a financing source',
10997:'in determining net results of operations.16 appropriations are used in operations when goods and services are received or benefits and',
10998:'grants are provided. goods and services including amounts capitalized are considered received when a liability is established. benefits are considered',
10999:'to be provided when the related liability is established. grantsare considered to be provided when granteesmeet the requirementsthat allowthem to',
11000:'use the grants.17 15other accounting standards will determine the criteria for the imputation of costs and how those costs shall',
11001:'be measured. this standard provides guidance for accounting for the corresponding financing source that is reported in such cases. 16as',
11002:'is explained in the basis for conclusions, in the private sector, the term “net results of operations” is synonymous with',
11003:'net income and net income is the “bottom line” measure of performance for profitseeking businesses. for most government reportingentities, ontheother',
11004:'hand,this is not the “bottomline” forperformance measurement. seepara. 224 and following. 17fasab plans to undertake a project on accounting for',
11005:'grants. page 28 sffas 7 fasab handbook, version 20 06/21 sffas 7 financing imputed for cost subsidies 73. government entities',
11006:'often receive goods and services from other government entities without reimbursing the providing entity for all the related costs. in',
11007:'addition, government entities often incur costs, such as for pensions, that are paid in total or in part by other',
11008:'entities. these constitute subsidized costs to be recognized by the receiving entity to the extent required by other accounting standards.',
11009:'an imputed financing source should be recognized equal to the imputed cost. this offsets any effect of imputed cost on',
11010:'net results of operations for the period. transfers ofassets 74. anintragovernmentaltransferofcashorofanothercapitalizedassetwithoutreimbursementchanges the resources available to both the receiving entity and',
11011:'the transferring entity. the receiving entity should recognize a transferin as an additional financing source in its result of operations',
11012:'for the period. similarly, the transferring entity should recognize the transfer out as a decrease in its result of operations.',
11013:'the value recorded should be the transferring entity’s book value of the asset. if the receiving entity does not know',
11014:'the book value, the asset should be recorded at its estimated fair value as of the date of transfer. 75.',
11015:'to the extent that a government entity’s exchange revenue that is included in calculating net cost of operations is required',
11016:'to be transferred to the treasury or another government entity, the amount should be recognized as a transferout in determining',
11017:'the net result of operations.18 prior periodadjustments 76. [rescinded by sffas 21.] budgetary information 77. the budget is the primary',
11018:'financial planning and control tool of the government. for this reason, and because of the importance of this information to',
11019:'users of federal financial information, the following material budgetary information should be presented by reporting entities whose financing comes wholly',
11020:'or partially from the budget: a total budgetary resources available to the reporting entity during the period; b the status',
11021:'of those resources including “obligations incurred”; c outlays. 18these transfers are distinguished fromcustodialtransfers in thattransfers involve assets that have been',
11022:'earned orin use by the entity in carrying out its programs whereas custodial transfers involve funds that have been collected',
11023:'on behalf of another entity. accounting for custodial transfers is described in the section covering nonexchange revenue. page 29 sffas',
11024:'7 fasab handbook, version 20 06/21 sffas 7 78. recognitionandmeasurementofbudgetaryresourcesshouldbebasedonbudgetconceptsand definitions contained in omb circularsa11 anda34. in addition, the reporting',
11025:'entity should provide this information for each of its major budget accounts as supplementary information. small budget accounts may be',
11026:'aggregated. 79. the following information about the status of budgetary resources should be disclosed. a the amount of budgetary resources',
11027:'obligated for undelivered orders at the end of the period; b available borrowing and contract authority at the end of',
11028:'the period; c repayment requirements, financing sources for repayment, and other terms of borrowing authority used; d material adjustments during',
11029:'the reporting period to budgetary resources available at the beginning of the year and an explanation thereof; e existence, purpose,',
11030:'and availability of permanent indefinite appropriations; f information about legal arrangements affecting the use of unobligated balances of budget authority',
11031:'such as time limits, purpose, and obligation limitations; g explanations of any material differences between the information required by paragraph77',
11032:'andthe amountsdescribedas “actual” inthe budgetoftheunited states government; h the amount, and an explanation that includes identification of balance sheet components,',
11033:'when recognized unfunded liabilities do not equal the total financing sources yet to be provided; and i the amount of',
11034:'any capital infusion received during the reporting period. 80. budgetary and financial accounting information are complementary, but both the types',
11035:'of information and the timing of their recognition are different. to better understand these differences, the reconciliation should explain the',
11036:'relationship between the net cost of operations18.1 and net outlays by the entity during the reporting period. the reconciliation should',
11037:'reference the reported “net outlays”18.2 and related adjustments as defined by office 18.1the terms ”net cost of operations” and “net',
11038:'cost” are used interchangeably to refer to the total cost incurred by the reporting entity less exchange revenue earned during',
11039:'the period. 18.2 omb circulara11: preparation, submission, and execution of the budget states, outlay means a payment to liquidate an',
11040:'obligation other than the repayment to the treasury of debt principal. outlays are a measure of government spending. subtract all',
11041:'offsetting collections unexpired and expired from gross outlays to yield net outlays so that the contribution of the budget account',
11042:'to the federal governments bottom line the surplus or deficit can be determined. page 30 sffas 7 fasab handbook, version',
11043:'20 06/21 sffas 7 of management and budget omb circulara11: preparation, submission, and execution of the budget 81. the net',
11044:'cost of operations should be adjusted by a components of net cost that are not part of net outlays e.g.,',
11045:'depreciation and amortization expenses of assets previously capitalized, change in asset/liabilities; b components of net outlays that are not part',
11046:'of net cost e.g., acquisition of capital assets; and c other temporary timing differences e.g., prior period adjustments due to',
11047:'correction of errors. 82. the adjustments should be presented and explained in appropriate detail and in a manner that best',
11048:'clarifies the relationship between net outlays and the accrual basis amounts used in financial accounting. anarrative explaining the purpose, the',
11049:'nature, and the line items of the reconciliation also should be presented with the reconciliation. the amount and nature of',
11050:'noncash outlays should be disclosed. for purposes of this statement, noncash outlays are outlays that are recognized without a concurrent',
11051:'cash disbursement, such as interest accrued by the department of the treasury treasury on debt held by the public and',
11052:'the change in allowance for subsidy cost. accountability for dedicated collections [paragraphs 83 through 87 were rescinded by sffas 31',
11053:'paragraph 34.] page 31 sffas 7 fasab handbook, version 20 06/21 sffas 7 part ii: concepts for reconciling budgetaryand financial',
11054:'accounting introduction 88. thestatement offederalfinancialaccountingconceptssffacno. 2, entity and display, wasissued to provide conceptualguidance astowhat would beencompassedbya federal entity’s financial report.',
11055:'it identifies the types of financial information to be communicated to users and suggests the types of information to be',
11056:'included in an entity’s report to help meet the objectives of federal financial reporting.among other things, sffac no. 2 supports',
11057:'reporting both budget information and operating performance i.e., proprietary information to meet the needs of users and the objectives of',
11058:'reporting. the budget information focuses on the obligation and outlay of financial resources to acquire or provide goods and services',
11059:'as defined by budget concepts. operating performance information focuses on the cost of resources used as defined by accrual accounting',
11060:'standards. 89. budgetary and financial accounting information are complementary, but both the types of information and the timing of their',
11061:'recognition is necessarily different because of the difference in focus. to better understand the differences and make better use of',
11062:'the complementary information provided, information needs to be provided to reconcile the use of budgetary resources to acquire or provide',
11063:'goods and services with the net cost of using those goods and services. an approach to doing this was explored',
11064:'in the exposure draft, accounting for revenue and other financing sources, and received substantial support from respondents. therefore, entityand displayisbeing',
11065:'amendedto include in itsconcepts the need to communicate information about the differences between the use of resources as reported in',
11066:'the budget and in the net cost of operations. amendments to sffac no. 2, entityand display 90. the following heading',
11067:'and two paragraphs numbered 91 and 92 in this document are added to the section of sffac no. 2 titled',
11068:'“displaying financial information.” reconciliation statement—budgetary and financialaccounting 91. subobjective 1c of the budgetary integrity objective states that information is needed',
11069:'to help the reader to determine how information on the use of budgetary resources relates to page 32 sffas 7',
11070:'fasab handbook, version 20 06/21 sffas 7 information on the costs of program operations and whether information on the status',
11071:'of budgetary resources is consistent with other accounting information on assets and liabilities. thisobjectivearisesbecause accrualbasedexpense measuresused in financial statements differ',
11072:'from the obligation and outlaybased measures used in budgetary reporting. 92. tosatisfythisobjective,informationisneededaboutthedifferencesbetweenbudgetaryand financial i.e., proprietary accounting that arise as a',
11073:'result of the different measures. this could be accomplished through a budget and accrual reconciliation bar that reconciles the net',
11074:'budgetary outlays for a federal entitys programs and operations to the net cost of operating that entity. the data presented',
11075:'could be for the reporting entity as a whole, forthemajorsuborganizationunits, formajorbudgetaccounts,orforaggregations of budget accounts, rather than for each individual budget',
11076:'account of the entity. 93. the budgetand accrualreconciliation is added to sffacno. 2ssuggested listof items included in the section titled',
11077:'financial reporting for an organizational entity. in addition, a footnote referencing the reconciliation of net costs to outlays should be',
11078:'added stating the following: omb will provide guidance regarding details of the display for the budget andaccrual reconciliation, including whether',
11079:'it should bepresentedas abasic financial statement or as aschedule in the notes to the basic financial statements. 94. the following',
11080:'heading and paragraphs numbered 95 through 101 in this document are added to the section of sffacno. 2 titled “recommended',
11081:'contentsfor the recommended displays.” budget andaccrual reconciliation 95. the purpose of the reconciliation of net costs to outlays is to',
11082:'explain how budgetary resources outlayed during the period relate to the net cost of operations for the reporting entity. this',
11083:'information should be presented in a way that clarifies the relationship between the outlays reported through budgetary accounting and the',
11084:'accrual basis of financial i.e., proprietary accounting. by explaining this relationship, the reconciliation provides the information necessary to understand how',
11085:'the budgetary outlays finance the net cost of operations and affect the assets and liabilities of the reporting entity. the',
11086:'appropriate elements for the reconciliation are indicated in the following paragraphs. they provide logical groupings of reconciling items that help',
11087:'the reader move from outlays to net cost of operations. 96. net cost of operations is from the statement of',
11088:'net cost. page 33 sffas 7 fasab handbook, version 20 06/21 sffas 7 97. components of net cost that are',
11089:'not part of net outlays are most commonly a the result of allocating assets to expenses over more than one',
11090:'reporting period e.g., depreciation and the writedown of assets due to revaluations, b the temporary timing differences between outlays/receipts and',
11091:'the operating expense/revenue during the period, and c costs financed by other entities imputed interentity costs. 98. components of net',
11092:'outlays that are not part of net cost are primarily amounts provided in the current reporting period that fund costs',
11093:'incurred in prior years and amounts incurred for goods or services that have been capitalized on the balance sheet e.g.,',
11094:'plant, property and equipment acquisition and inventory acquisition. 99. other temporary timing differences reflect special adjustments e.g., prior period adjustments',
11095:'due to correction of errors. 100. net outlays is the summation of the above amounts and equals the statement of',
11096:'budgetary resources net outlays amount. 101. the preparer should present material amounts separately in the reconciliation and discuss these in',
11097:'the narrative. the use of other captions should be minimized and individually material amounts should not be netted to report',
11098:'an immaterial amount. 102. the following is an example for the financial statement format. this format and its narrative will',
11099:'be added to the appendices of sffac no. 2. entity and display,appendix 1g example financial statement formats budget andaccural reconciliaiton',
11100:'narrative budgetary and financial accounting information differ. budgetary accounting is used for planning and control purposes and relates to both',
11101:'the receipt and use of cash, as well as reporting the federal deficit. financial accounting is intended to provide a',
11102:'picture of the governments financial operations and financial position so it presents information on an accrual basis. the accrual basis',
11103:'includes information about costs arising from the consumption of assets and the incurrence of liabilities. the reconciliation of net outlays,',
11104:'presented on a budgetary basis, and the net cost, presented on an accrual basis, provides an explanation of the relationship',
11105:'between budgetary and financial accounting information. the reconciliation serves not only to identify costs paid for in the past and',
11106:'those that will be paid in the future, but also to assure integrity between budgetary and financial accounting. the analysis',
11107:'below illustrates this reconciliation by listing the key differences between net cost and net outlays. page 34 sffas 7 fasab',
11108:'handbook, version 20 06/21 sffas 7 unrealized valuation loss on investment in the reconciliation is related to the write down',
11109:'of security investment due to recent market volatility, which did not result in an outlay but did result in a',
11110:'cost. the large increase of accounts payable compared to last year is because this years rent expense has not been',
11111:'paid but was included in the net cost this year and not included in the outlays. the large variance in',
11112:'the transfers in/out without reimbursement between fiscal year fy 201x and fy201x is primarily due to the transfer of program',
11113:'management responsibility from agency 1 to agency 2 as discussed in further detail in note x. in addition, the decrease',
11114:'in imputed financing source is a result of the payment in fy201x for the abc settlement. this is an illustration',
11115:'of what might be presented in the narrative paragraph. it is an example of how to explain the material line',
11116:'items in the reconciliation and describes why some material line items either increase or decrease net cost but do not',
11117:'have the same impact on net outlays. page 35 sffas 7 fasab handbook, version 20 06/21 sffas 7 reconciliation examplefor',
11118:'the year ended september 30, 201x intrawith the total fy governmental public 201x net cost $xxx $xxx $xxx components of',
11119:'net cost that are not part of netoutlays: property, plant, and equipment depreciation xxx xxx xxx property, plant, and equipment',
11120:'disposal & xxx xxx xxx revaluation yearend credit reform subsidy reestimates xxx xxx xxx unrealized valuation loss/gain on investmentsxxx xxx',
11121:'xxx increase/decrease in assets: accounts receivable xxx xxx xxx loans receivable xxx xxx xxx investments xxx xxx xxx other assets',
11122:'xxx xxx xxx increase/decrease in liabilities: accounts payable xxx xxx xxx salaries and benefits xxx xxx xxx insurance and guarantee',
11123:'program liabilities xxx xxx xxx environmental and disposal liabilities xxx xxx xxx other liabilities unfunded leave, unfunded feca, xxx xxx',
11124:'xxx actuarial feca other financing sources: federal employee retirement benefit costs paid by opm xxx xxx xxx and imputed to',
11125:'the agency transfers out in without reimbursement xxx xxx xxx other imputed financing xxx xxx xxx total components of net',
11126:'cost thatare not part ofnet outlays xxx xxx xxx components of net outlays that are not part of netcost: effect',
11127:'of prior year agencies credit reform subsidy rexxx xxx xxx estimates acquisition of capital assets xxx xxx xxx acquisition of',
11128:'inventory xxx xxx xxx acquisition of other assets xxx xxx xxx other xxx xxx xxx page 36 sffas 7 fasab',
11129:'handbook, version 20 06/21 sffas 7 intrawith the total fy governmental public 201x total components of net outlays thatare not',
11130:'part ofnet costs xxx xxx xxx other temporary timing differences xxx xxx xxx net outlays $xxx $xxx $xxx18.3 18.3 total',
11131:'net outlays can be linked to the statement of budgetary resources, and equals gross outlays less actual offsetting collections and',
11132:'distributed offsetting receipts. the net outlays for intragovernmental and with the public listed in the format are calculated totals. page',
11133:'37 sffas 7 fasab handbook, version 20 06/21 sffas 7 appendixa: basis for conclusions 103. this appendix does not constitute',
11134:'authoritative guidance for those who prepare and audit general purpose federal financial reports. it summarizes important considerations that fasab members',
11135:'considered as they deliberated on this statement. it includes reasons for accepting certain approaches and rejecting others. individual board members',
11136:'gave greater weight to some factors than to others. this statement may be affected by later statements. the fasab handbook',
11137:'is updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within the',
11138:'text of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect',
11139:'future changes. the reader can review the basis for conclusions of the amending statement for the rationale for each amendment.',
11140:'104. fasabpublished the exposure draftaccounting for revenue and other financing sources in july 1995. the exposure draft included 18 specific',
11141:'questions for respondents and invited comments on other topics. the board received 42 letters of comment from the following sources:',
11142:'internal to external to source the u.s. govt. the u.s. govt. total users,academics & others19 2 7 9 auditors 10',
11143:'1 11 preparers 22 22 total 34 8 42 105. fasab also held a public hearing on the exposure draft',
11144:'on september 20, 1995. one individual a professor of accounting, representatives of four federal organizations that prepare financial statements, and',
11145:'representatives of one federal audit organization presented comments and discussed the exposure draft with the board. most of those who',
11146:'commented orally or in writing supported most of the provisions of the exposure draft. most responses did suggest widening the',
11147:'proposed disclosures for trust funds to include other funds with similar special accountability for dedicated collections. also, most respondents suggested',
11148:'retaining the customary business practice of recognizing bad debt expense for credit losses from exchange transactions. the board made these',
11149:'changes. see paragraph 128 for details on the change regarding credit losses. see paragraphs 226 and following for details on',
11150:'the change regarding disclosures for trust funds and similar funds. concurrently 19this category includes representational organizations, retired federal employees, federal',
11151:'employees responding as individuals, and federal contractors, as well as academics and other users page 38 sffas 7 fasab handbook,',
11152:'version 20 06/21 sffas 7 with the widening of disclosures about funds, the board required disclosures and supplementary information about',
11153:'any overand underfunding of the trust funds see para. 66, 67.4 and 68. the board also made other lessmaterial changesin',
11154:'the exposure draftas a result of considering the comments it received. 106. as a result of further information received from',
11155:'irs following the exposure draft, the board made terminology changes with respect to “preassessments,” now referred to as “compliance assessments,”',
11156:'and “proposed assessments, now called “preassessment work in process.” more importantly, the board provided for the possibility that amounts for',
11157:'preassessment workin processmightnot bereasonably estimable see para. 67.1.asa result of further information from customs following the exposure draft, the board',
11158:'added a supplementary information requirement for unasserted claims for refund see para. 67.2. these include potential drawbacks that may approximate',
11159:'20% of customs reported revenue. 107. after some deliberation, the board also concluded that it would permit a fuller application',
11160:'of accrual accounting for taxes and duties than is required by the general rule see para. 49. this would apply',
11161:'in the interim period between the issuance date of the statement and any reconsideration of thestandard bytheboard. coincident with extendingtheeffective',
11162:'date of the standard for one year beyond that proposed in the exposure draft, and because of the importance of',
11163:'accurate information, the board decided to require that material revenue related transactions should be accounted for under a double entry',
11164:'accounting system rather than estimatedand changed the designation of thisinformation fromsupplementary to disclosure information [text deleted by sffas no. 20]',
11165:'see par. 65.3. 108. finally, the board recognized that, under certain circumstances, reporting entities may appropriately report information about taxexpendituresand',
11166:'directed flows of resources that are related to their programs. however, the standard only permits this information to be presented',
11167:'as other accompanying information if it is properly qualified and explained see para. 69.3 and 69.4. exchange revenue special nature',
11168:'of government exchange transactions 109. revenue from exchange transactions plays a different role in government than in private business. most',
11169:'government output is provided to the public directly as the result of political decisions rather than in exchange for revenue.',
11170:'this is regardless of whether the output is the provision of services, transfer payments to individuals, or grants to state',
11171:'and local governments. likewise, most of the government’s receipts are collected as a result of page 39 sffas 7 fasab',
11172:'handbook, version 20 06/21 sffas 7 exercising its power to compel tax payments rather than earned by providing goods and',
11173:'services to the public at a price. 110. where government goods and services are provided in exchange for revenue, prices',
11174:'may be set to cover cost. sometimes they may be set in the market as they would be set by',
11175:'a business such as auctioning the right to drill for oil on government land. however, law or policy sets many',
11176:'prices below the amount that might be obtained in an auction or other market transaction such as fees for grazing',
11177:'rights. in some of these cases, prices may be set with little or no regard to the related cost such',
11178:'as fees to visit national parks. 111. exchange transactions also occur between entities within the government, sometimes as stipulatedbylawandinothercasesbymutualagreement. these',
11179:'exchangetransactions, also, are oftennot conducted at fairmarket prices. servicesare often provided toa program free, such as the litigation the department',
11180:'of justice does for the internal revenue service. another common example is a central computer used without charge by several',
11181:'programs within an agency. where charges are imposed, the internal sales price or reimbursement is not necessarily based on the',
11182:'full cost of providing the goods or services or on competitive market equivalents. 112. some exchange transactions within the government',
11183:'are carried out by intragovernmental revolving funds. in many instances, these funds have been established with the goal of recovering',
11184:'their full cost by selling their output. this would allow them to be selfsustaining from their sales, including the maintenance',
11185:'of their capital, without the need for additional appropriations. goods and services must be priced at full cost to achieve',
11186:'this goal, but full cost is not always charged. as a result, revolving funds have often failed to be self',
11187:'sustaining and have required extra appropriations.20 recognition: general considerations 113. matching revenue with cost. it is often said that private',
11188:'sector accounting matches expense with revenue to measure the net income of the business. this provides a measure of effort',
11189:'compared withaccomplishment that cannot be usedfor most government activities. most government activity either provides collective goods and service such as',
11190:'national defense and justiceorredistributesincomeandwealth asin benefit paymentsand grants. therefore, the government’s output—its goods, services, transfers, and grants—is usually not provided',
11191:'in exchange for voluntary payments. in such cases, directly measuring the value that the government’s activity adds to society’s welfare',
11192:'is difficult. 20evenrevolvingfunds that are selffinancing do not recover fullcostfromtheircustomers ifthey are not charged for all of their own costs,',
11193:'such as pension and retirement health benefits for their employees. page 40 sffas 7 fasab handbook, version 20 06/21 sffas',
11194:'7 114. the objectives of federal financial reporting focuses on cost in relationship to accomplishmentasthemainobjective inreportinganentity’soperatingperformance. thisis because of the',
11195:'fundamental importance of cost information. it is important to program managers in operating their activities efficiently and effectively. it is',
11196:'equally important to executive and congressional decision makers in making resource allocations. subobjectives 2aand 2b declare that: federal financial reporting',
11197:'should provide information that helps the reader to determine the costs of providing specific programs and activities and the components',
11198:'of, and changes in, these costs [and] the efforts and accomplishments associated with federal programs and the changes over time',
11199:'and in relation to costs.21 115. the board’s explanation of the operating performance objective defines more exactly what this means:',
11200:'expenses can be matched against the provision of services year by year. the resulting cost can then be analyzed in',
11201:'relationship to a variety of measures of the achievement of results.22 116. sffas 4, managerial cost accounting standards and concepts,',
11202:'discusses the need for government accounting to emphasize cost as a way to improve decision making and programmanagement. it saysthat',
11203:'goodcost information can be usedfor: 1 budgetingand cost control, 2 performance measurement, 3 determining reimbursements and setting fees, 4 program',
11204:'evaluations, and 5 economic choice decisions such as whether to contractout a project.23 117. to meet these goals, cost must',
11205:'be matched with the provision of goods and services to the public or other government entities. to determine the net',
11206:'cost of an exchange activity—i.e., the part of the cost that is not offset by revenue earned from the goods',
11207:'and services provided—the related revenue must be matched with the cost. 118. matching revenue with cost in a uniform manner',
11208:'is essential in evaluating agency performance and settingprice. costandrevenue must pertaintothesame output inorderto estimate the extent to which the revenue',
11209:'covers the cost. therefore, costs should be matched against the provision of goods and services with revenue matched against those',
11210:'costs and thus with revenue also matched against the same provision of goods and 21sffac no. 1, objectives of federal',
11211:'financial reporting, paragraphs 126 and 128. 22ibid., para. 124. for more extended discussion, see ibid., chapter 8. as explained there,',
11212:'difficulties arise in practice for many reasons, e.g., the specific measures that are appropriate and feasible will vary from program',
11213:'to program, outcomes are influenced by external factors as well as actions of government, focusing attention on selected measures can',
11214:'have unintended—and sometimes undesired—consequences, etc. 23sffas no. 4, managerial cost accounting standards and concepts, para. 3140. page 41 sffas 7',
11215:'fasab handbook, version 20 06/21 sffas 7 services. when this is done, the gross and net cost of an entity',
11216:'can be compared with the related outputs and outcomes to evaluate its operating performance, pricing policy, and economic decisions. similarly,',
11217:'when this is done, the net cost to the taxpayer can be estimated for the entity’s related outputs provided to',
11218:'the public. 119. the standards in this statement therefore use the accrual basis for recognizing exchange revenue and provide for',
11219:'matching exchange revenue against related cost as closely as practicable. the standards specify how the matching is to be achieved',
11220:'for different types of transactions. 120. assigning revenue to the costs of earning it. determining the net cost of producing',
11221:'outputs, providing programs, or carrying out missions will often be more important than determining the net cost for the reporting',
11222:'entity as a whole. areporting entity may have several missions carried out by different suborganizations, all of them having component',
11223:'programs and outputs. for each of these, both gross and net cost are important in evaluating performance and managing cost.',
11224:'furthermore, either an entity as a whole or its suborganizations and programs may have material costs that are not incurred',
11225:'to earn revenue, as well as material costs that are incurred for that purpose. therefore, the revenueearning and nonrevenueearning components',
11226:'need to be separately evaluated in order to assess the net cost of particular activities. additionally, various components may earn',
11227:'revenue but cover costs to different degrees. 121. in allthese cases,the netcostofthe reporting entityas awholedoesnotshowthe extentto which earned revenue covers',
11228:'the cost of providing a particular output. this can only be calculated for theentity’scomponents. determiningthe net cost for componentsistherefore essential',
11229:'to achieve the goals of the standards in this statement: to match exchange revenue with the gross cost of outputs',
11230:'and to offset exchange revenue against that related gross cost. 122. to be most useful, therefore, the gross costs and',
11231:'net cost of operations should be calculated by suborganization, program, or output. suborganizations are generally equivalent to responsibility segments as',
11232:'defined by the standards on managerial cost accounting.24 each responsibility segment must be able to assign full costs to the',
11233:'measurable outputsof its programs.25 as a result, users of general purpose federal financial reports will be able to relate the',
11234:'net costs of a program to program outputs and outcomes. 24see ibid., para. 7788. also see sffac no. 2, entity',
11235:'and display, para. 75 and footnote 14. 25sffas no. 4, managerial cost accounting standards and concepts, para. 89104 and 116143.',
11236:'page 42 sffas 7 fasab handbook, version 20 06/21 sffas 7 123. preparers should decide the exact classification of suborganizations',
11237:'and programs based on the nature of the entity, the missions and outputs for its gprastrategic and annual performance plans,',
11238:'the concepts in entity and display, federal accounting standards, and omb’s bulletin prescribing the form and content of agency financial',
11239:'statements. exchange revenueshouldbe assigned tothe costsofoutputsunlessit isnotreasonablypossible todo so. if that cannot be done, exchange revenue should be assigned to',
11240:'the costs of programs, or, if that also is not reasonably possible, to the costs of suborganizations. assigning exchange revenue',
11241:'to the components of an entity in this way is more effective for performance evaluation, price setting, and other purposes',
11242:'than assigning it to the reporting entity as a whole. 124. the gross cost, the exchange revenue,and the difference or',
11243:'net cost should be determined for each such component. the net cost and gross cost for each component could be',
11244:'used for such purposes as comparison with the outputs and outcomes of that component in order to assess the efficiency',
11245:'and effectiveness with which resources were used to achieve results.26 125. good information on gross cost and net cost, determined',
11246:'and analyzed in this manner, is essential to the successof the government performance and resultsact of 1993 gpra27 in relating',
11247:'costs to accomplishments. gprarequires agencies to set performance goals for program activity and establish performance indicators to measure outputs and',
11248:'outcomes of the program activity. performance measurement under gprais to begin in fy 1999, and pilot projects started in fy',
11249:'1994. under the omb plan to carry out gpra, performance reportswillshowtheresultsof whatwasactuallyaccomplishedoutputsandoutcomeswith the resources used. the net cost of operations',
11250:'as well as gross cost should be a fundamental measure of these resources. 126. uncollectible amounts. when realization of the',
11251:'full amount of recognized revenue is not probable, the standards require that a separate provision be made if the uncollectible',
11252:'amount can be reasonably estimated. the board defines “probable” as “more likely than not.” this definition, and measurability, are the',
11253:'criteria for recognizing losses due to uncollectible amounts of accounts receivable under federal accounting standards.28 127. government entities have an',
11254:'extraordinary responsibility to be accountable—to the president, the congress, and the public. because of this, it is appropriate to show',
11255:'26as noted previously, the specific measures of program economy, efficiency, and effectiveness that are feasible and appropriate will vary among',
11256:'programs. 27public law 10362. 28sffas no. 1,accounting for selectedassets and liabilities, paragraphs 4445 and 12430. page 43 sffas 7 fasab',
11257:'handbook, version 20 06/21 sffas 7 separately1the fullrevenue dueunder their establishedpricingarrangements, and 2the amount of this revenue that they estimate',
11258:'will not be realized. 128. the exposure draft proposed that the entire provision for estimated uncollectible amounts be recognized as',
11259:'a revenue adjustment. it reasoned that, if some of the potential revenue is not likely to be received, this should',
11260:'be viewed as the failure to realize revenue or the absence of an inflow of resources. some of the respondents',
11261:'also viewed the entire uncollectibleamount asashortfallinrevenue,buta majoritybelievedthat creditlosseswere a cost of doing business. businesses extend credit in order to finance',
11262:'their customers, and any losses in this line of activity are another kind of expense. such treatment is required for',
11263:'direct loans and loan guarantees that follow the credit reform accounting standards of sffas no. 2. aparticularly telling argument, made',
11264:'by some, was that credit losses should be acomponent of fullcost when establishingpricesforthesaleofgoodsand services. this would be facilitated by recognizing',
11265:'credit losses as a bad debt expense rather than a revenue adjustment. for these reasons, the board concluded that credit',
11266:'losses should be recognized as an expense. 129. uncollectible amounts due to other reasons— such as returns, allowances, and price',
11267:'redeterminations—would, however, be recognized as revenue adjustments. this treatment is parallel with the treatment in this statement of taxes and',
11268:'other nonexchange revenue, where refunds, adjustments, and abatements are deducted from gross revenue rather than recognized as an expense. under',
11269:'current practice and private sector standards, these uncollectible amounts are commonly treated as revenue adjustments but are not always separately',
11270:'disclosed. 130. the bad debt expense and the revenue adjustment each needs to be separately shown in order for the',
11271:'entity to be accountable for the different reasons why revenue is not collectible. 131. the allowance for bad debts should',
11272:'be based on an analysis of both individual accounts and groupsof accounts, as appropriate underthe circumstances. thisprinciple isexplained in the',
11273:'standard for accounts receivable.29 for intragovernmental transactions, allowances for bad debts may not always be needed, because full payment can',
11274:'often be assumed. recognition: special cases 132. the general principles underlying exchange revenue recognition are supplemented for special cases. 29ibid.,',
11275:'para. 4451 and 131133. page 44 sffas 7 fasab handbook, version 20 06/21 sffas 7 133. gains and losses. gains',
11276:'and lossesare recognized rather than revenues and expenses in order to differentiate unusual or nonrecurring transactions for evaluating an entity’s',
11277:'performance or setting its prices. material gains and losses are expected to be infrequent. they would normally be of a',
11278:'type that management would want to be considered in appraisals of its operations. 134. direct loans and loan guarantees. standards',
11279:'for direct loans and loan guarantees were established in sffas no. 2, accounting for direct loans and loan guarantees. the',
11280:'basic principle is to recognize the subsidy cost of the direct loan or loan guarantee as an expense when the',
11281:'loan is made. subsidy cost is inherently a net concept: the present value of estimated cash outflows less the present',
11282:'value of estimated cash inflows over the life of the loan. this requires that the present value of estimated fees',
11283:'be recognized as a deduction in calculating subsidy cost, and that the present value of estimated defaults be included in',
11284:'calculating the subsidy cost. the standards for direct loans and loan guarantees that follow credit reform accounting thus differ from',
11285:'the standards in the present statement in three respects: revenue is deducted in calculating the subsidy cost, bad debts are',
11286:'included in calculating the subsidy cost, and both revenue and bad debts are measured as present values. 135. determiningthesubsidycostinthiswayisa methodofmatching',
11287:'revenue withcost,and itis also a method of matching the subsidy cost with the provision of the subsidy to the public.',
11288:'sffas no. 2 is therefore consistent with the objectives of this statement for exchange revenue, and the standards in this',
11289:'statement do not apply to the recognition and measurement of revenue and credit losses for direct loans and loan guarantees',
11290:'that follow credit reform accounting. this exception includes pre1992 direct loans and loan guarantees that have been restated on a',
11291:'present value basis. the guidance for classifying transactions inappendix b reflects the provisions of sffas no. 2. 136. exchange revenue',
11292:'collected for others. many entities that collect exchange revenue keep that revenue for their own use. revolving funds keep the',
11293:'revenue they earn. by their nature, they are expected to finance at least a material part of their cost by',
11294:'selling goods and services in a continuing cycle of businesstype activity. other collecting entities may also keep therevenuetheyearn. sometimes, however,',
11295:'theexchange revenueis transferred to the general fund or to other entities in whole or in part. for example, the southeastern',
11296:'andsouthwestern poweradministrations transfertherevenuetheycollect fromthe public to the general fund of the treasury; similarly the westernarea poweradministration, while retaining some of',
11297:'the revenue that it collects, transfers the rest to the general fund and various special funds designated by law. 137.',
11298:'as a general rule, exchange revenue transferred to others must be offset against the collecting entity’s gross cost to determine',
11299:'its net cost of operations. exchange revenue reduces the net cost of operations incurred by the entity in producing outputs,',
11300:'regardless of page 45 sffas 7 fasab handbook, version 20 06/21 sffas 7 whether the entity keeps the exchange revenue',
11301:'for its own use or transfers it to another operating entity or the general fund. likewise, exchange revenue reduces the',
11302:'net cost of the entity’s operations to the taxpayer regardless of its disposition. therefore, all exchange revenuerelatedtothe cost of operationsmust',
11303:'be deductedfromgrosscost to determinethe net cost of operations for the entity. 138. any exchange revenue that is transferred to others,',
11304:'however, does not affect the collecting entity’s net position. therefore, as required by the standards for other financing sources, such',
11305:'exchange revenue is recognized as a transferout in calculating the entity’s operating results. 139. the only exception to the general',
11306:'rule occurs when the entity recognizes virtually no cost in earning the exchange revenue, as explained in the following section.',
11307:'140. exchange revenue unrelated to recognized cost. in exceptional cases, an entity may recognize virtually no costs in connection with',
11308:'earning exchange revenue that it collects. a major example for many years has been the minerals management service mms of',
11309:'the department of the interior. it manages energy and other mineral resources on the outer continentalshelfocsandcollectsrents, royalties,and bonusesdue thegovernment and',
11310:'indian tribes from minerals produced on the ocs and other federal and indian lands. the rents, royalties, and bonuses are',
11311:'exchange revenues, earned by sales in the market. if the value of natural resources were recognized as an asset by',
11312:'mms, then depletion could be recognized as a cost according to the units of production method as minerals were extracted.30',
11313:'the revenue from rents, royalties, and bonuses could then be matched against mms’s gross cost, including depletion and minor other',
11314:'costs, to determine its net cost of operations. 141. mms does not recognize a depletion cost for various reasons, including',
11315:'the fact that under present accounting standards the value of natural resources is not recognized as an asset. as a',
11316:'result, this exchange revenue cannot be matched against the economic cost of operations and bears little relationship to the recognized',
11317:'cost of mms. therefore, it should not be subtracted from mms’s gross cost in determining its net cost of operations.',
11318:'if it were subtracted, the relationship between mms’s net cost of operations and its measures of performance would bedistorted. the',
11319:'net cost of operationsof the department of the interior would likewise be distorted. 142. mms collects this revenue and distributes',
11320:'it to the recipients designated by law: the treasury, certain entities within the government to which amounts are earmarked, the',
11321:'30methods of calculating depletion based on the economic cost of extraction, such as represented here, should be distinguished from depletion',
11322:'methods allowed under the internal revenue code. page 46 sffas 7 fasab handbook, version 20 06/21 sffas 7 states, and',
11323:'indian tribes and allottees. mms should account for the exchange revenue it collectsasan agent for the u.s. treasury or other',
11324:'federal component entities asa custodial activity, whichis an amountcollectedortobecollectedfor otherfederalentities, in the same way as the internalrevenue service accountsforthe nonexchange',
11325:'revenue that it collects. mms collection activity for nonfederal entities may meet the definition of fiduciary activity and, if so,',
11326:'should be accounted for in accordance with sffas 31, accounting for fiduciary activities. because the revenue collected by mms is',
11327:'exchange revenue, it should be recognized and measuredundertheexchange revenuestandardswhenthe rents, royalties, and bonuses are due pursuant to the contractual agreements.',
11328:'sffas 31, accounting for fiduciary activities, amended the provisions in paragraph 142. this amendment is effective for periods endingafterseptember 30,',
11329:'2008. to viewtheexplanatory text prior to this date, please see the previous edition of the fasab handbook at https://fasab.gov/accountingstandards/ archivedversions/',
11330:'143. the rents, royalties, and bonuses transferred to treasury for the general fund or to other governmentreportingentitiesshouldbe recognizedsimilarlybytheserecipient entities.the revenueisexchange',
11331:'revenueandshouldberecognized andmeasured undertheexchange revenue standards. however, neither the government as a whole nor the other recipient entities recognize the natural',
11332:'resources as an asset and depletion as a cost. therefore, the revenue should not offset the cost of operations for',
11333:'the u.s. government as a whole or for these entities. as in the case of mms, offsetting cost by this',
11334:'revenue would distort the relationship between the net cost of operations and the measures of the performance of these entities.',
11335:'the exchange revenue should instead be a financing source in determining the operating results and change in net position. 144.',
11336:'the board is addressing the accounting for natural resources in a separate project. if it concludes that the value of',
11337:'mineral rights should be recognized as an asset and depletion as a cost, it would be appropriate to recognize the',
11338:'exchange revenue from rents, royalties, and bonuses in determining the net cost of operations. 145. although mms is the most',
11339:'prominent case of an entity collecting exchange revenue for which it recognizes virtually no cost, there can be other instances.',
11340:'the federal communications commission collects exchange revenue from the auction of the radio spectrum. such revenue should be accounted for',
11341:'in the same wayas the revenue collected by mms. 146. one respondent to the exposure draft asked about the meaning',
11342:'of the term “virtually no costs.” if an entity sells scrap metal or fully depreciated equipment, the exchange revenue or',
11343:'gain is not related to any cost that is recognized at the time of sale. these assets are page 47',
11344:'sffas 7 fasab handbook, version 20 06/21 sffas 7 recorded on the balance sheet ashaving no value at the time',
11345:'of sale, so the grossproceeds from the sale are not offset by any remaining book value in calculating the entity’s',
11346:'gain. however, unlike the auctions of petroleum rights or the radio spectrum, costs were recognized in past periods for the',
11347:'purchase of the materials or the use of the equipment. therefore, offsetting the entity’s cost by its gains from sale',
11348:'provides a more accurate measure of its net cost of operations over time for comparison with measures of its performance',
11349:'over time. the standard has been clarified to say that the term “virtually no costs” meansthat virtuallyno costsare recognized during',
11350:'past periodsas well asduring the current period. 147. it is also possible thatan entity’s cost accounting may notassign any coststo',
11351:'byproducts of itsmajorgoodsorservices. however, cost isrecognized fortheactivitiesthatproducedboth the major products and the byproducts. all revenue earned in connection with these',
11352:'activities needsto be offset against the cost of these activities in determining the entity’s net cost for the purpose of',
11353:'making comparisons with its measures of performance. 148. specific goods orservices made to ordercompared with goods made for inventory. when',
11354:'an entity produces goods for sale, revenue can be matched with cost in either of two ways: 1 revenue and',
11355:'expense can be recognized as costs are incurred, or 2 the expenditures can be recorded in inventory, with the revenue',
11356:'and expense recognized subsequently when the goods are delivered to the customer. 149. for specific goods made to order under',
11357:'a contract or specific services produced to order, the standard requires that revenue be recognized as goods and services are',
11358:'acquired to fulfill the contract. more precisely, the standard requires that revenue, as determined by the contract price, be recognized',
11359:'in proportionto the estimated total cost as goodsand services are acquired to fulfill the contract. this means that the percentageofcompletion',
11360:'method must be used and the amounts of revenue must be calculated based on the costs of the goods and',
11361:'services acquired to date to fulfill the contract in relationship to the estimated total cost under the contract. if the',
11362:'time period and estimated total cost are uncertain, revenue recognition should be deferred until a firm basis can be established',
11363:'to assign cost. goods and services made or produced to order include such projects as building construction and ship repair,',
11364:'where costs are incurred over a period of time to provide a particular good or service to a specific customer',
11365:'according to characteristics determined by contract. they do not include the sale of standard services, such as electricity, under a',
11366:'contract. 150. recognizing revenue and cost in this way provides an uptodate measure of the entity’s operations in providing goods',
11367:'and services. the revenue and cost are generated by the entity’s activities during the current reporting period, unlike alternative recognition',
11368:'standards. in particular, this is unlike the completed contract method, under which the revenue and cost recognized in a period',
11369:'may have been generated substantially during page 48 sffas 7 fasab handbook, version 20 06/21 sffas 7 previous periods. because',
11370:'the revenue and cost recognized in the reporting period are upto date, they can more readily be compared with each',
11371:'other and with current outputs in evaluating the entity’s performance and pricing policy in that period. 151. in some instances,',
11372:'however, there may be no material difference between the percentage ofcompletion method and the completed contract method. this is especially',
11373:'likely for small or shortterm contracts. in such instances, the completed contract method could be followed. 152. the standard also',
11374:'requires that when a loss on a contract is probable more likely than not and measurable reasonablyestimable, it should be',
11375:'recognized over the life of the contract in proportion to the estimated total cost instead of immediately. this will come',
11376:'about by continuing to recognize revenue in proportion to estimated total cost and by continuing to recognize costs as goods',
11377:'and services are acquired to fulfill the contract. this requirement isan exception to sffas no. 5,accounting for liabilitiesof the federal',
11378:'government, under which a loss on a contract is recognized at the time when expected costs exceed expected revenue. the',
11379:'board believes this exception is appropriate, because it provides a more accurate measure of the entity’s net cost of operations',
11380:'during each reporting period than if the entire estimated loss were recognized in the single period when it was concluded',
11381:'that the loss was probable and measurable. the entire estimated loss, however, would be disclosed. 153. the standard is different',
11382:'when an entity produces goods to be kept “on the shelf” until ordered. it requires that manufacturing costs be charged',
11383:'to inventory and that revenue not be recognized until the goods are delivered to the customer. costs and revenue are',
11384:'recognized later than when goods and services are made to order, because there is less assurance of revenue at the',
11385:'time when the costs are incurred. the term “delivery to the customer” includes instances in which the sale has taken',
11386:'place and the goods have been segregated or set aside for delivery. 154. classification of interest on intragovernmental balances.large amounts',
11387:'of interest are paid and received on intragovernmental balances. most trust funds and some special funds and revolving fundshave invested',
11388:'in specialtreasurysecuritieson which they earn interest due from the treasury. treasury and the federal financing bank have made loans to',
11389:'a number of funds, on which those funds incur interest expense and on which interest is due to the treasury',
11390:'or the bank. the recorded interest revenue should be classified as exchange or nonexchange depending on the predominant source of',
11391:'funds upon which the interest payment isbased. other intragovernmental balancesbear no interest. the board is considering a project that might',
11392:'result in imputing interest where the balances bear no interest or the interest does not reflect the cost of borrowing',
11393:'by the treasury. page 49 sffas 7 fasab handbook, version 20 06/21 sffas 7 155. the interest on these intragovernmental',
11394:'liabilities has the form of an exchange transaction, but often it does not also have the substance of an exchange.',
11395:'the standards in this statement and the guidance inappendix b, “guidance on the classification of transactions,” differentiate among inflows of',
11396:'resources according to whether or not they should be deducted from an entity’sgrosscost in determining itsnetcostof operations. this differentiation depends',
11397:'fundamentally on whether the inflow of resources is related to costs that the entityincursand recognizesin order to produce outputs and',
11398:'the inflow of resources. 156. when applied to the receipt of interest by a government account from the treasury, this',
11399:'criterion implies that interest should be classified in the same way as the predominant source of revenue tothefund: asexchange revenue,',
11400:'if the predominant source isexchange revenue; andasnonexchange revenue, ifthepredominantsourceisnonexchangerevenue. if the investedfundscome fromexchange revenue, theinterest on these fundsderivesfrom exchange revenue',
11401:'and the costs incurred to earn that revenue; if the invested funds come from nonexchange revenue, the interest on these',
11402:'funds is based ultimately on the government’s power to compel payment rather than on a market transaction. with certain exceptions,',
11403:'this means that interest received by trust funds and special funds should be classified as nonexchange revenue, whereas interest received',
11404:'by revolving funds and trust revolving fundsshould be classifiedasexchangerevenue. thisisexplainedbelow, together with the exceptions and certain analogous transactions. 157. invested',
11405:'balances of trust funds and special funds predominantly derive from earmarked taxes, which are nonexchange transactions with the public e.g.,',
11406:'employment taxes and gasoline taxes. to a lesser extent they derive from other financing sources e.g., the general fund payment',
11407:'appropriated to the supplementary medical insurance fund. the balances are not earned in exchange transactions by the entity’s operations. most',
11408:'fundamentally, they are not produced by operations in which the entity incurs any costs. therefore, the interest on treasury securities',
11409:'should not be deducted from the gross costs of the trust fund or special fund in determining its net cost',
11410:'of operations. as a result, that interest should not be classified as an exchange revenue. it should instead have the',
11411:'same classification as the predominant source of the invested balances, which for most trust funds and special funds is nonexchange',
11412:'revenue. 158. the invested balances ofrevolving funds,on the other hand,predominantly derive from the funds’ businesstype operations. revolving funds need capital',
11413:'in their operations and may invest some of that capital in treasury securities. since the holding of invested balances and',
11414:'the sale of goods and servicesare both integral to the funds’ operations, the interest on theirsecuritiesisrelated to the funds’costsof operations',
11415:'just asisthe revenue earned from selling goods and services. furthermore, the source of the invested balances is predominantly revenue previously',
11416:'earned from the sales of goods and services, for which the funds incurred costs of operations when that revenue was',
11417:'earned. the interest they receive should therefore be classified in the same way as their revenue earned from selling page',
11418:'50 sffas 7 fasab handbook, version 20 06/21 sffas 7 goods and services and should likewise be deducted from gross',
11419:'cost in determining the net cost of operations. for this reason, interest earned by revolving funds should be classified as',
11420:'exchange revenue. 159. afewrevolving fundsare classified by law as trustfunds. trustrevolving funds need capital in their operations, just like other',
11421:'revolving funds, the source of which is predominantly the revenuetheyhaveearned. when some of theircapital isinvestedintreasurysecurities, the interest is related to',
11422:'their cost of operations in the same way as the revenue earned from selling services; and the source is predominantly',
11423:'revenue previously earned from the sales of services, for which they incurred costs of operations. their interest should therefore be',
11424:'classified in the same way as for other revolving funds, which is exchange revenue. 160. the three previous paragraphs explain',
11425:'the rationale for the normal classification of interest received by trust funds, special funds, revolving funds, and trust revolving funds.',
11426:'however, in some cases, the source of balances for trust funds and special funds may not be predominantly nonexchange revenue,',
11427:'and the source of balances for revolving funds and trust revolving funds may not be predominantly exchange revenue. for example,',
11428:'the main source of balances for two major trust funds, the civil service retirement and disability fund and the military',
11429:'retirement fund, consists of exchange revenue and other financing sources. in such exceptional cases, interest should be classified in the',
11430:'same way as the predominant source of balances rather than according to the normal rule. 161. agencies may receive authority',
11431:'to borrow from treasury or the federal financing bank, and they pay interest on their borrowings. the interest is a',
11432:'cost to the agency and an inflow of resources to the treasury. the treasury may be deemed to have borrowed',
11433:'from the public to finance the outlays for which the agency borrowed, and thus to have incurred a corresponding interest',
11434:'cost of its own. the interest received bytreasury from the agency is therefore related to treasury’s cost of borrowing from',
11435:'the public and should be classified as an exchange revenue. 162. when debt securities are retired before maturity, there may',
11436:'be a difference between the reacquisition price and the net carrying value of the extinguished debt. this difference is a',
11437:'gain or loss that should be classified in the same category as the interest on the extinguished debt. measurement 163.',
11438:'exchange transactions with the public ordinarily take place at prices set by the agency or the congress, such as electricity',
11439:'rates, book prices, and interest on delinquent taxes. sometimes the market sets the price, as with the rents and royalties',
11440:'from companies that bid to explore and produce oil and gas on the outer continental shelf. in either case the',
11441:'page 51 sffas 7 fasab handbook, version 20 06/21 sffas 7 actual prices represent the inflow of resources to the',
11442:'entity and, therefore, are the appropriate basis for measuring revenue. 164. exceptfor pricesset by law, omb circular no.a25 and other',
11443:'regulations generally provide that user charges for transactions with the public should be set at full cost or market price.31',
11444:'however, compliance with these regulations is partial, and potential revenue is not realized in many cases. to help report users',
11445:'understand how the entity’s operations are financed, disclosures are needed about 1 differences in pricing policy from the guidance in',
11446:'omb’s circular on user chargesand 2 transactions where prices are set by law or executive order and are not based',
11447:'on full cost ormarket pricing. other accompanying information isneeded about the revenue foregone in these transactions but only if a',
11448:'reasonable estimate is practicable. the other accompanying information should explain whether, and to what extent, the quantity demanded was assumed',
11449:'to change as a result of the change in price. 165. circulara25 defines “full cost” as “all direct and indirect',
11450:'costs to any part of the federal government of providing a good, resource, or service.”32 this generic definition and the',
11451:'accompanying examples in the circular are generally consistent with the definition of “full cost” in the managerial cost accounting standards33',
11452:'and the recognition and measurement of manyparticularexpensesin otherfederal accounting standards.34 however, unlike those standards, circulara25 also includes as part of',
11453:'the definition of full cost an annual rate of returnonland,structures, equipment, andothercapitalresourcesunlesstheyarerented;35 and it includes depreciation not only on structures',
11454:'and equipment that are classified as general pp&e property, plant, and equipment, which is required by federal accounting standards,but alsoon',
11455:'structuresandequipment classified asstewardshippp&e, whichina 31circular no.a25, user charges, asrevised july 8, 1993, establishes federal policyregarding feesassessed for governmentservicesandforthesaleor useofgovernmentgoodsorresources. itimplementsthe',
11456:'provisionsoftitle vof theindependent officesappropriationsact of 195231 u.s.c. 9701, which generally calls for “each service or thing of valueprovidedby anagency .',
11457:'toaperson . to be selfsustaining to the extentpossible” and says that charges shall be based on a number of specified',
11458:'criteriaincluding “the costs to the government.” the guidance of circulara25 also appliestotheassessment ofuser chargesunderother statutes. however,circulara25isintendedtobe applied only to theextent',
11459:'permitted by law or executive order; it does not apply to the legislative and judicial branches or to mixed ownership',
11460:'government corporations; andits requirements are deemed to be met by other omb circulars that provide guidanceconcerning a specific user charge',
11461:'area. 32circulara25, section 6d1. 33sffas no. 4, managerial cost accounting standards and concepts, para. 93107. 34for example, the standards for',
11462:'expenses related to credit are stated in sffas no. 2, accounting for direct loans and loan guarantees; and numerous standards',
11463:'for expense are stated in sffas no. 5, accounting for liabilities of the federal government. 35the board currently has a',
11464:'project to consider whether the rate of return on capital should be recognized as a cost in financial accounting statements.',
11465:'page 52 sffas 7 fasab handbook, version 20 06/21 sffas 7 few cases may be used in connection with the',
11466:'production of goods or services for sale.36 aside from these differences, the cost accounting and other accounting standards should enable',
11467:'the circulara25 definition of full cost to be measured more accurately than has been possible heretofore.37 166. the appropriate basis',
11468:'for measuring revenue from intragovernmental exchange transactions is likewise the actual price or reimbursement that the seller receives from the',
11469:'buyer. accounting systems should be able to provide the information needed to set the reimbursement at full cost, but often',
11470:'the full cost is not charged. in these cases, the amount of the reimbursement is an incomplete measure of the',
11471:'economic value of the transaction. when one entity receives goods or services from another without paying all related costs, the',
11472:'net operating cost of the receiving entity is understated if it does not recognize by imputation the additional cost paid',
11473:'by the providing entity. 167. other federal financial accounting standards require such interentity cost subsidies to be recognized by the',
11474:'receiving entity in certain cases.38 this statement, in the section on “other financing sources,” provides standards to recognize other financing',
11475:'sources that are imputedtooffsetwhateversubsidycoststhoseotherstandardsrequiretoberecognized and imputed. accounting for the imputed cost of goods and services provided by one government entity',
11476:'to another requires the exercise of judgment, based on the specific circumstances of each case. therefore, whether costs are imputed',
11477:'or not, the providing entity should disclose an explanation of the amount and reason for material disparities between the billing',
11478:'if any and the full cost. 36the extent of differences between circulara25 and federal accounting standards can be found by',
11479:'comparing circulara25, section 6d1b, with sffas no. 6, accounting for property, plant, and equipment. 37circulara25 says that “full cost shall',
11480:'be determined or estimated from the best available records of the agency, and new cost accounting systems need not be',
11481:'established solely for this purpose.” see section 6d1e. the cost accounting and other standards should improve agency records and specify',
11482:'the nature of costs more precisely and comprehensively. 38the general principles for recognizing imputed cost are stated in sffas no.',
11483:'4, managerial cost accounting standards and concepts, para. 105115. the accounting is similar to the accounting for employee pensions and',
11484:'retirement health benefits, where the entity administering the plan does not provide goods or services to the reporting entity but',
11485:'does pay some or all of the cost. see sffas no. 5, accounting for liabilities of the federal government, para.',
11486:'5693 and 148181. page 53 sffas 7 fasab handbook, version 20 06/21 sffas 7 nonexchange revenue inherent limitations 168. inherent',
11487:'limitations on the ability to perform accrual accounting for nonexchange revenue. accrual accounting recognizes the financial effects of transactions and',
11488:'events when theyoccur, whether or not cash changes handsat that time.as it does with respect to exchange revenue, full accrual',
11489:'accounting for nonexchange revenue would enhance financial planning, control, and accountability. full accrual accounting could provide important data with respect',
11490:'to future cash flows and tax policy and could improve the ability to evaluate the performance of the collecting entities',
11491:'and the exercise of their custodial responsibilities. 169. unfortunately, the degree of accrual accounting that is practicable to perform for',
11492:'taxes and duties is limited by difficulties in ascertaining the amount of revenue arising from the underlying events and by',
11493:'the assessment processes used to manage the collecting functions. taxpayers may not ascertain taxable income until after the underlying events.',
11494:'they may not file returns on their due dates, and due dates are generally set by the administrative processes after',
11495:'the occurrence of the underlying event. also, the extent of noncompliance is a function of the laws establishing these entities',
11496:'and the expectations by the congress and theadministration about how diligently the collecting entities should perform theircollection functions. these inherent',
11497:'limitationson theabilityto performaccrual accounting were considered by the board. practical limitations 170. practical limitations were also considered by the board.',
11498:'the board’s standards for accrual accounting require that accruals mirror the established assessment processes of the collecting entities. as such,',
11499:'they do not require, for example, the accrual of taxes or duties which are likely to be assessed under established',
11500:'processes, but only those that are actually assessed under the defined processes of the collecting entities. having accounting mirror the',
11501:'established processbywhichcollecting entitiesinteract with taxpayershasvalue, though arguably accounting for revenue should not be so limited. 171. at the time the',
11502:'board began deliberations on this standard, accounting systems necessary to determine even the limited revenue accruals thatare now required for',
11503:'taxes did notexist. the changes in systems required by this standard are limited to those necessary to mirror the established',
11504:'assessment processes. the board understands that the internal revenue service is attempting to improve its collection function and the related',
11505:'management information systems. because such systems must also provide accounting information, the board decided not to impose accounting standards at',
11506:'this time that might conflict with page 54 sffas 7 fasab handbook, version 20 06/21 sffas 7 systems changes needed',
11507:'to improve the efficiency and effectiveness of the collection process or go beyond the minimum changes considered necessary to enable',
11508:'the collecting entities to properly discharge their responsibilities. modified cash basis for taxes and duties 172. as a result of',
11509:'both the inherent limitations and the practical limitations accepted by the board, the accrual standard, as it applies to taxes',
11510:'and duties, might be best characterized as a “modified cash” basis of accounting. these limitations on full accrual accounting required',
11511:'the amendment of the accounting standard on recognition of receivables as provided in paragraph 41 of sffas no. 1, which',
11512:'said, in effect, that taxes should be recognized as receivables when they are due from taxpayers. 173. in the future,',
11513:'the general standard for accrual as it applies to taxes and duties could be tightened to produce a fuller application',
11514:'of the accrual concept. for fines, penalties and donations, no accountable event precedes the recognition point established by this standard.',
11515:'therefore, the general standard for recognition as it applies to these sources of revenue results in full accrual accounting for',
11516:'them. cash basis information needed 174. cash basis information on taxes and duties continues to be very important because it',
11517:'is widely used for planning purposes at present and is a component of the budget. it is also available soon',
11518:'after the close of the reporting period and is needed to comply with lawsthat require cashbasis accounting in particular instances.',
11519:'unfortunately, accurate cashbasis information to meet certain legal requirements and other information needs is not presently available. this standard accepts',
11520:'the importance of both types of information and requires entities that collect taxes and duties to provide both types of',
11521:'information. potential changes 175. requirements for disclosures, supplementary information, and other accompanying information compensate to some extent for the modified',
11522:'cash basis of accounting for taxes and duties being approved at this time. in the future, the board plans to',
11523:'evaluate users’ satisfaction with reports prepared on the basis of the standard and to give consideration to improvements being made',
11524:'in irsprocessesand related management information systems. based on this evaluation and consideration, it may propose to extend the degree of',
11525:'application of accrual accounting in several years time. in the interim, the board will permit changes in accounting made at',
11526:'the initiative of a collecting entity if the changes represent a fuller application of accrual accounting than that prescribed by',
11527:'the standard. for example, compliance assessments for taxes or unasserted claims for drawbacks may be recognized page 55 sffas 7',
11528:'fasab handbook, version 20 06/21 sffas 7 rather than shown as supplementary information if the amounts are both probable and',
11529:'reasonably estimable. entities responsible for measuring and recognizing revenue 176. collecting entities, e.g., the internal revenue service and the customs',
11530:'service, collect cash and administer the assessment processes that provide the basis for adjusting those collections to an accrual basis.',
11531:'they, therefore, have measurement and reporting responsibilities for these inflows of resources. they also, at the direction of the treasury',
11532:'department, account for the disposition of these inflows to recipient entities. the treasury determines the amounts payable to the recipient',
11533:'entities and, in conjunction with the collecting entities, makes the actual cash payments, or issues special treasury securities, as necessary,',
11534:'to fund the amounts transferred. because the recipient entities are designated by law to receive the inflows and make ultimate',
11535:'disposition of the funds, they, ratherthanthecollectingentities,mustrecognizethe inflowsasrevenuesin ordertoprovide financial statements which are meaningful to users. possible overand underfunding of trust',
11536:'funds 177. the standard provides that trust funds should recognize the amounts transferred and the change during the period of',
11537:'the amounts to be transferred from the collecting entity as revenue despite the fact that those transfers may not be',
11538:'made on the basis of applicable law. in the case of excise taxes, transferring more than the amounts actually collected',
11539:'may cause these trust funds to be overfunded. the board is advised by its legal counsel that this is a',
11540:'violation of law by the irs. such violations cannot be remedied unless, and until, the irs adopts methods to collect',
11541:'the needed data from taxpayers. in the case of social security, weaknesses in the data collection methods may cause these',
11542:'trust funds to be underfunded. the board isadvised by itslegal counselthat so long asirs and ssaact on the basis of',
11543:'the best available information there is no violation of law. in considering these twosituations, the boardconcludedthat it should not set',
11544:'anaccounting standard withwhich the recipient entities could not comply and, therefore, accepted the present basis of making transfers to them',
11545:'as the basis of recognition of revenue by them. however, the board believes that both the collecting entity and the',
11546:'recipient entity have the responsibility to disclose any violation of law and to provide, as supplementary information, if estimable, amounts',
11547:'by which the trust funds may be overor underfunded. conceptual criteria foraccrual and limitations on theirapplication 178. asmentioned earlier,thisstandardrecognizesbothinherentand certainpracticallimitations',
11548:'on the application of the accrual concept to taxes and duties. the conceptual criteria for full accrualaccounting fortaxesanddutiesare the underlying',
11549:'taxable events, a preconditionfor page 56 sffas 7 fasab handbook, version 20 06/21 sffas 7 the government to assert a',
11550:'demand for payment, and a demand date itself. ademand date conceivably could be as early as a date contemporaneous with',
11551:'the underlying events. 179. the underlying taxable events. conceptually, certain government taxes and duties could be accrued based on particular',
11552:'events, and certain others on events that take place over a period. excise taxes and customs duties are examples of',
11553:'taxes based on particular events sales or importing goods. individual and corporation income taxes are examples of taxes based on',
11554:'events that take place over a period e.g., income earned over the course of a year. indeed, some taxpayers who',
11555:'prepare accrualbasis financial statements for themselves normally accrue taxes due to the government based on the underlying events. 180. data',
11556:'aboutunderlying eventsis suppliedto collecting entitiesthrough returnsrequired to be filed by taxpayers. unfortunately, noncompliance with return requirements is estimated to account',
11557:'for more than $100 billion annually in uncollected taxes. only a relatively small portion of this amount is ultimately collected',
11558:'through the enforcement processes of the collecting entities. estimates of this tax gap made from timetotime have provided some information',
11559:'to guide enforcement efforts with respect to particular groups of tax payers, but do not provide sufficient information to establish',
11560:'claims against individual noncompliant taxpayers or defined groups of noncompliant taxpayers. therefore, the underlyingevent criterion for recognition can only be',
11561:'applied to the extent that taxpayers file tax returns39 or the collecting entities determine through their enforcement processes that specific',
11562:'non compliant taxpayers owe or might owe taxes. 181. the demand date. to obtain taxes and duties, the government must',
11563:'demand the payment. the criterion for revenue recognition under this concept could be that the demand date for taxes and',
11564:'duties is the same as the date the underlying taxable event occurs or over the period that the underlying taxable',
11565:'event occurs, e.g., as taxable income is earned by the taxpayer. however, demand dates presently defined by established assessment processes',
11566:'are the dates payments are required to be received by the collecting entities. they include dates for withholding and estimated',
11567:'tax payment as well as the final due dates for tax returns. thesedatesprovideadministrativeconveniencefortaxpayersandgenerallylag the underlying events. because of the emphasis',
11568:'on cash, those payments made in advance of due dates for payment are not deferred for accounting purposes. pastdue taxesas',
11569:'a result of taxpayer failure to comply with established payment dates are not accrued until the collecting entitiesreceive late tax',
11570:'returns from such taxpayers, or until the collecting entities determine through their enforcement processes that the government has a legally',
11571:'39even if all taxpayers filed returns, the underlying event criterion for most taxpayers is their income for the calendar year,',
11572:'whereas the government’s fiscal year ends september 30. presently required estimated tax payments do not eliminate the problem of measuring',
11573:'taxes based on an “artificial” nine months period ending september 30 for calendar year taxpayers whose income for the following',
11574:'three month “stub” period ending december 31 could be disproportionate. page 57 sffas 7 fasab handbook, version 20 06/21 sffas',
11575:'7 enforceable claim. only then are accounting accruals triggered under this standard. those dates lag the underlying events by more',
11576:'than necessary to determine an accrual. the aforementioned limitations on the application of the demand criterion, which are arguably practical',
11577:'ones, further constrain the conceptual basis for accrual. limitations on the scope ofaccounting 182. although relevant to the cost of',
11578:'the government from an economic perspective, to government fiscalpolicies, andtoperformanceevaluation of government reportingentities, the board concluded not to require information',
11579:'on “tax expenditures” or expenditures that federal laws require others to make, i.e., “directed flows of resources.” there were a',
11580:'variety of opinions among board members on the need for this information and different reasons given for not requiring some',
11581:'form of disclosure, but all board members agreed that relevant amounts are not normally measured under present accounting concepts. however,',
11582:'information may be provided under certain circumstances, but outside the financial statements themselves. some benefits of this standard 183. some',
11583:'of the benefits of the accrual requirements of this standard: reporting the “accrual adjustment” as a separately identified adjustment of',
11584:'taxes and duties collected. this preserves needed cashbasis information. improving the data for both accrualand cashbasis information. the standard accomplishes',
11585:'this because all transactions for which accounting could be performed underthe standard will need to be processed. some of thesehave',
11586:'not beenaccounted for in past financial reports because of delays in processing transactions at the end of the year. accrual',
11587:'of assessments.accountsreceivablewouldbeaccruedbasedonreturnsfiled or enforcement actions taken through the end of the period where such returns or actions have not yet',
11588:'resulted in cash receipts. astatistical estimate of the effect of this standard, as of september 30, 1993, disclosed approximately $29',
11589:'billion of net accounts receivable after deducting an allowance for uncollectible amounts of $42 billion. heretofore, net accounts receivable were',
11590:'thought to be in excess of $100 billion. the accountingrequirementsfor accrual should further improve the accuracyof the amount of accounts',
11591:'receivable. recognition of refunds payable will provide some indication of the lag in making refunds to taxpayers. some things this',
11592:'standard does notaccomplish 184. some of the things this standard does not accomplish: page 58 sffas 7 fasab handbook, version',
11593:'20 06/21 sffas 7 recognizing events after the close of the reporting period, such as cash received on later due',
11594:'dates, even if the receipt results from the underlying taxable events of the period. for example, unemployment taxes for the',
11595:'september 30 quarter are due in october and will be recognized in october if received on the october due date.',
11596:'deferring recognition of revenue for tax payments that may be received before the demandorunderlying event. for example, voluntaryoverwithholding bytaxpayerswill be',
11597:'treated as revenue. recognizingcomplianceassessmentsandpreassessmentworkinprocessorrefunds before completion of the assessment processes. as a result, variations in the speed and effectiveness of',
11598:'the assessment processes will affect the amount accrued at the end of a fiscal period. another result is that accounting',
11599:'information relative to measurement of the performance of the compliance functions by the collecting entities will not be available. recognizing',
11600:'the tax gap, i.e., taxes which include duties due from unidentified non compliant taxpayers and importers. as a result, this',
11601:'large potential source of revenue will not receive as much attention as it would if it could be made a',
11602:'formal part of the collecting entity’s accountability. accounting for “tax expenditures,” which may contribute to the programs of reporting entities,',
11603:'or “directed flows of resources,” which may substitute for program costs which might otherwise need to be incurred by reporting',
11604:'entities. these amounts are very large in relation to the “on budget” program amounts which are measured by accounting. as',
11605:'a result, these materially important performance and cost related data may not be fully considered. accounting systems changes 185. the',
11606:'irs accounting system at present does not account for revenue transactions on an accrual basis and, therefore, does not establish',
11607:'accounts receivable, refunds payable, and theallowance foruncollectibleaccountsonthe basisofthe flowof allthe variouseventsand transactions affecting these balances. instead of being an accrual',
11608:'accounting system, all assessments are recorded in an operating file not designed to do accounting and not operated under a',
11609:'double entry concept where the revenue effects of assessments are determined. that operating file, for example, includes multiple assessments made',
11610:'for the same tax claim so that the irs can pursue all potential sources for the payment of that claim.',
11611:'as a result of the present limitations of this operating file, to determine the accounts receivable at anypoint in time,',
11612:'theirs must make a statisticalprojection of a representative sample of valid tax claims. the potential error in the estimates made',
11613:'to date have been material, i.e., in excess of $5 billion. 186. this standard contemplates that systems and accounting records',
11614:'will be put in place to permit theaccuratedeterminationanddisclosureofallrevenueandcashtransactionswhich are reflected in the formal assessment process. by treating information relating to',
11615:'page 59 sffas 7 fasab handbook, version 20 06/21 sffas 7 compliance assessments, preassessment work in process, and refunds before',
11616:'the completion of the assessment process as supplementary information, this standard contemplates that statistical estimates, rather than transactiondriven accounting systems',
11617:'and auditable subsidiary accounting records for individual taxpayers, may be used to provide the dollar values for these important revenuerelated',
11618:'items. disclosures, supplementary information, and otheraccompanying information 187. this additional information will help users of federal financial reports in understanding',
11619:'the following: 187.1 components of the revenue stream. by disclosing the dollar amounts of the materialtypesoftransactionsreflected intherequired “modifiedcashbasis” revenuestream from',
11620:'initial recognition by the established assessment process through cash collections and refunds, important accountability information for oversight and performance evaluation',
11621:'will be provided about the tax collection function. providing as much accurate and detailed information as possible about the annual',
11622:'flow of taxpayer funds now over $1 trillion is important because the administration of the collection function is to some',
11623:'degree discretionary.40 187.2 cash flows. by disclosing cash flows by type of tax and tax year, accurate historical information will',
11624:'be provided about the source and timing of the annual flow. material trends in collection and refund patterns may be',
11625:'apparent from the comparative financial statements presented and by reference to financial statements of prior periods. both the ability to',
11626:'accurately forecast future flows and to understand the speed and effectiveness of the collection function should be enhanced by this',
11627:'information. also, an indication of the degree of potentially correctable “error” from the use of a modified cash basis of',
11628:'accounting should be provided by this cumulative cash flow data. 187.3 other futureoriented information. disclosures about categories of accounts receivable',
11629:'provide additional information about collection problems and timing of future cash flows.at irs, different categories of receivables vary considerably in',
11630:'terms of ultimate collectability and timing of collection. 187.4 otherpotentiallyreportablerevenue.supplementaryinformationoncompliance assessments and preassessment workin process and on refunds before the',
11631:'completion of 40pursuant to law, customs establishes legal assessments for fines in amounts which frequently materially exceed the value of',
11632:'the goods, then subsequently abates the fine to a fraction of that value, also in accordance with applicable law. full',
11633:'disclosure and explanation of practice should aid better understanding of the significance of assessments, abatements, and uncollectible amounts reported by',
11634:'customs. [text deleted by sffas no. 22.] page 60 sffas 7 fasab handbook, version 20 06/21 sffas 7 the assessment',
11635:'processes provides indications of the amounts of potentially accruable revenue. if such amounts were ultimately accrued, the “accrual adjustment” on',
11636:'a modified cashbasiswouldbeconvertedtoan “accrualadjustment” that cameclosertoanestimateof the effect of full accrual accounting. some or all of these potential accounts receivable',
11637:'and payable may become measurablebythe collecting entities, and the boardmayrequire their accrual when the collecting entities’ management systems are improved.',
11638:'187.5 sharing of the income tax burden. other accompanying information about the tax gap and irs historical information showing income,',
11639:'deductions, and credits by income level assets for corporations responds to those concerned with the extent of noncompliance with the',
11640:'laws and how the income tax burden is shared among compliant taxpayers. 187.6 administration of the tax laws by the',
11641:'collecting agencies. disclosures, supplementary information, and other accompanying information provide a more complete picture of how the collecting agencies are',
11642:'functioning. this information may be relevant to allocation of resources to collecting agencies, to their performance appraisal, and to their',
11643:'oversight. supplementary information on compliance assessments and preassessment work in process and on refunds before the completion of the assessment',
11644:'process shows the backlog in processing assessments and refunds. the disclosure and supplementary information with respect to overand underfunding of',
11645:'the trust funds identifies administrative problems to be overcome. disclosure of abatement of assessed taxes with respect to noncompliant taxpayers',
11646:'$37 billion by the irs in 1993 provides some information about the administrative discretion exercised by collecting entities. however, no',
11647:'information is required about reductions of possibly material amounts in compliance assessments and preassessment work in process as a result',
11648:'of the resolution of examinations, investigations, protests, and litigation. therefore, accounting reports will not include data about these processes, which',
11649:'involve an even higher degree of administrative discretion than the formal assessment process. nor will they provide data, e.g., complianceassessmentsmadeduring',
11650:'thereportingperiod, that might be related tothe cost of compliance, e.g., salaries of revenue agents and related administrative costs, that might',
11651:'be relevant to evaluating the performance of the collecting entities’ compliance function. tax gap 188. the exposure draft proposed that',
11652:'available information about the nonexchange revenue gap, including the tax gap, be provided as “other accompanying information.” this information would',
11653:'not have been subject to audit, and the auditor’s responsibility would page 61 sffas 7 fasab handbook, version 20 06/21',
11654:'sffas 7 have been limited to reporting if it was materially misleading in light of the information gathered during the',
11655:'audit. substantially all of the revenue gap is the tax gap because duties are technicallyatype of tax, sothe board decidedto',
11656:'dealonlywiththetaxgap. the sources of noncompliance that cause the tax gap include unreported income, overstated exemptions, and overstated deductions. the largest',
11657:'component of the tax gap relates to income taxes. irs originally estimated the gross income tax gap at $94 billion',
11658:'for tax year 1987. the net income tax gap for 1987, which is the gross income tax gap less the',
11659:'estimated amount that has been or will be collected through irs’s enforcement efforts, is now estimated at $72 billion. thus,',
11660:'with respect to 1987, later collections from non compliant taxpayers are about $22 billion. estimates of the income taxgap cover',
11661:'only taxes on legally earned income of individuals and corporations—not taxes owed from illegal sources of income such as drugs',
11662:'and prostitution.41 189. estimates of the tax gap by irs have been made from time to time. congress recently concluded',
11663:'not to authorize a current study42 and there isno presentplan to conductanother one. on the other hand, customs makes estimates',
11664:'of amounts due from unknown non compliant importers. the board concluded, therefore, that the standard should require only that anyestimatesbythe',
11665:'government of thetaxgap be presentedwhen theywererelevant, i.e., provided reasonably current information is available. 190. some respondents to the exposure draft',
11666:'believed that tax gap information is important, but others believed it is too imprecise to be a required disclosure. the',
11667:'board considered establishing a new category of information “required supplementary stewardship information” rssi for the “unidentified persons or entities” portion',
11668:'of the tax gap. this concept is also being considered for application to certain “stewardship information.” the board concluded that',
11669:'for the time being this standard should say that available information about the tax gap should be provided as other',
11670:'accompanying information. in addition to the tax gap information requirements see para. 69.2, other accompanying information is required or permitted',
11671:'under certain circumstanceswith respect to athe income tax burden see para. 69.1, b tax expenditures see para. 69.3, c directed',
11672:'flows of resources see para. 69.4, and d revenue foregone for exchange transactions see para. 47. 191. the board intends',
11673:'to review the requirements in this standard to provide other accompanying informationwhenitconsidersstandardsforthemanagement discussionand analysis md&a. the board may decide to',
11674:'modify the information requirements when it considers the degree to which this information should be subject to some sort of',
11675:'audit 41for details see net tax gap and remittance gap estimates supplement to publication 7285, publication 1415 490, internal revenue',
11676:'service; and tax gap: manyactions taken, but a cohesive compliance strategy needed, gao/ggd94123, may 1994. 42the tax compliance measurement program',
11677:'tcmp planned for 1996. page 62 sffas 7 fasab handbook, version 20 06/21 sffas 7 scrutiny. auditing standards for the',
11678:'md&ahave not been established by any auditing standard setters, including the comptroller general, who establishes standards for auditors who audit',
11679:'federal organizations, programs, and activities. it isexpected that audit standards for an md&awill be considered by the comptroller general’sadvisory council',
11680:'and standards may be set later by the comptroller general. particular audit requirements for md&amay be set by agreement between',
11681:'omb and gao if consistent with any such standards then existing. when the board’s project on md&ais considered, omb and',
11682:'gao plan to give consideration to the auditing requirements for md&aand to the concept of rssi. tax expenditures 192. tax',
11683:'expenditures are estimates of the revenue foregone because of preferential provisions of the tax structure. they are due to special',
11684:'exclusions, exemptions, deductions, credits, deferrals, and tax rates that depart from a “baseline.” these exceptions are generally intended to achieve',
11685:'public policy objectives by providing benefits to qualifying individuals or entities or by encouraging particular activities. they also may be',
11686:'intended to improve tax equity or offset imperfections in other parts of the tax structure. tax expenditures are not revenue.',
11687:'they are not inflows of resources to the reporting entity. 193. the following are some examples of tax expenditures with',
11688:'estimates from the treasury department of the revenue foregone in fy 1995: the exclusion from gross income of the housing',
11689:'and meals provided military personnel $2.0 billion; taxcreditsforexpenditurestopreserveandrestorehistoricstructures$0.1billionand to produce “alternative” fuels $1.0 billion; exclusion from gross income of employee',
11690:'compensation in the form of health insurance premiums and other medical care $59.4 billion; and deductions for mortgage interest $48.1',
11691:'billion and state and local property taxes $15.3 billion on owneroccupied homes. 194. the board considered a proposal to require',
11692:'each reporting entity to provide supplementary information on tax expenditures related to its missions. the amounts reported would have been',
11693:'the treasury department’s estimates that are published in the president’s budget. 195. those who supported that proposalbelievethat thisinformation isrelevanttoevaluating the',
11694:'performance of government programs that have related tax expenditures. some of these tax expenditures are very closely tied to program',
11695:'operations. others are less closely tied to an agency’s operating activities but still relate to its mission. for example, the',
11696:'preferential treatment of owneroccupied homes can be related to hud’s mission to promote good housing for the nation. page 63',
11697:'sffas 7 fasab handbook, version 20 06/21 sffas 7 196. furthermore, policy makers may compare changes in tax expenditures with',
11698:'changes in direct budgetary outlays. they did so, for example, in 1983 and 1993 when they increased the taxation of',
11699:'social security benefits but alternatively could have reduced the costoflivingadjustment. inwayssuchasthese, the reportingonthecostsandaccomplishmentsof an entity is incomplete unless it includes',
11700:'the tax expenditures related to its missions. 197. the board decided not to require supplementary information on tax expenditures in',
11701:'component entity financial statements for several reasons. the definition of the baseline for comparison is in part a matter of',
11702:'values and judgment. in some cases the association with particular programs is not sufficiently clear. furthermore, the information is available',
11703:'elsewhere now. however, the board agreed to permit reporting entities to present, as other accompanying information, information on tax expenditures',
11704:'that the reporting entity considers relevant to its programs, if suitable explanations and qualifications are provided. directed flows of resources',
11705:'198. the boardconsidered a proposal to require each entity to provide supplementary estimates of thematerialannualexpense tononfederalentitiesofexistingfederallawsandregulations associated with its programs.',
11706:'the requirement would have been limited to regulations that establish standards for the characteristics of products or for the methods',
11707:'of production, or that mandate expenditures by state and local governments. these estimates would not necessarily have included nonpecuniary costs,',
11708:'although nonpecuniary costs might have been included to the extent identifiable. each entity also would have provided any appropriate explanations',
11709:'about availability of data and limitations on the reliability of the estimates. 199. advocates of the proposal believe that the',
11710:'government pursues some of its goals by requiring states, local governments, and private entities to spend funds for specified public',
11711:'purposes. for example, the government may require states to extend the coverage of medicaid, communities to have water treatment plants',
11712:'that meet government safety standards, firms to minimize their workers’ exposure to asbestos, and automobile manufacturers to install air bags.',
11713:'when the regulations apply to state and local governments, they are generally called “unfunded mandates.” 200. the costsandfinancing offederal regulationsdo',
11714:'notflowthrough the government,buttheir effects are similar to the effects of direct federal expenditures and revenue. fundamentally, both regulation and federal',
11715:'expenditure allocate resources to the purposes specified by the government. the cost of regulation includes regulations imposed in the past',
11716:'as well as newly issued regulations. furthermore, expenditure required by regulation may be an alternative means of achieving the same',
11717:'public policy goals as direct federal expenditure or other methods. for example, medicaid coverage may be extended with or without',
11718:'more federal grants. page 64 sffas 7 fasab handbook, version 20 06/21 sffas 7 201. advocates of this requirement believe',
11719:'that financial reports that omit important financial effects of governmental action do not fairly present the results of the government’s',
11720:'operations. such reports fail to achieve the objectives of federal financial reporting. they believe that the effortsand accomplishmentswithwhich an agencypursuesitsgoals',
11721:'can be properly assessed only if the financial reports include all material information. this means that the reports should bring',
11722:'together information about the net cost of operations, the tax expenditures, and the directed flows of resources that are intended',
11723:'to achieve the same or similar missions. 202. the board decided not to require supplementary information on directed flows for',
11724:'several reasons. much of this information is not available now and will not be available to preparers of financial reports',
11725:'without added expense. in some cases the estimates would be very imprecise. finally, most board members believe that the scope',
11726:'of government financial reporting should not extend toflowsof financialresourcesthat are not inflowsto, or outflows from, federal government reporting entities. however,',
11727:'the board agreed to permit reporting entities to present, as other accompanying information, information on directed flows of resources that',
11728:'the reporting entity considers relevant to its programs, if suitable explanations and qualifications are provided. other financing sourcesand budgetary resources',
11729:'general principles 203. the standards for other financing sources and budgetary resources should satisfy several of the objectives of financial',
11730:'reporting such as: 1 explaining the relationship of budgetary resources obligated to the net cost of operations, 2 showing how',
11731:'budgetary resources were used and the statusof budgetary resourcesat the end of the period, and 3 indicating the effect on',
11732:'the net results of operations of the entity of all the financing sources used to finance the net cost of',
11733:'operations. however, financing from a financial accounting proprietary perspective is different than the budgetary accounting perspective. 204. the budget is',
11734:'the primary financial planning and control tool of the government. its objectives, such as planning resource allocation, authorizing and controlling',
11735:'obligations, planning cash disbursements, and raising revenue, differ from those of financial reporting where the focus is on net cost',
11736:'of the entity’s programs and activities and stewardship of its assets and liabilities. differing objectives are responsible for some but',
11737:'not all of the many differencesinthesetwo financialmanagementtools. differences instandards formeasuring and reporting budgetary and financial information, coupled with unreliable data,',
11738:'have caused financial statements to be underutilized by government managers, the budget community, and others who might benefit from financial',
11739:'information. page 65 sffas 7 fasab handbook, version 20 06/21 sffas 7 reducing differences 205. the problem of unreliable data',
11740:'is being addressed through financial statement audits that will include both proprietary and budgetary information and improvements in financial management',
11741:'systems. these federal accounting standards reduce unnecessary differences between the information reported in these two tools of financial management and',
11742:'require reconciliations and data to explain necessary differences. this should increase the utilityof the financialplanning and controlinformation provided by the',
11743:'flow statementsin general purpose financial reports and enhance the usefulness of the other accountability information provided, e.g., the balance sheet.',
11744:'this should occur because those who focus on the budget will better understand the financial statements and find them to',
11745:'be reliable and useful reports. 206. the new recognition and measurement standards for financial accounting adopt budgetary flow concepts for',
11746:'appropriations and provide consistent flow standards for nonbudgetary resources.asexplained earlier, standards forrecognition of nonexchangerevenue reported by government entities reflect legal',
11747:'requirements. these changes make the reporting on financing for entity net costs more consistent among entities and more comparable to',
11748:'the budget. 207. however, differences inherent in the different objectives of the budget and the financial statements must remain. the',
11749:'obligation basis for the budget differs from the costsincurred basis for the financial statements. this difference must continue in order',
11750:'for both types of information to serve their purposes. some budgetary resources are used to invest in assets and therefore',
11751:'are not reflected in operating costs. also, an entity may incur costs that were covered by previously provided budgetary resources',
11752:'e.g., depreciation, costs not yet covered by budgetary resources e.g., accrued annual leave, or costs covered by budgetary resources of',
11753:'other entities e.g., some pension costs. continuing these differences in the accounting reports is essential if financial statements are to',
11754:'report cost information that can be related to entities’ outputs and if the statements are to report other information on',
11755:'the resources over which the entities are accountable. these remaining differences need to be explained in the financial statements to',
11756:'increase the utility of the financial statements. the budgetary process and its linkage toaccounting 208. the budget controls obligations and',
11757:'thus ultimately controls expenditures by government entities. in this sense, it is about their outflows of resources. conversely, the budget',
11758:'makes inflows of resources available to component entities to finance expenditures. the inflows are reported in the financial statements as',
11759:'revenues and other financing sources e.g., appropriations. 209. the budgetary process provides a component entity with budgetary resources through appropriations',
11760:'acts. budget authority may be provided in the form of appropriations, borrowing authority, contract authority, or spending authority from offsetting',
11761:'collections. an page 66 sffas 7 fasab handbook, version 20 06/21 sffas 7 appropriation may make funds available from the',
11762:'general fund, special funds, or trust funds—including amounts received from earmarked taxes—or may authorize the spending of offsetting collections credited',
11763:'to expenditure accounts. budgetary resources also include unobligated balances remaining from prior reporting periods and a number of adjustments e.g.,',
11764:'recoveriesof prior yearobligations. execution of the budget includes the obligation of budgetary resources and the outlays to liquidate the obligations.',
11765:'210. borrowing authority is sometimes used instead of appropriations to incur obligations and make paymentstoliquidatethemout of borrowed money. however, borrowingmoneyunder',
11766:'this authority does not change the net position of the entity. the liability created by the borrowing is recorded along',
11767:'with the related asset the cash borrowed. repayment of the liability later will normally require the use of an offsetting',
11768:'collection or an appropriation. assets acquired as a result of borrowing may be later amortized or written off and become',
11769:'part of an entity’s costs. when this occurs, or in the unusual event that the borrowing finances expenses rather than',
11770:'assets, the entity’s net position will be reduced. 211. contract authority is not a reportable financing source because it only',
11771:'allows agencies to incur obligations in advance of receiving funds to pay for any resulting liabilities. the funds to liquidate',
11772:'any resulting liabilities will come from an appropriation or offsetting collections. for financial statement purposes, a financing source is recognized',
11773:'in accordance with the appropriate accounting standards for the type of financing received to liquidate the liability. under past practice',
11774:'the financing was recognized at the time liabilities were incurred, but under the new standard the financing will not be',
11775:'recognized until liquidating appropriations are made available, which may be in the same reporting period as the liability is incurred',
11776:'or a later period. 212. appropriations, including permanent indefinite appropriations, are the most widely used form of budget authority. when',
11777:'obligated by orders for, or receipt or provision of, goods, services,orbenefits, theyarereflectedasobligationsincurred.43 whenused, appropriations are accounted for as an inflow',
11778:'of resources i.e., an other financing source in calculating net results of operations for the reporting period. 213. from the',
11779:'budgetary perspective, appropriations include dedicated tax receipts, such as socialsecuritytaxesand highwaytrust fundexcise taxes. fromaproprietaryperspective, on the other hand, unexpended appropriations',
11780:'do not include dedicated tax receipts, because these receipts are accounted for as nonexchange revenue. therefore, appropriations used do not',
11781:'include dedicated tax receipts, thus avoiding double counting of these amounts as financing sources. 43amounts appropriated to liquidate contract authority',
11782:'or repay debt are not available to incur new obligations and hence are not considered budget authority. page 67 sffas',
11783:'7 fasab handbook, version 20 06/21 sffas 7 214. the accounting treatment for recognizing “appropriations used” as a financing source',
11784:'parallels the budgetary accounting for expended appropriations. expended appropriations are recognized when goods and services ordered have been delivered, when',
11785:'benefits are payable to recipients, or when funds available under a grant agreement are payable, and there is an available',
11786:'appropriation to pay these amounts. under this standard, this is also the time when “appropriations used” is recognized as a',
11787:'financing source in the proprietary accounts. 215. thus, at the time a liability is established which will be paid by',
11788:'an available appropriation, appropriations are considered used. liabilities should be established in accordance with sffas no. 5. under that standard,',
11789:'a liability can be established in several ways, and the type of transaction that has occurred governs when a liability',
11790:'has occurred. for example, grants can be provided under different transactions. some can be provided without any required exchange of',
11791:'service with the federal government, while othersmayrequire specific activities to occur before the funds are available. 216. providing funds from',
11792:'an appropriation does not necessarily cause the recognition of a financing source if that payment is an advance. for example,',
11793:'an entity may advance funds to a grantee under the grant agreement. this should not cause recognition of a financing',
11794:'source. the recognition of appropriations used would not occur until the grantee meets the requirements that allow it to use',
11795:'the funds in accordance with the grant agreement. 217. the focusonnetcostratherthan on matchingfinancing withexpensesasincurredprovided an opportunity to simplify the accounting',
11796:'for appropriations and to eliminate one of the differences between financial and budgetary accounting. reporting entities will no longer have',
11797:'to defer recognition of appropriations used nor accrue appropriations before they become available. recognition was previously deferred for appropriations used',
11798:'to finance capitalized transactions, such as the purchase of a fixed asset or the making of a loan under precredit',
11799:'reform programs which have not converted their accounts to a present value basis. the use of financing was previously recognized',
11800:'at the same time and rate that depreciation of the asset’s cost was recognized as an expense or that bad',
11801:'debts expense was recognized on precredit reform receivables which had not been converted to present values. accrual of appropriations as',
11802:'amounts receivable was sometimes allowed for costs incurred but not funded until after the period the costs were incurred, such',
11803:'as subsidy reestimates under the credit reformact. reestimates of subsidy cost for credit programs are made at or after the',
11804:'end of a period for which the reestimate applies and for which an expense is recognized, but the permanent indefinite',
11805:'authority is not available until the following period. when a financing accrual was not used for page 68 sffas 7',
11806:'fasab handbook, version 20 06/21 sffas 7 unfunded expenses, the unfunded expenses were removed from cumulative results of operations and',
11807:'reported separately in net position as future funding requirements. 218. these changes eliminate reporting invested capital and future financing sources',
11808:'in equity. these two equity accounts did not provide accurate information because invested capital wasnever expected to be returnedand future',
11809:'financing requirementsdidnot coverallfuture financing needed but only that amount which had been recognized as expenses. 219. an appropriation may provide',
11810:'an agency with the authority to obligate and expend earmarked receipts to which it is legally entitled and its offsetting',
11811:'collections. most of these inflows of resources are classified and accounted for as either exchange or nonexchange revenue in accord',
11812:'with the accounting standards previously discussed. however, the relationship is not exact between these revenues and related new budget authority.',
11813:'for example, some offsetting collections are neither a revenue nor a financing source. they only change the form of a',
11814:'resource already reported on the balance sheet e.g., funds received from the sale of anasset at bookvalue. some offsettingcollectionsarecreditedto receipt',
11815:'accounts instead of expenditure accounts and cannot be obligated without specific appropriation. some of these revenues are precluded from obligation',
11816:'in a fiscal year by a provision of law, such as a benefit formula that determines obligations, or by a',
11817:'limit on the amount of obligations that can be incurred. amounts precluded from obligation are not counted as budget authority',
11818:'in that year. 220. by recognizing nonbudgetary resources, e.g.,imputed financing and transfers, the financial statements of the entity will show',
11819:'how its recorded costs were financed by the budgetary resources of other entities as well as its own. a “imputedfinancing”',
11820:'sourcesarereportedtooffsetbudgetedcostsofanotherentitythat applicable accounting standards impute to the reporting entity.44 the imputing process recognizes these costs in the net cost of',
11821:'operations of the responsible entity. by reflecting “imputed financing” in the changes in net position, the net position of the',
11822:'responsible entity is not affected and there is no double counting. b “transfersin” and “transfersout” are necessary to show transfers',
11823:'of assets or revenue from one government entity to another. in the case of assets, the transferor’s budget reflected the',
11824:'original expenditure for the asset, but the budget normally does not reflect the subsequent transfer of the asset. the transfer',
11825:'changes the entity’s financialposition at thetime of transfer but not its net cost of operations. therefore, it is 44imputed financing',
11826:'sources may be reported to recognize imputed costs that have not yet been budgeted for other entities, such as for',
11827:'pensions and retirement health care. page 69 sffas 7 fasab handbook, version 20 06/21 sffas 7 recognized in determining the',
11828:'net results of operations for the reporting period but not net cost. 221. in the case of earned revenue, the',
11829:'budgetmay require the earned revenue inflow related to the entity’scosts to be paidto the general fundoranother entity. reporting the transferout',
11830:'of such revenue as a reduction in net results of operations lets the responsible entity properly report its earnings in',
11831:'net cost of operations without increasing its net position. 222. donations are not included as receipts in the budget, except',
11832:'for cash and nearcash items. however, some other kinds of donations are also recognized as revenue. such revenues are permanent',
11833:'differences between the budget and the financial statements. donation revenue will increase net results of operations under these standards. under',
11834:'the standard, accounting for donations is consistent with current practice in the private sector where contributions are recognized as revenue.',
11835:'223. costs that are not yet covered by budgetary resources are “permanent” differences until congress acts to finance them in',
11836:'the budget or until permanent budget authority becomes available. under the new standards, financing yet to be provided for recorded',
11837:'costs will not be accrued. accordingly, it will not increase cumulative results of operations. implications of the term “net results',
11838:'of operations” 224. some of those who commented on the exposure draft expressed concern that some readers might infer that',
11839:'the amount of “net results of operations” reported on the new statement of changesinnet position wasa relevant performance measure. some',
11840:'financial statement users might draw such an inference because, in the private sector, the term “net results of operations” is',
11841:'synonymous with net income and net income is the “bottom line” performance measure. similarly, the statement of operations used by',
11842:'federal reporting entities prior to implementation of sffas no. 7 focused on a similar bottom line, net results of operations.',
11843:'this was the result of showing the flow of all operating activities on a single statement. for most governmental entities,',
11844:'however, no single bottom line can accurately measure performance, and “net results of operations” normallyprovides little information on either the',
11845:'costs or the benefits of an entity’s operations. 225. the new reporting model, illustrated in entity and display, focuses on',
11846:'measuring costs and reporting on performance. both gross and net cost are key financial performance measures that can be related',
11847:'to outputs and outcomes of the entity’s programs and activities. page 70 sffas 7 fasab handbook, version 20 06/21 sffas',
11848:'7 dedicated collections 226. the exposure draft proposed disclosure requirements for trust funds that were included within the reporting entity’s',
11849:'financial statements in total and for material individual fund. the information was proposed to provide users a basis for understanding',
11850:'these funds and for holding the government accountable for the use and disposition of earmarked collections. based on comments received,',
11851:'this standard changes what was proposed as follows. a. the proposed standard did not cover funds administered by a federal',
11852:'entity in a fiduciary relationship with beneficiaries that were not included in the entity’s financial statement. in addition, it did',
11853:'not cover other funds which are of the same nature as many trust funds. the standard now requires disclosures for',
11854:'these funds also. b. the requirement for a total for all funds was modified. if the fund is not material',
11855:'to the reporting entity, disclosure may be made in a special report to the contributors and beneficiaries or their representatives',
11856:'and only disclosure of the total of these funds is required. 227. user needs. funds that account for dedicated collections',
11857:'are of great interest to users of federal financial statements. first and foremost are the contributors and beneficiaries to which',
11858:'thegovernment needsto be accountableforthereceipt and dispositionof earmarked collections and for the balances that remain available to pay beneficiaries in the',
11859:'future or serve other purposesdetermined by law. other usersare interested in the financing of other government operations with these fund',
11860:'balances. 228. external users of federal financial reports sometimes misunderstand the relationship of thesefunds, especiallytrustfunds, tothegovernment. veryfewgovernmenttrustfundsare held “in trust”',
11861:'in a fiduciary relationship as is customarily the meaning of this term outside the government. also, some of the trust',
11862:'funds currently spend less than the receipts they collect each year. most of the cash surplus that arises when receipts',
11863:'are greater than outlays is invested in treasury securities until the amounts are needed for the trust fund to use',
11864:'in accordance with benefit formulas or other provisions of the law. 229. the treasury uses these additional receipts to meet',
11865:'the cash needs of general operations, thus reducing the need to borrow from the public, raise taxes, or reduce spending.',
11866:'in the consolidated financialstatementsofthegovernment,theinvestmentsintreasurysecurities held bytrust fundsandotherfundentitiesandthecorresponding debt owed bythetreasury to these funds cancel out. they are eliminated from the',
11867:'amounts reported in the consolidated balance sheet but footnote disclosure of these amounts normally has been included. page 71 sffas',
11868:'7 fasab handbook, version 20 06/21 sffas 7 230. funds covered by the standard.as pointed out by respondents, trust funds',
11869:'are not the only type of fund that collects dedicated moneys. however, the exposure draft did not specifically delineate which',
11870:'funds might be included in the wider scope. the board decided to limit these disclosures to funds where there was',
11871:'a need to show accountability to contributors and expected beneficiaries. therefore, the funds that are covered by this standard are',
11872:'all trust funds, all special funds that are similar to trust funds, and all fiduciary funds whether or not in',
11873:'the budget. 231. the federal government does not use a consistent fund designation for these types of collections. funds classified',
11874:'by law as trust funds are established by specific legislation to carry out activities stipulated by law and frequently are',
11875:'financed by taxes. while the government’s use of the term “trust funds” ordinarily differs from use of the term in',
11876:'the private sector, a few trust funds within the federal universe have the stringent fiduciary characteristics similar to those of',
11877:'trust funds in the private sector. furthermore, some funds within the budget are classified as special funds and are similar',
11878:'in nature to nonfiduciary trust funds within the budget. providing precise criteria for which nontrust funds are covered by this',
11879:'requirement is difficult. the board realized that it will not always be easy for management to identify accountability expectations of',
11880:'contributors and beneficiaries. 232. on the other hand, no special accountability of a fund is needed for the sake of',
11881:'those who make voluntary payments in contemporaneous exchange for goods or services. once goods and services have been rendered for',
11882:'the payment made, the purchaser generally does not expect the fund to provide additional accountability. for this reason the special',
11883:'reporting requirements do not apply to revolving funds or other funds financed similarly. however, special accountability may exist for a',
11884:'revolving fund that collects receipts for goods and services that are expected to be provided at a later period, such',
11885:'as longterm insurance contracts, and preparers are encouraged to provide the needed information in such cases. 233. funds not part',
11886:'of the reporting entity’s financial statements. in most cases, the requirement will apply to a fund that is included in',
11887:'the financial statements of the reporting entity. inthecaseof most fiduciaries, however, the fund isadministered bya reporting entity but is not',
11888:'part of the reporting entity itself or included in its own general purpose financial statements. the disclosure requirement applies to',
11889:'such funds as well. 234. special reports. since the primary purpose of this requirement is accountability to the contributors and',
11890:'expected beneficiaries, all funds that meet the stated criteria are deemed material inthisrespect. therefore, informationneeds to be providedregardless of whetherit',
11891:'is material to the reporting entity. however, to minimize the amount of additional information requiredinfinancialstatements, wherethedisclosures fordedicatedcollections are madeto the',
11892:'contributors and beneficiaries in special reports and the information required is not material to the reporting entity, minimal disclosures are',
11893:'included in the reporting entity’s page 72 sffas 7 fasab handbook, version 20 06/21 sffas 7 general purpose financial statements',
11894:'or notes thereto. special reports provided to representatives of contributors or beneficiaries may satisfy this requirement for example, a report',
11895:'to an indian tribal government. page 73 sffas 7 fasab handbook, version 20 06/21 sffas 7 appendix b: guidance for',
11896:'the classification of transactions introduction 235. thegovernmentofthe united stateshasagreatmanytypesoftransactionsthatfinanceits cost of operations, and they must be classified in various ways',
11897:'for revenue accounting in order to achieve the objectives of the standards in this statement. the type of transaction may',
11898:'be an exchange transaction, a nonexchange transaction, or an other financing source; the transaction may be made between a government',
11899:'reporting entity and the public or between two reporting entities within the government i.e., an intragovernmental transaction. if it is',
11900:'an exchange transaction, it will normally produce revenue but may produce gains and losses. this appendix provides guidance for the',
11901:'classification of specific transactions based on the standards for accounting for revenue and other financing sources, and the reasoning behind',
11902:'these standards as explained in the introduction and the basis for conclusions. 236. to servethatpurpose,thisappendixprovidesguidance for classifying allmajor transactions that',
11903:'finance the government’s cost of operations and a significant number of lesser transactions. it is intended that these classificationstogether with',
11904:'the explanation of these classifications, interpreted in the light of the standards, the basis for conclusions, and the introduction—will provide',
11905:'guidance for classifying all the financing transactions of the government, including those that are not specifically listed. it should be',
11906:'understood that while some classifications are unequivocal, others are the result of balancing different considerations. 237. the transactions in this',
11907:'appendix are divided into several groups. transactions recognized in the financial statements have a twofold division: first, whether they are',
11908:'with the public or intragovernmental; and second, whether they are nonexchange transactions, exchange transactions that produce revenue, exchange transactions that',
11909:'produce gains or losses, or other financing sources. aseparate group consists of gains and losses due to revaluation. 238. exchange',
11910:'transactions are classified as producing gains or losses if they are likely to be unusualornonrecurring. if the transactionsclassified in thisappendixasgains',
11911:'or lossesare usual and recurring for a particular reporting entity, that entity should classify them as producing exchange revenue or',
11912:'expense instead of gains or losses. 239. the final group of transactions in this appendix consists of transactions that produce',
11913:'amounts not recognized as revenues, gains, or other financing sources. although in some instances there is overlap with other groups,',
11914:'they are presented together as a convenient reference to amounts not classified in any of the other categories. they include:',
11915:'page 74 sffas 7 fasab handbook, version 20 06/21 sffas 7 anumber oftransactions inwhichthereis nonetinflowofresources or thenetinflow is less than',
11916:'the full amount of the transaction because one asset is exchanged for another or there is an increase in both',
11917:'assets and liabilities. certain transfers and donations that do not affect net cost or net position. anumber oftransactions involvingdirectloansandloanguarantees,whichare recognized',
11918:'as expenses or reductions in expenses according to the standards in sffas no. 2,accounting for direct loans and loan guarantees.',
11919:'deposit fund transactions. 240. as a guide to this appendix, the following table lists in order the transactions that are',
11920:'illustrated, group by group, and cites the page. unless otherwise stated: revenue from nonexchange transactions is included in determining the',
11921:'net operating results and hence the change in net position. revenue from exchange transactions is subtracted from gross cost in',
11922:'determining the net cost of operations. gains and losses from exchange transactions also affect net cost. other financing sources are',
11923:'included in determining the net operating results and hence the change in net position. 241. in addition, the collection and',
11924:'disposition of most nonexchange revenue and a small part of exchange revenue is accounted for as a custodial activity of',
11925:'the collecting entity. page 75 sffas 7 fasab handbook, version 20 06/21 sffas 7 table of transactions transactions with the',
11926:'public 78 nonexchange transactions with the public 78 individual income taxes, corporation income taxes, social insurance taxes and contributions, excise',
11927:'taxes, 78 estate and gift taxes, and customs duties social insurance taxes and contributions paid by federal employees 80 deposits',
11928:'by states for unemployment trust fund 80 user fees, harbor maintenance trust fund 81 customs service fees 81 deposits of',
11929:'earnings, federal reserve system 82 donations: except types of property, plant, and equipment that are expensed 83 fines and penalties',
11930:'83 penalties due to delinquent taxes in connection with custodial activity 83 forfeitures 84 exchange transactions with the public: revenue',
11931:'85 sales of goods and services 85 sales of goods and services in undercover operations 85 interest unless classified elsewhere,',
11932:'dividends, and rents except for mineral rights on government 85 property rents, royalties, and bonuses on outer continental shelf ocs',
11933:'and other petroleum and mineral rights. 86 proceeds from the auction of the radio spectrum 87 interest on post1991 direct',
11934:'loans 87 interest on delinquent taxes and other receivables that arise as the result of custodial operations 88 regulatory user',
11935:'fees such as patent and copyright fees; immigration and consular fees; sec registration 88 and filing fees; and nuclear regulatory',
11936:'commission fees diversion fees, department of justice 88 premiumsforsmisupplementarymedicalinsurance,bankdepositinsurance,pensionbenefitguarantees, 88 crop insurance, life insurance, and other insurance federal employee contributions',
11937:'to pension and other retirement benefit plans 89 federal employee contributions to health benefits plan for current coverage 89 reimbursement',
11938:'for collecting revenue 89 reimbursement for cleanup costs exchange transactions with the public: gains and losses salesofgovernmentassets:otherthanproperty,plant,andequipmentandforfeitedandforeclosedproperty 90 sales of',
11939:'property, plant, and equipment 91 acquisition of property, plant, and equipment through exchange sales of foreclosed property: associated with pre1992',
11940:'direct loans sales of receivables: except direct loans sales of direct loans page 76 sffas 7 fasab handbook, version 20',
11941:'06/21 sffas 7 continued from previous page retirement of debt securities prior to maturity other financing sources from the public',
11942:'seigniorage 93 intragovernmentaltransactions 93 nonexchange transactions—intragovernmental: revenue 93 interest ontreasury securities heldbytrustfunds andspecialfunds excepttrustrevolvingfunds 93 interest received by one fund',
11943:'from another 94 employer entity contributions to social insurance programs 94 nonexchange transactions—intragovernmental: gains and losses 95 retirement of debt',
11944:'securities prior to maturity: trust funds and special funds except trust revolving funds 95 cancellation of debt 95 exchange transactions—intragovernmental:',
11945:'revenue 95 intragovernmental sales of goods and services by a revolving fund 95 intragovernmental sales of goods and services by',
11946:'a fund other than a revolving fund 95 employer entity contributions to pension and other retirement benefit plans for federal',
11947:'employees 96 employer entity contributions to health benefit plans for current coverage of federal employees 96 employer entity payments for',
11948:'unemployment benefits and workers compensation 97 interest ontreasury securities heldby revolvingfunds 97 interest ontreasury securities heldbytrust revolvingfunds 97 interest on',
11949:'uninvested funds received by direct loan and guaranteed loan financing accounts 98 interest received by treasury 98 exchange transactions—intragovernmental: gains',
11950:'and losses 98 retirement of debt securities prior to maturity: revolving funds and trust revolving funds 95 other financing sources—intragovernmental',
11951:'99 appropriations 99 cost subsidies: difference between internal sales price reimbursement and full cost 99 cost subsidies: difference between the',
11952:'service cost of pensions and other retirement benefits, less the 100 employee contributions, if any, and the employer entity contributions',
11953:'contribution by the general fund to the smi trust fund 100 transfer by ccc to federal crop insurance corporation interchange',
11954:'between the railroad retirement board and the social security and hospital insurance trust 101 funds transfer of cash and other',
11955:'capitalized assets without reimbursement transfer of property, plant, and equipment without reimbursement: types that are expensed revaluations revaluation of capitalized',
11956:'property, plant, and equipment revaluation of inventory and related property page 77 sffas 7 fasab handbook, version 20 06/21 sffas',
11957:'7 continued from previous page transactions not recognized as revenues, gains, or other financing sources 103 borrowing from the public',
11958:'103 borrowing from treasury, the federal financing bank, or other government accounts 103 disposition of revenue to other entities: custodial',
11959:'transfers 104 sales of different types of government assets 104 acquisition of property, plant, and equipment through exchange 104 transfer',
11960:'of property, plant, and equipment without reimbursement: types that are expensed 105 donation of property, plant, and equipment: types that',
11961:'are expensed 105 negative subsidies on post1991 direct loans and loan guarantees 105 downward subsidy reestimates for post1991 direct loans',
11962:'and loan guarantees 106 fees on post1991 direct loans and loan guarantees 106 repayment of post1991 direct loans 106 repayment',
11963:'of pre1992 direct loans 106 repayment of receivables: except direct loans 106 sales of direct loans 107 sales of foreclosed',
11964:'property: associated with post1991 direct loans and loan guarantees 107 transactions with the public nonexchange transactions with the public 242.',
11965:'individual income taxes, corporation income taxes, social insurance taxes and contributions,45 excise taxes, estate and gift taxes, and customs duties.—taxes',
11966:'including customs duties are levied through the exercise of the power of the government to compel payment. in broad terms,',
11967:'taxes are “the price we pay for civilization.” more specifically they finance spending of many types to promote the general',
11968:'welfare, provide for the common defense, and ensure domestic tranquillity: national defense, a judicial system, aid to the elderly, construction',
11969:'of infrastructure, education and training, and so forth. the relationship between the taxpaid andthe valuereceived istoo indirect and disproportionatetorelate the',
11970:'revenue that is received from any identifiable taxpayer to the cost that is incurred for providing that identifiable taxpayer with',
11971:'benefits. this is especially the case where the benefits are of a collective or public nature, such as national defense,',
11972:'in which case consumption by one taxpayer does not reduce the consumption available for another; or 45“social insurance” does not',
11973:'include programs established solely or primarily for federal employees, such as pension and other retirement plans. “social insurance” taxes and',
11974:'contributions do, however, include payments made by or on behalf of federal employees to social insurance plans, such as social',
11975:'security and medicare. page 78 sffas 7 fasab handbook, version 20 06/21 sffas 7 where the benefitsare designed to redistribute',
11976:'income from one group of people to another. therefore, tax revenue is nonexchange revenue. 243. all excise taxes, like other',
11977:'taxes, are classified as resulting in nonexchange revenue. some excise taxes considered to be benefit taxes are levied on bases',
11978:'that are related to the use of publicly provided goods and servicesor the publicprovision of otherbenefits, such as the gasoline',
11979:'tax; certain other excise taxes are levied on bases related to a cause of some damage and are dedicated to',
11980:'pay down costs, such as the tax on domestically mined coal, which is dedicated to the black lung disability trust',
11981:'fund. even in these cases, however, the relationship between the taxand the benefit received byan identifiable recipient is relatively indirectanddisproportionate.',
11982:'moreover, theseexcisetaxes,likeothertaxes,aredetermined through the exercise of the power of the government to compel payment. therefore, like other taxes, they are',
11983:'classified as producing nonexchange revenue. 244. board members have differing views on whether social insurance programs result in exchange or',
11984:'nonexchange transactions.46 however, they agree that social insurance tax revenue should be reported in the same way as other tax',
11985:'revenue for the purposes of financial reporting. this is because social insurance taxes, like other taxes, are determined through the',
11986:'exercise of the power of the government to compel payment. furthermore, individuals and businesses subject to social insurance taxes are',
11987:'subject to them as a byproduct of their decision to enter covered employment or engage in a covered business, so',
11988:'especially for the major, broadbased social insurance programs—social security, medicare hospital insurance, and unemployment compensation—they have virtually no legal option',
11989:'except to pay. 245. tax receipts are generally collected from the public by the irs internal revenue service and, to',
11990:'a lesser extent, by the customs service and other entities acting as agents for the recipient entitiesrather than on their',
11991:'own behalf. the collecting entity receives the cash and then transfers it to the general fund, trust fund, or special',
11992:'fund on whose behalf it was collected. the amount so collected should be accounted for as a custodial activity by',
11993:'the collecting entity. the tax is recognized as a nonexchange revenue by the entity that is legally entitled to the',
11994:'amount. this would be a trust fund or special fund in the case of an earmarked i.e., dedicated tax. if',
11995:'collected on behalf of the government as a whole, it would be recognized in the governmentwide consolidated financial statements. 46see',
11996:'discussion of social insurance programs in fasab, exposure draft, supplementary stewardship reporting august 1995. page 79 sffas 7 fasab handbook,',
11997:'version 20 06/21 sffas 7 246. socialinsurancetaxesandcontributionspaidbyfederalemployees.47—federalemployees may be covered by social insurance programs such as social security48 and medicare',
11998:'under the same terms and conditions as the remainder of the covered population. the payments made by federal employees are',
11999:'in the nature of taxes, compulsory payments demandedbythe government through the exerciseof itspower to compelpayment. insofar as the social insurance',
12000:'program applies to employees of the united states government, the terms and conditions are generally the same as the program',
12001:'for private employees. the employer and employee contributions are generally calculated in the same way; the employee contribution is not',
12002:'earned by the social insurance program; and the benefits are generally calculated in the same way. the employee does not',
12003:'obtain particular benefits under the plan from rendering service in federal employment, because he or she would have been similarly',
12004:'covered by the program if privately employed and would have obtained similar benefits. for these reasons, the employee contribution should',
12005:'have the same classification as contributions by nonfederal employees, which is nonexchange revenue. 247. depositsby states for unemployment trust fund.—states',
12006:'deposit the receipts from the state unemployment tax to the u.s. treasury for the unemployment trust fund in order to',
12007:'finance most of the benefits under the unemployment compensation system. the state unemployment tax differs from state to state in',
12008:'terms of the tax rate, tax base, and certain other characteristics, and unemployment benefits also differ from state to state.',
12009:'nevertheless, the deposit has long been construed as a federal budget receipt a governmental receipt, and the unemployment trust fund',
12010:'has long been included as an account in the federal budget. 248. this is for a combination of reasons taken',
12011:'together: a the unemployment compensation system—including the system of taxes, the system of benefits, and the trust fund—was established by',
12012:'the socialsecurityact of 1935 and hasbeen amended byfederal lawmany times; bdepositsareheld ina trust fund operatedbytheu.s. government; cfederallaw specifies extensive requirements',
12013:'for the state unemployment tax and unemployment benefits; d the federal unemployment tax finances grants to states to cover their',
12014:'entire cost of administering the unemployment system; and e federal law effectively coerces states to participate in the system, with',
12015:'participation requiring them to levy the state unemployment tax and deposit the collections in the u.s. treasury. if a state',
12016:'does not participate orisnot certifiedbythe department of laborasmeeting federalrequirements: i the federal unemployment tax is levied within the state at',
12017:'its maximum rate, ii the systemdoesnot payanyunemployment compensationbenefitswithin thestate, and iiithe 47“social insurance” does not include programs established solely or',
12018:'primarily for federal employees, such as pension and other retirement plans. 48most federal civilian employees hired before 1984 are not',
12019:'covered by social security. page 80 sffas 7 fasab handbook, version 20 06/21 sffas 7 federal government provides no grants',
12020:'to state governments to pay for the costs of administration. the deposits of the state tax are therefore nonexchange revenue',
12021:'of the unemployment trustfund. thefederalunemploymenttaxisleviedandcollectedseparately from the state unemployment tax. 249. user fees, harbor maintenance trust fund. —this is an',
12022:'example of a tax that is termed a “userfee” bylawwhileclassifiedinthe budget asagovernmentalreceipt togetherwith other taxes and duties. it is an',
12023:'ad valorem tax of 0.125 percent imposed on commercial cargo loaded and unloaded at specified u.s. ports open to public',
12024:'navigation. the receipt is earmarked to the harbor maintenance trust fund. it is similar in nature to other excise taxes',
12025:'that result from the government’s power to compel payment and that are dedicated to a trust fund or special fund',
12026:'to be spent for a designated purpose for example, the gasoline excise tax, which isdedicated tothe highwaytrust fund. it therefore',
12027:'should be recognized as nonexchange revenue by the harbor maintenance trust fund. 250. customs service fees.—the customs service collects revenue',
12028:'primarily from duties on imported merchandise but also from two types of fees: the merchandise processing fee and a group',
12029:'of fees called “user fees.” 251. the merchandise processing fee is primarily an ad valorem charge on formal merchandise entries',
12030:'into the united states at 0.19 percent subject to a maximum and minimum charge. it also includes flat fees on',
12031:'informally entered goods. the collections are earmarked by law to a special fund from which receipts are made available to',
12032:'finance customs service operations to the extent provided by current appropriations. 252. the merchandise processing fee is associated with the',
12033:'cost of the customs service’s operations. the fee as originally enacted was modified by the customs and tradeact of 1990',
12034:'to make it consistent with u.s. obligations under gatt the generalagreement on tariffs and trade after a gatt panel had',
12035:'ruled that the original fee a straight ad valorem fee exceeded the cost of services rendered and was a tax',
12036:'on imports that discriminated against imports in favor of domestic production. the maximum and minimum fees and the flat fees',
12037:'were enacted to meet the u.s. obligation. 253. however, the associated cost is primarily some of the costs of assessing',
12038:'and collecting duties on imported merchandise, such as the salaries of import specialists who classify merchandise and the costs of',
12039:'processing paperwork. the importer pays duties that are required by law; it does not receive anything of value from the',
12040:'government in the nature of an exchange. furthermore, these costs are not likely to depend significantly on the value of',
12041:'the merchandise, and the fee is levied through the power of the government to compel payment. therefore, for the purpose',
12042:'of a classification systemfor financialreporting, the fee is akin to dedicated taxesthat are also related in the aggregate to associated',
12043:'costs and that page 81 sffas 7 fasab handbook, version 20 06/21 sffas 7 are classified as nonexchange revenue e.g.,',
12044:'the excise tax on gasoline. the merchandise processing fee is therefore classified as a nonexchange revenue. 254. the user fees',
12045:'consist of a group of flat fees charged on passengers and conveyances enteringthecountry.49 the collectionsare dedicated bylawto aspecialfund whose receipts',
12046:'are made available by permanent indefinite appropriation to finance customs service operations. 255. these fees are intended to offset certain',
12047:'inspection costs that relate to the processing of passengersandconveyancesenteringthecountry. theyareleviedthroughthepowerof the government to compel payment, and the person or entity',
12048:'that pays these fees does not receive anything of value from the government in exchange. the inspection activities are for',
12049:'a variety of purposes: to ensure that dutiable merchandise is declared, to seize contraband such as narcotics and illegal drugs,',
12050:'to detect infringements of patent and copyright laws, and so forth. some of these purposes are related to the government’s',
12051:'powers to raise taxes, which are nonexchange revenue, and to enforce laws. only to a limited extent are they like',
12052:'regulatory user fees, based on the government’s power to regulate particular businesses or activities. therefore, like the merchandise processing fee,',
12053:'the user fees are classified as nonexchange revenue. 256. deposits of earnings, federal reserve system.—the federal reserve system consists of',
12054:'the board of governors of the federal reserve system and twelve regional federal reserve banks. under federal accounting concepts, it',
12055:'is not considered to be part of the governmentwide reporting entity. therefore, payments made to or collections received from the',
12056:'federal reserve system would be reported in the financial statements of the federal government and its component reporting entities.50 the',
12057:'federal reserve earns large amounts of interest on its portfolio of treasury securities and deposits to the treasury all net',
12058:'income after deducting dividends and the amount necessary to bring the surplus of the federal reserve banks to the level',
12059:'of capital paidin. 257. the federal reserve was established byact of congress pursuant to the government’s sovereign power over the',
12060:'nation’s money, and its investment in treasury securities is necessary for carrying out its monetary function. it does not receive',
12061:'anything of value from the government in exchange for its deposit of earnings, and on occasion it has been required',
12062:'by law to make extra payments. the revenue from the deposits is therefore nonexchange. 49these fees are sometimes called the',
12063:'“cobrauser fees.” this term comes from the consolidated omnibus budget reconciliationact of 1985, which established these fees. 50sffac no. 2,',
12064:'entity and display, para. 47. page 82 sffas 7 fasab handbook, version 20 06/21 sffas 7 258. donations: except types',
12065:'of property, plant, and equipment that are expensed.—donations are contributionstothegovernment, i.e.,voluntarygiftsofresourcestoagovernment entity bya nonfederal entity.51 thegovernmentdoesnotgiveanythingofvaluetothedonor,and the donor receives only',
12066:'personal satisfaction. the donation of cash, other financial resources, or nonfinancialresourcesexcept stewardship property, plant, and equipment is therefore a nonexchange',
12067:'revenue. 259. the exception,stewardship pp&e, consists of federal mission pp&e, heritage assets, and stewardship land. such pp&e is expensed if',
12068:'purchased, but no amount is recognized if it is received as a donation. correspondingly, no revenue is recognized for such',
12069:'donations. 260. fines and penalties.—fines and penalties are monetary requirements imposed on those who violate laws or administrative rules. the',
12070:'person or other entity that pays a fine or penalty does not receive anything of value in exchange, nor does',
12071:'the government sacrifice anythingofvalue.thegovernmentcollectstheseamountsthroughtheexerciseofitspower to compel payment. fines and penalties are therefore a nonexchange revenue. 261. fines from judicial proceedings',
12072:'are collected by the entity acting as an agent for the government asa whole ratherthanon itsown behalf. theyare therefore accountedfor',
12073:'asa custodial activity of the collecting entity and recognized as a nonexchange revenue in the governmentwide consolidated financial statements. 262.',
12074:'fines and penalties produced by an entity’s operations—such as inspections to ensure compliance with federal law and with regulations that',
12075:'are the responsibility of the entity e.g., inspections by the office of surface mining or compliance with regulations for the',
12076:'conduct of a federal program—are recognized as nonexchange revenue by whichever entity is legally entitled by law to the revenue.',
12077:'in some cases, but not all, this would be the collecting entity. if the collecting entity transfers the nonexchange revenue',
12078:'to the general fund or another entity, the amount is accounted for as a custodial activity by the collecting entity.',
12079:'if transferred to the general fund, the penalties are recognized as nonexchange revenue in the governmentwide consolidatedfinancial statements; if transferred',
12080:'to another entity, they are recognized as nonexchange revenue by the entity that receives the transfer. 263. penaltiesdue todelinquenttaxes inconnection',
12081:'with custodial activity.—the person orother private entity that pays a penalty on delinquent taxes does not receive anything in exchange,',
12082:'nor does the government sacrifice anything of value. the government collects these amounts through its power to compel payment. penalties',
12083:'on delinquent taxes are therefore a nonexchange revenue. the penaltiesare accounted for as a custodial activity. if transferred to the',
12084:'general fund, the penalties are recognized as nonexchange revenue in 51the term “donations” includes wills disposing of property and judicial',
12085:'proceedings other than forfeitures. page 83 sffas 7 fasab handbook, version 20 06/21 sffas 7 thegovernmentwide consolidated financialstatements; if transferredtoanother',
12086:'entity,they are recognized as nonexchange revenue by the entity that receives the transfer. 264. forfeitures.—property may be seized as a',
12087:'consequence of various laws and regulations and forfeited to the government. forfeited property may be acquired through forfeiture proceedings, be',
12088:'acquired to satisfy a tax liability, or consist of unclaimed and abandoned merchandise. forfeited property is principally managed by theasset',
12089:'forfeiture fund of the justicedepartment andthetreasuryforfeiture fund of thetreasurydepartment. revenue is recognized from forfeited property unless the property is distributed',
12090:'to state or local law enforcement agencies or foreign governments or is received in satisfaction of a previously recognized revenue',
12091:'e.g., accrued tax receivables.52 265. the timing of revenue recognition depends on how the property is forfeited and the nature',
12092:'of the property. in the case of unclaimed and abandoned merchandise, revenue is recognized in the amount of the sales',
12093:'proceeds at the time the property is sold. in the case of property acquired through forfeiture proceedings, the timing of',
12094:'recognition depends on the nature and disposition of the property. for monetary instruments, the revenue is recognized at the time',
12095:'of obtaining forfeiture judgment; for property that is sold, at the time of sale; and for property that is held',
12096:'for internal use or transferred to another federal agency, at the time of obtaining approval to use the property internally',
12097:'or transfer it.53 266. the method of measuring revenue depends on the nature of the property. the amount of revenue',
12098:'recognized for monetary instruments is the market value when the forfeiture judgment is obtained. for property that is sold, it',
12099:'is the sales proceeds. for property that is held for internal use or transferred to another federal agency, it is',
12100:'the fair value of the property less a valuation allowance for any liens or third party claims. 267. the revenue',
12101:'from forfeiture is nonexchange revenue, because the government seizes the property through the exercise of its power. the government does',
12102:'not sacrifice anything of value in exchange and the entity that forfeits the property does not receive anything of value.',
12103:'more than half of the forfeiture revenue of the two funds mentioned above is from currencyandothermonetaryinstruments.althoughothertypesofforfeited propertymustbe sold in order',
12104:'to recognize revenue, or constructively sold if transferred to another federal 52this amends sffas no. 3, accounting for inventory and',
12105:'related property, with respect to forfeitures related to satisfying tax liabilities. 53sffas no. 3, para. 5778. the standardalsorequires deferredrevenue to',
12106:'be recognized when a forfeiture judgment is obtained,butthedeferredrevenueisreversed when revenue is recognized. the amount ofrevenueordinarilydiffers from the amount of deferred',
12107:'revenue. in some cases, an adjustment subsequent to the original forfeiture judgment may be necessary when it is later determined',
12108:'that a portion of the forfeiture is to be distributed to state or local law enforcement agencies or foreign governments.',
12109:'page 84 sffas 7 fasab handbook, version 20 06/21 sffas 7 agency or placed into internal use, this is the',
12110:'last step in a process that is inherently nonexchange. 268. the dispositionofthe revenuefromforfeiture isdetermined bylaw. revenue or the property itself',
12111:'may ultimately be distributed to the seizing entity, state or local law enforcement agencies, foreign governments, or the general fund.',
12112:'revenue is recognized as nonexchange revenue by the entity that is legally entitled to use the revenue or to use',
12113:'the property itself. if the property is distributed to a state or local law enforcement agency or a foreign government,',
12114:'revenue is not recognized by a federal government reporting entity. if the revenue is transferred to the general fund, it',
12115:'is recognized as nonexchange revenue in the governmentwide consolidated financial statements. 269. some entities may be involved in the management',
12116:'and liquidation of forfeited property but not themselves be entitled to the revenue or to the use of the property.',
12117:'for example, a central fund created to support the seizure activities of multiple entities may manage forfeitedpropertyand thecollectionanddisposition of the',
12118:'revenuefrom that property. these entities should account for the property as a custodial activity. revenue is shown when it is',
12119:'recognized, and it is shown as transferred to others when the cash is disbursed or the property is delivered. the',
12120:'disposition of property to an entity outside the federal government is also accounted for. exchange transactions with the public: revenue',
12121:'270. sales of goods and services.—the cost of production for goods and services such as electricity, maildelivery,and mapsisdefrayed in wholeorin',
12122:'part byrevenuefromselling the goods or services provided. the sales may be made by a public enterprise revolving fund such as',
12123:'the bonneville poweradministration, an intragovernmental revolving fund such as the government printing office, or a fund that is not a',
12124:'revolving fund such as the geological survey. each party receives and sacrifices something of value. the sale is therefore an',
12125:'exchange transaction, and the revenue is exchange revenue for the entity making the sale. 271. sales of goods and services',
12126:'in undercover operations.—the cost of the government’s undercover operations is defrayed in whole or in part from the proceeds of',
12127:'sales of goods that have been purchased as opposed to goods that have been forfeited. each party receives and sacrifices',
12128:'something of value. these characteristics of the transaction are not affected by whether the sale is illegal. the sale is',
12129:'therefore an exchange transactions, and the revenue is exchange revenue of the entity making the sale. 272. interest unless classified',
12130:'elsewhere, dividends, and rents except for mineral rights on government property.—each partyreceivesandsacrificessomethingofvalue,sotheinflow of resources is an exchange transaction. page 85',
12131:'sffas 7 fasab handbook, version 20 06/21 sffas 7 273. interest is classified as exchange revenue notwithstanding the fact that',
12132:'the entity may not be charged a cost of capital for the assets that yield these inflows; or, if the',
12133:'entity borrowed fromtreasuryto acquire the assets, it mayhavebeencharged abelowmarket interest rate. the gross cost of the entity is understated in',
12134:'such cases; and to recognize an exchange revenue is to recognize a revenue without some or all of the related',
12135:'costs, and hence to understate the entity’s net cost of operations. nevertheless, in some cases the entity does pay the',
12136:'treasury at least some interest; and the government’s cost of borrowing to acquire the assets is recognized as a cost',
12137:'of the government as a whole. since some cost is recognized, even if not always the full cost of the',
12138:'entity,54 an exchange revenue is recognized for the entity that receives the inflow of interest. 274. rents, royalties, and bonuses',
12139:'on outer continental shelf ocs and other petroleum and mineralrights.—rents, royalties, and bonusesareexchange revenues, because each party receives and sacrifices',
12140:'something of value. the amounts are earned by sales in the market and therefore are exchange revenue. they are collected',
12141:'by the minerals management service mms of the department of the interior, which manages the energy and minerals resourcesontheocs and',
12142:'collects the amounts duethegovernment andindian tribesfrom minerals produced on the ocs and other federal and indian lands. 275. mms does',
12143:'not recognize a depletion cost for various reasons, including the fact that under present accounting standards natural resources are not',
12144:'recognized as an asset and depletion is not recognized as a cost. as a result, this exchange revenue bears little',
12145:'relationship to the recognized cost of mms and cannot be matched against its gross cost of operations. therefore, although the',
12146:'inflows are exchange revenue, they should not be subtracted from mms’s gross cost in determining its net cost of operations.',
12147:'276. mms collects rents, royalties, and bonuses and distributes the collections to the recipients designated by law: the general fund,',
12148:'certain entities within the government to which amounts are earmarked, the states, and indian tribes and allottees. mms collection activity',
12149:'for nonfederal entities may meet the definition of fiduciary activity and, if so, should be accounted for in accordance with',
12150:'the requirements of sffas 31, accounting for fiduciary activities. the amounts of revenue should be recognized and measured under the',
12151:'exchange revenue standards when they are due pursuant to the contractual agreement. 277. the rents, royalties, and bonuses transferred to',
12152:'treasury for the general fund, or to other government reporting entities, should be recognized by them as exchange revenue. however,',
12153:'neither the government as a whole nor the other recipient entities recognize the natural resources as an asset and depletion',
12154:'as a cost. therefore, this exchange revenue 54the partial recognition of associated cost distinguishes interest from rents, royalties, and bonuses',
12155:'on the outer continental shelf and the auction of the radio spectrum. for the latter transactions, see the subsequent paragraphs.',
12156:'page 86 sffas 7 fasab handbook, version 20 06/21 sffas 7 should not offset their gross cost in determining their',
12157:'net cost of operations. it should instead be a financing source in determining their operating results and change in net',
12158:'position. 278. proceeds from the auction of the radio spectrum.—the proceeds from auctioning the right to use the radio spectrum',
12159:'are exchange revenues, because each party receives and sacrifices something of value. the amount of revenue is earned by sales',
12160:'in the market at auctions. it bears little relationship to the costs recognized by the federal communications commission fcc, which',
12161:'collects the revenue, or to the costs recognized by the u.s. government as a whole. therefore, it should not be',
12162:'offset against the costs of the fcc in determining its net cost of operations or against the costs of the',
12163:'government as a whole in governmentwide consolidated financial statements. 279. the fcc should therefore account for this exchange revenue as',
12164:'a custodial activity, acting as an agent on behalf of the general fund; and it should be included as exchange',
12165:'revenue in the governmentwide consolidated financial statements. 280. interest on post199155 direct loans.56—interest on direct loans is an exchange transaction,',
12166:'because it is part of a broader exchange transaction in which the entity makes a loan to the borrower and',
12167:'the entity and borrower each receives and sacrifices something of value. interest on direct loans that are budgeted according to',
12168:'the provisions of the federal credit reformact of 1990 consists of two components: the nominal interest the stated interest rate',
12169:'times the nominal principal and the amortized interest change in present value of the loans receivable due to the passage',
12170:'of time. the combined effect of these components equals the effective interest, which is directly defined as the present value',
12171:'of the loans receivabletimesthetreasuryinterestrateapplicabletothe particularloansi.e.,the interest rate used to calculate the present value of the direct loans when the direct',
12172:'loans were disbursed. the effective interest causes an equal increase in the aggregate value of the assets on the balance',
12173:'sheet, and therefore the effective interest is the amount recognized as exchange revenue.57 55post1991direct loans consist of direct loans that',
12174:'were obligated after september 30, 1991, whereas pre1992 direct loans consist of direct loans that were obligated before october 1,',
12175:'1991. the same accounting that is used for post1991direct loans is alsousedfor pre1992direct loans thatwere modified and transferred to financing',
12176:'accounts;loans receivable arising from defaulted post1991 guaranteed loans; and loans receivable arising from defaulted pre1992 guaranteed loans that were modified',
12177:'and transferred to financing accounts. 56for interest on pre1992 direct loans, see the preceding section on “interest unless classified elsewhere',
12178:'. . .” 57see sffas no. 2, accounting for direct loans and loan guarantees, paragraphs 3031 and 37; for an',
12179:'illustrative case study, also seeappendix b. page 87 sffas 7 fasab handbook, version 20 06/21 sffas 7 281. interest on',
12180:'delinquent taxes and other receivables that arise as the result of custodial operations.—receivables that arise as the result of custodial',
12181:'operations are custodial or nonentity assets, held by the irs or another entity as an agent for the government as',
12182:'a whole rather than on its own behalf e.g., irs tax receivables on which the delinquent taxpayer must pay interest.',
12183:'the interest is an exchange revenue, because each party receives and sacrifices something of value, but it is not related',
12184:'to the costs incurred by the collectingentity. theinterest isaccountedforasa custodialactivitybythecollectingentity. if transferred to the general fund, the interest is recognized',
12185:'as exchange revenue in the governmentwide consolidated financial statements because it is related to the government’s cost of borrowing; if',
12186:'transferred to another entity, it is recognized as nonexchange revenue by the entity that receives the transfer. 282. regulatory user',
12187:'fees such as patent and copyright fees; immigration and consular fees; sec registration and filing fees; and nuclear regulatory commission',
12188:'fees.—regulatory user fees are charges based on the government’s power to regulate particular businesses or activities. the revenue is related',
12189:'to the cost in one of two ways. special benefits may be provided to identifiable recipients who pay the fees,',
12190:'beyond the benefits, if any, that accrue to the general public e.g., passport fees; or the government may incur costs',
12191:'in order to regulate an identifiable entity for the benefit of the general public or some other group, in which',
12192:'case the user charge compensates the government for its regulatory costs that were caused by the activity of the party',
12193:'that pays the charge e.g., sec and nuclear regulatory commission fees. because in general the revenue is closely related to',
12194:'the cost of operations, these fees are classified as exchange transactions and the revenue is an exchange revenue of the',
12195:'entity that charges the fee. 283. diversion fees,departmentof justice.—registrants in the diversion control program e.g., physicians pay fees to the',
12196:'drug enforcementadministration, in exchange for which the deaprovides the registrants with the authority to prescribe controlled substances. the diversion fees',
12197:'are intended to cover the costs of the diversion control program. because the revenue is related to the cost and',
12198:'the registrants both receive and sacrifice value, the payment of these fees is an exchange revenue of the diversion control',
12199:'program. 284 premiums for smi supplementary medical insurance, bank deposit insurance, pension benefit guarantees, crop insurance, life insurance, and other',
12200:'insurance.—in exchange for a premiumandotherconsiderations,thegovernmentpromisestomakepaymentstoprogram participants if specified events occur. the premium offsets the cost of the program in whole',
12201:'or in part. the degree to which participation is voluntary differs from program to program. because the revenue is related',
12202:'to the cost of the providing service, it is an exchange revenue of the insurance program. page 88 sffas 7',
12203:'fasab handbook, version 20 06/21 sffas 7 285. federal employee contributions to pension and other retirement benefit plans.58— employees of',
12204:'the federal government provide service to their employer in exchange for compensation, of which some is received currently the salary',
12205:'and some is deferred pensions, retirement health benefits, and other retirement benefits. this is an exchange transaction, because each partysacrifices',
12206:'value and receivesvalue in return.aspart of this exchange transaction, the government promises a pension to its employees after they retire.',
12207:'the government also promises other retirement benefits, notably health benefits. in return, the employee provides services and, under some plans,',
12208:'makes a contribution to the retirement fund out of his or her salary. the financing of these benefits may include',
12209:'contributions paid by the employee to the retirement fund. 286. in broad terms,the employee contribution isan inflow ofresourcesto the retirementfund',
12210:'as part of this exchange transaction. more narrowly, it is a payment by the employee as part of an exchange',
12211:'of money and services for a future pension or other retirement benefit. therefore, it is an exchange revenue of the',
12212:'entity that administers the retirement plan and thus is an offset to that entity’s gross cost in calculating its net',
12213:'cost of operations.59 287. federalemployee contributionstohealthbenefitsplan forcurrentcoverage.—employeesof the federal government provide services to their employer in exchange for compensation, of',
12214:'which some is received currently in the form of money the salary; some is received currently in the form of',
12215:'payments to a third party the employer entity contribution to the medical insurance plan for current coverage of its employees;',
12216:'and some is deferred pensions and other retirement benefits. this is an exchange transaction, because each party sacrifices value and',
12217:'receives value in return. as part of this exchange transaction, the government and its employees both contribute to a medical',
12218:'insurance plan that provides current coverage of the employees. 288. in broad terms,the employee contributionoutofhisor her salaryisaninflowofresourcesto the health benefits',
12219:'plan as part of this exchange transaction. more narrowly, it is a payment in exchange for current coverage by a',
12220:'health benefits plan. therefore, it is an exchange revenue of the entity that administers the health benefits plan and thus',
12221:'is an offset to that entity’s gross cost in calculating its net cost of operations. 289. reimbursement for collecting revenue.—the',
12222:'customs service collects duties on goods imported by puerto rico and the virgin islands. the customs service retains an amount',
12223:'58federal employee retirement plans do not include social insurance, such as social security and medicare.8 59for further discussion of the',
12224:'accounting standards for pensions and other retirement benefits of federal employees, see sffas no. 5,accounting for liabilities of the federal',
12225:'government, para. 5693 and 148181. the standards do not cover accountingfor theplanper se as distinct from the administeringentity. nordo they',
12226:'coverdefined contribution plans, or administrative entities that are not federal reporting entities. page 89 sffas 7 fasab handbook, version 20',
12227:'06/21 sffas 7 equal to the estimated cost of collecting these duties, including all costs of operations in puerto rico',
12228:'and the virgin islands and an allocation of overhead; it transfers the remainder to the treasury, which, in turn, transfers',
12229:'the collections to puerto rico or the virgin islands. 290. the total amount of duties collected on these goods should',
12230:'be accounted for as a custodial activity by the customs service. notwithstanding that duties are a nonexchange revenue, these particular',
12231:'duties are a nonexchange revenue of an entityother than the united states and therefore are not recognized as a nonexchange',
12232:'revenue of the u.s. government. 291. the method of disposing of these collections combines two distinct transactions into one. the',
12233:'entire amount of the duties could be transferred to puerto rico and the virgin islands, and these governments could then',
12234:'pay the customs service to reimburse it for its services of collecting duties. the payment to customs would be exchange',
12235:'revenue of the customs service. the actual procedure for reimbursement, whereby customs retains an amount equal to the estimated cost,',
12236:'is simpler but equivalent in substance. hence, the custodial transfer to treasury for puerto rico and the virgin islands and',
12237:'the amount retained by customs should be shown as separate components of the disposition of the revenue from customs duties.',
12238:'the amount retained by customs to reimburse itself for its costs is exchange revenue of the customs service and is',
12239:'offset against its gross cost in calculating its net cost of operations. 292. reimbursement for cleanup costs.—the coast guard or',
12240:'other federal entities may incur costs to clean up environmental hazards caused by private parties and, in some cases, require',
12241:'these private parties to reimburse it for the costs incurred. notwithstanding that the government demands the revenue under its power',
12242:'to compel payment, the revenue arises from the action of the private parties and is closely related to the cost',
12243:'of operationsincurred as a result of that action. therefore, the revenue is an exchange revenue of the entity that incurs',
12244:'the cost. exchange transactions with the public: gains and losses 293. note: as explained in the introduction to this appendix,',
12245:'transactions that are classified as producing gains or losses should instead be classified as producing revenue or expense if they',
12246:'are usual and recurring for a particular reporting entity. 294. sales of government assets: other than property, plant, and equipment',
12247:'and forfeited and foreclosed property.—the sale of government assets other than property, plant, and equipment and forfeitedand foreclosedpropertyisanexchange transaction,because each',
12248:'party receives and sacrifices something of value. if the sales price equals book value, there is no gain or loss,',
12249:'because a cash inflow equal to book value is the exchange of one asset for another of equal recorded value',
12250:'and therefore not a net inflow of resources. if the sales price is more or less than the book value',
12251:'of the property, a gain or loss, respectively, is page 90 sffas 7 fasab handbook, version 20 06/21 sffas 7',
12252:'recognized to the extent of the difference. the amount of the difference between salesprice and book value is ordinarily a',
12253:'gain or loss rather than a revenue or expense, because sales of property are ordinarily an unusual or nonrecurring inflow',
12254:'of resources. 295. sales of property, plant, and equipment.— the transaction is an exchange transaction, because each party receives and',
12255:'sacrifices something of value. if the sales price60 equals book value, there is no gain or loss, because a cash',
12256:'inflow equal to book value is the exchange of one asset for another of equal recorded value and therefore not',
12257:'a net inflow of resources. if the sales price is more or less than book value, a gain or loss,',
12258:'respectively, is recognized to the extent of the difference. the amount of the difference is ordinarily a gain or loss',
12259:'rather than a revenue or an expense, because sales of property, plant, and equipment are ordinarily an unusual or nonrecurring',
12260:'inflow of resources. 296. the entire sales price is a gain if the book value ofthe asset is zero. the',
12261:'book value is zero a if the asset is general property, plant, and equipment pp&e that is fully depreciated or',
12262:'writtenoff or b if the asset is stewardship pp&e, for which the entire cost is expensed when the asset is',
12263:'purchased.61 297. acquisition of property, plant, and equipment through exchange.—the cost of property, plant, and equipment pp&e acquired through an',
12264:'exchange of assets with the public is the fair value of the pp&e surrendered at the time of exchange. if',
12265:'the fair value of the pp&e acquired ismore readilydeterminable than that of the pp&e surrendered, thecost isthe fair value of',
12266:'the pp&e acquired. if neither fair value is determinable, the cost of the pp&e acquired is the cost recorded for',
12267:'the pp&e surrendered net of any accumulated depreciation or amortization. in the event that cash consideration is included in the',
12268:'exchange, the cost of pp&e acquiredisincreased ordecreasedbythe amountof thecash surrendered or received. 298. any difference between the cost of the',
12269:'pp&e acquired and the book value of the pp&e surrendered is recognized as a gain or loss.62 it is a',
12270:'gain or loss rather than a revenue or expense, because ordinarily the amount would be an unusual or nonrecurring inflow',
12271:'of resources. 60the sales price may include the fair value of items received in exchange. 61sffas no. 6, accounting for',
12272:'property, plant, and equipment, has divided property, plant,and equipment pp&einto two basic categories: general pp&e and stewardshippp&e whichconsists of federal',
12273:'mission pp&e, heritage assets, and stewardship land. general pp&e is capitalized and recognized on the balance sheet; stewardship pp&e is',
12274:'expensed and thus has no book value. stewardship pp&e is presented in a stewardship statement. 62see sffas no. 6, accounting',
12275:'for property, plant, and equipment, para. 32. page 91 sffas 7 fasab handbook, version 20 06/21 sffas 7 299. if',
12276:'the fair value of the pp&e acquired is less than the fair value of the pp&e surrendered, the pp&e acquired',
12277:'is recognized at its cost and subsequently reduced to its fair value. the difference between the cost of the pp&e',
12278:'acquired and its fair value is recognized as a loss.63 300. sales of foreclosed property: associated with pre1992 direct loans',
12279:'and loan guarantees.— foreclosed property associated with pre1992 direct loans and loan guarantees is recognized as an asset at net',
12280:'realizable value. the sale is an exchange transaction, and anydifference between the sales proceedsand bookvalue isrecognized asa gain or loss.64',
12281:'301. sales of receivables: except direct loans.—the transaction is an exchange transaction, because each party receives and sacrifices something of',
12282:'value. upon sale, any difference between the sales proceeds and book value is recognized as a gain or loss. if',
12283:'the sales price equals book value, there is no gain or loss, because the exchange of one asset for another',
12284:'of equal value is not a net inflow of resources. 302. sales of direct loans.—the sale of a direct loan',
12285:'is a modification according to the federal credit reformact of 1990, regardlessof whetherthe loan being sold wasobligated after fy 1991',
12286:'or before fy 1992. the book value loss or gain on a sale of direct loans equals the book value',
12287:'of the loans sold prior to sale minus the net proceeds of the sale. it normally differs from the cost',
12288:'of modification, which is recognized as an expense.65 any difference between the bookvalue lossor gainand the cost of modification isrecognized',
12289:'asagain or loss.66 303. retirement of debt securities prior to maturity.—debt securities may be retired prior to maturity if they',
12290:'have a call feature or if they are eligible for redemption by the holder on demand. manytreasury bonds issued before',
12291:'1985 are callable; savings bonds, the government account series, the foreign series, and the state and local series of treasury',
12292:'securities are redeemable on demand, although sometimes with a penalty or other adjustment or only after a specified period of',
12293:'time. 304. each party receives and sacrifices something of value in buying and selling debt securities that may be retired',
12294:'prior to maturity. the sales price reflects such features. therefore, the 63ibid., footnote 38. 64see sffas no. 3, accounting for',
12295:'inventory and related property, para. 7991. 65this difference is due to the different interest rates used to discount future cash',
12296:'flows for calculating the subsidy cost and subsidy allowance when theloan is made and for calculating the cost of modification',
12297:'at a later time. if the sale is with recourse, the present value of the estimated loss from the recourse',
12298:'is also recognized as an expense. 66see sffas no. 2, accounting for direct loans and loan guarantees, para. 5355 andappendix',
12299:'b, part iib. page 92 sffas 7 fasab handbook, version 20 06/21 sffas 7 transaction is an exchange transaction. the',
12300:'difference, if any, between the reacquisition price and the net carrying value of the extinguished debt is recognized as a',
12301:'loss or gain.67 other financing sources from the public 305. seigniorage.—seigniorage is the face value of newly minted coins less',
12302:'the cost of production which includes the cost of the metal, manufacturing, and transportation. it results from the sovereign power',
12303:'of the government to directly create money and, although not an inflow of resources from the public, does increase the',
12304:'government’s net position in the same manner as an inflow of resources. because it is not demanded, earned, or donated,',
12305:'it is an other financing source rather than revenue. it should be recognized as an other financing source when coins',
12306:'are delivered to the federal reserve banks in return for deposits. intragovernmental transactions nonexchange transactions—intragovernmental: revenue 306. interest on treasury',
12307:'securities held by trust funds and special funds except trust revolving funds.—many trust funds and special funds hold treasury securities',
12308:'on which they receive interest. in most cases the invested balances of these funds derive predominantly from the funds’ earmarked',
12309:'taxes, which are nonexchange transactions with the public e.g., employment taxes and gasoline taxes, and to a lesser extent from',
12310:'other financing sources received from other government entities e.g., the general fund payment appropriated to the supplementary medical insurance fund.',
12311:'the balances are not earned in exchange transactions by the entity’s operations. most fundamentally, they are not produced by operations',
12312:'in which the entity incurs a cost. 307. therefore, in such cases, the interest on treasury securities should not be',
12313:'deducted from the gross costs of the trust fund or special fund, or the organization in which it is administered,',
12314:'in determining its net cost of operations. as a result, that interest should not be classified as exchange revenue. it',
12315:'should instead have the same classification as the predominant source of the investedbalances, which for most trust funds and specialfunds',
12316:'is nonexchange revenue. the interest received from invested balances of trust funds and special funds except trust revolving funds is',
12317:'therefore normally a nonexchange revenue. 67sffas no. 5, accounting for liabilities of the federal government, para. 54. page 93 sffas',
12318:'7 fasab handbook, version 20 06/21 sffas 7 308. the source of balances for some trust funds and special funds',
12319:'may not be predominantly nonexchange revenue. for example, the main source of balances for two major trust funds, the civil',
12320:'service retirement and disability fund and the military retirement fund, consistsof exchange revenue and other financing sources. in such exceptional',
12321:'cases, as explained in the basis for conclusions, the interest should be classified in the same way as the predominant',
12322:'source of balances—in these cases, as exchange revenue—rather than according to the normal rule. 309. interest received by one fund',
12323:'from another.—one fund within the government may borrow from another. for example, in 1983 the oldage and survivors insurance trust',
12324:'fund borrowed from the disability insurance and hospital insurance trust funds. when that occurs, the lending fund sacrificesinterest fromtreasurysecuritieson itsinvested',
12325:'balances and instead receives interest from the borrowing fund on the amount of the loan. since the predominant source of',
12326:'balances to the lending fund is the same regardless of whether it invests in treasury securities or lends to another',
12327:'fund, the interest received from the other fund should be classified in the same way—as nonexchange or exchange revenue—as the',
12328:'interest received on treasury securities. 310. employer entity contributions to social insurance programs.68—federal employees may be covered by social insurance',
12329:'programs such as social security69 and medicare under the same terms and conditions as the rest of the covered population.',
12330:'intragovernmental contributions to social insurance programs such as social security and medicare are nonexchange transactions, just aspayments made byprivate employers',
12331:'to these programs are nonexchange transactions. contributions by private employers are in the nature of taxes; i.e., compulsory payments demanded',
12332:'by the government through the exercise of its power to compel payment. insofar as the social insurance program applies to',
12333:'federal employees, the terms and conditions are generally the same as the program for private employees. the employer and employee',
12334:'contributions are generally calculated in the same way; the employerentitycontribution isnot earned bythe socialinsurance program; and the benefits are generally',
12335:'calculated in the same way. the employee does not obtain particular benefits under the plan from rendering service in federal',
12336:'employment, because he or she would have been similarly covered by the program if privately employed and would have received',
12337:'similar benefits. for these reasons, the employer entity contribution should have the same classification as private employer contributions, which is',
12338:'nonexchange revenue. 68“social insurance” does not include programs established solely or primarily for federal employees, such as pension and other',
12339:'retirement plans. 69most federal civilian employees hired before 1984 are not covered by social security. page 94 sffas 7 fasab',
12340:'handbook, version 20 06/21 sffas 7 nonexchange transactions—intragovernmental: gains and losses 311. retirement of debt securities prior to maturity: trust',
12341:'funds and special funds except trust revolving funds.—treasury securities held by trust funds and special funds are primarily issued in',
12342:'the government account series, which can generally be redeemed on demand. other treasury securities held by these funds may also',
12343:'be callable or redeemable on demand. if these debt securities are retired before maturity, the difference, if any, between the',
12344:'reacquisition price and the net carrying value of the extinguished debt should be recognized as a gain or loss by',
12345:'the fund that owned the securities. the gain or loss should be accounted for as a nonexchange gain or loss',
12346:'if the interest on the associated debt securities is classified as nonexchange revenue, and it should be accounted for as',
12347:'an exchange gain or loss if the interest on the associated debt securities is classified as exchange revenue. for trust',
12348:'funds except trust revolving funds and special funds, as explained elsewhere, the interest is normally but not always a nonexchange',
12349:'revenue. 312. the difference, if any, between the reacquisition price and the net carrying value of the extinguished debt should',
12350:'be recognized as a loss or gain in accounting for interest on treasury debt. the amount should be equal in',
12351:'absolute value but with the opposite sign to the gain or loss recognized by the trust fund or special fund.',
12352:'the amount should be recognized as a gain or loss from exchange in order to offset it against the gross',
12353:'interest on treasury debt in the governmentwide consolidated financial statements. 313. cancellation of debt.—the debt that an entity owes treasury',
12354:'or other agency may be canceled byact of congress. the amount of debt that is canceled including the amount of',
12355:'capitalizedinterest thatiscanceled, if anyisagainto theentitywhose debt iscanceled and a loss to treasury or other agency. the purpose of borrowing authority',
12356:'is generally to provide an entity with capital rather than to finance its operations. therefore, the cancellation of debt is',
12357:'not earned by the entity’s operations and is not directly related to the entity’s costs of providing goods and services.',
12358:'as a result, the cancellation is a nonexchange gain to the entity that owed the debt and a nonexchange loss',
12359:'to the lender. exchange transactions—intragovernmental: revenue 314. intragovernmental sales of goods and services by a revolving fund.—the cost of providing',
12360:'goods or services by a revolving fund is defrayed in whole or in part by selling the goods or services',
12361:'provided. intragovernmental sales may be made by an organization that maintains either an intragovernmental revolving fund such as the defense',
12362:'business operations fundora publicenterpriserevolvingfundsuch asthepostalservice. eachpartyreceives and sacrifices something of value. the proceeds are an exchange revenue. 315. intragovernmental sales',
12363:'of goods and services by a fund other than a revolving fund.—the cost of providing goods or services is defrayed',
12364:'in whole or in part by selling the goods or page 95 sffas 7 fasab handbook, version 20 06/21 sffas',
12365:'7 servicesprovided. each partyreceivesandsacrificessomething of value. the proceedsare an exchange revenue. 316. employer entity contributions to pension and other retirement',
12366:'benefit plans for federal employees.—employees of the federal government provide service to their employer in exchange for compensation, of which',
12367:'some is received currently the salary; and some is deferred pensions, retirement health benefits, and other retirement benefits. this is',
12368:'an exchange transaction, because each party sacrifices value and receives value in return. as part of this transaction, the government',
12369:'promises a pension and other retirement benefits especially health benefits to the employees after they retire. the financing of these',
12370:'benefits may include contributions paid by the employer entity to the retirement fund. 317. in broad terms, the employer entity',
12371:'contribution is an inflow of resources to the retirement fund as part of this exchange transaction. more narrowly, it is',
12372:'a payment by the employer entity in exchange for the future provision of a pension or other retirement benefit to',
12373:'its employees. therefore, it is an exchange revenue of the entity that administers the retirement plan and thus is an',
12374:'offset to that entity’s gross cost in calculating its net cost of operations.70 318. employer entity contributions to health benefit',
12375:'plans for current coverage of federal employees.—employees of the federal government provide services to their employer in exchange for compensation,',
12376:'of which some is received currently in the form of money the salary; some is received currently in the form',
12377:'of payments to a third party the employer entity contribution to the medical insurance plan for current coverage of the',
12378:'employees; and some is deferred pensions and other retirement benefits. this is an exchange transaction, because each partysacrifices value and',
12379:'receivesvalue in return.aspart of this exchange transaction, the government and its employees both contribute to a medical insurance plan that',
12380:'provides current coverage of its employees. 319. in broad terms, the employer entity contribution is an inflow of resources to',
12381:'the health benefits plan as part of this exchange transaction. more narrowly, it is a payment in exchangeforcurrentcoverage of the',
12382:'employerentity’semployeesbyahealthbenefitsplan. therefore, it is an exchange revenue of the entity that operates the health benefits plan and thus is an',
12383:'offset to that entity’s gross cost in determining its net cost of operations. 70for further discussion of the accounting standards',
12384:'for pensions and other retirement benefits for federal employees, see sffas no. 5,accounting for liabilities of the federal government, para.',
12385:'5693 and 148181. the standards do not cover accountingfor theplanper se as distinct from the administeringentity. nordo they coverdefined contribution',
12386:'plans, or administrative entities that are not federal reporting entities. page 96 sffas 7 fasab handbook, version 20 06/21 sffas',
12387:'7 320. employer entity payments for unemployment benefits and workers compensation.—the employerentityrecognizesaliabilityandanexpenseforfederalemployeeswho arelaidoff or injured on the job and are',
12388:'entitled under law to unemployment benefits or workers compensation, respectively.71 the payment to the former or current employee is made',
12389:'by the unemployment trust fund department of labor in the case of unemployment benefits and by the special benefits fund',
12390:'department of labor in the case of workers compensation. unemployment benefits are reimbursed by the former employer entity; and workers',
12391:'compensation costs are mostly charged back to the employer entity. 321. sincethe costsarerecognizedbytheemployerentityand itspaymenttothe unemployment trust fund or the special',
12392:'benefits fund reimburses these funds for the costs they incur, the amounts these funds receive from the employer entity are',
12393:'exchange revenues. 322. interest on treasury securities held by revolving funds.—arevolving fund conducts a cycle of businesstype operations in which',
12394:'the expenses are incurred to produce goods and services that generate revenue, and the revenue, in turn, finances expenses. revolving',
12395:'funds need capital in their operations and may invest some of that capital in treasury securities. since their holding of',
12396:'invested balances and the sale of goods and services are both integral to the funds’ operations, the interest on the',
12397:'funds’ securities is related to the funds’ cost of operations just as is the revenue earned from selling goods and',
12398:'services. furthermore, the source of the invested balances is predominantly revenue earned from theirsalesof goodsand services,forwhichthe fundsincurred costsof operationswhenthat revenue',
12399:'was earned. the interest they receive should therefore be classified in the same way as their revenue earned from selling',
12400:'goods and services and should likewise be deducted from gross cost in determining the net cost of operations. for this',
12401:'reason, interest earned by revolving funds should normally be classified as exchange revenue. 323. the source of balances for some',
12402:'revolving funds may not be predominantly exchange revenue. for such exceptions, asexplained inthebasisfor conclusions, the interest should be classified in',
12403:'the same way as the predominant source of balances rather than according to the normal rule. 324. interest on treasury',
12404:'securities held by trust revolving funds.—atrust revolving fund is a revolving fund that is also classified by law as a',
12405:'trust fund. like other revolving funds, it earns exchange revenue, which is an offset to its gross cost. for example,',
12406:'the revenue that the employees health benefit fund earns from contributions by federal employees, annuitants, employer entities, and the office',
12407:'of personnel management opm is an offset to the insurance premiums that it pays to private firms. trust revolving funds',
12408:'need capital in their operations, just like other revolving funds, the source of which is predominantly the 71see sffas no.',
12409:'5, accounting for liabilities of the federal government, para. 96 and para. 181, footnote 70. page 97 sffas 7 fasab',
12410:'handbook, version 20 06/21 sffas 7 revenuetheyhaveearned. when some of theircapital isinvestedintreasurysecurities, the interest is related to their cost of',
12411:'operations in the same way as the revenue earned from selling services. furthermore, the source of the investedbalancesispredominantlyrevenue earned from',
12412:'the sales of services, for which they incurred costs of operations when the revenue was earned. the interest they receive',
12413:'should therefore be classified in the same way as the interest received by other revolving funds, which is exchange revenue.',
12414:'325. the source of balances for some trust revolving funds may not be predominantly exchange revenue. for such exceptions, asexplained',
12415:'inthebasisfor conclusions, the interest should be classified in the same way as the predominant source of balances rather than according',
12416:'to the normal rule. 326. interest on uninvested funds received by direct loan and guaranteed loan financing accounts.—aguaranteed loan financing',
12417:'account holds uninvested balances as reserves against its loan guarantee liabilities and earns interest on these balances that adds to',
12418:'its resources to pay these liabilities.adirect loan financing account may hold uninvested balances to bridge transactions that are integral to',
12419:'its operations, such as when it borrows from treasury to disburse direct loans prior to the time of disbursement; it',
12420:'earns interest on these balancesto reflect the time value of money and thereby finance the interest it payson its debt',
12421:'to treasury. thus, in both cases, the interest received by the financing account is earned through exchange transactions with treasury',
12422:'and is an offset to the financing account’s related costs of operations. the interest is therefore an exchange revenue of',
12423:'the financing account. 327. interest received by treasury.—accounts or funds including direct loan and guaranteed loan financing accounts maybeauthorizedto borrowfrom',
12424:'thetreasuryor from thefederal financingbankanentitywithintreasuryorother sources. theinterest that theentitypays on its borrowings is a cost to the entity and an inflow',
12425:'of resources to the treasury. the treasury may be deemed to have borrowed from the public to finance the outlays',
12426:'for which the entity borrowed, and thus to have incurred a corresponding interest cost of its own. the interest received',
12427:'by treasury from the entity is therefore related to treasury’s cost of borrowing from the public and should be classified',
12428:'as an exchange revenue. exchange transactions—intragovernmental: gains and losses 328. note: as explained in the introduction to this appendix, transactions',
12429:'that are classified as producing gains or losses should instead be classified as producing revenue or expense if they are',
12430:'usual and recurring for a particular reporting entity. 329. retirement of debt securities prior to maturity: revolving funds and trust',
12431:'revolving funds.— treasury securities held by revolving funds and trust revolving funds are primarily issued in the government account series,',
12432:'which can generally be redeemed on demand. other page 98 sffas 7 fasab handbook, version 20 06/21 sffas 7 treasury',
12433:'securities held by these funds may also be callable or redeemable on demand. if these debt securities are retired before',
12434:'maturity, the difference, if any, between thereacquisition price and the net carrying value of the extinguished debt should berecognized as',
12435:'a gain or loss by the fund that owned the securities. the gain or loss should be accountedforasanonexchangegainorlossiftheinterest onthe associateddebt',
12436:'securitiesis classified as nonexchange revenue, and it should be accounted for as an exchange gain or loss if the interest',
12437:'on the associated debt securities is classified as exchange revenue. for revolving funds and trust revolving funds, as explained elsewhere,',
12438:'the interest is normally but not always an exchange revenue. 330. the difference, if any, between the reacquisition price and',
12439:'the net carrying value of the extinguished debt should be recognized as a loss or gain in accounting for interest',
12440:'on treasury debt. the amount should be equal in absolute value but with the opposite sign to the gain or',
12441:'lossrecognized bythe revolving fund or trust revolving fund. the amount should be recognized as a gain or loss from exchange',
12442:'in order to offset it against the gross intereston treasury debt in the governmentwide consolidated financial statements. other financing sources—intragovernmental',
12443:'331. appropriations.—appropriations—a form of budget authority—permit an entity to incur obligations and make payments and thus are a means of',
12444:'financing the entity’s cost. they are not otherwise related to the entity’s cost and therefore are not an offset to',
12445:'its gross cost in determining its net cost of operations. they are not earned by the entity’s activities, demanded by',
12446:'the entity, or donated to the entity. therefore, appropriations provide an other financing source instead of a revenue. 332. more',
12447:'precisely, “appropriations used” is recognized as an other financing source in determining the entity’s operating results when the entity receives',
12448:'goods and services or provides benefits, grants, or other transfer payments. to avoid double counting, appropriations used are not recognized',
12449:'for the appropriation of earmarked revenues or other financing sources, which are already counted in determining the entity’s operating results.appropriations',
12450:'that have been made available for apportionment but have not been used are recognized as “unexpended appropriations” in the entity’s',
12451:'capital. 333. costsubsidies:difference between internalsalespricereimbursementandfullcost.—one entity may receive goods or services from another entity without paying the full cost of',
12452:'the goodsorservicesorwithoutpayinganycostatall. otherfederalaccounting standardsmayrequire the receiving entityto recognize the full cost asan expense or, if appropriate, as anasset. in these',
12453:'cases the difference between full cost and the internal sales price or reimbursement sometimes called a “transfer price” is an',
12454:'imputed cost to the receiving entity.72 72see sffas no. 4, managerial cost accounting standards and concepts, para. 105115. page 99',
12455:'sffas 7 fasab handbook, version 20 06/21 sffas 7 334. thefinancingofthe imputedcostisalsoimputedtothereceivingentity. imputedfinancingis necessary so that the imputed cost does',
12456:'not reduce the entity’s operating results and net position. the imputed financing equals the imputed cost and is recognized as',
12457:'an other financing source. it isnot a revenue, because the receiving entitydoes not earn the amount imputed or demand its',
12458:'payment. 335. cost subsidies: difference between the service cost of pensions and other retirement benefits, less the employee contributions, if',
12459:'any, and the employer entity contributions.— the service cost of pensions and other retirement benefits to the employer entity, less',
12460:'the employee contributions, if any, is recognized as a cost to the employerentity. the difference between the employer entity’s cost',
12461:'and its contributions, if any, is imputed to the employer entity as part of its recognized cost. for pensions, the',
12462:'cost recognized by the employer entity is more than its contribution for employees who are covered by the civil service',
12463:'retirement system and several minor systems in a few of which the employer entity does not make any contributions toward',
12464:'the service cost. for retirement health care benefits, neither theemployeesnor theemployerentitymake anycontributionswhiletheemployee is working.73 therefore, the entire service cost is',
12465:'recognized as a cost to the employer entity and imputed to it. 336. the financing of the imputed cost is',
12466:'also imputed to the employer entity.74 the imputed financing is necessary so that the imputed cost does not reduce the',
12467:'employer entity’s operating results and net position. the imputed financing equals the imputed cost and is recognized as an other',
12468:'financing source. it is not a revenue, because the employer entity does not earn the amount imputed or demand its',
12469:'payment.75 337. this transaction differs from the immediatelypreceding transaction,in which an entitydoes not pay the full cost of the goods',
12470:'or services it receives from another entity. in the present case, the employer entity acquires the services of the employees',
12471:'itself, but another entity pays part of their cost. 338. contribution by the general fund to the smi trust fund.—the',
12472:'general fund makes a contribution to the smi supplementary medical insurance trust fund. this appropriated payment is separate from the',
12473:'transfer of earmarked premiums and is not a transfer of 73retired employees do pay premiums, however, and the service cost',
12474:'to the employer entity is defined net of the actuarial present value of those future premiums. 74the employer entity’s own',
12475:'contribution, if any, is generally financed by an appropriation but could be financed by earned revenue or other sources. 75for',
12476:'further discussion of the accounting standards for pensions and other retirement benefits for federal employees, see sffas no. 5, accounting',
12477:'for liabilities of the federal government, para. 5693 and 148181. the standards do not cover accountingfor theplanper se as distinct',
12478:'from the administeringentity. nordo they coverdefined contribution plans, or administrative entities that are not federal reporting entities. page 100 sffas',
12479:'7 fasab handbook, version 20 06/21 sffas 7 earmarked taxes or other income. it does not arise from an exchange',
12480:'transaction, because smi does not sacrifice any value to the general fund in exchange for the payment, and the general',
12481:'fund does not receive anything of value from smi. instead, the payment constitutes a general fund subsidy of the smi',
12482:'trust fund. since the payment is not demanded or earned, it is an other financing source to smi rather than',
12483:'a revenue. 339. examples of other payments of a similar nature and also classified as other financing sources are the',
12484:'payment by the general fund to the social security trust funds for military service credits and for certain uninsured persons',
12485:'at least 72 years old; and the payment by the general fund to the railroad retirement board for the vested',
12486:'dual benefit payments received by certain retirees under both the railroad retirement and the social security systems. the quinquennial military',
12487:'service credit adjustment paid between the general fund and the social security trust funds is likewise an other financing source',
12488:'to the social security trust funds but one that may be either positive or negative. 340. transfer by ccc to',
12489:'federal crop insurance corporation.—the commodity credit corporation ccc makes transfers to the federal crop insurance corporation fcic, which it finances',
12490:'by an appropriation. this payment does not arise from an exchange transaction, because fcic does not sacrifice anything of value',
12491:'to ccc, and ccc does not receive anything of value from fcic. it differs from the contribution to smi primarily',
12492:'in that it is paid by another program entity the ccc rather than directly by the general fund. since the',
12493:'payment is not demanded or earned, it is an other financing source to fcic rather than a revenue. 341. interchange',
12494:'between the railroad retirement board and the social security and hospital insurance trust funds.—the railroad retirement board pays benefits equivalent',
12495:'to the amounts that would have been paid if railroad workers had been covered under social security since its inception,',
12496:'plus additional amounts unique to that program. the railroad retirement program is partly financed by an annual financial interchange that',
12497:'takes place between the railroad social security equivalent benefitaccount a trust fund and the trust funds for oldage and survivors',
12498:'insurance, disability insurance, and hospital insurance oasdhi. the interchange is designed to place each of the oasdhi trust funds in',
12499:'the same position as it would have been if railroad employment had been covered under social security since its inception.',
12500:'342. theamountofthepaymentreflectsthedifferencebetweenathebenefitsthattheoasdhi trust funds would have paid to railroad workersand their familiesif railroademployment had been covered by oasdhi and b',
12501:'the payroll taxesthat the oasdhi trust funds would have received if railroad employment had been covered by oasdhi. if benefits',
12502:'would have exceeded taxes, the oasdhi trust funds make a payment to the railroad social security equivalent benefitaccount; if benefits',
12503:'would have been less, the oasdhi trust funds receive a payment. currently oasi and di make payments to thataccount, and',
12504:'hi receives page 101 sffas 7 fasab handbook, version 20 06/21 sffas 7 payment. the interchange differs from the examples',
12505:'in the previous cases primarily in that a the payment is between two trust funds and b the payment may',
12506:'be made in either direction. 343. the financial interchange does not arise from an exchange transaction, because it is a',
12507:'reallocation of resources among funds, all of which are financed primarily from nonexchange revenue. furthermore, the nature of this reallocation',
12508:'is such that the transferring entity does not receive anything of value and the recipient entity does not sacrifice anything',
12509:'of value. therefore, the recipient entity recognizes the transferin as an other financing source, and the transferring entity recognizes the',
12510:'transferout as a negative financing source. 344. transfer of cash and other capitalized assets without reimbursement.—cash and other capitalizedassetsmaybetransferredwithout reimbursementfromonegovernmententityto',
12511:'another. cash mayincludeexchange revenue that is recognized by the transferring entity in determining its net cost of operations but is',
12512:'required to be transferred to the general fund or another entity; other capitalized assets may include general property, plant, and',
12513:'equipment. the receiving entity does not sacrifice anything of value, and the transferring entity does not acquire anything of value.',
12514:'therefore, the transfer is not an exchange transaction. the receiving entity recognizes the transferin as an other financing source; the',
12515:'transferring entity recognizes the transferout as a negative financing source. the amount recorded by both entities is the transferring entity’s',
12516:'book value of the asset. 345. transfer of property, plant, and equipment without reimbursement: types that are expensed.—property, plant, and',
12517:'equipment pp&e of types that are expensed i.e., stewardship pp&e may be transferred from one government entity to another. if',
12518:'the asset was classified as stewardship pp&e in its entirety by both the transferring entity and the recipient entity, thetransferdoesnotaffect',
12519:'thenet cost of operationsor netpositionofeither entity and therefore in such a case it is not a revenue, a gain or',
12520:'loss, or other financing source. 346. however, if the asset that is transferred was classified as general pp&e for the',
12521:'transferring entity but stewardship pp&e for the recipient entity, it is recognized as a transferout a negative other financing source',
12522:'of capitalized assets by the transferring entity. revaluations 347. revaluationofcapitalizedproperty,plant,andequipment.—capitalizedproperty,plant,and equipment pp&e may be removed from the general pp&e accounts',
12523:'if it no longer provides service in the operations of the entity because it has suffered damage, become obsolete in',
12524:'advance of expectations, or is identified as excess. it is recorded as an asset at page 102 sffas 7 fasab',
12525:'handbook, version 20 06/21 sffas 7 its expected net realizable value. any difference between the book value and the expected',
12526:'net realizable valueisrecognized asa gain or lossindetermining the net cost of operations, because the revaluation results from the entity’s operations.',
12527:'the expected net realizable valueisadjusted at theendofeachperiod, andanyfurtherrevaluationisalsorecognized as a gain or loss in determining the net cost of operations.76',
12528:'348. since the revaluation does not affect obligations incurred but does affect net cost, an amount equal to the revaluation',
12529:'is recognized in determining the reconciliation between obligationsincurred and net cost of operations.areconciliationisnot needed in determining the change in net',
12530:'position, because the revaluation affects net cost and net position equally. 349. revaluation of inventory and related property.—inventory and related',
12531:'property may be revalued for such reasons as determination that the property is excess, obsolete, or unserviceable; that stockpile materials',
12532:'have decayed or been damaged; that a loss is estimated on commodity purchase agreements; or that a change has occurred',
12533:'in the net realizable value of commodities valued at the lower of cost or net realizable value. the amount of',
12534:'revaluation is recognized as a loss or a gain in determining the net cost of operations, because it results from',
12535:'the entity’s operations. assets are correspondingly reduced or increased.77 350. since the revaluation does not affect obligations incurred, but does',
12536:'affect net cost, an amount equal to the revaluation is recognized in determining the reconciliation between obligationsincurred and net cost',
12537:'of operations.areconciliationisnot needed in determining the change in net position, because the revaluation affects net cost and net position equally.',
12538:'transactions not recognizedas revenues, gains, or other financing sources 351. borrowing from the public.—borrowing from the public is a means',
12539:'of financing the government’s outlays. however, it is not a net inflow of resources to the treasury or other borrowing',
12540:'entity, because the asset received cash is offset by an equal liability debt. therefore, it is not revenue or an',
12541:'other financing source. 352. borrowing fromtreasury,the federalfinancing bank,orother governmentaccounts.— an entity may be provided the authority to borrow from treasury,',
12542:'the federal financing bank, or other government accounts. intragovernmental borrowing is a means of financing the 76sffas no. 6, accounting',
12543:'for property, plant, and equipment, para. 39. 77see sffas no. 3, accounting for inventory and related property, para. 2930, 4748,',
12544:'54, 97, and 107. page 103 sffas 7 fasab handbook, version 20 06/21 sffas 7 entity’s outlays. however, it is',
12545:'not a net inflow of resources to the entity, because the asset received cash is offset by an equal liability',
12546:'debt. therefore, it is not revenue or an other financing source. 353. disposition of revenue to other entities: custodial transfers.—revenue,',
12547:'primarily nonexchange revenue, may be collected by an entity acting on behalf of the general fund or another entity within',
12548:'the government on whose behalf it was collected. the collecting entity accountsforthe disposition of revenue as part of its custodial',
12549:'activity. these custodial transfers,bydefinition,donotaffectthecollectingentity’snet costofoperationsoroperating results, nor are they part of the reconciliation between its obligations and net cost of',
12550:'operations. the receiving entity recognizes the revenue as nonexchange or exchange revenue, depending on its nature, according to the applicable',
12551:'revenue standards. 354. sales ofdifferenttypesofgovernmentassets.—the saleofgovernment assets otherthan forfeited property is an exchange transaction, because each party receives and sacrifices',
12552:'something of value. as a general rule, any difference between the sales proceedsand book value is recognized as a gain',
12553:'or loss when the asset is sold. the remainder of the transaction does not provide a net inflow of resources,',
12554:'so no gain, revenue, or other financing source is recognized. if the sales proceeds equal book value, there is no',
12555:'gain or loss, because the exchange of one asset for another of equal recorded value is not a net inflow',
12556:'of resources. 355. this general rule applies to property, plant, and equipment, receivables other than direct loans, foreclosed property associated',
12557:'with pre1992 direct loans and loan guarantees, and miscellaneous assets. it does not apply to inventory, nor does it apply',
12558:'to forfeited property as explained in the previous section on nonexchange revenue. it also does not apply to the sale',
12559:'of direct loans and the sale of foreclosed property associated with post1991 direct loans and loan guarantees. the latter transactions',
12560:'are discussed in subsequent paragraphs. 356. acquisition of property, plant, and equipment through exchange.—the cost of property, plant, and equipment',
12561:'pp&e acquired through an exchange of assets with the public is the fair value of the pp&e surrendered at the',
12562:'time of exchange. if the fair value of the pp&e acquired ismore readilydeterminable than that of the pp&e surrendered, thecost',
12563:'isthe fair value of the pp&e acquired. if neither fair value is determinable, the cost of the pp&e acquired is',
12564:'the cost recorded for the pp&e surrendered net of any accumulated depreciation or amortization. in the event that cash consideration',
12565:'is included in the exchange, the cost of pp&e acquiredisincreased ordecreasedbythe amountof thecash surrendered or received.78 78see sffas no. 6,',
12566:'accounting for property, plant, and equipment, para. 32. page 104 sffas 7 fasab handbook, version 20 06/21 sffas 7 357.',
12567:'any difference between the cost of the pp&e acquired and the book value of the pp&e surrendered is recognized as',
12568:'a gain or loss. if the cost of the pp&e acquired equals the book value of the pp&e surrendered, there',
12569:'is no gain or loss nor a revenue or other financing source, because the exchange of one asset for another',
12570:'of equal value does not provide anet inflowofresources. therefore, theamount of the transaction equal to the book value of the',
12571:'pp&e surrendered isnot recognized asa gain, a revenue, oran otherfinancing source. 358. transfer of property, plant, and equipment without reimbursement:',
12572:'types that are expensed.—property, plant, and equipment pp&e of types that are expensed i.e., stewardship pp&e may be transferred from',
12573:'one government entity to another. if the asset was classified as stewardship pp&e in its entirety by both the transferring',
12574:'entity and the recipient entity, thetransferdoesnotaffect thenet cost of operationsor netpositionofeither entity and therefore in such a case it is',
12575:'not a revenue, a gain or loss, or other financing source. 359. however, if the asset that is transferred was',
12576:'classified as general pp&e for the transferring entity but stewardship pp&e for the recipient entity, it is recognized as a',
12577:'transferout a negative other financing source of capitalized assets by the transferring entity. 360. if multiuse heritage assets are transferred',
12578:'and some cost was recognized for them on the books of the transferring entity, that cost is recognized as a',
12579:'transferout a negative other financing source of capitalized assets. no amount is recognized by the entity that receives the asset.79',
12580:'361. donation of property, plant, and equipment: types that are expensed.—the acquisition cost of stewardship property, plant, and equipment pp&e',
12581:'is recognized as a cost when incurred. such pp&e consists of federal mission pp&e, heritage assets, and stewardship land. when',
12582:'such pp&e is donated to the government, however, no amount is recognized as a cost.80 since the donation of such',
12583:'pp&e does not affect the net cost or net position of the recipient entity, it is not a revenue, a',
12584:'gain, or an other financing source. 362. negative subsidies on post1991 direct loans and loan guarantees.—anegative subsidy means that the',
12585:'direct loans or loan guarantees are estimated to make a profit, apart from administrative costs which are excluded from the',
12586:'subsidy calculation by law. the amount of the subsidy cost is recognized as an expense when the direct loan or',
12587:'guaranteed loan is disbursed. anegative subsidy is recognized as a direct reduction in expense, not as a revenue, gain, or',
12588:'other financing source.81 79sffas no. 6, accounting for property, plant, and equipment, para. 61 and 72. 80ibid. page 105 sffas',
12589:'7 fasab handbook, version 20 06/21 sffas 7 363. downward subsidy reestimates for post1991 direct loans and loan guarantees.—a downward',
12590:'subsidy reestimate means that the subsidy cost of direct loans or loan guarantees is estimated to be less than had',
12591:'previously been estimated. the initial subsidy cost is recognized as an expense; a positive subsidy reestimate is recognized as an',
12592:'expense; and a downward subsidy reestimate is recognized as a direct reduction in expense, not as a revenue, gain, or',
12593:'other financing source. 364. fees on post1991 direct loans and loan guarantees.—the present value of estimated fees is included as',
12594:'an offset in calculating the subsidy cost of direct loans and loan guarantees, which is recognized as an expense when',
12595:'the loans are disbursed. the present value of estimated fees is likewise included as one component in calculating the value',
12596:'of loansreceivable or loan guarantee liabilities. when cash is received in payment of fees, the loans receivable decrease by an',
12597:'equal amount or the loan guarantee liabilities increase by an equalamount.theincreasein one asset isoffset byanequaldecreasein anotherasset or by an equal',
12598:'increase in liabilities. therefore, fees are not recognized as a revenue, a gain, or an other financing source.82 365. repayment',
12599:'of post1991 direct loans.—the present value of estimated loan repayments is included in the calculation of the subsidy cost of',
12600:'direct loans, and this subsidy cost is recognized as an expense when the loans are disbursed. the present value of',
12601:'estimated loan repayments is likewise included in the value of the loans receivable. when cash is received for the repayment',
12602:'of loans, the loans receivable decrease by an equal amount. the increase in one asset is offset by an equal',
12603:'decrease in another asset. therefore, cash inflow from the repayment is not recognized as a revenue, a gain, or an',
12604:'other financing source.83 366. repaymentofpre1992 direct loans.—when pre1992 direct loans are repaid in whole or in part, the entity exchanges',
12605:'one asset loans receivable for another cash with equal value. there is no net inflow of resources. therefore, the amount',
12606:'of cash inflow equal to book value is not recognized as a revenue, a gain, or an other financing source.84',
12607:'367. repayment of receivables: except direct loans.—when receivables other than direct loans are paid or repaid in whole or in',
12608:'part, the entity exchanges one asset loans receivable for 81for standards on direct loans and loan guarantees, see sffas no.',
12609:'2, accounting for direct loans and loan guarantees. the accounting for negative subsidy costs is symmetrical to the accounting for',
12610:'positive subsidy costs. 82the fee component of the subsidy cost is required to be disclosed separately. 83if the actual repayment',
12611:'is different from the previous estimate, the present value of the difference between cash inflows and outflows over the term',
12612:'of the loan—calculated as of the date of disbursement—is reestimated and is recognized as a subsidy expense or a reduction',
12613:'in subsidy expense. 84if the loan is not repaid, the unpaid amount is recognized as an adjustment to the bad',
12614:'debt allowance and does not affect revenue, gains, or other financing sources. page 106 sffas 7 fasab handbook, version 20',
12615:'06/21 sffas 7 another cash with equal value. there is no net inflow of resources. therefore, the amount of cash',
12616:'inflow equal to book value is not recognized as a revenue, a gain, or an other financing source.85 368. sales',
12617:'of direct loans.—the sale of a direct loan is a modification according to the federal credit reformact of 1990 regardless',
12618:'of whether the loan being sold was obligated after fy 1991 or before fy 1992. the book value loss or',
12619:'gain on a sale of direct loans equals the book value of the loans sold prior to sale minus the',
12620:'net proceeds of the sale. it normally differs from the cost of modification, which is recognized as an expense.86any difference',
12621:'between the bookvalue lossor gainand the cost of modification isrecognized asagain or loss.87 the amount of cash inflow equal to',
12622:'book value is not a net inflow of resources to the entity, because it is an exchange of one asset',
12623:'for another of equal recorded value. therefore, the amount of cash inflow equal to book value is not recognized as',
12624:'a revenue, a gain, or an other financing source. 369. sales of foreclosed property: associated with post1991 directloansand loan guarantees.—',
12625:'the net present value of the cash flow from the estimated sales of foreclosed property is included in calculating the',
12626:'subsidy cost of post1991 direct loans and loan guarantees. this subsidy cost is recognized as an expense when the loans',
12627:'are disbursed. when property is foreclosed, the property is recognized as an asset at the net present value of its',
12628:'estimated net cash flows. when the foreclosed property is sold, any difference between the sales proceeds and the book value',
12629:'i.e., the net present value as of the time of sale requires a reestimateofthesubsidyexpense, which isrecognizedasa subsidyexpense ora reduction in',
12630:'subsidy expense. the amount of cash flow equal to book value is an exchange of one asset for another of',
12631:'equal recorded value and therefore is not recognized as a gain, a revenue, or an other financing source.88 370. [paragraph',
12632:'370 was rescinded by sffas 31, paragraph 34.] 85if thereceivable is not repaid, the unpaid amount is recognized as an',
12633:'adjustment to the bad debt allowance and does not affect revenue, gains, or other financing sources. 86this difference is due',
12634:'to the different interest rates used to discount future cash flows for calculating the subsidy cost and subsidy allowance when',
12635:'the loan is disbursed and for calculating the cost of modification at a later time. if the sale is with',
12636:'recourse, the present value of the estimated loss from the recourse is also recognized as an expense. 87sffas no. 2,',
12637:'accounting for direct loans and loan guarantees, para. 5355 andappendix b, part iib. 88see sffas no. 2,accounting for direct loans',
12638:'and loan guarantees, para. 5760 andappendix b, part iiie; and sffas no. 3,accounting for inventory and related property, para. 7991',
12639:'and 154158. page 107 sffas 7 fasab handbook, version 20 06/21 sffas 7 appendix c: glossary see consolidated glossary in',
12640:'“appendix e: consolidated glossary”. page 108 sffas 7 fasab handbook, version 20 06/21 sffas 7 index oftransactions classified inappendix b',
12641:'acquisition of property, plant, and equipment through exchange 104 appropriations 99 borrowing from the public 103 borrowing from treasury, the',
12642:'federal financing bank, or other government accounts 103 cancellation of debt 95 contribution by the general fund to the smi',
12643:'trust fund 100 cost subsidies: difference between internal sales price reimbursement and full cost 99 cost subsidies: difference between the',
12644:'service cost of pensions and other retirement benefits, less the employee contributions, if any, and the employer entity contributions 100',
12645:'customs service fees 81 deposit fund transactions 107 deposits by states for unemployment trust fund 80 deposits of earnings, federal',
12646:'reserve system 82 disposition of revenue to other entities: custodial transfers 104 diversion fees, department of justice 88 donation of',
12647:'property, plant, and equipment: types that are expensed 105 donations: except types of property, plant, and equipment that are expensed',
12648:'83 downward subsidy reestimates for post1991 direct loans and loan guarantees 106 employer entity contributions to health benefit plans for',
12649:'current coverage of federal employees 96 employer entity contributions to pension and other retirement benefit plans for federal employees 96',
12650:'employer entity contributions to social insurance programs 94 employer entity payments for unemployment benefits and workers compensation 97 exchange transactions',
12651:'with the public: gains and losses 90 exchange transactions with the public: revenue 85 exchange transactionsintragovernmental: gains and losses 98',
12652:'exchange transactionsintragovernmental: revenue 95 federal employee contributions to health benefits plan for current coverage 89 federal employee contributions to pension',
12653:'and other retirement benefit plans 89 fees on post1991 direct loans and loan guarantees 106 fines and penalties 83 forfeitures',
12654:'84 individual income taxes, corporation income taxes, social insurance taxes and contributions, excise taxes, estate and gift taxes, and customs',
12655:'duties 78 interchange between the railroad retirement board and the social security and hospital insurance trust funds 117 interest unless',
12656:'classified elsewhere, dividends, and rents except for mineral rights on government property 85 page 109 sffas 7 fasab handbook, version',
12657:'20 06/21 sffas 7 interest on delinquent taxes and other receivables that arise as the result of custodial operations 88',
12658:'interest on post1991 direct loans 87 interest on treasury securities held by revolving funds 97 interest on treasury securities held',
12659:'by trust funds and special funds except trust revolving funds 93 interest on treasury securities held by trust revolving funds',
12660:'97 interest on uninvested fundsreceived by direct loan and guaranteed loan financing accounts98 interest received by one fund from another',
12661:'94 interest received by treasury 98 intragovernmental sales of goods and services by a fund other than a revolving fund',
12662:'95 intragovernmental sales of goods and services by a revolving fund 95 intragovernmental transactions 93 negative subsidies on post1991 direct',
12663:'loans and loan guarantees 105 nonexchange transactions with the public 78 nonexchange transactionsintragovernmental: gains and losses 95 nonexchange transactionsintragovernmental: revenue',
12664:'93 other financing sources from the public 93 other financing sourcesintragovernmental 99 penalties due to delinquent taxes in connection with',
12665:'custodial activity 83 premiums for smi supplementary medical insurance, bank deposit insurance, pension benefit guarantees, crop insurance, life insurance, and',
12666:'other insurance 88 proceeds from the auction of the radio spectrum 87 regulatory user fees such as patent and copyright',
12667:'fees; immigration and consular fees; sec registration and filing fees; and nuclear regulatory commission fees 88 reimbursement for cleanup costs',
12668:'90 reimbursement for collecting revenue 89 rents, royalties, and bonuses on outer continental shelf ocs and other petroleum and mineral',
12669:'rights. 98 repayment of post1991 direct loans 106 repayment of pre1992 direct loans 106 repayment of receivables: except direct loans',
12670:'106 retirement of debt securities prior to maturity 95 retirement of debt securities prior to maturity: revolving funds and trust',
12671:'revolving funds 98 retirement of debt securities prior to maturity 92 revaluation of capitalized property, plant, and equipment 102 revaluation',
12672:'of inventory and related property 103 revaluations 102 sales of different types of government assets 104 sales of direct loans',
12673:'92 sales of foreclosed property: associated with post1991 direct loans and loan guarantees 107 sales of foreclosed property: associated with',
12674:'pre1992 direct loans 92 page 110 sffas 7 fasab handbook, version 20 06/21 sffas 7 sales of goods and services',
12675:'85 sales of goods and services in undercover operations 85 sales of government assets: other than property, plant, and equipment',
12676:'and forfeited and foreclosed property 90 sales of property, plant, and equipment 91 sales of receivables: except direct loans 92',
12677:'seigniorage 93 social insurance taxes and contributions paid by federal employees 80 transactions not recognizedas revenues, gains, or other financing',
12678:'sources 103 transactions with the public 78 transfer by ccc to federal crop insurance corporation 101 transfer of cash and',
12679:'other capitalized assets without reimbursement 102 transfer of property, plant, and equipment without reimbursement: types thatare expensed 102 transfer of',
12680:'property, plant, and equipment without reimbursement: types thatare expensed 105 user fees, harbor maintenance trust fund 81 page 111 sffas',
12681:'7 fasab handbook, version 20 06/21 sffas 7 list ofabbreviations see consolidated list ofacronyms in “appendix f: consolidated list ofabbreviations.”',
12682:'page 112 sffas 7 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards8: supplementary stewardship reporting status issued june 11, 1996 effective date',
12683:'for fiscal years beginning after september 30, 1997 except for the consolidated financialreport of thefederal government cfr. for the cfr:',
12684:'chapters 6 through 7 are not effective until further action by the board. affects none. affected by sffas 17 provides',
12685:'standards for accounting for social insurance. sffas 8, paragraphs 116117 deferred consideration of social insurance. sffas 23, par. 9 affects',
12686:'sffas 8 by rescinding the prefatory box preceding paragraph 52 and paragraphs 52 through 70 chapter 3. sffas 25,paragraph5rescinds chapter8andparagraphs1416ofsffas',
12687:'8, and the associated illustration of the current servicesassessment in appendix b of sffas 8. sffas 29, par 12 rescinded',
12688:'chapter 2 heritageassets and par. 31 rescinded chapter 4 stewardship land and the associated illustrations in appendix b of sffas',
12689:'8. sffas 29 provides the standards for heritage assets and stewardship land. sffas 57, rescinded sffas 8 in its entirety.',
12690:'sffas 57, omnibus amendments 2019, rescinded sffas 8 in its entirety. page 1 sffas 8 fasab handbook, version 20 06/21',
12691:'statementoffederalfinancialaccountingstandards9: deferral of the effective date of managerial cost accounting standards for the federal government in sffas no. 4 status',
12692:'issued november 3, 1997 effective date for fiscal years ending september 30, 1998 and thereafter. affects sffas 4. affected by',
12693:'none. summary this statement is issued to amend the effective date of the standards in statement of federal financialaccounting standards',
12694:'sffas no. 4, managerial cost accounting concepts and standards for the federal government, issued in july 1995. the original effective',
12695:'date was for reporting periods beginning after september 30, 1996. the amended effective date is for periods beginning after september',
12696:'30, 1997. in july 1997, the federalaccounting standardsadvisory board the board received a request from the cfo council for a',
12697:'two year deferral of the effect date of the managerial cost accounting standards to fiscal year 1999. the cfo council',
12698:'representatives stated that many agencies have not been able to implement the managerial cost accounting standards during the two years',
12699:'since sffas no. 4 was issued, due to the following reasons: a the joint financial management improvement program jfmip has',
12700:'not issued its managerial costaccounting system requirements, b the cfo council has not issued its managerial cost accounting guide, and',
12701:'c most agencies do not have adequate cost accounting systemsin place.afterconsidering the cfo council’s request, theboard reluctantlyagreed to propose deferring',
12702:'the effective date of the managerial cost accounting standards for one year to fiscal year 1998 and issued an exposure',
12703:'draft ed for public comments. most responses to the ed were in favor of the proposal. after reviewing the comments',
12704:'to the ed, the board decided to recommend the one year deferral.at the same time, it reemphasizesthe importanceof managerial cost',
12705:'accounting to federal program and financial management. the chief financial officersact of 1990 requires the development of cost information and',
12706:'the systematic measurement of performance. reliable and relevant cost information is indispensable for implementing the requirements of the government performance',
12707:'and resultsact of 1993. the board urges federal entities and their cfos to give priority to implementing the requirements in',
12708:'sffas no. 4. page 1 sffas 9 fasab handbook, version 20 06/21 sffas 9 table of contents page summary 1',
12709:'introduction 3 the amended effective date 4 basis for the board’s conclusions 4 attachment: letter from cfo council 8 page',
12710:'2 sffas 9 fasab handbook, version 20 06/21 sffas 9 introduction 1. this statement is issued to amend the effective',
12711:'date of the managerial cost accounting standards prescribed in statement of federal financialaccounting standards sffas no. 4, managerial cost accounting',
12712:'concepts and standards for the federal government,1 which was issued in july 1995. the standards in sffas no. 4 were',
12713:'effective for reporting periods beginning after september 30, 1996. the amended effective date is for reporting periods beginning after september',
12714:'30, 1997. 2. inaugust1997,theboardissuedanexposuredrafted2inwhichitproposedadeferralof the effective date of managerial cost accounting standards. the ed was issued after considering a request',
12715:'presented to the board by the cfo council. seeattachment: letter from the cfo council, dated june 26, 1997. in their',
12716:'request, the cfo council representatives stated that most agencies were having difficulties in implementing the cost accounting standards because a',
12717:'the managerial costaccounting system requirements have not yet been issued,3 b the cfo council has yet to issue a managerial',
12718:'cost accounting guide,4 and c most agencies do not have adequate cost systems in place. the cfo council representatives requested',
12719:'that the effective date of sffas no. 4 be deferred for two yearsto reporting periods that begin after september 30,',
12720:'1998. theyalso requested that “relevant portions” of sffas 7, accounting for revenue and other financing sources, be delayed to that',
12721:'same date. 3. after considering the reasons presented by the cfo council, the board reluctantly proposed aone yeardelayfor sffas no.',
12722:'4, to reporting periodsbeginning after september 30, 1997, and issued the ed for that proposal. no delay was proposed for',
12723:'any part of sffas no. 7, which is effective for reporting periods beginning after september 30, 1997. the board noted',
12724:'that cost accounting is required by the chief financial officersact of 1990 the cfoact, and reliable cost information is necessary',
12725:'for implementing the government performance and resultsact gpra of 1993. the board also observed that the cost accounting standards allow',
12726:'federal entities without a sophisticated cost accounting system 1inadditiontomanagerialcost accounting standards,sffas no. 4alsocontains managerialcostaccounting concepts which provide general guidance for',
12727:'managerial cost accounting but do not constitute specific requirements. the effective date does not apply to those concepts. 2the ed',
12728:'was published in fasab news issue no. 45,august 1997. 3inapril 1997, jfmipissued an exposure draft on managerial costaccounting system requirements,',
12729:'which is yet to be finalized as of this date. 4the cfo council’s governmentwide costaccounting work group issued an exposure',
12730:'draft of the managerial cost accounting implementation guide on june 30, 1997, which has not been finalized as of this',
12731:'date. page 3 sffas 9 fasab handbook, version 20 06/21 sffas 9 to use cost studies or cost finding techniques',
12732:'to meet the requirements of the cost accounting standards. the board further observed that during the past two years since',
12733:'sffas no. 4 was issued, most agencies should have had sufficient time to develop at least the basic cost accounting',
12734:'processes as described in paragraph 71, sffas no. 4. 4. the board received 26 responses to the ed. most respondents',
12735:'supported the board’s proposal for a one year deferral of the cost accounting standards in sffas no. 4 to fiscal',
12736:'year1998.after considering thecomments, includingthoseopposed to anydelayandthose favoring a two year delay, the board decided to recommend the one year deferral',
12737:'to the fasab principals. theamended effective date 5. the effective date of the managerial cost accounting standards provided in paragraph',
12738:'30, sffas no. 4, is amended as follows: “the managerial cost accounting standardsprescribed in sffas no. 4 shall be effective',
12739:'for fiscal periods beginning after september 30, 1997. earlier implementation is encouraged.” basis for conclusions this statement may be affected',
12740:'by later statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements',
12741:'that amend this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix',
12742:'will not be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement',
12743:'for the rationale for each amendment. reasons for the delay 6. afterconsideringthecfocouncil’spresentationandtheresponsestotheed,theboardis convinced that as of the end of fiscal',
12744:'year 1997, most agencies were not ready to produce cost information as required in the cost accounting standards. as described',
12745:'in cfo council’srequest and inthe responsestofasab’sed,manyagenciesneed more timeand guidance todefine responsibilitysegmentsandto developprocedures foraccumulatingand assigning costs. they also said that they',
12746:'need more time to upgrade or expand their accountingsystems,andtopromotetheuseof costmeasuresamongprogramandfinancial managers. page 4 sffas 9 fasab handbook, version 20 06/21',
12747:'sffas 9 7. most respondents stated that the one year delay should not significantly affect implementation of the government performance',
12748:'and resultsact of 1993 gpra. with regard to the gprarequirement that federal agencies measure and report outputs, outcomes, and related',
12749:'costs by segments for fiscal year 1999 and thereafter, the respondents stated that with the one year deferral of the',
12750:'cost accounting standards, agencies will have time to align their cost accounting structures with the gprameasures. 8. under these circumstances,',
12751:'the board concluded that a one year deferral would be appropriate. the deferral would provide the federal entities with an',
12752:'opportunity to engage toplevel agency officials, budget analysts, and program and financial managers in the processes of developing, collecting and',
12753:'using cost information. 9. several respondents reiterated the cfo council’s original request for a two year delay to fiscal year',
12754:'1999, on the grounds that their systems would not be ready within fiscal year 1998. the board cannot agree with',
12755:'this request. it believes that cost accounting capability must be developed in time to fully support the gprareporting. the board',
12756:'thus urges federal entities to give implementation of sffas no. 4 a high priority and take immediate actions to define',
12757:'and structure responsibility segments and develop costing methodologies. 10. several respondents said that, after the effective date, federal entities should',
12758:'be given a transitional period in which they could have flexibility to develop and improve their cost accounting systems and',
12759:'procedures gradually. the board disagrees with this approach for two reasons: a such a transitional period would add uncertainty to',
12760:'the required implementation, b a degree of flexibility for developing cost accounting systems and procedures is already built in the',
12761:'standards, and thus a transitional provision is not necessary. 11. the board notes that the standards already provide a sufficient',
12762:'degree of flexibility to federal entities. for example, paragraph 70, sffas no. 4, provides that managerial cost accounting processes can',
12763:'be accomplished through the use of a cost accounting system or the use of cost findingtechniquesor othercoststudiesandanalyses. paragraph 266further provides',
12764:'that “federal agencies can take a gradual approach to the development of cost systems, if necessary, while developing basic cost',
12765:'information through other means in the short run.” federal agencies are expected to refine and improve their costing procedures, methods,',
12766:'and systems, as they gain experience in using cost information paragraph 24, sffas no. 4. those who are not familiar',
12767:'with the criteria of implementation should review the standard on “requirement for costaccounting” in paragraphs 67 through 76, sffas no.',
12768:'4. 12. several respondents were opposed to any deferral. they pointed out that the original effective date was more than',
12769:'two years after sffas no. 4 was issued, and it provided enoughleadtimeforagenciestoimplementthe cost accountingstandards. theystated that page 5 sffas 9',
12770:'fasab handbook, version 20 06/21 sffas 9 if the delay in implementing the standards was caused by a lack of',
12771:'action, a mere deferral could only cause continued inaction. the board recognizes that many agencies have made significant progress in',
12772:'improving general accounting and financial reporting. the board anticipates that the one year deferral will bring similar progress in implementing',
12773:'the cost accounting standards. the status of interpretation no. 2 13. in january 1997, fasab issued interpretation no. 2, accounting',
12774:'for treasury judgment fund transactions. the treasury judgment fund was established by congress to pay, in whole or part, the',
12775:'court judgments or settlements negotiated by the justice department on behalf of federalagencies. interpretation no. 2requiresthat if a lossin litigation',
12776:'isprobable and estimable, the reporting entity in the litigation should recognize an expense and liability for the full amount of',
12777:'the estimated loss, although the loss may be paid by the treasury judgment fund. the interpretation reflects the cost principle',
12778:'in sffas no. 4, and is based ontheprincipleof recognizingcontingent liabilitiesinsffas no. 5, accounting for liabilities of the federal government. the',
12779:'interpretation was made effective for reporting periods beginning after september 30, 1996, the same as sffas no. 4 and no.',
12780:'5. 14. the ed raised a question: if sffas no. 4 were deferred as proposed, should interpretation no. 2 be',
12781:'deferred as well? some respondents believed that interpretation no. 2 should be deferred to fiscal year 1998. they were concerned',
12782:'with difficulties in collecting reliable information to estimate the probable litigation losses. other respondents, however, did not believe that interpretation',
12783:'no. 2 should be delayed for the following reasons: 1 the recognition of litigation losses and liabilities is not dependent',
12784:'on cost accounting capabilities, and 2 the recognition of contingent liabilities and lossesisrequired by sffas no. 5, which is not',
12785:'deferred. 15. the board agrees with the view that interpretation no. 2 is based on the principle provided in sffas',
12786:'no. 5 of recognizing contingent liabilities, and that its implementation should not be deferred. as with all matters in litigation,',
12787:'the data should come from agencies’ management and their legal offices and the department of justice. deferring the interpretation is',
12788:'not a positive solution to the data gathering problem. the status of sffas no. 7 16. thoserespondentswhopreferredatwoyeardelayforsffasno. 4alsoreiteratedthecfo council’s original',
12789:'request to defer certain costrelated portions of sffas no. 7, accounting for revenue and other financing sources to fiscal year1999.',
12790:'while no specific paragraphs were mentioned, they were concerned with the requirements for matching costs with page 6 sffas 9',
12791:'fasab handbook, version 20 06/21 sffas 9 revenues by suborganizations equivalent to responsibility segments. see, for example, paragraphs 116 through',
12792:'126, sffas no. 7. they stated that they are modifying their systems to accommodate those requirements, but their systems work',
12793:'could not be completed in fiscal year 1998. 17. with the effective date of sffas no. 4 deferred to fiscal',
12794:'year 1998, the cost accounting standards should be implemented and the necessary cost information should be accumulated tosupport implementation of',
12795:'sffas no. 7 forthat year. thus, theboard is not convinced that sffas no. 7 needs to be deferred. the board',
12796:'believes that it is highly important to relate sffas no. 4 and no. 7 to measuring program performance and results.',
12797:'while the standards in sffas no. 4 provide more detail in cost concepts, procedures, and methodologies, sffas no. 7 brings',
12798:'cost information into focus in measuring the net results of programs and activities. the integrated implementation of those two statementsis',
12799:'crucial for meeting the objectives of financial reporting by federal entities and for implementing the gprarequirements. page 7 sffas 9',
12800:'fasab handbook, version 20 06/21 sffas 9 attachment: letter from cfo council united states government chief financial officers council jun',
12801:'26, 1997 mr. dave mosso, chairman financial accounting standards advisory board 441 g street, n. w. washington, d.c. 20548 dear',
12802:'mr. mosso: the chief financial officers council cfoc recognizes the importance for federal agencies to move forward and implement the',
12803:'statement of federal financialaccounting standards sffas no. 4, managerial costaccounting concepts and standards for the federal government. we believe this',
12804:'standard, effective for reporting periods after september 30,1996, is essential to support the cost effectiveness of mission performance and to',
12805:'provide full accountability to taxpayers over our resources. the council is concerned, however, over the impediments and difficulties most agencies',
12806:'are having in implementing this standard. these difficulties exist due to the following: themanagerialcostaccountingsystemrequirements havenotyetbeenissued; themanagerialcostaccountingguidance,whichwillhelp agencies inimplementing sffas no.4,',
12807:'will not be issued until later this summer; adequatecostsystemsarenotinplacetomeettherequirements oftheresultsactto provide program cost and performance information in an agency’s annual',
12808:'performance report.agency performance reportsrequired underthe resultsact are not due until march 2000. it will be several years before agencies will',
12809:'have the necessary cost systems in place. for the above reasons, the council requests fasab to change the effective date',
12810:'for sffas no. 4, and in relevant portions of its companion, sffas no. 7,accounting for revenue and other financial sources',
12811:'effective for reporting periods after september 30,1997, to the “revised effective date” for reporting periods after september 30, 1998. given',
12812:'that the systems and cost accountingguidanceneededbyagencieshave not beenissued andonly4months remain inthis fiscal year, we feel this request is justified. additionally,',
12813:'this request is further supported by the fact that the resultsact performance report requirements are not statutorily required until fy',
12814:'1999. page 8 sffas 9 fasab handbook, version 20 06/21 sffas 9 while we recommend a change in the effective',
12815:'implementation date, we fully acknowledge and support the critical importance of the cost and revenue standards. based on the importance',
12816:'and usefulnessof anticipatedcost information for internal agencymanagement andotherpurpose, in addition to the significant benefits that are often derived from early',
12817:'implementation of federal accounting standards, we nevertheless encourage federal agencies to implement these standardsassoon aspracticable basedonthecapabilitiesofagencysystemsandthematurityof agency cost accountingpractices. while',
12818:'such early, voluntary implementation isencouraged, the council requests that the board change the mandatory implementation date to fiscal periods after',
12819:'september 30, 1998. specific questions regarding this request may be directed to frank m. sullivan, chair, cfoc costaccounting committee, at',
12820:'202 2735504 or via email at “fs@mail.va.gov”. sincerely, signed arnold g. holz executive vicechair chief financial officers council page 9',
12821:'sffas 9 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 10: accounting for internal use software status issued',
12822:'october 9, 1998 effective date for periods beginning after september 30, 2000 affects sffas 10, paragraph 7, rescinds sffas 6,',
12823:'paragraphs 2728. affected by sffas 32 amends paragraph 35. sffas 50 amends paragraph 16 and 36. related guidance tr 16,',
12824:'implementation guidance for internal use software. summary this statement provides accounting standards for internal use software. under the provisions of',
12825:'this statement, internal use software is classified as “general property, plant, and equipment” pp&e as defined in statement of federal',
12826:'financialaccounting standards sffas 6, accounting for property, plant, and equipment.thisstatementincludessoftwareusedto operate a federal entity’s programs e.g., financial and administrative software,',
12827:'including that used for project management and software used to produce the entity’s goods and services e.g., air traffic control',
12828:'and loan servicing. internal use software can be purchased offtheshelf from commercial vendors and can be developed by contractors with',
12829:'little technical supervision by the federal entity or developed internally by the federal entity. for capitalizable software, capitalization would begin',
12830:'after the entity completed all planning, designing, coding, and testing activities that are necessary to establish that the software can',
12831:'meet the design specifications. at the conclusion of the pp&e project the federalaccounting standardsadvisory board discussed whether the standard for',
12832:'internally developed software should also apply to contractordeveloped software. also, some users of sffas 6 were unsure how to apply',
12833:'it to cots and contractordeveloped software. the board decided, in december 1996, to review the issue and develop a separate',
12834:'standard for internal use software. this standard requires the capitalization of the cost of internal use software whether it is',
12835:'cots, contractordeveloped,orinternallydeveloped. suchsoftwareservesthesamepurposesasother general pp&e and functions as a longlived operating asset. this standard provides guidance regarding the types of',
12836:'cost elements to capitalize, the timing and thresholds of capitalization, amortization periods, accounting for impairment, and other guidance. page 1',
12837:'sffas 10 fasab handbook, version 20 06/21 sffas 10 table of contents page summary 1 introduction 3 purpose 3 scope',
12838:'3 background 4 materiality 4 effective date 4 internal use softwareaccounting standard 4 definitions 4 software development phases 5 recognition,',
12839:'measurement, and disclosure 7 implementation 12 appendixa: basis for conclusions 15 appendix b: glossary [see consolidated glossary inappendix e] 26',
12840:'page 2 sffas 10 fasab handbook, version 20 06/21 sffas 10 introduction purpose 1. this statement provides accounting standards for',
12841:'internal use software1 used by federal entities. federal entities purchase commercial “offtheshelf” cots software, hire contractors to develop substantially all',
12842:'of the desired software contractordeveloped, or develop software internally using their own employees, with or without a contractor’s assistance internally',
12843:'developed. scope 2. this statement establishes accounting standards for the cost of software developed or obtained for internal use. these',
12844:'include the cost of software used to operate an entity’s programs e.g., financial and administrative software, including that used for',
12845:'project management, software used to produce the entity’s goods and to provide services e.g., air traffic control and loan servicing,',
12846:'and software that is developed or obtained for internal use and subsequently provided to other federal entities with or without',
12847:'reimbursement. 3. this statement provides standards on accounting for software consisting of one or more components or modules. for example,',
12848:'an entity may develop an accounting software systemcontaining threeelements: ageneralledger, an accountspayable subledger, and an accounts receivable subledger. each element',
12849:'might be viewed as a component or module of the entire accounting software system. this standard may be applied to',
12850:'the total cost of the software or, when appropriate, to individual components or modules. for example, one software module may',
12851:'be implemented before others, in which case, the provisions of this standard for capitalization, amortization, etc., would apply to it',
12852:'separately. 1the terms defined in the glossary will be in boldface when they first appear in the body of this',
12853:'document [see appendix e, consolidated glossary] page 3 sffas 10 fasab handbook, version 20 06/21 sffas 10 background 4. at',
12854:'the conclusion of the general property, plant, and equipment pp&e project, the federal accountingstandardsadvisoryboard boarddiscussedwhetherthe standard for internally developed software',
12855:'should also apply to contractordeveloped software. also, some users of statement of federal financialaccounting standardssffas no. 6 were unsure of',
12856:'how to apply it to cots and contractordeveloped software. the board decided in december 1996 to review the issue and',
12857:'develop a separate standard for internal use software. 5. in june 1997, the board issued an exposure draft entitled accounting',
12858:'for internal use software.the board received comments from 26 respondents and held a publichearing on december 18, 1997. materiality 6.',
12859:'the provisions of this statement need not be applied to immaterial items. effective date 7. the provisions of this statement',
12860:'are effective for reporting periods that begin after september30, 2000. paragraphs27and28of sffas no. 6, accounting for property, plant, and equipment,',
12861:'which pertain to internally developed software, are rescinded upon this standard’s issuance. federal entities may continue their current accounting practices',
12862:'for internal use software for accounting periods beginning before october 1, 2000. early implementation of this statement is encouraged. internal',
12863:'use softwareaccounting standard definitions 8. software includes the application and operating system programs, procedures, rules, and anyassociateddocumentationpertainingtotheoperationof acomputersystemorprogram. “internal use',
12864:'software” means software that is purchased from commercial vendors “offtheshelf,” internally developed, or contractordeveloped solely to meet the entity’s internal',
12865:'or operational needs. normally software is an integral part of an overall systems having interrelationships between software, hardware, personnel, procedures,',
12866:'controls, and data. page 4 sffas 10 fasab handbook, version 20 06/21 sffas 10 9. this definition of internal use',
12867:'software encompasses the following: a. commercial offtheshelf cots software: cots software refers to software that is purchased from a vendor',
12868:'and is ready for use with little or no changes. b. developed software 1 internally developed software refers to software',
12869:'that employees of the entity are actively developing, including new software and existing or purchased software that are being modified',
12870:'with or without a contractor’s assistance. 2 contractordeveloped software refers to software that a federal entity is paying a contractor',
12871:'to design, program, install, and implement, including new software and the modification of existing or purchased software. software development phases',
12872:'10. software’s lifecycle phases2 include planning, development, and operations. this standard provides a framework for identifying software development phases and',
12873:'processes to help isolate the capitalization period for internal use software that the federal entity is developing. 11. thefollowingtableillustratesthevarioussoftwarephasesandrelatedprocesses. thesteps',
12874:'within each phase of internal use software development may not follow the exact order shown below. this standard should be',
12875:'applied on the basis of the nature of the cost incurred, not the exact sequence of the work within each',
12876:'phase. 2therearenofederalrequirements regarding the phasesthateach software project mustfollow.the lifecycle phases of a software application described here are compatible with and',
12877:'generally reflect those in the office of management and budget’s omb circulara130, management of information resources, and capital programming guidance;',
12878:'the governmentaccountability office’s gao, measuring performance and demonstrating results of information technology investments gao/aimd9889, mar. 1998;andtheamericaninstituteofcpa’sstatement of positionno. 981, accounting',
12879:'for the costs of computer software developed or obtained for internal use mar. 4, 1998. successful software projects normally would',
12880:'have at least an initial design phase, an application development phase, and a postimplementation/operational phase. also, software eventually would become',
12881:'obsolete or otherwise be replaced and therefore have a termination phase. circulara130 acknowledges that the “life cycle varies by the',
12882:'nature of the information system. only two phases are common to all information systems—a beginning and an end. as a',
12883:'result, life cycle management techniques that agencies can use may vary depending on the complexity and risk inherent in the',
12884:'project.” a130, “analysis of key sections,” p. 63. page 5 sffas 10 fasab handbook, version 20 06/21 sffas 10 preliminary',
12885:'designphase software development phase postimplementation/ operational phase conceptual formulation of alternatives3 evaluation and testing of alternatives design of chosen path,',
12886:'including software configuration and software interfaces4 coding data conversion application maintenance determination of existence of needed technology final selection of',
12887:'alternatives installation to hardware testing, including parallel processing phase 12. in the preliminary design phase, federal entities will likely do',
12888:'the following: a. make strategic decisions to allocate resources between alternative projects at a given time. for example, should programmers',
12889:'develop new software or direct their efforts toward correcting problems in existing software? b. determine performance requirements i.e., what it',
12890:'is that they need the software to do. c. invite vendors to perform demonstrations of how their software will fulfill',
12891:'a federal entity’s needs. d. explore alternative means of achieving specified performance requirements. for example, should a federal entity make',
12892:'or buy the software? should the software run on a mainframe or a client server system? e. determine that the',
12893:'technology needed to achieve performance requirements exists. f. select a vendor if a federal entity chooses to obtain cots software.',
12894:'g. select a consultant to assist in the software’s development or installation. 13. in the software development phase, federal entities',
12895:'will likely do the following: a. use a system to manage the project. 3see omb circulara11, planning, budgeting, and acquisition',
12896:'of capital assets; supplement to circulara11, capital programming guide july 1997; and circulara109, major systems acquisitions, par. 11, “alternative systems.”',
12897:'4see omb circulara109, major systems acquisitions, par. 13, “fullscale development and production.” page 6 sffas 10 fasab handbook, version 20',
12898:'06/21 sffas 10 b. track and accumulate lifecycle cost and compare it with performance indicators. c. determine the reasons for',
12899:'any deviations from the performance plan and take corrective action. d. test the deliverables to verify that they meet the',
12900:'specifications. 14. in the postimplementation/operational phase, federal entities will likely do the following: a. operatethesoftware,undertakepreventivemaintenance,andprovideongoingtraining for users. b. convert data',
12901:'from the old to the new system. c. undertake postimplementation review comparing asset usage with the original plan. d. track',
12902:'and accumulate lifecycle cost and compare it with the original plan. recognition, measurement,and disclosure software usedas general pp&e 15. entities',
12903:'should capitalize the cost of software when such software meets the criteria for general property, plant, and equipment pp&e. general',
12904:'pp&e is any property, plant, and equipment used in providing goods and services.5 capitalizable cost 16. althoughthemeasurementbasisremainshistoricalcost,reasonableestimatesmaybeused to establish the',
12905:'capitalized cost of internally developed software, in accordance with the asset recognition and measurement provisions herein. for internally developed software,',
12906:'capitalized cost should include the full cost direct and indirect cost incurred during the software development stage.6 such cost should',
12907:'be limited to cost incurred after a. management authorizes and commits to a computer software project and believes that it',
12908:'is more likely than not that the project will be completed and the software will be used to perform the',
12909:'intended function with an estimated service life of 2 years or more and b. the completion of conceptual formulation, design,',
12910:'and testing of possible software project alternatives the preliminary design stage. 5general pp&e, as distinguished from stewardship pp&e, is defined',
12911:'in pars. 2325, in sffas no. 6, accounting for property, plant, and equipment. 6for a full discussion of direct and',
12912:'indirect cost, see sffas no. 4, managerial cost accounting concepts and standards for the federal government june1995, pars. 9092.also see',
12913:'pars. 9495, statement of federalfinancial accounting concepts no. 2, entity and display. page 7 sffas 10 fasab handbook, version 20',
12914:'06/21 sffas 10 17. suchcostsincludethosefornewsoftwaree.g.,salariesofprogrammers,systemsanalysts, project managers, and administrative personnel; associated employee benefits; outside consultants’ fees; rent; and supplies and',
12915:'documentation manuals. 18. for cots software, capitalized cost should include the amount paid to the vendor for the software. for',
12916:'contractordeveloped software, capitalized cost should include the amount paidtoacontractortodesign, program,install, andimplementthe software. materialinternal cost incurred by the federal entity to',
12917:'implement the cots or contractordeveloped software and otherwise make it ready for use should be capitalized. data conversion cost 19.',
12918:'all data conversion costs incurred for internally developed, contractordeveloped, or cots software should be expensed as incurred, including the cost',
12919:'to develop or obtain software that allows for access or conversion of existing data to the new software. such cost',
12920:'may include the purging or cleansing of existing data, reconciliation or balancing of data, and the creation of new/additional data.',
12921:'cutoff for capitalization 20. costs incurred after final acceptance testing has been successfully completed should be expensed. where thesoftwareistobeinstalledat multiple',
12922:'sites,capitalizationshould cease at each site after testing is complete at that site. multiuse software 21. the cost of software that',
12923:'serves both internal uses and stewardship purposes “multiuse software” should be accounted for as internal use software e.g., a global',
12924:'positioning system used in connection with national defense activities and general operating activities and services. integrated software 22. computer software',
12925:'that is integrated into and necessary to operate general pp&e, rather than perform an application, should be considered part of',
12926:'the pp&e of which it is an integral part and capitalized and depreciated accordingly e.g., airport radar and computeroperated lathes.',
12927:'the aggregate cost of the hardware and software should be used to determine whether to capitalize or expense the costs.',
12928:'page 8 sffas 10 fasab handbook, version 20 06/21 sffas 10 bundled products and services 23. federalentitiesmaypurchasesoftwareaspartofapackageofproductsandservicese.g., training, maintenance, data',
12929:'conversion, reengineering, site licenses and rights to future upgrades and enhancements. federal entities should allocate the capitalizable and noncapitalizable cost',
12930:'of the package among individual elements on the basis of a reasonable estimate of their relative fair values. costs that',
12931:'are not susceptible to allocation between maintenance and relatively minor enhancements should be expensed. capitalization thresholds 24. each federal entity',
12932:'should establish its own threshold as well as guidance on applying the threshold to bulk purchases of software programs e.g.,',
12933:'spreadsheets, wordprocessing programs, etc. and to modules or components of a total software system. that guidance should consider whether period',
12934:'cost would be distorted or asset values understated by expensing the purchase of numerous copies of a software application or',
12935:'numerous components of a software system and, if so, provide that the collective cost should be capitalized. enhancements 25. the',
12936:'acquisition cost of enhancements to existing internal use software and modules thereof should be capitalized whenitismore likelythan not that theywillresultinsignificant',
12937:'additionalcapabilities. forexample,in aninstancewherethefederalentityaddsacapability or function to existing software for making ad hoc queries, the cost would be capitalized. 26. enhancements',
12938:'normally require new software specifications and may require a change of all or part of the existing software specifications as',
12939:'well. the cost of minor enhancements resulting from ongoing systems maintenance should be expensed in the period incurred. also, the',
12940:'purchase of enhanced versions of software for a nominal charge are properly expensed in the period incurred. 27. cost incurred',
12941:'solely to repair a design flaw or to perform minor upgrades that may extend the useful life of the software',
12942:'without adding capabilities should be expensed.7 7however, in instances where the useful life of the software is extended, the amortization',
12943:'period would be adjusted. the board has considered the cost associated with modifying internal use software for the year 2000',
12944:'y2k and has determined that such cost should be charged to expenses as incurred, since it is a repair of',
12945:'a design flaw that allows existing software to continue being used. however, an enhancement could presumably provide enhanced capabilities and',
12946:'at the same time, as an integral part of the new code and other software enhancements, cure the y2k problem.',
12947:'the total cost of such an enhancement should be capitalized rather than allocated between the y2k cost and all other',
12948:'cost. page 9 sffas 10 fasab handbook, version 20 06/21 sffas 10 impairment postimplementation/operational software 28. impairment should be recognized',
12949:'and measured when one of the following occurs and is related to postimplementation/operational software and/or modules thereof: the software is',
12950:'no longer expected to provide substantive service potential and will be removed from service or asignificantreductionoccursinthecapabilities,functions,orusesofthesoftwareora module thereof. 29. iftheimpairedsoftwareistoremaininuse,thelossduetoimpairmentshouldbemeasured',
12951:'as the difference between the book value and either 1 the cost to acquire software that would perform similar remaining',
12952:'functions i.e., the unimpaired functions or, if that is not feasible,2theportion ofbookvalue attributableto theremaining functionalelementsof the software. the loss should',
12953:'be recognized upon impairment, and the book value of the asset reduced accordingly. if neither 1 nor 2 above can',
12954:'be determined, the book value should continue to be amortized over the remaining useful life of the software. 30. if',
12955:'the impaired software is to be removed from use, the loss due to impairment should be measured as the difference',
12956:'between the book value and the net realizable value nrv, if any.8 the loss should be recognized upon impairment, and',
12957:'the book value of the asset reducedaccordingly. the nrv, if any, shouldbetransferred to an appropriate asset account until such time',
12958:'as the software is disposed of and the amount is realized. developmental software 31. in instances where the managers of',
12959:'a federal entity conclude that it is no longer more likely than not that developmental software or a module thereof',
12960:'will be completed and placed in service, the related book value accumulated for the software or the balance in a',
12961:'work in process account, if applicable should be reduced to reflect the expected nrv, if any, and the loss recognized.',
12962:'the following are indications of this: expenditures are neither budgeted nor incurred for the project. programming difficulties cannot be resolved',
12963:'on a timely basis. major cost overruns occur. information has been obtained indicating that the cost of developing the software',
12964:'will significantly exceed the cost of cots software available from third party vendors; 8presumably, nrv will be zero for software.',
12965:'however, in the rare case that it is not zero, nrv should be recognized. page 10 sffas 10 fasab handbook,',
12966:'version 20 06/21 sffas 10 hence, management intends to obtain the product from those vendors instead of completing the project.',
12967:'technologies that supersede the developing software product are introduced. the responsibility unit for which the product was being created is',
12968:'being discontinued. amortization 32. software that is capitalized pursuant to this standard should be amortized in a systematic and rational',
12969:'manner over the estimated useful life of the software. the estimated useful life used for amortization should be consistent with',
12970:'that used for planning the software’s acquisition.9 33. for each module or component of a software project, amortization should begin',
12971:'when that module or component has been successfully tested. if the use of a module is dependent on completion of',
12972:'another modules, the amortization of that module should begin when both that module and the other modules have successfully completed',
12973:'testing. 34. any additions to the book value or changes in useful life should be treated prospectively. the change should',
12974:'be accounted for during the period of the change and future periods. no adjustments should be made to previously recorded',
12975:'amortization. when an entity replaces existing internal use software with new software, the unamortized cost of the old software should',
12976:'be expensed when the new software has successfully completed testing. disclosures 35. the disclosures required by sffas no. 6, paragraph',
12977:'45, for general pp&e are applicable to general pp&e software. thus, for material amounts, the following should be disclosed in',
12978:'the financial statements regarding the software: the cost, associated amortization, and book value. the estimated useful life for each major',
12979:'class of software. the methods of amortization. the above listed disclosure requirements are not applicable to the u.s. government wide',
12980:'financial statements. sffas 32 provides for disclosure applicable to the u.s. governmentwide financial statements for these activities. 9for example, federal',
12981:'agencies use the following planning guidance: omb circularsa11, budget planning, budgeting, and acquisition of fixed assets;a94, guidelines and discount rates',
12982:'for benefitcost analysis of federal programs; anda109, acquisition of major systems; omb’s capital programming guide july 1997; gao’s assessing risks',
12983:'and returns: a guide for evaluating federal agencies’ it investment decisionmaking feb. 1997; and other federal guidance. page 11 sffas',
12984:'10 fasab handbook, version 20 06/21 sffas 10 implementation 36. alternative methods for establishing opening balances.9a the following guidance is',
12985:'applicable for the reporting period when the reporting entity is presenting financial statements, or the line item addressed by this',
12986:'statement, following generally accepted accounting principles gaap promulgated by fasab either 1 for the first time or 2 after a',
12987:'period during which existing systems could not provide the information necessary for producing such gaapbased financial statements without use of',
12988:'the alternative methods. the following should be considered in establishing opening balances: a. the alternative methods for establishing opening balances',
12989:'may be applied for the reporting period in which the reporting entity, taken asa whole, makesan unreserved assertion9b that its',
12990:'financial statements, or the line item addressed by this statement, are presented fairly in accordance with gaap. the alternative methods',
12991:'provided in this statement should also be applied to correct subsequently discovered errors in general pp&e that were valued under',
12992:'an alternative method. b. theapplicationofthesealternativemethodsbasedonthesecondconditionspecified in paragraph 36 is available only once to each reporting entity. c. a reporting entity',
12993:'that meets either condition in paragraph 36 and elects to apply any of the alternative methodsavailable in establishing opening balances',
12994:'is subject to the reporting requirements under paragraph 13 of statement of federal financial accounting standards 21, reporting corrections of',
12995:'errors and changes in accounting principles, amendment of sffas 7, accounting for revenue and other financing sources. d. alternativemethods. areportingentityshouldchooseamongthefollowingalternative',
12996:'methods for establishing an opening balance for internal use software. because a reporting entity may have multiple component or subcomponent',
12997:'reporting entities9c 9a opening balances are account balances that exist at the beginning of the reporting period. opening balances are',
12998:'based upon the closing balances of the prior period and reflect the effects of transactions and events of prior periods',
12999:'and accounting policies applied in the prior period. opening balances also include matters requiring disclosure that existed at the beginning',
13000:'of the period, such as contingencies and commitments. 9b an unreserved assertion is an unconditional statement. 9c sffas 47, reporting',
13001:'entity, provides that “component reporting entity” is used broadly to refer to a reporting entity within a larger reporting entity.',
13002:'examples of component reporting entities include organizations such as executive departments and agencies. component reporting entities would also include subcomponents',
13003:'that may themselves prepare general purpose federal financial reports gpffrs. one example is a bureau that is within a larger',
13004:'department that prepares its own standalone gpffr. page 12 sffas 10 fasab handbook, version 20 06/21 sffas 10 selecting different',
13005:'alternative methods, a reporting entity should establish an opening balance based on one, or a combination, of these alternative methods.',
13006:'however, applicationofaparticularalternativemethodmust beconsistentwithineachindividual subcomponent reporting entity prior to consolidation into the larger component reporting or reporting entity. i. alternative valuation',
13007:'method. deemed cost9d is an acceptable valuation method for opening balances of internal use software. see ssfas 6 paragraph 40.d.',
13008:'for implementation guidance regarding deemed cost. ii. prospective capitalization. the reporting entity may choose prospective capitalization of internal use software.',
13009:'if the reporting entity elects prospective treatment, the reporting entity should choose between the following acceptable alternative methods at the',
13010:'opening balance date: a exclude all internal use software, inclusive of that under development at the opening balance date, from',
13011:'the opening balance. b excludeinternalusesoftwareinservicefromtheopeningbalance,butinclude amounts related to internal use software under development at the opening balance date. internal use',
13012:'software under development should be recognized in opening balances based on the provisions of paragraphs 15 through 27 or on',
13013:'the alternative valuation method deemed cost provided in paragraph 36.d.i. e. once established using alternative methods, opening balances are considered',
13014:'consistent with gaap. f. component reporting entity disclosures: i. a component reporting entity electing to apply deemed cost in establishing',
13015:'opening balances for internal use software should disclose this fact and describe the methods used in the first reporting period',
13016:'in which the reporting entity makes an unreserved assertion that its financial statements, or one or more line items, are',
13017:'presented fairly in accordance with gaap. financial statements or, as applicable, reports on line items of subsequent periods need not',
13018:'repeat this disclosure, unless the financial statements for which deemed cost was applied in establishing opening balances are presented for',
13019:'comparative purposes. no 9d deemed cost is an amount used as a surrogate for initial amounts that otherwise would be',
13020:'required to establish opening balances. page 13 sffas 10 fasab handbook, version 20 06/21 sffas 10 disclosure of the distinction',
13021:'or breakout of the amount of deemed cost of internal use software included in the opening balance is required. ii.',
13022:'a component reporting entity electing to apply the provisions of paragraph 36.d.ii. should disclose this fact and describe the alternative',
13023:'methods used in the first reporting period in which the component reporting entity makes an unreserved assertion that its financial',
13024:'statements, or one or more line items, are presented fairly in accordance with gaap. in the event different alternative methods',
13025:'are applied by subcomponent reporting entities consolidated into a larger reporting entity, the alternative method adopted by each significant subcomponent',
13026:'should be disclosed. financial statements or, as applicable, reports on line items of subsequent periods need not repeat this disclosure,',
13027:'unless the statements for which the alternative method was applied in establishing opening balances are presented for comparative purposes. no',
13028:'disclosure of the distinction or breakout of amount of deemed cost of internal use software included in the opening balance',
13029:'is required. g. financial report of the u.s. government disclosures: i. when a component reporting entity elects to apply deemed',
13030:'cost, the u.s. governmentwide financial statements should disclose this fact, the identity of the component reporting entity, and a reference',
13031:'to the component reporting entity’s financial report. subsequent financial statements need not repeat this disclosure unlessthefinancial statementsfor which deemed cost',
13032:'wasapplied in establishing opening balances are presented for comparative purposes. no disclosure of the distinction or breakout of the amount',
13033:'of deemed cost of internal use software included in the opening balance is required. ii. when a component reporting entity',
13034:'elects to apply the provisions of paragraph 36.d.ii.,the u.s. governmentwide financial statements should disclose this fact, anexplanationoftheelection,the identityofthecomponentreportingentity,and a reference',
13035:'to the component reporting entity’s financial report. page 14 sffas 10 fasab handbook, version 20 06/21 sffas 10 appendixa: basis',
13036:'for conclusions this statement may be affected by later statements. the fasab handbook is updated annually and includes a status',
13037:'section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections',
13038:'are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the',
13039:'basis for conclusions of the amending statement for the rationale for each amendment. general property, plant,and equipment 37. as statedinstatementoffederalfinancialaccountingstandards',
13040:'sffasno. 6, accounting for property, plant, and equipment, paragraph 10, the federalaccounting standardsadvisory board board believes that measuring the cost',
13041:'associated with using general property, plant, and equipment pp&e, and including that cost in a federal entity’s operating results will',
13042:'help to achieve the operating performance objective. to meet the operating performance objective, the board seeks to provide accounting standards',
13043:'that will result in relevant and reliable cost information for decisionmaking by internal users, comprehensive, comparable cost information for decisionmaking',
13044:'and program evaluation by congress and the public, and information to help assess the efficiency and effectiveness of asset management.',
13045:'38. the board believes that the cost of software acquired or developed for internal use that meets the sffas no.',
13046:'6 criterion for general pp&e should be capitalized. internal use software is specifically identifiable, can have determinate lives of 2',
13047:'years or more, is not intendedforsale in theordinarycourseof operations, andhasbeen acquiredorconstructed with the intention of being used by the entity.10',
13048:'39. this standard does not apply to software that is an integral part of stewardship property, plant, and equipment. for',
13049:'example, if software is a part of a weapons systems, it would not be capitalized but included in the cost',
13050:'of investing in that weapons system. on the other hand, software used to accumulate the cost of acquiring that weaponssystemorto',
13051:'manage and account for that item would meet the criteria for general pp&e and should be capitalized. 10see sffas no.',
13052:'6, par. 17. page 15 sffas 10 fasab handbook, version 20 06/21 sffas 10 40. regarding any costs of internal',
13053:'use software acquired or developed for stewardship pp&e or stewardship investments, the board chose to follow sffas no. 6, accounting',
13054:'for property, plant, and equipment, and sffas no. 8, supplementary stewardship reporting, and expense them as incurred. for example, a',
13055:'research project may involve new software applications for computer simulation or modeling and meet the definition of a stewardship investment',
13056:'in research and development. in such cases, that software should be expensed as part of that research and development stewardship',
13057:'investment. however, software used to manage, account for, and report on research and development projects and activities would meet the',
13058:'criteria for general pp&e and should be capitalized. comparison with sffas no. 6 41. as explained in the following paragraphs',
13059:'and in subsequent sections of the basis for conclusions, the accounting standard for internal use software required some tailoring of',
13060:'the provisions in sffas no. 6. first, the criteria in this standard for determining when to start amortizing/depreciating differs from',
13061:'sffas no. 6. sffas no. 6 provides that for constructed pp&e, depreciationbeginswhen the pp&e is “placedinservice.” however,this standard defines the',
13062:'start of amortization for internal use software as the point when final acceptance testing is successfully completed. this additional criteria',
13063:'is necessary, especially for internally developed software—but also for contractordeveloped and commercial offtheshelf cots software—because 1 testing plays a major',
13064:'role for software assets by demonstrating that the software product can meet the requirements and 2 of the need for',
13065:'clear point for ending the developmental phase. 42. asecondareaoftailoringinvolves “enhancements” andother potentially capitalizable expenditures incurred after the software and/or other',
13066:'general pp&e is in service. sffas no. 6 provides a criterion for capitalizable cost for general pp&e that is different',
13067:'from that required here for software enhancements. sffasno. 6 providesthat cost incurred to either extend the useful life of existing',
13068:'general pp&e or to enlarge or improve its capacity should be capitalized.11 43. bycontrast,thisstandard,asexplainedbelow,takesadifferenttackforsoftware. itprovides that material expenditures to add',
13069:'capability/functionality would be capitalized but expenditures that result in extending useful life or capacity would be expensed. 44. finally, it',
13070:'should be noted that this standard provides additional procedures for recognizing and measuring impairment. the provisions in this standard and',
13071:'in sffas no. 6 are the 11par. 37. page 16 sffas 10 fasab handbook, version 20 06/21 sffas 10 same',
13072:'regarding situations where the software/general pp&e is impaired and will be removed fromservice in itsentirety. bothprovide that the lossismeasured asthedifference',
13073:'between the book value and the net realizable value, if any. however, as explained below, this standard also provides for',
13074:'instances where 1 operational software is only partly impaired and 2 developmental software becomes impaired. respondent’s comments 45. therespondentstotheexposuredrafted, accounting',
13075:'for internal use software, generally agreed with the principles presented therein. most of the respondents agreed that the cost of',
13076:'internal use software and enhancements thereto should be capitalized, that capitalized amounts should be written down or off when the',
13077:'software is impaired, and that the guidance in the ed was sufficient to identify capitalizable cost and to recognize impairment.',
13078:'two thirds of the respondents agreed with the capitalization point in the ed—after 1 management authorizes and commits to funding',
13079:'a project and believes that it is more likely than not that the project will be successful and 2 the',
13080:'preliminary design stage is complete. 46. some respondents raised objections and concerns, similar to those expressed in response to the',
13081:'original pp&e exposure draft, about capitalizing software, especially internally developed software. they were concerned that distinguishing between the cost of',
13082:'new and/or enhanced software on the one hand and maintenance and routine improvements that do not benefit future periods on',
13083:'the other hand would be difficult. other respondents noted the rapidity with which technology changes and current software becomes obsolete,',
13084:'and said that the risky and uncertain nature of software development makes writeoff much more likely for software than for',
13085:'general pp&e. 47. notwithstanding these objections, the board continues to believe that internal use software is similar to other general',
13086:'pp&e and should be accounted for accordingly. internal use software andother information technology productsandservicesare importantresources for government operations. theyare subject',
13087:'to similarrisks of impairment and writeoff and, otherwise, havegeneralpp&e characteristics. moreover, some respondentssaidtheywere already capitalizing their cots software, which represents',
13088:'a large and growing percentage of their software portfolio. 48. the board believes that the difference between internal use software',
13089:'and other general pp&e is not sufficient to justify different accounting treatment. this standard provides guidancefordeterminingwhen capitalizationstartsandstops, howto amortizethesoftware, how',
13090:'to determine and measure impairment, and other guidance. page 17 sffas 10 fasab handbook, version 20 06/21 sffas 10 costbenefit',
13091:'49. severaloftherespondentsopposedthecapitalizationofinternalusesoftwarebecausethey do not believe that the benefits of doing so are worth the cost. the respondents are concerned about',
13092:'the difficulty and cost of evaluating, measuring, and tracking such information. some respondents point especially to the difficulty of allocating',
13093:'federal employees’ salaries and contractors’ cost in multiuse contracts e.g., systems development and maintenance. 50. some argue 1 that capitalized',
13094:'internal cost related to developing internal use software is often unrelated to the software’s actual value or is irrelevant, 2',
13095:'that capitalization would result in arbitrary values and amortization periods, and 3 that such cost is frequently writtenoff, causing readers',
13096:'to be misled by the initial capitalization and subsequent write off. 51. in statementoffederalfinancialaccountingconcepts no. 1, objectives of federal financial',
13097:'reporting, the board points out that recommending accounting standards necessarily involves judgments about the cost and benefits of producing information',
13098:'and that standardscan have different effectson different users. the board isconcerned that the benefits from standardsshould exceed the cost of',
13099:'complying with them but realizes that the benefits from standards are very hard to quantify.12 52. the board is persuaded',
13100:'that the benefits from this standard exceed the cost. the board believes that internal use software meets the definition of',
13101:'general pp&e and that general pp&e ought to be capitalized as an asset and amortized to the future periods benefited.',
13102:'53. capitalizingsoftwarecontributestotheeffectivemanagementoffederal entities’resources. the careful measurement of the cost to construct capital assets, the matching of such cost to periods',
13103:'and programs benefitted on the federal entity’s statement of net cost, and the comparison of cost with other alternatives for',
13104:'achieving the entity’s goal comprise good management. moreover, the regular review of software assets for impairment provides an early warning',
13105:'of problems. in short, such information provides periodic feedback about the quality and competitiveness of software products and services.13 12also,seeomb',
13106:'circulara130, management of federal information resources,par. 7d, whichestablishesthegoal of having benefits exceedcost but notes that “thebenefits to bederived from government',
13107:'information may not always be quantifiable.” 13see omb circulara130, par. 8a, “information management policy,” and par. 9b, as well as',
13108:'omb’s capital programming guide, for detailed guidance on analyzing information technology through the planning, acquisition, and managementinuse phases. page 18',
13109:'sffas 10 fasab handbook, version 20 06/21 sffas 10 54. the board believes that expensing software costs incurred 1 in',
13110:'the preliminary design stage,2forsoftware repairsandimprovementsthat increase efficiencyandusefullife see discussion of enhancements below, and 3 under materiality considerations will ease the',
13111:'burden of complying with this standard. federal entities incur cost in the preliminary design stage exploring design and technical possibilities.',
13112:'expensing this cost will limit the risk of “overcapitalization.” 55. the board realizes that software—in general—and internally developed internal use',
13113:'software—in particular—present difficult materiality considerations. however, the board believes that federal entities will be able to use their discretion under',
13114:'the materiality provisions of federal accounting standards to set reasonable limits to capitalization and avoid incurring excessive cost in tracking',
13115:'de minimis items. 56. sffas no. 4 calls for the full cost of resources that directly and indirectly contribute to',
13116:'the production of outputs to be assigned to outputs through appropriate costing methodologies. cost effectiveness is a key consideration in',
13117:'selecting a cost assignment method. as a generalrule, directlytracingcostsandassigningcostsonacauseandeffect basisaremore expensive thancostallocations, becausetheyrequire detailed analysesandrecordkeeping for costs and activities. however,',
13118:'they are preferable because they produce more reliable cost information than cost allocations.14 in any case, the method used to',
13119:'trace, assign or allocate costs must produce materially correct and complete costs. 57. the board acknowledges that the service life',
13120:'of software is less predictable than that for other general pp&e. however, the board is not persuaded that the difficulties',
13121:'of estimation and adjustment justify an accounting treatment different from that for other general pp&e. the board believes that the',
13122:'additional guidance in the standard versus that in the ed will address the concerns raised by respondents and will be',
13123:'sufficient for federal entities to comply with the standard. cost to be capitalized—directand indirect cost 58. many respondents agreed with',
13124:'the ed position that indirect cost should be expensed. the ed provided that such cost should be expensed because of',
13125:'costbenefit considerations and the risk of overcapitalization. 59. several respondents objected to the failure of the ed to require indirect',
13126:'as well as direct costs to be capitalized. most of these respondents based their objection on the fullcost 14sffas no.',
13127:'4, par. 143. page 19 sffas 10 fasab handbook, version 20 06/21 sffas 10 requirements in sffas no. 4, managerial',
13128:'cost accounting concepts and standards for the federal government, believing that the board would not be consistent with this standard',
13129:'unless full cost accounting were adopted. 60. the board had reserved final judgment on the issue of capitalizing indirect cost',
13130:'at the time the ed was published. several of the board’s members had argued that capitalizing only direct cost was',
13131:'inconsistent with sffas no. 4. also, some board members felt that, if the standard not did require indirect cost to',
13132:'be capitalized, the cost of internally developed internal use software would not be comparable with cots and contractordeveloped software, which',
13133:'would include indirect cost. 61. after reconsidering the issue, the board is persuaded that sffas no. 4 requires both direct',
13134:'and indirect costs to be capitalized. moreover, the new federal capital programming guidelines15 require full lifecycle cost to be tracked,',
13135:'which is a more extensive requirement than that required by this standard, since it includes cost that would be expensed',
13136:'for accounting purposes.16 also, software asset values will be comparable among internally developed, cots and contractordeveloped software. commencing capitalization 62.',
13137:'twothirds of the respondents agreed that capitalization should begin as described in par. 21 of the ed and par. 16',
13138:'of this standard: that is, when 1 management authorizes and commits to a software project and believes that it is',
13139:'more likely than not that the software will be completed and 2 the preliminary design stage is complete. two of',
13140:'these respondents noted that the standard was consistent in this regard with theamerican institute of certified publicaccountant’s aicpa draft statement',
13141:'of position sop.17 six other respondents would begin to capitalize only when “technological feasibility” is demonstrated.18 other respondents either would',
13142:'not capitalize internal use software under any circumstances or only cots software. 15theofficeof managementand budget’s omb capital programming guide, supplementto',
13143:'omb circulara11,part 3 july 1997, integrates the various executive branch and statutory asset management initiatives, including the government performanceandresultsact, theclingercohenact,',
13144:'and thefederalacquisitionstreamliningact, into a single, integrated capitalprogramming guide. 16“capital assets are land, structures, equipment, and intellectual property including software that',
13145:'have an estimated life of twoyears or more the cost of a capital asset is its full lifecycle cost, including',
13146:'all direct and indirect cost for planning, procurement operations and maintenance, including service contracts and disposal.” capital programming guide, version',
13147:'1.0, definition of capital asset, p. i july 1997. 17published march 4, 1998 as sop no. 981. 18“technological feasibility” is',
13148:'the criteria that the financialaccounting standards board fasb used in statement of financialaccountingstandards sfasno. 86, accounting for the costs of',
13149:'computer software to be sold, leased, or otherwise marketed. page 20 sffas 10 fasab handbook, version 20 06/21 sffas 10',
13150:'63. theboardhasaddedaframeworkforidentifyingthestages ofa softwareproject. also, the standard now draws a sharperdistinction between internally developed software on the one hand and',
13151:'cots and contractordeveloped software on the other. however, the board believes that flexibility is needed so that the standard can',
13152:'be applied governmentwide. 64. one respondent asked for clarification regarding management’s commitment to the software project. this is critical, since',
13153:'it is the starting point for the capitalization of software cost. the board believes that management’s authorization and commitment are',
13154:'a recognizable point for major software projects. a“go/no go” decision should be a visible milestone. management should use its best',
13155:'judgment to identify when its commitment to a major software project takes place. 65. theboarddecidedthatthe “technologicalfeasibility” testinsffasno. 6,whichfollowsthe financialaccounting standard',
13156:'board’s statement of financialaccounting standards no. 86, should be changed. the board believes that that test is appropriate for software',
13157:'developed for sale or lease or otherwise marketed but is not applicable to internal use software. federal software should be',
13158:'capitalized because it is a longlived operating asset rather than inventory to be sold. however, federal entities normally do not',
13159:'develop software for sale. if, in a rare instance, an entity should engage to develop software for another federal entity,',
13160:'sfas no. 86 would be applicable. software licenses 66. one respondent asked for guidance on accounting for licenses for cots',
13161:'software. the board had not discussed software licenses during its deliberations leading up to the publicationofthe ed. softwarelicensescancoverperiodsrangingfromtheentire estimated service',
13162:'life of the software a “perpetual” license to annual or more frequent periods and are similar to leases of general',
13163:'pp&e. 67. the board believes that it would be appropriate for the federal entity to apply lease accounting concepts19 and',
13164:'the entity’s existing policy for capitalization thresholds and for bulk purchases to licenses. immaterial costs would be expensed, but the',
13165:'entity should consider whether period costs would be distorted by expensing the license. 19see sffas no. 5, accounting for liabilities',
13166:'of the federal government, “capital leases,” pars. 4346, and sffas no. 6, accounting for property, plant, and equipment, par. 20,',
13167:'for federal accounting standards for leases. page 21 sffas 10 fasab handbook, version 20 06/21 sffas 10 capitalization thresholds 68.',
13168:'in sffas no. 6, the board carefully considered whether to take a prescriptive approach regarding capitalization thresholds or to permit',
13169:'each entity to set its threshold in light of its own particular operating environment. the board decided that federal entities',
13170:'were too diverse to require one threshold for all entities; hence, the board adopted a materiality approach wherebyeach entityestablishesitsown threshold',
13171:'as well asthe guidance for bulk purchases. the board continues to believe that permitting management discretion in establishing capitalization policies',
13172:'will lead to a more costeffective application of the accounting standards. data conversion cost 69. the issue of whether to',
13173:'capitalize all, some, or no data conversion cost is a difficult one. some argue that the cost of converting existing',
13174:'data to a new software systemis analogous to the types of cost that theaccounting principles board opinion apb no. 17,',
13175:'intangible assets, requires to be expensed as incurred because they are not specifically identifiable, have indeterminate lives, or are inherent',
13176:'in a continuing business and related to an enterprise as a whole—such as goodwill apb 17, par. 24. the board',
13177:'is persuaded that data conversion costs are operating costs and should be expensed. amortization period 70. most respondents said that',
13178:'no maximum period for amortization should be set in the standard. one respondent asked for clarification regarding the meaning of',
13179:'the general requirement that the amortization period be “consistent with management’s plan for use.” anotherrespondentaskedwhethertheamortizationperiodshouldbeginwhencapitalization stops or when the system',
13180:'is put into use, saying that, often, there can be a significant time lag betweenthese two events. one respondent askedforclarificationregarding',
13181:'incremental implementation. 71. the board has added additional guidance regarding the cessation of capitalization and commencement of amortization. the standard',
13182:'now focuses on the point when testing is complete. the term “operational,” which some respondents found vague, is no longer',
13183:'used as a definitive point for cessation of capitalization. also, provision has been made to treat each location and/or module',
13184:'separately. enhancements 72. several respondents requested additional guidance for distinguishing maintenance from enhancements. theexposure draft proposed capitalizingthecostof changesto theexisting page',
13185:'22 sffas 10 fasab handbook, version 20 06/21 sffas 10 system as an enhancement if it is more likely than',
13186:'not that the changes add capabilities or useful life. one respondent asked whether the cost of changes that make the',
13187:'software or system easier to use and users more efficient, but do not significantly change the capability/functionality i.e., the system',
13188:'does not do any additional tasks, should be expensed or capitalized. also, the ed proposed that year 2000 y2k cost',
13189:'be expensed as incurred, even though they extend useful life. several respondents asked whether y2k cost were “enhancements.” 73. the',
13190:'board believes that an “enhancement” should be limited to instances where significant newcapabilities are being added to the software. merely',
13191:'making the software more efficient and/or extending its service life should not constitute a capitalizable cost. software is more fluid',
13192:'and malleable than other pp&e and the board concludes that a higher threshold for additional capitalization is reasonable. impairment 74.',
13193:'twothirds of the respondents said that the guidance on impairment was sufficient. several respondents had questions about how the impairment',
13194:'provisions would apply to particular situations. 75. arespondentaskedwhether theavailability of anew, updatedversionofcotssoftware with significantly improved functionality, efficiency, or effectiveness means',
13195:'that the older version is impaired even if the older version is still performing the functions for which it was',
13196:'designed. he asked whether the availability of new technology, whether adapted or not, render existing software “impaired.” he asked about',
13197:'the affect of modernizing existing software to take advantage of the new technology. this respondent was concerned that if modernization',
13198:'is included in the definition of “impairment,” there will be constant write downs. 76. the board believes that none of',
13199:'the situations cited by the respondent would meet the criteria of this standard in paragraphs 2831. according to the criteria,',
13200:'in order for software to be considered impaired, it would have to have lost its service potential such that the',
13201:'federal entity would plan to remove it from service or the software would have had its capabilities reduced. 77. one',
13202:'respondent asked about the ed’s proposal for expensing y2k cost. since the implementation date for thisstandard has been moved back',
13203:'to fy 2001, the issue is largely moot. however, the board’s rationale for recommending that the y2k cost be expensed',
13204:'is that such cost is incurred to repair a design flaw rather than to add to the software’s capabilities or',
13205:'useful life, although the latter would be affected. page 23 sffas 10 fasab handbook, version 20 06/21 sffas 10 working',
13206:'capital funds 78. at least one respondent was concerned about the impact of capitalizing noncots internal use software on the',
13207:'cash flows, billing rates, and performance measurement of working capital funds wcfs. this respondent said that developing software internally and',
13208:'through contractors could require long lead times during which wcfs would have to finance the project because wcfs could not',
13209:'start to recover the cost from customers until the software project was complete and amortization commences. also, this respondent said',
13210:'that write downs or writeoffs due to impairment by rapidly changing technology would be difficult to recapture from customers who',
13211:'expect and budget for consistent billing rates. this respondent believes that the capitalization of internally developed or contractordeveloped software could',
13212:'result in fluctuating rates depending on when new projects come “on line” and on writedowns or writeoffs due to impairment.',
13213:'79. this respondent said that if writedowns or writeoffs cannot be recovered from customers, then capital fundswould be unavailable for',
13214:'investment, the wcfs’ equity could be seriously impaired, and the wcfs would rapidly become unable to effectively provide the services',
13215:'for which they were established. the respondent said that wcfs are vulnerable to capital shortages because they operate on a',
13216:'breakeven basis rather than generate retained earnings, and because they do not have access to private capital markets. this respondent’swcf',
13217:'currentlycapitalizescotssoftware because itisaproven commodity; it becomes operational immediately and the wcf can begin chargingback the cost to customers. 80. fixed',
13218:'assets usually provide important future benefits but require large amounts of resources upfront and extended periods for planning and acquisition.',
13219:'making capital planning decisions is often difficult for agencies because full budget authority is required before the acquisition can commence',
13220:'and the entire acquisition has an immediate budgetary impact. thismakescapital assets lookexpensive relative to, for example, annual lease payments even',
13221:'though the latter may be more expensive in the longrun.20 81. notwithstanding these very real concerns, the board concludes that',
13222:'the wcfs problem is one of budgetary control and program finance rather than of accounting. congress has instituted various alternatives',
13223:'for wcfs to acquire capital. the board’s responsibility is to recommend what it considers the best accounting treatment considering all',
13224:'the circumstances and the board’s objectives. 20see gao, budget issues: budgeting for federal capital gao/aimd975 nov. 1996, for 1 an',
13225:'analysis of capital budgeting problems experienced by wcfs and federal agencies generally and 2 possible solutions. page 24 sffas 10',
13226:'fasab handbook, version 20 06/21 sffas 10 implementation date 82. the 23 respondents who addressed the question of the implementation',
13227:'date were almost evenly divided as to the feasibility of an fy 1999 implementation date. most respondents opposing the fy',
13228:'1999 date said that federal agencies do not have the cost accounting systems as yet to account for capitalized cost',
13229:'but are developing such capabilities. some respondents said that most federal agencies have a great deal “on their plate” now,',
13230:'when one considers the many recent initiatives. they said that an fy 2000 or fy 2001 implementation date would be',
13231:'better. 83. onerespondent saidthattheaicpa’ssopis effectivefor periods beginningafter december 15, 1998, and that there is no reason for the federal government',
13232:'to adapt such a standard before the private sector does. the respondent said that federal implementation after the private sector',
13233:'implementsits standard would allowthe federal government to learn from the private sector’s experience. 84. the board believes that federal entities',
13234:'are striving to meet deadlines for audited financial statements, performance reports, cost accounting, technology management, and other initiatives. entities resources',
13235:'are under stress to meet these deadlines. thus, the board believes that moving the implementation to fy 2001 is reasonable.',
13236:'page 25 sffas 10 fasab handbook, version 20 06/21 sffas 10 appendix b: glossary see consolidated glossary in “appendix e:',
13237:'consolidated glossary”. page 26 sffas 10 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 11: amendments toaccounting for',
13238:'property, plant, and equipment definitional changes amending sffas 6and sffas 8accounting for property, plant, and equipment and supplementary stewardship reportingrescinded',
13239:'status issued december 15, 1998 effective date the amendments to sffas 6 and 8 in this statement wereeffective for periodsbeginningafterseptember30,1998.asofseptember30,',
13240:'2002 this statement was rescinded in its entirely by sffas 23. affects none. affected by sffas 23 rescinded sffas 11',
13241:'in its entirety. sffas 23, eliminating the category national defense property, plant, and equipment rescinded sffas 11 in its entirety.',
13242:'page 1 sffas 11 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 12: recognition of contingent liabilitiesarising fromlitigation:anamendment',
13243:'of sffas 5,accounting for liabilities of the federal government status issued february 5, 1999 effective date for periods beginning after',
13244:'september 30, 1997 affects sffas 5, paragraphs 33 and 36. affected by none. summary this standard amends statement of federal',
13245:'financialaccounting standards 5, accounting for liabilities of the federal government sffas 5. it provides an exception to the contingent liability',
13246:'standard for recognizing losscontingencies on matters of pending or threatened litigation and unasserted claims. for loss contingencies for matters of',
13247:'pending or threatened litigation and unasserted claims, a contingent liability would be recognized1 when a future outflow or other sacrifice',
13248:'of resources is “likely to occur,” a past event or exchange transaction has occurred, and the future outflow or sacrifice',
13249:'of resources is measurable. before the amendment, sffas 5 called for recognition whenanoutflowis “more likelythan not.” in additiontorecognition, disclosure2would be',
13250:'required for loss contingencieson matters of pending or threatened litigation and unasserted claims if it is at least reasonably possible',
13251:'that a loss or an additional loss may have been incurred. the amendment does not affect recognition of other types',
13252:'of contingencies. 1the term “recognize” means the formal recording or incorporating of an item into the financial statements of an',
13253:'entity as an asset, liability, revenue, expense, etc. see fasab consolidated glossary 2theterm “disclosure” means thereporting of information in notes',
13254:'or narrative regarded as an integralpart of the basic financial statement. see fasab consolidated glossary. page 1 sffas 12 fasab',
13255:'handbook, version 20 06/21 sffas 12 table of contents page summary 1 purpose, scope & background 3 materiality 4 effective',
13256:'date 4 accounting standard 5 appendixa: basis for conclusions 6 appendix b: selected section from statement of financialaccounting standards no.',
13257:'5, accounting for contingencies appendix c: selected sections of statement of federal financial accounting standards no. 5, accounting for liabilities',
13258:'of the federal government page 2 sffas 12 fasab handbook, version 20 06/21 sffas 12 purpose 1. this statementamends statementoffederalfinancialaccountingstandards',
13259:'number 5 sffas no. 5,accounting for liabilities of the federal government, to provide an exception to the contingent liability standard',
13260:'for matters of pending or threatened litigation and unasserted claims. the proposed amendment would affect accounting for contingencies under sffas',
13261:'no. 5 by inserting an exception to the definition of “probable” andto therecognition criteria in sffas no. 5 seecurrent paragraphs33,',
13262:'36, and 38 of that standard inappendix c. scope 2. thisstandardappliestoevaluationsandaccountingrecognitionanddisclosureofthefuture outcome of litigation. background 3. thefederalaccountingstandardsadvisoryboardfasab was askedto clarifythe',
13263:'application of the standard for recognizing loss contingencies for pending or threatened litigation and unasserted claims. sffas no. 5 provides',
13264:'the definition for “liability” and establishes specific standards for five liability categories, including contingencies. 4. sffas no. 5 defines a',
13265:'contingency as an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss.1 sffas no.',
13266:'5 requires a liability to be recognized for loss contingencies when a past event or exchange transaction makesa future outflow',
13267:'of resourcesprobable and measurable.2it defines “probable” as that which can reasonably be expected or believed to be more likely than',
13268:'not on the basis of available evidence or logic but which is neither certain nor proven.3 5. sffas no. 5',
13269:'uses the same general framework for evaluating loss contingencies as financialaccountingstandardsboardfasbstatementoffinancialaccountingstandards 1sffas no. 5, par. 35, and also inappendix c.',
13270:'2sffas no.5, par. 36. 3sffas no. 5, par. 33 and also see sffas no. 5’s glossary. page 3 sffas 12',
13271:'fasab handbook, version 20 06/21 sffas 12 no. 5, accounting for contingencies sfas no. 5. contingencies can be “probable,” “reasonably',
13272:'possible,” or “remote;” and, based on that, are recognized on the balance sheet, disclosed in footnotes, or not mentioned in',
13273:'the financial statements, respectively. however, sfas no. 5 defines “probable” as “likely to occur” instead of “more likely than not.”4',
13274:'6. someauditors have expressedreservations abouttheir abilityunder statementofauditing standards12sas12toexpressanunqualifiedopinionontheentity’sfinancialstatements without a legal representation letter that refers to the sffas no. 5',
13275:'standard. lawyers have expressed seriousobjectionto thedefinitionofprobable“morelikelythan not”containedin sffas no. 5. they state that a lawyer’s prediction of failure under the',
13276:'sffas no. 5 definition of “probable” “more likely than not”, and the recording of a liability to reflect that judgment,',
13277:'could be used as an admission against interest, thereby jeopardizing the government’s ability to fairly defend the public interest. similarly,',
13278:'they further state that a lawyer’s response to an auditor’s request for information on matters where an unfavorable outcome is',
13279:'more likely than not could result in the disclosure of information protected bythe lawyerclient privilege, disadvantaging the government in any',
13280:'dispute, and violating the american barassociation’s code of professional responsibility. 7. the board believes that this amendment clarifies the standard',
13281:'for contingencies involving pending or threatened litigation and unasserted claims and will facilitate communication among auditors, lawyers, those who prepare',
13282:'financial statements, and those who use the financial statements. materiality 8. the provisions of this statement need not be applied',
13283:'to immaterial items. effective date 9. this standard is effective for reports issued subsequent to the date of this statement',
13284:'for reporting periods beginning after september 30, 1997. 4sffas no. 5, par. 3. page 4 sffas 12 fasab handbook, version',
13285:'20 06/21 sffas 12 accounting standard 10. paragraph 33 of sffas no. 5 is amended by adding “with the exception',
13286:'of pending or threatened litigation andunasserted claims” at theend of the firstsentence. paragraph 33 is further amended by adding the',
13287:'following footnote to the first sentence: the concept of probability is imprecise and difficult to apply with respect to most',
13288:'legal matters. the “morelikelythan not” phrase suggestsgreaterprecision than isattainable when assessing the outcome of matters in litigation. accordingly, in the',
13289:'context of assessing the outcome of matters of pending or threatened litigation and unasserted claims, and recognizing an associated liability,',
13290:'“probable” refers to that which is likely, not to that which is more likely than not. note that the remaining',
13291:'two criteria for recognizing a liabilitythat is, a past event or exchange transaction has occurred and the future outflow or',
13292:'sacrifice of resources is measurablealso must be met before recognizing a contingent liability in matters involving litigation. 11. other conforming',
13293:'changes to sffas no. 5 are: the first bullet of paragraph 36 ischanged asfollows: “probable: the future confirming event or',
13294:'events are more likely than not to occur, with the exception of pending or threatened litigation and unasserted claims. for',
13295:'pending or threatened litigation and unasserted claims, the future confirming event or events are likely to occur.” paragraph 38 of',
13296:'sffas no. 5 is amended by replacing “more likely than not” in the second bullet with “likely.” page 5 sffas',
13297:'12 fasab handbook, version 20 06/21 sffas 12 appendixa: basis for conclusions this statement may be affected by later statements.',
13298:'the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this',
13299:'statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be',
13300:'updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale',
13301:'for each amendment. 12. in their capacity as legal counsel to federal agencies, lawyers should evaluate the outcome of matters',
13302:'of pending or threatened litigation and unasserted claims, and estimate any losses therefrom, in accordance with theamerican barassociation’s statement of',
13303:'policy regarding lawyer’s responses to auditors’ requests for information. attorneys note that neither the outcome of litigation nor any loss',
13304:'resulting therefrom can be assessed “in any way that is comparable to a statistically or empirically determined concept of probability”',
13305:'see auditor’s letter handbook,american barassociation, page 18. the “more likely than not” phrase suggests greater precision than is attainable when',
13306:'assessing the outcome of matters in litigation. 13. accordingly, in the context of such cases the standard refers simply to',
13307:'that which is “likely.” in this context, therefore, “likely to occur” is used in federal accounting standards in the same',
13308:'way that it is used in statement of financialaccounting standards no. 5, accounting for contingencies, published by the financialaccounting standards',
13309:'board in 1975. 14. the board believes that this amendment will serve the objectives of financial reporting because it will',
13310:'facilitate communications among auditors, lawyers, those who prepare financial statements, and those who use the statements. 15. the board published',
13311:'an exposure draft of this standard on october 30, 1998, and received thirty responses, six of which had no comment.',
13312:'of the 24 who commented, 22 concurred with the proposed standard. two responses were positive but could not be characterized',
13313:'as concurrence. no respondent objected to the amendment. five respondents suggested broadening the scope of the amendment to apply “likely',
13314:'to occur” to all contingent liabilities. 16. although some respondents suggested broadening the application, the board concluded that the amendment',
13315:'should be limited to contingent liabilities resulting from litigation. most respondents concurred with this approach. the board plans additional research',
13316:'on this subject in 1999. 17. the board has made minor changes to the proposal published as an exposure draft.',
13317:'several respondents suggested minor changes in wording and/or notations in paragraphs page 6 sffas 12 fasab handbook, version 20 06/21',
13318:'sffas 12 33 and36 inaddition toorinstead ofparagraph38to clarify theamendment. theboard has adopted most of these suggestions. 18. the board makes',
13319:'this recommendation with a vote of nine members approving issuance and no members opposing issuance. page 7 sffas 12 fasab',
13320:'handbook, version 20 06/21 sffas 12 appendix b: selected section from statement of financial accounting standards no. 5,accounting for contingencies.',
13321:'1. for the purposes of this statement, a contingency is defined as an existing condition, situation, or set of circumstances',
13322:'involving uncertainty as to possible gain hereinafter a “gain contingency” or loss hereinafter a “loss contingency” to an enterprise that',
13323:'will ultimately be resolved when one or more future events occur or fail to occur. resolution of the uncertainty may',
13324:'confirm the acquisition of an asset or the reduction of a liability or the loss or impairment of an asset',
13325:'or the incurrence of a liability. 3. whenalosscontingencyexists,thelikelihoodthatthefutureeventoreventswillconfirmthe loss or impairment of an asset or the incurrence of a liability',
13326:'can range from probable to remote. this statement uses the terms probable, reasonably possible, and remote to identify three areas',
13327:'within that range, as follows: a. probable. the future event or events are likely to occur. b. reasonably possible. the',
13328:'chance of the future event or events occurring is more than remote but less than likely. c. remote. the chance',
13329:'of the future event or events occurring is slight. 8. anestimatedlossfromalosscontingencyasdefinedinparagraph1shallbeaccruedbya charge to income if both of the following conditions',
13330:'are met: a. information available prior to issuance of the financial statements indicates that it is probable that an asset',
13331:'had been impaired or a liability had been incurred at the date of the financialstatement. it isimplicit in thiscondition that',
13332:'it must be probable that one or more future events will occur confirming the fact of the loss. b. the',
13333:'amount of the loss can be reasonably estimated. page 8 sffas 12 fasab handbook, version 20 06/21 sffas 12 appendix',
13334:'c: selected sections of statement of federal financialaccounting standards no. 5,accounting for liabilities of the federal government footnotes omitted. 33.',
13335:'“probable” refers to that which can reasonably be expected or is believed to be more likely than not on the',
13336:'basis of available evidence or logic. the probability of a future outflow or other sacrifice of resources is assessed on',
13337:'the basis of current facts and circumstances. these current facts and circumstances include the law that provides general authority for',
13338:'federal entity operations and specific budget authority to fund programs. if budget authority has not yet been provided, a future',
13339:'outflow or other sacrifice of resources might still meet the probability test if 1 it directly relates to ongoing entity',
13340:'operations and 2 it is the type for which budget authority is routinely provided. therefore, the definition applies both to',
13341:'liabilities covered by budgetary resources and to liabilities not covered by budgetary resources. contingencies 35. acontingencyisanexistingcondition,situation,or set of circumstances involving',
13342:'uncertaintyasto possiblegain orlosstoanentity. theuncertaintywillultimatelyberesolved when one or more future events occur or fail to occur. resolution of the uncertainty may',
13343:'confirm a gain i.e., acquisition of an asset or reduction of a liability or a loss i.e., loss or impairment',
13344:'of an asset or the incurrence of a liability. 36. thisstatementdoesnotdealwithgaincontingenciesormeasurementofcontingenciesthat involveimpairmentofnonfinancialassets. when alosscontingencyi.e.,contingentliability exists, the likelihoodthat the future event',
13345:'oreventswillconfirmthe lossortheincidence of a liability can range from probable to remote. the probability classifications are as follows: probable: the future',
13346:'confirming event or events are more likely than not to occur. reasonablypossible:thechancesofthefutureconfirmingeventoreventsoccurringis more than remote but less than probable. remote:',
13347:'the chance of the future event or events occurring is slight. 37. the following are some examples of loss contingencies:',
13348:'collectibility of receivables, page 9 sffas 12 fasab handbook, version 20 06/21 sffas 12 pending or threatened litigation, and possible',
13349:'claims and assessments. criteria for recognition ofacontingent liability 38. acontingentliability shouldberecognizedwhen all ofthese three conditionsaremet: apasteventorexchangetransactionhasoccurrede.g.,afederalentityhasbreached a contract with a',
13350:'nonfederal entity. afutureoutflow or other sacrificeofresources isprobablee.g.,thenonfederal entity has filed a legal claim against a federal entity for breach of',
13351:'contract and the federal entity’s management believes the claim is more likely than not to be settled in favor of',
13352:'the claimant. the future outflow of resources is measurable e.g., the federal entity’s management determines an estimated settlement amount. 39.',
13353:'the estimated liability may be a specific amount or a range of amounts. if some amount within the range is',
13354:'a better estimate than any other amount within the range, that amount is recognized. if no amount within the range',
13355:'is a better estimate than any other amount, the minimumamount in the range isrecognized andtherangeand adescription of the nature of',
13356:'the contingency should be disclosed. criteria for disclosure ofacontingent liability 40. acontingentliability shouldbedisclosedif anyofthe conditionsfor liability recognitionare not met and',
13357:'there is at least a reasonable possibility that a loss or an additional loss may have been incurred. “disclosure” in',
13358:'this context refers to reporting information in notes regarded as an integral part of the basic financial statements. 41. disclosure',
13359:'should include the nature of the contingency and an estimate of the possible liability, an estimate of the range of',
13360:'the possible liability, or a statement that such an estimate cannot be made. 42. insomecases,contingenciesmaybeidentifiedbutthedegreeofuncertaintyissogreatthat no reporting i.e., recognition or',
13361:'disclosure is necessary in the general purpose federal financial reports. specifically, contingencies classified as remote need not be reported in',
13362:'general purpose federal financial reports, though law may require such disclosures in special purpose reports. if information about remote contingencies',
13363:'or related to remote contingencies is included in general purpose federal financial reports e.g., the total face amount of insurance',
13364:'and guarantees in force, it should be labeled in such a way to avoid the misleading inference that there is',
13365:'more than a remote chance of a loss of that amount. page 10 sffas 12 fasab handbook, version 20 06/21',
13366:'statement offederal financialaccounting standards 13: deferral of paragraph 65.2—material revenuerelatedtransactions disclosures status issued february 5, 1999 effective date this amendment',
13367:'was effective for fiscal periods beginning after september 30, 1998, until october 1, 2000, when paragraph 65.2 of sffas 7',
13368:'was rescinded by sffas 20. affects sffas 7 by deferring the effective date of disclosure requirements in paragraph 65.2. affected',
13369:'by sffas 20 rescinded sffas 7, paragraph 65.2. summary this statement deferred paragraph 65.2 of sffas 7 for three years.',
13370:'as a result, paragraph 65.2 would have become effective for periods beginning after september 30, 2000; however, paragraph 65.2 was',
13371:'subsequently rescinded by sffas 20. page 1 sffas 13 fasab handbook, version 20 06/21 sffas 13 table of contents page',
13372:'summary 1 background 3 statement of standards 3 effective date 3 basis for conclusions 4 boardapproval 5 page 2 sffas',
13373:'13 fasab handbook, version 20 06/21 sffas 13 background 1. statementoffederalfinancialaccountingstandards no. 7, accounting for revenue and other financing sources',
13374:'including paragraphs65.2 became effective for fiscalyear 1998. it included detailed provisions that apply to entities collecting taxes on behalf of',
13375:'the federal government. 2. paragraph 65.2 of sffas no. 7 states: entities that collect taxes and duties should disclose: 65.2',
13376:'material revenue related transactions. revenuerelated transactions affecting thebeginningandendofperiodbalancesofaccountsreceivable,accountspayablefor refunds, and the allowance for uncollectible amounts should be disclosed. all material',
13377:'types of revenue transactions which relate to the custodial responsibilities of the collecting entities should be disclosed. the disclosure should',
13378:'be comprehensive enough to include as a minimum: selfassessments by the taxpayers or importers; assessments by the entity; penalties; interest;',
13379:'cash collections applied to taxpayer accounts and unapplied collections; refunds, refund offsets, and drawbacks; abatements; accounts receivable written off during',
13380:'the reporting period as uncollectible; and provisions made to the allowance for uncollectible amounts. 3. because of difficulties in preparing',
13381:'the information and questions as to its usefulness, the board agreed to consider deletion of paragraph 65.2. ultimately, the board',
13382:'agreed that more study of the issues was needed. accordingly, it agreed that the requirement should be deferred. statement of',
13383:'standards 4. paragraph 65.2 of sffas no. 7 is deferred three years; it will be effective for periods beginning after',
13384:'september 30, 2000. effective date 5. this amendment is effective for fiscal periods beginning after september 30, 1998. earlier implementation',
13385:'is encouraged. page 3 sffas 13 fasab handbook, version 20 06/21 sffas 13 basis for conclusions this statement may be',
13386:'affected by later statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent',
13387:'statements that amend this statement. within the text of the statements, the authoritative sections are updated for changes. however, this',
13388:'appendix will not be updated to reflect future changes. the reader can review the basis for conclusions of the amending',
13389:'statement for the rationale for each amendment. 6. experiencegainedbyirsandgaowhileattemptingtoimplementtheprovisionsofsffas no. 7 provided greater insight into the difficulties of preparing, analyzing,',
13390:'and communicating the information described in paragraph 65.2 than was available when sffas no. 7 was approved. based on that',
13391:'additional experience and insight, the board proposed that subparagraph65.2shouldberescinded.an exposuredraft to accomplish this was published in november 1998. the exposure',
13392:'draft included the alternative view of one board member. he believed that subparagraph 65.2 should be retained, albeit possibly with',
13393:'some modification. 7. the responses received by the board which expressed an opinion on the proposal were approximately evenly divided.',
13394:'respondents supporting the deletion indicated that the requirements were calling for more detailed analysis than generally found in accounting standards,',
13395:'were not cost beneficial, and were potentially misleading because assessments and associated abatements are often substantially overstated. respondents opposing the',
13396:'deletion indicated that the requirements were essential for proper management and oversight, necessary to overcome the limitations of the modified',
13397:'cash basis of accounting for tax revenues, and helpful in ensuring that systems support evaluations of activity during the year.',
13398:'8. after reviewing the comment letters and redeliberating, the board agreed that the primary question was the degree to which',
13399:'the information would be relevant. some members believe the information would be relevant to users and that it, or similar',
13400:'information, is needed to address the objectives of federal financial reporting. other members believe that the information presented by irs',
13401:'and the gao staff responsible for auditing the financial statements of irs calls into question the boards prior conclusion that',
13402:'the information is relevant. responses to the exposure draft that proposed deletion of subparagraph 65.2 did not resolve this issue.',
13403:'therefore, the board agreed that it should conduct further study regarding the relevance of the items of information discussed in',
13404:'subparagraph 65.2. 9. theboardconcludedthattheeffectivedateforsubparagraph65.2shouldbedeferredthree years; from fiscal year 1998 to fiscal year 2001. the board expects to complete the study',
13405:'before the new effective date. page 4 sffas 13 fasab handbook, version 20 06/21 sffas 13 boardapproval 10. the board',
13406:'approves this recommendation by a vote of eight members approving its issuance and one member opposing its issuance. page 5',
13407:'sffas 13 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 14: amendments to deferred maintenance reportingamendingsffas 6,accounting for',
13408:'property, plant and equipment and sffas 8, supplementary stewardship reportingrescinded status issued june 8, 1999 effective date for fiscal years',
13409:'beginning after september 30, 1998 with earlier implementation encouraged. affects sffas 6 paragraphs 7980 and 8384. affected by sffas 29,',
13410:'par. 13 rescinds par. 10 and 11 of sffas 14. sffas 42 rescinded sffas 14 in its entirety. sffas 42,',
13411:'deferred maintenance and repairs: amending statements of federal financial accounting standards 6, 14, 29 and 32 rescinded sffas 14 in',
13412:'its entirety. page 1 sffas 14 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 15: management’s discussions andanalysis',
13413:'status issued august 12, 1999 effective date for fiscal periods beginning after september 30, 1999 affects none. affected by none.',
13414:'summary this document establishes standards for preparing management’s discussion andanalysis md&a. md&ais an important vehicle for 1 communicating managers’ insights',
13415:'about the reporting entity, 2 increasing the understandability and usefulness of the general purpose federal financial report gpffr,1 and 3',
13416:'providing understandable and accessible information about the entity and its operations, service levels, successes, challenges, and future. some federal agencies',
13417:'also refer to md&aas the “overview.” the basic concept that underlies the standards for md&ais: each general purpose federal financial',
13418:'report gpffr should include a section devoted to management’s discussion and analysis md&a. it should address the reporting entity’s performance',
13419:'measures, financial statements, systems and controls, compliance with laws and regulations, and actions taken or planned to address problems. the',
13420:'discussion and analysis of these subjects may be based partly on information contained in reports other than the gpffr. md&aalso',
13421:'should address significant events, conditions, trends and contingencies that may affect future operations. aseparate document titled concepts for management’s discussion',
13422:'and analysis explains the conceptual basis for the role and importance of md&a, the general content of the gpffr, and',
13423:'the elements of md&a. the concepts provide a foundation for the standards presented in this document. the concepts include suggestions',
13424:'about the contents of md&a, but those suggestions are not accounting standardsor principles for federal reporting entities. in particular, the',
13425:'concepts are not “prescribed guidelines” for required supplementary information as discussed in section 558 of the codification of statements on',
13426:'auditing standards published by 1the term “general purpose federal financial report,” abbreviated gpffr, is used as a generic term to',
13427:'refer to the report that contains theentity’s financial statements that are prepared and audited pursuant to the cfoact of 1990,',
13428:'as amended. entities may refer to these reports using different terms, such as “annual report,” “accountability report,” “financialmanagement report,” etc.',
13429:'paragraphs 54112andappendix 1of statementof federal financialaccounting concepts 2, entity and display, describe and illustrate the contents of the gpffr. page',
13430:'1 sffas 15 fasab handbook, version 20 06/21 sffas 15 theamerican institute of certified publicaccountants aicpa. the only standards and',
13431:'prescribed guidelines for md&aare in paragraphs 18 of this document. the standards require md&ato be included in each gpffr as',
13432:'required supplementary information rsi. md&ashould address: the entity’s mission and organizational structure; the entity’s performance goals and results; the entity’s',
13433:'financial statements; the entity’s systems, controls, and legal compliance; and the future effects on the entity of existing, currentlyknown demands,',
13434:'risks, uncertainties, events, conditions and trends. the discussion and analysis of these subjects may be based on information in other',
13435:'discrete sections of the gpffr or it may be based on reports separate from the gpffr. the standards are effective',
13436:'for reporting periods that begin after september 30, 1999. page 2 sffas 15 fasab handbook, version 20 06/21 sffas 15',
13437:'table of contents page summary 1 statement of standards 4 appendix a: basis for conclusions 7 page 3 sffas 15',
13438:'fasab handbook, version 20 06/21 sffas 15 management’s discussionandanalysis statement of standards 1. areportthatpresentsafederal reporting entity’s financialstatements inconformancewith federal accounting',
13439:'principles should include management’s discussion and analysis md&a of the financial statements and related information. md&ashould provide a clear and',
13440:'concise description of the reporting entity and its mission, activities, program and financial performance, systems, controls, legal compliance, financial position,',
13441:'and financial condition. md&ashould provide a balanced presentation that includes both positive and negative information about these topics. md&ashould be',
13442:'regarded as “required supplementary information” as that term is used in auditing standards.2 2. md&ashouldcontainsections that addresstheentity’s: mission and organizational',
13443:'structure; performance goals, objectives, and results; financial statements; and systems, controls, and legal compliance. 3. md&ashouldinclude forwardlookinginformationregardingthepossiblefutureeffects of the most',
13444:'important existing, currentlyknown demands, risks, uncertainties, events, conditions and trends. md&amay also include forwardlooking information about the 2see section 558,',
13445:'“required supplementary information,” in codification of statements on auditing standards, american institute of certified publicaccountants aicpa page 4 sffas 15',
13446:'fasab handbook, version 20 06/21 sffas 15 possible effects of anticipated future demands, events, conditions, and trends.3 forward looking information',
13447:'may comprise a separate section of md&aor may be incorporated with the sections listed above. 4. md&ashoulddiscussimportantproblemsthatneedtobeaddressed,andactionsthathave been taken or',
13448:'planned. actions needed, taken, and planned may be discussed within the sections listed above or in a separate section of',
13449:'md&a. 5. because md&amustbe concise ifitis tobeuseful, management must selectthemost important matters to discuss. this means that some items that',
13450:'are material to the financial statements, notes, and other sections of the gpffr may not be discussed in md&a. 6.',
13451:'md&ashoulddeal withthe “vitalfew” matters;i.e., themostimportant matters thatwill probably affect the judgments and decisions of people who rely on the gpffr',
13452:'as a source of information. the specific topics mentioned in concepts for management’s discussion and analysis are examples of items',
13453:'that might be relevant for md&aof a given entity. matters to be discussed and analyzed are those that management of',
13454:'the reporting entity believes it is reasonable to assume could: lead to significant actions or proposals by top management of',
13455:'the reporting unit; besignificanttothemanaging,budgeting,andoversightfunctionsofcongressandthe administration; or significantly affect the judgment of citizens about the efficiency and effectiveness of their federal',
13456:'government. 7. management of the reporting unit is responsible for the content md&a. 8. the standards are effective for reporting',
13457:'periods that begin after september 30, 1999. 3the word “anticipated” is used in a broad, generic sense in this document.',
13458:'in this context the term may encompass both “probable” losses arising from events that have occurred, which should be recognized',
13459:'on the face of the basic or “principal” financial statements, as well as “reasonably possible” losses arising from events that',
13460:'have occurred, which should be disclosed in notes to those statements. “anticipated” may include the effects of future events that',
13461:'are deemed probable, for which a financial forecast would be appropriate. the term may also encompass hypothetical future trends or',
13462:'events that are not necessarily deemed probable, for which financial projections may be appropriate. such informationabout thepossibleeffects of anticipated future',
13463:'demands, events, conditions and trends, if presented, should includethe term or label “projected” or “projection,” and the key hypothetical underlying',
13464:'assumptions should be explained. as with other information presented in md&a, no examination of this information by the auditor is',
13465:'now routinely included within the scope of an audit of a federal entity’s financial statements; however, preparers and auditors may',
13466:'finduseful backgroundinformationintheaicpa’s statements onstandardsforattestationengagements nos. 1and4,codifiedas section200, “financialforecasts and projections,” oftheaicpa’s codification of statements on standards for attestation engagements. page',
13467:'5 sffas 15 fasab handbook, version 20 06/21 sffas 15 this statement of recommended standards was adopted unanimously by the',
13468:'eight members of the federal accounting standards advisory board serving on the board in april 1999. page 6 sffas 15',
13469:'fasab handbook, version 20 06/21 sffas 15 appendixa: basis for conclusions this statement may be affected by later statements. the',
13470:'fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement.',
13471:'within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated',
13472:'to reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale for',
13473:'each amendment. background, rationale, and project history 9. theboardidentifiedmd&aasatopicfor itsagendashortlyaftertheboard’s inception. the board deferred workonthistopic, however, until it completed recommendationsforaninitial',
13474:'set of basic accounting standards. 10. fasabpublishedaninitialexposuredraftonmd&ainjanuary,1997. itwaspresentedasa statement of recommended concepts rather than standards. the board proposed that it',
13475:'would deal with md&aconceptually, with the understanding that omb would provide authoritative guidance on md&ato implement the concepts. this approach',
13476:'would have been similar to the one used to deal with the topics of entity and display. the board dealt',
13477:'with those topics conceptually in sffac 2. omb then provided authoritative guidance in its bulletin on form and content. 11.',
13478:'theboardreceivedcommentlettersontheinitialexposuredraftfromthefollowingsources: federal internal nonfederal external total citizens, users, academics and others4 4 4 auditors 7 3 10 preparers and financial',
13479:'managers 16 16 totals 23 7 30 4this category includes representational organizations, retired federal employees, federal employees responding as individuals,',
13480:'and federal contractors, as well as academics and other gpffr users. page 7 sffas 15 fasab handbook, version 20 06/21',
13481:'sffas 15 concepts and standards 12. the first exposure draft asked respondents whether all or part of the exposure draft’s',
13482:'provisions should be issued as recommended standards rather than recommended concepts. responses were mixed; most of those who commented on',
13483:'this question favored concepts, but a significant numberexpressed the view that standardswould be appropriate. the board concluded that, given the',
13484:'importance of md&aas an integral part of the gpffr, it would be appropriate for federal accounting principles to include standards',
13485:'for md&a. 13. atthesametime, theboardconcludedthatmd&ashouldbetreatedasrequired supplementary information. the board agreed that it would recommend no detailed requirements or guidelines for',
13486:'md&aat this time, beyond those in paragraphs 18. in other words, adiscussion and analysisbymanagement that addressesthelistedtopicsshould be required, because it',
13487:'is an essential part of a complete gpffr. at the same time, management shouldhave great discretionregarding what to sayabout thosetopics,',
13488:'subject only to the criteria in paragraphs 18 and the pervasive requirement that md&anot be misleading. the standard itself, therefore,',
13489:'is not extremely prescriptive. 14. because of this change from what was originally exposed for comment, the board decided to',
13490:'expose separately the proposed standards and concepts for further comment. the exposure drafts were issued in october, 1998; responses were',
13491:'requested by january 1999. the proposed standard, like the final recommended standard, would require the auditor to note the omission',
13492:'of md&aor the failure to address the specified topics.at the same time, rsi status for md&a—coupled with the lack of',
13493:'specific, detailed, prescriptive standards for the content of md&a—would minimize the requirement for the auditor to scrutinize md&a. this, the',
13494:'board believed, would provide the flexibility appropriate for dealing with topics such as performance measurement at this point in the',
13495:'evolution of federal financial reporting. page 8 sffas 15 fasab handbook, version 20 06/21 sffas 15 responses to second exposure',
13496:'draft 15. the board received comment letters on the second exposure draft from the following sources: federal internal nonfederal external',
13497:'total citizens, users, academics and others 3 3 auditors5 3 3 6 preparers and financial managers 11 11 totals 14',
13498:'6 20 16. most comments were generally favorable, but comments were mixed regarding some points. afew auditors and preparers expressed',
13499:'some concern about requiring forward looking information as rsi. others expressed support for doing so. after considering these responses, the',
13500:'board agreed to defer the recommended implementation date of the standard by one year and to make minor editorial changes',
13501:'to the standards and concepts that were exposed for comment. 17. although the resulting standard differs from private sector standards,',
13502:'the board expects that, in practice, the effect on auditors will not be greatly different.6 in the private sector, corporations',
13503:'frequently include with their annual financial report the md&athat they are required to file with the sec. because it is',
13504:'required by the sec rather than by accounting standards, the auditor engaged to audit the corporation’s financial statements normally treats',
13505:'md&aas “accompanying information” that is not audited in the context of the audit of the financial statements. the auditor also',
13506:'may review the submission to the sec and may have certain responsibilities in that regard, but the auditor’s usual role',
13507:'regarding md&ais, nevertheless, fairly limited. 18. becausethisstandarddefinesmd&aforfederalreportingentitiesasrsi,auditorswillhave certain responsibilities regarding it; however, both the accounting standards specified here and the',
13508:'auditing standards specified by theaicpaand incorporated in governmentaudit standards for rsi are rather general. therefore, the board does not expect',
13509:'that this standard will cause the auditor to be deeply involved in reviewing the contents of md&a. 5includes theaicpa’s federalaccounting',
13510:'andauditingsubcommitteeandthecomptroller general’sadvisory council on governmentaudit standards. 6the standard itself differs from the sec’s guidance for md&ain ways that reflect the',
13511:'unique federal reporting environment. this will affect what financial statement preparers must do to comply with the standard. for example,',
13512:'reporting on performance of governmental programs requires measures in addition to net income or net cost. page 9 sffas 15',
13513:'fasab handbook, version 20 06/21 sffas 15 19. morespecificrequirements regardingthecontentofmd&amaybeaddedlater byomb acting on its own authority or pursuant to future',
13514:'fasab recommendations. for example, omb might at some time in the future require preparers to address certain of the suggested',
13515:'items in concepts for management’s discussion andanalysis. omb also mayprovide more specific guidance regarding the auditor’s responsibility for md&a. that',
13516:'guidance may call for more extensive review of all or parts of md&athan the minimum contemplated by this accounting standard',
13517:'in the context of current auditing standards. for example, omb might at some time in the future decide that the',
13518:'minimum scope of engagements to audit federal financialstatementsshould be expandedtoinclude areview or examinationof all or parts of md&a, consistent with',
13519:'attestation guidelines published by theaicpa.7 accountability reports 20. the board notes that the concept and practice of the “accountability report”',
13520:'continue to evolve through the pilot project voluntarily undertaken by several agencies.8 the board supports this evolution and encourages agencies',
13521:'to participate in the pilot project. the concepts and standards fasab recommends are intended to be applicable to the gpffr',
13522:'of federal entities, whether those reports are prepared pursuant to the chief financial officersact, the government management reformact, or some',
13523:'future law that might establish a statutory basis foraccountability reports. in the event of such future legislation, omb will need',
13524:'to resolve any questions about how to apply existing federal accounting standards in the context of new legislative requirements. forwardlooking',
13525:'information 21. md&ashouldinclude forwardlookinginformationregardingthefuture effectsof existing, currentlyknown demands, risks, uncertainties, events, conditions and trends. this kind of 7see statement on',
13526:'standards forattestation engagements no. 8, management’s discussion and analysis, issued by theauditing standards board of theaicpa, march 1998. 8accountability reports',
13527:'are broader in scope than traditional general purpose financial reports. as explained by omb: “six pilot agencies volunteeredtoproducean ’accountability report’',
13528:'for fy1995 to providemore useful information to decision makers by linking together information required by several management statutes accountability reports',
13529:'integrate the following information: the fmfiareport, the cfosactannual report including audited financial statements; management’s report on finalaction as required by',
13530:'the igact; civil monetary penalty and prompt paymentact reports; and availableinformation onagency performancecomparedwithits statedgoals and objectives, in preparation for implementation',
13531:'of gpra.” federal financial management status report and five year plan, june 1996, pp. 3334. twelve agencies produced accountability reports',
13532:'for fy1997;eighteen plan to do so for fy1998; the number will increase to 23 for fy 2000. the requirement to',
13533:'include civil monetary penalty and prompt paymentact reports has been deleted. page 10 sffas 15 fasab handbook, version 20 06/21',
13534:'sffas 15 forwardlooking information is required when management believes it would be important to people who read the financial report.',
13535:'though not required, md&amay also include forward looking information about the possible effects of anticipated future demands, events, conditions, and',
13536:'trends. fasab encourages management to include forwardlooking information about the possible effects of anticipated future demands, events, conditions, and trends',
13537:'to the extent management believes such information would be useful and relevant. this information can be highly useful, but management',
13538:'should avoid turning this part of md&ainto mere “lobbying” for more budgetary authority. incorporation by reference 22. somerespondents expressed concernthat,ifmd&ais',
13539:'toberegardedasrsi,audit problems might arise from “incorporation by reference” in md&aof information drawn from other sources that might not have been',
13540:'subject to audit or review as basic or required supplementaryinformation,andforwhichauthoritativeguidancehadnotbeenprovidedbya standard setter. the board noted that most of those who',
13541:'commented, including most auditors, did not appear to be greatly concerned about this potential problem. the board concluded, therefore, that',
13542:'any such problems were not likely to be insurmountable. the board did, however, agree to defer by one year the',
13543:'implementation date of the standard to allow omb and gao time to resolve any audit issues that may arise. page',
13544:'11 sffas 15 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 16: amendments toaccounting for property, plant, and',
13545:'equipment— measurement and reporting for multiuse heritageassets:amending sffas 6 and sffas 8accounting for property, plant, and equipment and supplementary stewardship',
13546:'reporting rescinded status issued september 8, 1999 effective date for fiscal periods beginning after september 30, 1999 affects none. affected',
13547:'by sffas 29 par. 14 rescinded sffas 16 in its entirety to incorporate all standards related to heritage assets and',
13548:'multiuse heritage assets into one document. sffas 29, heritage assets and stewardship land par. 14 rescinded sffas 16 in its',
13549:'entirety. page 1 sffas 16 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards17: accounting for social insurance status issued november 19, 1999',
13550:'effective date for fiscal periods beginning after september 30, 1999 affects none. affected by sffas 26, par. 5, affects sffas',
13551:'17, paragraphs 24, 273, 31, and 323 by changing the classification of information required by sffas 17. sffas 33, par.',
13552:'3941, affects sffas 17, par. 25, 272, and 274a. sffas 37 affects sffas 17, par. 26, 26a, 27, and 32.',
13553:'summary this statement presents accounting standards for federal social insurance programs. the standards cover the following programs: social security oldage,',
13554:'survivors, and disability insurance, medicare hospital insurance [parta] and supplementary medical insurance [part b], railroad retirement benefits, black lung benefits,',
13555:'and unemployment insurance. the standards do not cover any other programs at this time. social insurance programs have complex characteristics',
13556:'and thus require specialized accounting standards. these programs blend elements of exchange and nonexchange transactions and therefore do not completely',
13557:'fit traditional accounting notions of either annual governmental assistance programs nonexchange transactions or longterm pension programs exchange transactions. because taxpayers',
13558:'rely on social insurance programs in their longterm planning, fundamental questions about social insurance programs include 1 whether they are',
13559:'sustainable as currently constructed and 2 what their effect on the government’s financial condition will be. the requirements of this',
13560:'standard reflect the complexity of these programs. in its entirety, the information required will help users assess the government’s financial',
13561:'condition and the sufficiency of future budgetary resources for these programs. no single element of the information required is sufficient',
13562:'to meet all the users’ needs. the standards require that a liability be recognized when payments are due and payable',
13563:'to beneficiaries or service providers. supplementary stewardship information is to be reported to facilitate assessing the program’s longterm sustainability and',
13564:'the ability of the program and the nation to raise resources from future program participants to pay for benefits proposed',
13565:'to present participants. page 1 sffas 17 fasab handbook, version 20 06/21 sffas 17 the information is required in the',
13566:'financial reports of both the individual agency and the governmentwide entity. the information is tailored for specific programs but generally',
13567:'includes narrative and/or graphic presentation of the following: 1 longrange cashflow projections in nominal dollars and as a percentage of',
13568:'a the payroll that issubject to thetaxearmarked for the program and b the gross domestic product; 2 longrange projection of',
13569:'the ratio of contributors to beneficiaries commonly called the “dependency ratio”; and 3 a statement presenting the actuarial present values',
13570:'of i future benefits and ii contributions and tax income for social insurance programs; the statement of social insurance. the',
13571:'board is issuing this statement after years of debate. taken as a whole, the package is a major step forward',
13572:'in meeting the objectives of federal financial reporting. nonetheless, federal financial reporting is in a period of great change and',
13573:'the board expects that further research regarding presentation of a federal balance sheet is needed. in statement of federal financialaccounting',
13574:'concepts 1, objectives of federal financial reporting, the board acknowledged that an evolutionary approach would be taken: thefasabrecognizesthatdevelopingandimplementingstandardsthat willcontribute to',
13575:'achieving certain objectives may take considerable time. time will be needed to establish informationgathering systems and to gain experience by',
13576:'experimenting with alternative approaches. [par. 35] the fasab expects that some of these objectives may best be accomplished through means',
13577:'of reporting outside general purpose financial reports. indeed, the fasab recognizes that information sources other than financial reporting, sources over',
13578:'which the fasab may have little of no influence, also are important to achieving the goals implied by these objectives.',
13579:'[par. 36] page 2 sffas 17 fasab handbook, version 20 06/21 sffas 17 table of contents page summary 1 purpose',
13580:'4 scope 4 background 4 materiality 8 effective date 8 accounting standards for social insurance 8 appendixa: basis for conclusions',
13581:'18 appendix b: sample reporting 39 appendix c: historical background 79 appendix d: glossary [see consolidated glossary inappendix e] 84',
13582:'page 3 sffas 17 fasab handbook, version 20 06/21 sffas 17 purpose 1. the purpose of this statement is to',
13583:'establish standards for reporting information on social insurance programs that will assist users in evaluating operations and aid in assessing',
13584:'the government’sfinancialconditionandthesufficiencyof futurebudgetaryresourcestosustain program services and meet program obligations as they come due. social insurance programs were studied and analyzed',
13585:'during the board’s work on statements of federal financialaccounting standards sffas no. 5, accounting for liabilities of the federal government,',
13586:'and no. 8, supplementary stewardship reporting. however, the board decided to address the subject in a separate project. scope 2.',
13587:'this statement establishes accounting standards to be used by component entities and by the governmentwide entity for the following federal',
13588:'programs: oldage, survivors, and disability insurance oasdi or “social security”, medicare1hospital insurance hi, medicare supplementary medical insurance smi, railroad retirement',
13589:'benefits, black lung benefits, and unemployment insurance ui for the general public.accounting standards for ui for federal employees are provided',
13590:'in statement of federal financial accounting standards no. 5 and are not within the scope of this statement. this statement',
13591:'should be applied only to programs listed in paragraph 14. background 3. as notedin fasab’s statementoffederalfinancialaccountingconcepts sffacno. 1, objectives of',
13592:'federal financial reporting objectives, the federal government is unique when compared with any other entity in the country. it is',
13593:'the vehicle that citizens of the united states use to exercise their sovereign power. it has continuing responsibility for the',
13594:'general welfare. it also has unique access to financial resources in that it has the power to tax, to borrow,',
13595:'and to create money. 4. asaresultoftheseresponsibilities,thefederalgovernmentengagesinmanyactivitiesthat have no counterpart or that are a relatively small part of the activities in',
13596:'the private sector. 1see the [consolidated] glossary appendix e for definitions of terms used in the statement. terms defined in',
13597:'the glossary are in boldface the first time they appear in the text. page 4 sffas 17 fasab handbook, version',
13598:'20 06/21 sffas 17 the government is concerned, for example, with macroeconomic policies to maintain incomes during recessions and therefore',
13599:'provides unemployment compensation and other benefits. it is concerned with the distribution of income and therefore 1 provides a wide',
13600:'variety of welfare payments in cash and in kind to lowincome households and 2 makes taxes and many kinds of',
13601:'benefits “progressive.” it is concerned about conditions and services in certain regions and communities, urban and rural, and therefore provides',
13602:'grants to state and local governments for various purposes. the fiscal year 2000 budget of the united states reports that',
13603:'social security, medicare, and other health and income security payments for individuals constituted more than 50 percent of the federal',
13604:'budget; grants to state and local governments comprised 15 percent. 5. in objectives, the board established four major reporting objectives',
13605:'around which accounting standards should be organized. taken together, they provide a framework for assessing the existing accountability and financial',
13606:'reporting systems of the federal government and for considering how new accounting standards might enhance those systems.2 the four objectives',
13607:'are 1. budgetary integrity, 2. operating performance, 3. stewardship, and 4. systems and controls. 6. although all the objectives are',
13608:'important, nos. 2 and 3 directly impact the social insurance standards. objective no. 2 provides, federal financial reporting should assist',
13609:'report users in evaluating the service efforts, costs, and accomplishments of the reporting entity; the manner in which these efforts',
13610:'and accomplishments have been financed; and the management of the entity’s assets and liabilities.3 as noted in objectives, because government',
13611:'services are not usually provided in exchange for voluntary payments or fees, expenses cannot be matched against revenue to measure',
13612:'“net income.” moreover, directly measuring the value added to society’s welfare by government actions is difficult. nonetheless, expenses can be',
13613:'matched against the provision of services year by year. the resulting cost can then be analyzed in relation to a',
13614:'varietyof measuresof the achievement of results. information about social insurancethat is relevant to this objective includes the cost of the',
13615:'program as well as longrange estimates 2sffac no. 1, par. 109. 3sffac no. 1, par. 122. page 5 sffas 17',
13616:'fasab handbook, version 20 06/21 sffas 17 and ranges of estimates of future costs and other obligations. estimates of future',
13617:'costs highlight the cost impact of changes in benefit levels as well as economic and demographic changes e.g., in the',
13618:'cost of health care and in life expectancies. 7. meeting objective no. 3 is the other focus for this statement.',
13619:'it says, federal financial reporting should assist report users in assessing the impact on the country of the government’s operations',
13620:'and investments for the period and how, as a result, the government’s and the nation’s financial condition has changed and',
13621:'may change in the future.4 this objective is based on the government’s responsibility for the general welfare of the nation',
13622:'in perpetuity. it focuses not on the provision of specific services but on the requirement that the government report the',
13623:'broad outcomes of its actions. thus, federal financial reporting should provide information that helps the reader to determine whether the',
13624:'government’s financial position improved or deteriorated over the period, whether future budgetary resources will likely be sufficient to sustain public',
13625:'services and to meet obligations as they come due, and whether government operations have contributed to the nation’s current and',
13626:'future wellbeing. 8. in light of objective nos. 2 and 3, fundamental questions about social insurance programs that can be',
13627:'addressed by accounting standards include whether the programs are sustainableascurrentlyconstructed,whetherthegovernment’sfinancialconditionimproved or deteriorated as a result of its efforts to provide',
13628:'these and other programs, and the likelihood that these programs will be able to provide benefits at current levels to',
13629:'those who are planning on receiving them. the information required by this standard, taken as a whole, will help users',
13630:'make this assessment while acknowledging the complexity of the programs and the uncertainty of longterm projections. 9. to meet the',
13631:'objectives of federal financial reporting, the standards require that: 4sffac no. 1, par. 134. page 6 sffas 17 fasab handbook,',
13632:'version 20 06/21 sffas 17 1 a liability be recognized5 when payments are due and payable to beneficiaries or service',
13633:'providers and 2 supplementary stewardship information be reported to facilitate the assessment of: i the longterm sustainability of the program',
13634:'from both an entity and a governmentwide perspective and ii the ability of the program and the nation to raise',
13635:'resources from future program participants to pay for benefits proposed to present participants. 10. the rssi includes: longrange cashflow projections,',
13636:'longrange projections of the ratio between the number of those paying taxes earmarked for the program and the number of',
13637:'program beneficiaries, and actuarial present values of i future benefits for and ii contributions and tax income from or on',
13638:'behalf of current and future program participants. sffas 26,par. 5 requiresthattheactuarialpresentvaluesand significant assumptions be presented as a basic financial statement',
13639:'and as disclosures, respectively. 11. thespecificationofrssibytheboardshouldnotbeconstruedasprecludingmanagement from voluntarily providing any additional information pertaining to the financial condition of its program',
13640:'that it believes useful and appropriate. 5the terms “recognition,” “disclosure,” and “required supplementary stewardship information” rssi have specific, technical application',
13641:'in accounting.as explainedfurther in theglossary tothis statement, “recognition” or “recognize” means formally recording or incorporating an item into the financial',
13642:'statements of an entity as an asset, liability, revenue, expense, etc. “disclosure” or “disclose” means reporting information in notes or',
13643:'narrative regarded as an integral part of the basic financial statements. rssi is information reported outside the principal financial statements',
13644:'that the board considers essential to an entity’s financial reporting and therefore recommends authoritative guidelines for its measurement and presentation.',
13645:'page 7 sffas 17 fasab handbook, version 20 06/21 sffas 17 materiality 12. the provisions of the accounting standards in',
13646:'this statement need not be applied to immaterial items. effective date 13. the provisions of this statement would be effective',
13647:'for reporting periods that begin after september 30, 1999. accounting standards for social insurance 14. the following programs are designated',
13648:'as social insurance and subject to these standards: oldage, survivors, and disability insurance oasdi or “social security”; hospital insurance hi',
13649:'and supplementary medical insurance smi, known collectively as “medicare”; railroad retirement benefits; black lung benefits; and unemployment insurance ui. no',
13650:'other programs are subject to these standards, and the characteristics presented below should not be used to include other programs.',
13651:'characteristics of social insurance programs 15. these programs were developed to carry out the responsibilities of the government and generallyhavecharacteristicsthat',
13652:'make themunique.althoughtheygenerallyshare certain characteristics, “social insurance” programs are too diverse to allow definitive criteria to be applied to include some',
13653:'and exclude others from the category. this statement identifies the following five characteristics common among social insurance programs: 1 financing',
13654:'from participants or their employers, 2 eligibility from taxes/fees paid and time worked in covered employment, 3 benefits not directly',
13655:'related to taxes/fees paid, 4 benefits prescribed in law, and page 8 sffas 17 fasab handbook, version 20 06/21 sffas',
13656:'17 5 programs intended for the general public. these characteristics are briefly described below. financing from participants 16. some of',
13657:'the resources needed to run these programs are raised through explicit taxes and fees collected from the program participant or',
13658:'from the participant’s employer. taxes paid are usually a fixed percentage of the participant’s wage income. 17. federal social insurance',
13659:'programs utilize “trust funds” to account for dedicated collections held for later use to accomplish the program’s purpose. federal trust',
13660:'funds are accounts designated by law as such for receipts earmarked for specific purposes and the associated expenditure of those',
13661:'receipts. trust funds serve useful purposes in allocating federal spending authority and accounting for earmarked taxes. eligibility from taxes/fees paid',
13662:'and time worked in covered employment 18. eligibility for benefits under social insurance programs usually rests, in part, on current',
13663:'or previous taxes and/or fees paid by the individual, the individual’s employer, or both, and the time worked in covered',
13664:'employment. frequently an individual’s taxes and/or fees paid and time worked in covered employment also make family members eligible. benefits',
13665:'not directly related to taxes/fees paid 19. socialinsuranceprogramssometimesintentionallyredistributetowardlowerwageworkers. lowerwage workers tend to receive proportionately more in benefits relative to taxes',
13666:'paid than the higherwage workers, sometimes much more. many social insurance plans also subsidize benefits for nonworking members of workers’',
13667:'families and others. benefits prescribed in law 20. social insurance programs normally have uniform sets of entitling events; and schedules',
13668:'of benefits are developed, announced, and applied to all participants. administrators of such programs have little discretion in determining who',
13669:'should get benefits or how much they should get. page 9 sffas 17 fasab handbook, version 20 06/21 sffas 17',
13670:'intended for the general public 21. these programs are intended for the general public and not solely for present or',
13671:'former federal employees. component entityaccounting & reporting standard expense & liability recognition 22. the expense recognized for the reporting period',
13672:'should be the benefits paid during the reporting period plus any increase or less any decrease in the liability from',
13673:'the end of the prior period to the end of the current period. the liability should be social insurance benefits',
13674:'due and payable to or on behalf of beneficiaries at the end of the reporting period, including claims incurred but',
13675:'not reported ibnr. 23. forunemploymentinsuranceui,theliabilitytoberecognizedincludes1amountsdueto states and territories for benefits they have paid to beneficiaries but for which they have',
13676:'not withdrawn funds from the federal unemployment trust fund utf as of fiscal year end, and 2 estimated amounts to',
13677:'be withdrawn from utf and benefits paid by states and territories after fiscal year end for compensable days occurring prior',
13678:'to fiscal year end. required supplementary stewardship information sffas 26 reclassified most rssi as rsi. see sffas 26 for detailed',
13679:'guidance. 24. theentityresponsibleforthesocialinsuranceprogramshouldincludeinitsfinancialreport, as required supplementary stewardship information rssi, a clear and concise description of the program, how it is',
13680:'financed, how benefits are calculated, and its financial and actuarial status. the description should include a discussion of the longterm',
13681:'sustainability and financial condition of the program. adisplay should illustrate and the discussion should explain the trends revealed in the',
13682:'data. the entity should consider both narrative and graphic presentations. statutory or other material changes affecting the program after the',
13683:'current fiscal year, including those enacted between the fiscal year end and the date of the report, should be described,',
13684:'along with the implications thereof. [see sffas 26.] page 10 sffas 17 fasab handbook, version 20 06/21 sffas 17 25.',
13685:'theprojectionsandestimatesusedshouldbebasedontheentity’sreasonableestimatesof demographic and economic assumptions, taking each factor individually and incorporating future changes mandated by current law. significant assumptions should',
13686:'be disclosed. 26. all projections and estimates required by this statement should be made as of a date the valuation',
13687:'date as close to the end of the fiscal year being reported upon “current year” as possible and no more',
13688:'than one year prior to the end of the current year. this valuation date should be consistently followed from year',
13689:'to year. if, after the valuation date, but prior to the end of the fiscal year, policy changes are enacted',
13690:'that could materially affect the basic statement, theprojectionsshould beadjusted, if feasible, asif the policychangestookplace as of the valuation date. if',
13691:'not feasible, the entity should disclose an estimate of the magnitude of the effect of the policy change on the',
13692:'projection or, if not possible, disclose that it was not possible to reasonably estimate the effect. in any case, the',
13693:'nature of the policy change should be disclosed. if policy changes are enacted after the end of the fiscal year,',
13694:'but prior to the issuance of the financial statements, the financial statements should disclose the nature of the policy change',
13695:'and, if known, the estimated effect on the projections. 26.a.the entityshould provide a brief statement explaining that the sosi amounts',
13696:'are estimates based on current conditions, that such conditions may change in the future, and that actual cost may vary,',
13697:'sometimes greatly, from estimated cost. the entity should state that the amounts of the open and closed group measures depend',
13698:'on the assumptions used and that actual experience is likely to differ from the estimate. for example: application of criticalaccounting',
13699:'estimates the financial statements are based on the selection of accounting policies and the application of significant accounting estimates, some',
13700:'of which require management to make significant assumptions. further, the estimates are based on current conditions that may change in',
13701:'the future. actual results could differ materially from the estimated amounts. the financial statements include information to assist in understanding',
13702:'the effect of changes in assumptions to the related information. 27. the information on financial and actuarial status should include',
13703:'the following measures and data: 1 cashflow projections projections of cashflow for those persons who are participating or eventually will',
13704:'participate in the program as contributors or beneficiaries during a projection period sufficient to illustrate longterm sustainability e.g., traditionally the',
13705:'“social security,” or oasdi, program has used a projection period of 10 years for relatively shortterm and 75 years for',
13706:'longterm projections, and the ui program has used a projection period of 10 years for its projections. the projection should',
13707:'include page 11 sffas 17 fasab handbook, version 20 06/21 sffas 17 current workers, retirees, survivors, disabled persons, and new',
13708:'participants entering the workforce or becoming beneficiaries, including those who will be born or immigrate to the united states during',
13709:'the projection period. the information should include the following: actuarial projections of the annual cashflow, with amounts reported for at',
13710:'least every fifth year in the projection period. the cashflow information should show i total cash inflow from: 1 all',
13711:'sources and 2 excludingnetinterestonintragovernmentalborrowing/lending,6and ii total cash outflow. the narrative accompanying thecashflow data shouldincludeidentification of anyyear or years during the',
13712:'projection period when cash outflow exceeds inflow, both in total and excluding interest on intragovernmental borrowing/lending the “crossover points”, and',
13713:'an explanation of the significance of the “crossover points. for the oasdi and hi programs, the actuarial projections of the',
13714:'annual cashflows should be expressed as a percentage of taxable payroll and gross domestic product gdp. for the smi program,',
13715:'the actuarial projections should be expressed as a percentage of gdp. for the rrb program, the actuarial projections should be',
13716:'expressed as a percentage of taxable payroll. for black lung and ui programs, the actuarial projections should be expressed in',
13717:'constant or inflationadjusted dollars. 2 ratio of contributors to beneficiaries withrespect totheoasdi andhiprograms,the ratio of the number of contributors to',
13718:'the number of beneficiaries commonly called the “dependencyratio”duringthe same projectionperiodasforcashflowprojectionse.g., 6“interest on intragovernmental borrowing” refers to interest earned by the',
13719:'social insurance program on obligations of the u.s. government. page 12 sffas 17 fasab handbook, version 20 06/21 sffas 17',
13720:'75 years, using the program managers’ estimate.7at a minimum, the ratio should be reported for the beginning and end of',
13721:'the projection period. sffas26, par. 5requiresthattheactuarialpresentvalues and significant assumptions be presented as a basic financial statement and as disclosures, respectively.',
13722:'3 actuarial present values for all programs except ui, a statement presenting the actuarial present value of each of the',
13723:'following: all future expenditures during the projection period related to benefit payments: a to or on behalf of current participants',
13724:'who have not yet attained retirement age e.g., the social securityadministration has assumed an age of 15 years for new',
13725:'participants and an age of 62 years for retirement, b to or on behalf of current participants who have attained',
13726:'retirement age, c to or on behalf of those who are expected to become plan participants i.e., new entrants during',
13727:'a projection period encompassing substantially all the present value attributed to a and b immediately above;8 all future contributions and',
13728:'tax income from taxation of benefits during the projection period: d from or on behalf of current participants who have',
13729:'not yet attained retirement age same group as in a above, e from or on behalf of current participants who',
13730:'have attained retirement age same group as in b above, 7smi, black lung benefits, and ui programs are financed by,',
13731:'respectively, premiums paid by covered participants and general fund contributions smi; direct payments from employers, excise taxes per ton of',
13732:'coal, and general fund contributions black lung; and state/employerspecific payroll taxes ui. therefore, these programs are not required toprovidetheratioof contributors',
13733:'tobeneficiaries. theoasdi trustees refer to theratioof beneficiaries to contributors as the “dependency ratio.” 8aprojection period for future participants would cover',
13734:'their working and retirement years. the entity would make an assumption about the length of this period. for example, the',
13735:'oasdi program uses a projection period of 75 years. a projection period for current participants that is, for the people',
13736:'actually participating in the program would theoretically cover all of their working and retirement years, a projection period that could',
13737:'be greater than 75 years a in few instances. as a practical matter the present values of future payments and',
13738:'contributions for/from current participants beyond 75 years usually would not be material, and a 75 year projection period would include',
13739:'virtually all the future contributions, tax income, and benefit payments for current as well as future participants. page 13 sffas',
13740:'17 fasab handbook, version 20 06/21 sffas 17 f from or on behalf of those who are expected to become',
13741:'plan participants same group as in c above during a projection period encompassing substantially all the present value attributed to',
13742:'d and e immediately above. net present value of cashflow during the projection period: g the actuarial present value of',
13743:'future contributions and tax income during the projection period [d+e+f] should be subtracted from the actuarial present value of future',
13744:'expenditures for the projection period related to benefit payments [a+b+c] to derive a total excess of future benefit payments over',
13745:'future contributions and tax income or contributions and tax income over benefits. notes to the statement should present: h the',
13746:'accumulated excess of all past cash receipts, including interest on investments, over all past cash disbursements within the social insurance',
13747:'program represented by the fund balance at the valuation date, and i a statement that the actuarial net present value',
13748:'of the excess of future expenditures related to benefit payments to or on behalf of current participants, that is, of',
13749:'the “closed group” of participants see a and b above, over future contributions and tax income from them or paid',
13750:'on their behalf see d and e above is calculated by subtracting the actuarial present value of future contributionsand taxincome',
13751:'paid byand forcurrent participants[d+e] fromthe actuarial present value of the future benefit payments to them or on their behalf [a+b].',
13752:'j information required in subparagraphs 273ah for the current year and separate estimates for each of the four preceding years.',
13753:'4 sensitivity analysis all programs should provide sensitivity analysis appropriate for their particular circumstances. the objectiveof sensitivityanalysisisto illustratehow an estimate',
13754:'or projection would change if assumptions, data, methodologies or other inputs change. the oasdi, medicare and railroad retirement programs should',
13755:'provide sensitivity analysis of the open group measure presented in the sosi summary. appropriate considerations include future trends, the utility',
13756:'of the information to the users and policymakers, and the relative burden on the component entity resources. providing analysis or',
13757:'disclosure for one or more periods will not imply that such analysis or disclosure is appropriate in the future, although',
13758:'the reasons for discontinuing a particular sensitivity analysis should be addressed in the page 14 sffas 17 fasab handbook, version',
13759:'20 06/21 sffas 17 annual report. the entity should state that the amounts of the closed and open group measure',
13760:'depend on the assumptions used and that actual experience is likely to differ from the estimate. 5 statebystate analysis for',
13761:'the ui program provide a statebystate analysis illustrating the relative solvency of individual state programs. the analysis should provide theratioofeachstate’scurrent',
13762:'accumulatedfundbalancetoa year’sprojected benefit payments based on the highest level of annual benefit payments experienced by that state over the last',
13763:'20 years. transition 28. in instances where data are not available to calculate the actuarial estimates for one or more',
13764:'prior years, as required in paragraph 273j the entity may apply the standard prospectively. consolidated governmentwide entityaccounting & reporting standard',
13765:'29. the standard for consolidated governmentwide accounting and reporting for social insurance programs is the same as that for component',
13766:'entities except as provided below. thus, except for the specific modifications listed below, the governmentwide entity should refer to the',
13767:'relevant paragraphs of the standard for component entities in the preceding section for a description of the information to be',
13768:'provided. expense & liability recognition 30. expense and liability recognition for the consolidated governmentwide entity are the same as for',
13769:'the component entities see pars. 2223. required supplementary stewardship information sffas 26 reclassified most rssi as rsi. see sffas 26',
13770:'for detailed guidance. page 15 sffas 17 fasab handbook, version 20 06/21 sffas 17 31. the consolidated governmentwide financial report',
13771:'should include, as required supplementary stewardship information rssi, a summary of the entities’ descriptions of their social insurance programs see',
13772:'paragraph 24. the description should include a discussion of the longterm sustainability and financial conditions of the programs, illustrate and',
13773:'explain the trends revealed in the data, and explain the relationship of the social insurance programs to governmentwide financing, especially',
13774:'regarding the intra governmental nature of trust fund assets and government debt. 32. the information on financial and actuarial status',
13775:'should include the following measures and data: 1 cashflow projections a cashflow projections should be made for all social insurance',
13776:'programs as described under the component entity standard see par. 27, except that only cash inflow from the public that',
13777:'is, excluding interest on intragovernmental borrowing/lending and total cash outflow are required. at a minimum the oasdi, hi,andsmi programsshould be',
13778:'separatelyidentified. the projectionperiodofthe display should be based on those used by the component entities, which may require summarization or presentation',
13779:'techniques such as using more than one graph e.g., a 10year graph and a 30year graph. the presentation should include',
13780:'an explanation of material crossover points, if any, where cash outflow exceeds cash inflow and the possible reasons therefore. b',
13781:'for the programs indicated immediately below, estimated future cash inflow excluding net interest on intergovernmental borrowing/lending and outflow for the',
13782:'projection period described in paragraph 27 as a percent of i taxable payroll for oasdi and hi, presenting each program',
13783:'separately, and ii gdp for oasdi, hi, and smi, presenting each program separately. 2 ratio of contributors to beneficiaries for',
13784:'oasdi and hi, the ratio of the number of contributors to the number of beneficiaries commonly called the “dependency ratio”',
13785:'during the projection period as described under the standard for component entities see par. 272. sffas 26, par. 5 requires',
13786:'that the actuarial present values and significantassumptionsbe presented asa basicfinancial statement and as disclosures, respectively. page 16 sffas 17 fasab',
13787:'handbook, version 20 06/21 sffas 17 3 actuarial present values for all programs except ui provide a statement combining the',
13788:'entity statements required in paragraph 273ai. the presentation should include data for the current year and separate estimates for each',
13789:'of the four preceding years. at a minimum oasdi, hi, and smi should be separately identified. 4 sensitivity analysis for',
13790:'all social insurance programs provide a summary of the sensitivity analyses required for component entities. 5 statebystate analysis provide a',
13791:'summary of the statebystate analysisrequired for the ui program see par. 275. transition 33. in instances where data are not',
13792:'available to calculate the actuarial estimates for one or more prior years, as required in paragraph 273j the entity may',
13793:'apply the standard prospectively. page 17 sffas 17 fasab handbook, version 20 06/21 sffas 17 appendixa—basis for conclusions this statement',
13794:'may be affected by later statements. the fasab handbook is updated annually and includes a status section directing the reader',
13795:'to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are updated for changes.',
13796:'however, this appendix will not be updated to reflect future changes. the reader can review the basis for conclusions of',
13797:'the amending statement for the rationale for each amendment. section 1 — response to comments received 34. this appendix does',
13798:'not constitute authoritative guidance for those who prepare and audit general purpose federal financial reports. it summarizes important matters that',
13799:'the fasab members considered as they deliberated on this statement. it includes reasons for accepting certain approaches and rejecting others.',
13800:'individual board members gave greater weight to some factors than to others. 35. fasab published the exposure draft accounting for',
13801:'social insurance infebruary1998. the exposure draft included five questions and invited comments on the usefulness of the proposal for accounting',
13802:'and reporting for social insurance. twentynine letters were received from the following sources: federal nonfederal internal external total general public',
13803:'2 8 10 [retired employees] auditors 3 4 7 preparers and financial managers 12 0 12 total 17 12 29',
13804:'36. fasab also held a public hearing on the exposure draft on october 56, 1998. testimony wasreceivedfromrepresentativesofaccounting,auditing,and actuarial organizations;from a',
13805:'public service organization; and from the social security and medicare programs. appendix c, historical background, provides a history of past',
13806:'accounting for these programs. 37. section 1 of this basis for conclusions addresses certain responses to the exposure draft and',
13807:'the comments received at the public hearing. page 18 sffas 17 fasab handbook, version 20 06/21 sffas 17 38. the',
13808:'responses to the exposure draft illustrate what was described in the basis for conclusions for the exposure draft as two',
13809:'polarized views regarding recognizing or even disclosing a liability measure beyond the due and payable amount called for in this',
13810:'standard. some respondents restated their views on the propriety of the accounting proposed in the ed, and/or they said they',
13811:'favored one or the other of the two opposing views described in the basis for conclusions. some respondents argued once',
13812:'again that social insurance programs are payasyougo, income transfer programs for which an estimate of accrued and future benefits and',
13813:'contributions and tax income is inappropriate. other respondents reiterated the contrary argument. they said that such programs are commitments for',
13814:'which a longrange accrual is not only appropriate but also essential for the balance sheet, if the information presented therein',
13815:'is not to be misleading. 39. the board continues to believe that the original basis for conclusions in the exposure',
13816:'draft describes and explains the board’s conclusions adequately. therefore, except for those issues specifically discussed immediately below, the board is',
13817:'presenting the original basis for conclusions from the exposure draft in section 2. changes were made where necessary to reflect',
13818:'the requirement for a statement of social insurance in the final standard. expanded presentation and visibility ofactuarial present values 40.',
13819:'in response to comments received on the exposure draft and subsequent public hearing, the board is adding a requirement for',
13820:'a statement presenting the actuarial present values apv of future benefits for and future contributions and tax income from or',
13821:'on behalf of all current and future participants during the projection period normally used by the programs. for example, the',
13822:'oasdi program uses a 75year projection period. the net total of the statement will present the total excess of benefits',
13823:'over contributions and tax income. 41. the board believes that this information will be useful in analyzing the sustainability and',
13824:'financialposition of si programs. the addeddetailon individualcomponentsof the actuarial net present value will provide analysts interested in different facts with',
13825:'useful detail. in addition, the statement presentation will increase the prominence of important data otherwise obscured in a long narrative.',
13826:'42. the board has considered whether the changes made regarding the presentation of actuarial present values requires reexposure. the original',
13827:'exposure draft focused on one net actuarial present value, for the “closed group,” while the final standard presents the components',
13828:'of that value as well as data on future participants. also, the exposure draft proposed subtracting the fundbalance at thevaluation',
13829:'date fromthe actuarialpresent value of the net cash outflow over the projection period, while the standard now calls for fund',
13830:'balance information to be presented in a note to the statement. page 19 sffas 17 fasab handbook, version 20 06/21',
13831:'sffas 17 43. the board decided that the new presentation and data did not require reexposure. the information added to',
13832:'the standard resultsfrom adding more detail andmodifying the display to increase visibility. these modifications are responsive to the views expressed',
13833:'by many during the comment period. the board believes that the difference in the presentation does not warrant delaying the',
13834:'issuance of the standard. specific identification of social insurance programs 44. afewoftherespondentsdisagreedwiththe approachin theexposuredraftwhereby programs are specifically identified. one respondent',
13835:'reasoned that an accounting standard would be more useful if it established definitive criteria for current and future programs to',
13836:'meet rather than designating only specific programs. conversely, another respondent said the standard should be even more specific and deal',
13837:'with the individual programs separately because some have characteristics of defined benefit plans while others are similar to welfare programs.',
13838:'45. after weighing these arguments carefully, the board continues to believe that definitive criteria would be unworkable. although these programs',
13839:'do generally share certain characteristics, they are complex. each program has unique benefits, different eligibility requirements, and different financing arrangements.',
13840:'because definitive criteria would be subject to interpretation, questions would arise about individuals programs that would require a response from',
13841:'the board. the board has decided to identify social insurance programs that now exist and consider the classification of other',
13842:'programsas theymayarise in the future. consistency ofassumptions 46. several respondents to the exposure draft expressed concern that projections of cashflow',
13843:'and gdp would not be consistent between entities and within an entity due to the use of different assumptions by',
13844:'separate programs. one respondent believed that cashflow estimates as a percentage of gdp would not be meaningful without a tremendous',
13845:'amount of effort and cost expended in coordinating assumptions and methodologies to achieve consistency. 47. the board considered these arguments',
13846:'and decided not to require uniform assumptions. theassumptionsusedbysocialsecurityandmedicare, thetwopredominant programs,will be consistent. these programs use the same principal assumptions and',
13847:'have the same trustees. on the other hand, the board concluded that the gdp projection should not be required of',
13848:'smaller programs and therefore explicitly exempts them from that requirement. page 20 sffas 17 fasab handbook, version 20 06/21 sffas',
13849:'17 sensitivity analysis 48. some respondents disagreed with the approach in the exposure draft regarding sensitivity analysis, which calls for',
13850:'showing the effect of changing one major assumption at a time. one respondent favored a general requirement that entities provide',
13851:'sensitivity analysis rather than telling them how to do it. this respondent favored the high, low, and intermediate sets of',
13852:'cost assumptions that are featured in the trustees’ annual reports for social security and medicare. another respondent suggested that the',
13853:'standard not require sensitivity analysis because most users would not understand it and the potential for misuse would be great.',
13854:'another respondent said that the requirement in the standard was useful because it gives an idea about the uncertainty associated',
13855:'with the estimate. however, this respondent said sensitivity analysis was inadequate without a further discussion of the nature of uncertainty',
13856:'itself and recommended mandating such a discussion. 49. the board continues to believe that the analysis required by the standard',
13857:'is a clear, easily understoodillustrationofthesensitivityofprojectionstochangesinassumptions. theboard recognizes the difficulty in illustrating the uncertainty inherent in all projections, especially very longrange',
13858:'projections. however, the requirement in the standard would not preclude the entity from presenting additional discussions of uncertainty and the',
13859:'board expects that agencies would do so voluntarily. state and local government pensionaccounting 50. some respondents urged the board to',
13860:'consider whether the approach used by state and local governments to account for employee pensions would be suitable, at least',
13861:'for some social insurance programs that are most analogous to pensions, such as the retirement benefitportionofsocialsecurity. thoserespondentsfocusonsimilarities,suchasdefined benefit formulas tied',
13862:'to earnings. 51. the board concluded that there are important differences in the programs and environments involved. for example, state',
13863:'and local pension plans typically do not have extensive income transfer features. they are much like federal employee pension programs,',
13864:'which are not considered to be social insurance. on balance the board concluded that such an approach would be inappropriate.',
13865:'vote ofapproval 52. thisrecommendedstatementwasapprovedbytheboardwithavoteof6membersinfavor of its issuance and 3 members opposing its issuance. two members submitted written dissents, which are',
13866:'available for public inspection at the fasab’s offices. page 21 sffas 17 fasab handbook, version 20 06/21 sffas 17 section',
13867:'2 — basis for conclusions from the exposure draft [note: the board’s recommendation differs from the proposal made in the',
13868:'exposure draft. certain sections from the basis for conclusion in the exposure draft were deleted since they are no longer',
13869:'relevant to the final recommendation. paragraphs 4051 explain the differences and reasons therefore.] 53. the following paragraphs address the basis',
13870:'for the board’s proposals on defining social insurance, recognition of liabilities and expense for social insurance, and required supplementary stewardship',
13871:'information rssi. characteristics of social insurance programs 54. as stated in the introductory sections, the board has analyzed certain programs',
13872:'that are generallyconsidered social insurance. these programshave certain characteristics that set them apart from general assistance programs on the one',
13873:'hand and insurance programs on the other hand. accounting standards for liabilities associated with general assistance and insurance programs are',
13874:'provided in sffas no. 5, accounting for liabilities of the federal government. 55. after analyzing specific programs, the board determined',
13875:'that, although these programs generally shared certain characteristics, their operational features were too diverse for establishing definitive criteria that would',
13876:'include all the subject programs and exclude all other federal programs for which accounting standards have already been provided. thus,',
13877:'the board has outlined the general characteristics that social insurance programs usually— but not always—possess and haslisted the specific programs',
13878:'to which the standardsapply. this does not preclude the board from considering an additional programs in the future and, given',
13879:'the individual circumstances pertaining to that program, including it within this statement. however, noentityonitsownvolition should applythisstatement toanyprogram not listed in',
13880:'this statement. 56. accounting for ui for federal employees is provided in sffas no. 5 and is not within the',
13881:'scope of this standard. sffas no. 5 provides that the unemployment program for federal employees should be accounted for like',
13882:'other postemployment benefits e.g., severance benefits and workers’ compensation because the nature of the liability is similar. federal employer entities',
13883:'must reimburse the labor department for the full cost of unemployment benefits received by former federal employees rather than paying',
13884:'a payroll tax each period. page 22 sffas 17 fasab handbook, version 20 06/21 sffas 17 nature of social insurance',
13885:'57. in determining how social insurance program transactions should be recognized in the financialstatementsandthesupplementaryinformationthatshouldbeprovidedaboutthem, the board considered the nature of',
13886:'the federal government, the nature of those programs, and the needs of users of federal financial reports. statement of federal',
13887:'financial accounting concepts sffac no. 1, objectives of federal financial reporting, notes the federal government’s unique responsibilities for the common',
13888:'defense and general welfare and its unique access to financial resources and financing, including the power to tax and create',
13889:'money. the government undertakes many programs despite potentially unfavorable effects on its financial condition, and transactions between citizens and the',
13890:'government generally are not individual exchanges between willing buyers and sellers.9 58. consideration of guidance for the recognition, measurement, and',
13891:'display of obligations for social insurance programs has continued to present the board with significant, vexing theoretical and practical problems.',
13892:'the programs are complex, reach a unique order of magnitude, and involve projections that are extremely sensitive to assumptions whose',
13893:'range of possibilities is large. expense & liability recognition 59. the board believes that the annual expenses of such programs',
13894:'should be the benefits paid duringtheaccounting period plusanyincreaseorlessanydecreaseintheliabilityfromthe end of the prior period to the end of the current period,',
13895:'including claims incurred but not reported. the liabilityshould be socialinsurance benefitsdue and payable to or on behalf of beneficiaries at',
13896:'the end of the reporting period, and supplementary stewardship information should be provided as described in the standards. exchange and',
13897:'nonexchange transactions 60. during its consideration of social insurance and, before that, of liability accounting, the board consideredwhethersocialinsurance programsresultin exchange',
13898:'or nonexchange transactions or whether they contained features of both.as described in statement of federal financialaccounting standards sffas no. 5,',
13899:'accounting for liabilities of the federal government, nonexchange transactions give rise to a different kind of obligation than exchange transactions',
13900:'under federal accounting principles. 9sffac no. 1, objectives of federal financial reporting, pars. 52, 53, 55, and 60. page 23',
13901:'sffas 17 fasab handbook, version 20 06/21 sffas 17 61. the distinction between exchange and nonexchange transactions is important in',
13902:'determining the point of liability recognition in federal accounting. in an exchange transaction, a liability is recognized when one party',
13903:'receives goods or services in return for a promise to provide money or other resources in the future. however, for',
13904:'a nonexchange transaction, a liability is recognized for any unpaid amounts due and payable as of the reporting date, including',
13905:'estimates of claims incurred but not yet reported. 62. as defined in sffas no. 5, obligations become liabilities against the',
13906:'federal government in different ways and at different points within transaction cycles that relate to various programs. an important factor',
13907:'in distinguishing the liability recognition point among various federal programs is whether a nonexchange transaction is involved. although a high',
13908:'probability may exist that a grant, a subsidy, or an income transfer will be made or will continue to be',
13909:'made in future years, the recipientsdo not have ashigh an equitable claimto receive grants, subsidies, or transfers in the future',
13910:'as do those who exchange service for promises of future payments. the latter have a greater probability of being paid',
13911:'than the former.at the same time, many people feel that some social insurance benefits, social security in particular, also have',
13912:'similar “exchange” or “equitable” claims. they also believe that social insurance benefits have as great a probability of being paid',
13913:'as any other payments. 63. whether on the balance sheet or elsewhere in the financial report, estimates of the future',
13914:'amounts required to continue present policies regarding such programs are relevant to certain decisions and should be disclosed or otherwise',
13915:'reported. in the context of the board’s definition, however, estimates of future nonexchange payments should not be recognized as a',
13916:'current period liability. on the other hand, any payments due as a result of past events but unpaid at the',
13917:'end of the period constitute a liability.10 polarization 64. with regard to social insurance, the board notes the strength of',
13918:'feelings on this issue. the board has been faced with two polarized views. on the one hand there are those',
13919:'who believe a liability should be recognized for the net benefits expected to be paid in future periods to current',
13920:'participants. on the other hand, there are those who believe that the longterm obligation i.e., beyond amounts due and payable',
13921:'at the end of an accounting period associated with these programs is not a liability and should not be recognized',
13922:'as such. some people also believe such amounts should not be reported as rssi. 10sffas no. 5, pars. 129131. page',
13923:'24 sffas 17 fasab handbook, version 20 06/21 sffas 17 arguments against recognition, disclosure, or supplementary reporting 65. the latter',
13924:'group would argue that social insurance programs do not result in exchange transactions, that social insurance programs are income transfers',
13925:'financed primarily by compulsory earmarked taxes and also, in certain cases, general revenues of the government. for them, the political',
13926:'nature of the commitment is critical, for its terms can be and are changed by the congress to maintain actuarial',
13927:'balance. in this regard, they point to flemming, secretary of hew v. nestor, part i 363 u.s. 608611 wherein mr.',
13928:'justice harlan, delivering the opinion of the court, said, [t]heentire[socialsecuritysystem] restsonthelegislativejudgmentthat those whoin their productive years were functioning members of',
13929:'the economy may justly call upon that economy, in their later years, for protection from the ’rigors of the poor',
13930:'house’ he continued, it is apparent that the noncontractual interest of an employee covered by theact cannot be soundlyanalogized to',
13931:'that of theholderofanannuity, whoseright to benefits are bottomed on his contractual premium payments to engraft upon the social security system',
13932:'a concept of ‘accrued property rights’ would deprive it of the flexibility and boldness in adjustment to everchanging conditions which',
13933:'it demands. emphasis added. 66. those who believe that only the due and payable amount should be recognized as the',
13934:'liability would argue that, under social insurance, the government uses its sovereign power to require payment of taxes that it',
13935:'dedicates to finance benefits. the individual beneficiaries of these programs are receiving payments that may be indirect and disproportionate to',
13936:'the taxes paid by them or on their behalf. in the case of social security, the oldest social insurance program,',
13937:'those who retired in the first years after enactment in 1935 received benefits that were many times their taxes. this',
13938:'was possible because the system transfers resources across generations. the system transfers resources within a generation as well, from those',
13939:'working and paying taxes to the disabled, the surviving spouse, and dependent children. 67. theywouldarguethatbenefitshavealsobeenverydifferentbyfamilytype,wagelevel,and sex. oneearner couples receive benefits',
13940:'that are far larger than taxes paid, followed by twoearner couples. single females have still lower benefit/tax ratios, followed by',
13941:'single males. lowwage earners have a higher benefit ratio than those with average or high wages. for each type of',
13942:'recipient, benefit/tax ratios have been trending down. highand averageearning single males retiring now cannot expect to get their money back,',
13943:'with interest; and this will soon also be true for highearning single females.11 11see steuele, c. eugene, and jon m.',
13944:'bakija, retooling social security for the 21st century: right and wrong approaches to reform, the urban institute press, washington, dc.',
13945:'page 25 sffas 17 fasab handbook, version 20 06/21 sffas 17 uncertainty 68. some of those who do not believe',
13946:'that social insurance obligations constitute a liability argue that the level of future benefit paymentsistoo uncertain for accrual asa liability.',
13947:'they point out that not only did congress expressly include and retain the right to alter, amend, or repeal any',
13948:'provision in the social security act itself, it has made such changes frequently. in the early years, the changes generally',
13949:'expanded benefits—for example, to dependents, the disabled, and early retirees; to a broader coverage of workers; to protect retirees against',
13950:'inflation—and increased tax rates. but as the system has matured, the changes have increased the tax rate further, taxed an',
13951:'increasing proportion of benefits, reduced cost of living adjustments and various benefit provisions, and prospectively raised the retirement age. 69.',
13952:'theyarguefurtherthatthebenefitpaymentsthatmightbemadeinthefuturearedependent on economic and demographic variables including the growth of real wages, interest rates, births, immigration, and labor force participation.',
13953:'the aggregate benefits under the high cost social security assumptions in 2070 are estimated by the social security trustees to',
13954:'be 2.5 times those under the low cost assumptions.and the estimates change over time. the legislative changes in 1983 were',
13955:'expected to maintain a positive fund balance until 2063; however, by current intermediate cost assumptions the fund will run out',
13956:'three decades sooner. period costs 70. some argue that the critical issue is the period to which a particular cost',
13957:'or expense relates. theyemphasize that a significant determination in accounting isto decide in which period a transaction should be recognized',
13958:'as an expense. they believe that social insurance benefits, like other nonexchange transactions, should be recognized as expenses in the',
13959:'time period when they are paid or are due and payable and not earlier when a participant has covered wages.',
13960:'future social insurance benefits constitute program costs of future periods, notwithstanding that they may be for the purpose of carrying',
13961:'out responsibilities that the government has already assumed. 71. they would argue further that, given the nature of the federal',
13962:'government and of social insurance, liabilitytype measures of the social insurance obligation e.g., the closed group measure are meaningless or',
13963:'even potentially misleading. in particular, they argue that this information would not be useful to assess sustainability. it ignores the',
13964:'payasyougo financing, excludes future earmarked taxes from future participants, and results in such an enormous actuarial present value that it',
13965:'may needlessly scare those unfamiliar with the debate. such measures do not reflect the way the program is financed under',
13966:'current law and could, if taken out of context, imply that the current participants have a right to benefits superior',
13967:'to future participants. page 26 sffas 17 fasab handbook, version 20 06/21 sffas 17 72. they argue that other supplementary',
13968:'information would provide useful sustainability information. for example, the social securitytrustees’annualreport provides “open group” projections of cashflow—in dollars, as a',
13969:'percentage of the tax base earmarked for the program, of the gdp, etc.—and the “dependency ratio.” the open group measure',
13970:'reflects the way the program is financed; and the dependency ratio—the ratio of contributors to beneficiaries—indicates whether the program could',
13971:'potentially encounter stress in the future. both of these were proposed in the exposure draft on social insurance as part',
13972:'of the supplementary information. they argue that these and other measures provide meaningful sustainability information. arguments for recognition, disclosure, or',
13973:'supplementary reporting 73. those who hold a contrary view believe either that the distinction between exchange and nonexchange transactions is',
13974:'not relevant to the liability recognition or supplementary reporting issue or that the programs possess characteristics that make the transactions',
13975:'predominantly exchanges. they argue that social insurance programs possess certain characteristics that, taken together, cause the criteria for recognizing a',
13976:'liability to be met long before payments are due and payable. those characteristics are 1. the contributory nature of the',
13977:'program i.e., benefits are predicated to some extent on prior payments, 2. time in covered employment, 3. government sponsorship, 4.',
13978:'benefits prescribed in law, and 5. specific accounting entity e.g., the trust fund and longrange financing. 74. these characteristics, in',
13979:'conjunction with the historical experience and political climate affectingtheprograms, createobligationsandsocietalexpectationsthatmaketheoutflowof resources highly probable — far more than 50 percent. therefore,',
13980:'an accounting liability should be recognized at an earlier point than when payments are due and payable; and the liability',
13981:'should be based on longterm or actuarial estimates of future payments. 75. supporters of this view note that social insurance',
13982:'programs, as distinguished from general assistance programs, require the payment of taxes in order to establish an “insured status” before',
13983:'an individual is eligible for benefits. this is often referred to as an “earned right to benefits.” in addition, most',
13984:'such programs have an element of individual equity in their benefit formulas whereby greater levels of taxes result in greater',
13985:'levels of benefits — although medicare hi is a notable exception. moreover, both the participant and the employer sacrifice value',
13986:'in anticipation of future benefit. not only do the participants anticipate retirement benefits as a result of these sacrifices, many',
13987:'employers, including the federal government, build in the value of social security benefits when designing page 27 sffas 17 fasab',
13988:'handbook, version 20 06/21 sffas 17 retirement plans. those holding this view would argue that these factors make social insurance',
13989:'programs predominantly exchanges. 76. someofthosearguingforrecognitionor disclosure believe that social insurance programs are constructive liabilities and that users of financial statements',
13990:'are accustomed to seeing commitments as firm as these quantified in financial statements or in notes to the statements. some',
13991:'say that there is little conceptual difference between the liability that is recognized for federal pensions and the closed group',
13992:'obligation for social insurance. they would say that the failure at least to disclose a liabilitytype measure of the obligation',
13993:'therefore would potentially be misleading to those who relied on the financial statements and would raise questions about the credibility',
13994:'of the statements. 77. in addition, they believe that the closed group number is a measure of the intergenerational transfer',
13995:'implicit in the program under its current terms and that this number should be reported. they would argue that the',
13996:'failure to disclose this number makes these programs look healthier than they are and thus may lead to poor decisions',
13997:'about consumption and saving by congress and by citizens. those who hold this view would argue that a closed group',
13998:'measure that treats social insurance benefits as earned annually would help users to understand the extent to which social insurance',
13999:'programs have committed futureyear taxpayers to finance amounts earned by participants as of a given point in time. 78. some',
14000:'of those who argue that a liability should be recognized on the balance sheet maintain that most of the financial',
14001:'reporting community in the united states have adopted a different standard than exchange or nonexchange. the financialaccounting standards board fasb',
14002:'concept statements adopt an “asset/liability” perspective in which what mattersiswhethera promisehas been made, not whether something hasbeen received for it',
14003:'or how it will be funded—in other words, what matters is whether a future sacrifice of resources is probable, regardless',
14004:'of whether it arises from an exchange of consideration. from thisperspective, theonlyreasonfornot recognizing aliabilityforthe amount promised by the social insurance',
14005:'program would be the assumption that it may not be paid. 79. because most users are familiar with fasb’s definition,',
14006:'or at least are accustomed to seeing financial reports based on it, those who favor recognition or disclosure of a',
14007:'liability type measure argue it is inherently misleading to fail to quantify the size of the promise that is continually',
14008:'being made and on which people are told they can rely. while many who support liabilitytype disclosure agree the open',
14009:'group data are desirable to aid in assessing the sustainability of social insurance programs, they also believe that an assessment',
14010:'of the financial condition of the program — and more importantly, of the federal government — is not possible absent',
14011:'liability or closed group data. if a reader seeks to answer the question — have we burdened future generations of',
14012:'citizens with the cost of the current and past years? and, if so, to what extent? — the very large',
14013:'obligations for social insurance must be considered. page 28 sffas 17 fasab handbook, version 20 06/21 sffas 17 the board’s',
14014:'conclusion regarding recognition, disclosure, or supplementary reporting 80. theboardacknowledgesthatitisfacedwithtwopolarizedviewswithoutmuchhopeofone side convincing the other side of the correctness of its position.',
14015:'on the one side are those who believe that social insurance programs — especially social security and medicare — constitute',
14016:'a liability of the federal government that should be recognized on the consolidated balance sheet and that the closed group',
14017:'is the best measure of it. they agree that other measures such as a longrange projection of a program’s cash',
14018:'inflow from all sources and outflow for all purposes are also useful, and note that all measures of sustainability and',
14019:'financial condition must be taken in context to be meaningful.at the opposite pole are those who firmly believe that the',
14020:'closed group measure is meaninglessor even potentially misleading and should not be disclosed at all in the financial report. 81.',
14021:'the board recognizes that both approaches have limitations and that the data are best understood when used together. an “earned',
14022:'right” measure, for example, produces a relatively large dollar amount that could confuse the reader who is unaware of the',
14023:'way in which the program wasintended to be funded.althoughboth sidesmake strong arguments, noempiricalevidencehasbeenofferedthatwouldproveonesiderightandtheotherwrong. the board believesthebest approach toresolve thisissue isfortheclosedgroup',
14024:'data to be reported off the balance sheet as part of a balanced rssi package of disclosures about the socialsecurityandother',
14025:'socialinsuranceprograms. [the board subsequently affirmed that the data necessary to calculate the closed group measure should be reported. see paragraphs',
14026:'4043 for a discussion of the board’s final recommendation.] 82. the board believes such disclosure will provide useful information and',
14027:'also serve the interests of users who are concerned primarily with federal accounting in its entirety. the board has heard',
14028:'much from the two opposing sides, within the federal government, with the keenest interest in this issue. it does not',
14029:'forget, however, a larger third group of constituents, both within and outside the federal government, who are concerned with federal',
14030:'accounting in its entirety. 83. the board believes that these users would consider social insurance accounting in general and social',
14031:'security accounting in particular to be important but only as one element of the complex of problems in federal accounting',
14032:'that led to the establishment of the fasab. a closedgroupmeasure of some type undoubtedlywillbe provided tothis group of usersfrom some',
14033:'source if it is not provided based on government standards. these userswillbebetter served if the federal government defines a credible',
14034:'measure, calculating it by using assumptions consistent with other social security and other social insurance program estimates, and disclosing it',
14035:'with explanatory materials and in a governmentwide and national context. page 29 sffas 17 fasab handbook, version 20 06/21 sffas',
14036:'17 measurement of social insurance obligations 84. considering the polarity of these positions, the board is persuaded that the requirements',
14037:'incorporated in this statement best serve the users of federal financial information. the board continues to believe that, given the',
14038:'strength of these differing views concerning the nature of social insurance transactions, an overriding concern exists that no single measurement',
14039:'on the balance sheet or elsewhere could adequately convey the financial sustainability of social insurance programs or the impact on',
14040:'the financial condition of the administrative entities or the government as a whole. using social security as an example, one',
14041:'could approach measurement from the perspective of an obligation to participants based on earned rights to future benefits; or one',
14042:'could approach measurement from a pay asyougo funding perspective, giving consideration to both future inflows and outflows. projections based on',
14043:'a payasyougo approach would acknowledge the way in which social securityisfunded and provide dataon longrange sustainabilitybased on the current benefit',
14044:'structure.an “earned rights” approach would acknowledge that, at anygiven point in time, social security has $x of accumulated obligation to',
14045:'current participants that would need to be provided by future generations under current law. 85. the board believes that a',
14046:'more complete picture of the financial condition of the government can be provided by a forwardlooking assessment of whether it',
14047:'can “sustain public services and meet obligations as they come due.” the users of federal financial informationneedto know agreat dealabout',
14048:'the future of social insuranceprograms, a large and growing proportion of federal spending with financing that is under demographic and',
14049:'other strains. understanding the financial condition of these programs is important to understanding the condition of the federal government as',
14050:'a whole. in addition, many citizens depend on these programs for their own financial security. the board therefore believesthat usefulinformationabout',
14051:'thefutureprospectsof these programsshould be fully and impartiallypresented in the financial reports of entitiesoperating these programs and in the consolidated financial',
14052:'report of the united states government. the social insurance standards set forth the minimum information that the board believes necessary',
14053:'for that purpose. required supplementary stewardship information 86. the board believes that the required information is relevant for assessing the',
14054:'sustainability of social insurance programs and also bears on the government’s financial condition. the following paragraphs discuss each of the',
14055:'rssi elements. cashflow 87. an estimate based on the amount and timing of future cash inflows and outflows will help',
14056:'users understand the longrange sustainability of the social insurance programs based on page 30 sffas 17 fasab handbook, version 20',
14057:'06/21 sffas 17 current revenue and benefit structure. the board believes that the yearly inflows and outflows under the open',
14058:'group method should be disclosed over a sufficient number of years e.g., 10 years, 75 years to display “crossover” points',
14059:'where outflows begin exceeding inflows. crossover pointsprovide an early warningasto the need toadjust either the revenue stream or the expenditure',
14060:'stream to ensure that the program is sustainable under current law. 88. theboardconsideredspecifyingthelengthoftheprojectione.g.,1020years. however,it decided that allowing the entity to',
14061:'use its traditional timeframe was preferable, if the period presented is long enough to reveal anticipated critical points as mentioned',
14062:'in the preceding paragraph. percentage of taxable payroll & gdp 89. cashflow should also be put in relation to the',
14063:'taxable payroll or other tax base earmarked for the program, the gdp, or other benchmark that would be meaningful to',
14064:'users. the sustainability of a social insurance program cannot be determined solely on the basis of the financial position of',
14065:'the federal government. rather, the size of the total fiscal burden shifted by government to future taxpayers—in relation to their',
14066:'ability to bear it—is critical to that determination. thus, sustainability from the governmentwide perspective is better measured in terms of',
14067:'a healthy relationship between social insurance programs—and, indeed, the entire budget—and the national economy, as measured by the gdp or',
14068:'taxable wages. dependency ratio 90. the ratio of contributors to beneficiaries, also commonly called the “dependency ratio” shows the estimated',
14069:'number of contributors e.g., covered workers per program beneficiary. the board believes that a projection of the trend in the',
14070:'relationship between contributors and beneficiariesshould be displayed. this ratio helps readers assesswhether the program is under potential stress and whether',
14071:'it is sustainable as currently constructed. adeteriorating dependency ratio would illustrate the effect of demographic trends on relationships between contributors',
14072:'and beneficiaries that may affect the sustainability of the program as currently constructed. the “closed group” measure [the social insurance',
14073:'exposure draft proposed that the net apv for the closed group of participants be reported as rssi. as explained in',
14074:'paragraphs 4043, the final standard requires information about the closed group apv, within the structure of the new statement of',
14075:'actuarial values, and an explanation of how to calculate it. see note no. 3 of the illustrated statement of social',
14076:'insurance, page 46. the closed group measure proposed in page 31 sffas 17 fasab handbook, version 20 06/21 sffas 17',
14077:'the exposure draft represented the actuarial net present value of a the future benefit payments to current participants, b future',
14078:'contributions to be made be them and their employers, and c the accumulated excess of cash receipts over cash disbursements',
14079:'within the social insurance program represented by fund balance at the valuation date. the board continues to believe that the',
14080:'closed group measure is useful, and that the following paragraphs from the exposure draft retain their cogency.] 91. the closed',
14081:'group measure is sometimes referred to as an actuarial liability12 for certain socialinsurance programs relating to the closedgroup of current',
14082:'participants. somebelieve it is analogous to the liability that would be recognized on the face of the balance sheet if',
14083:'social insurance programs were accounted for like federal pension and retiree health care benefits. others dispute this, pointing to different',
14084:'financing arrangements, legal status, and the nature of social insurance and pensions. 92. until 1985, the “prototype” consolidated financial statements',
14085:'of the united states recognized a liability for social security, using a calculation similar to that called for by opinion',
14086:'no. 8 of theaccountingprinciplesboard, accounting for the cost of pension plans, apb 8. this liability was calculated by amortizing the',
14087:'“closed group” obligation and recognizing as a liability the unfunded portion that was amortized each year. apb 8 defined a',
14088:'variety of acceptable methods for measuring pension expense and required that any unfunded pension expense be recognized as a liability.',
14089:'apb 8 was superseded by statement 87 of the financialaccounting standards board fasb, published in december 1985. fasb published statement',
14090:'87 to make accounting for pensions more independent of thefinancingarrangements, toprovidemorestandardizationinmeasurement of thepension expense and liability, and to require that',
14091:'at least a “minimum liability” be recognized in employers’statementsof financialposition balance sheets. from1985 through1994, the closed group amount was disclosed',
14092:'in a footnote in the cfs. 93. some people believe that the closed group measure is analogous to the measure',
14093:'of “risk assumed” that would be reported as supplementary stewardship information if social insurance programs were accounted for like other',
14094:'federal insurance programs. sffas no. 5, accounting for liabilities of the federal government, defines “risk assumed” as the present value',
14095:'of unpaid expected losses net of associated premiums, based on the risk inherent in the insurance or guarantee coverage in',
14096:'force i.e., the expected loss on the “current book of business”. in the context of social insurance, one would use',
14097:'the term “closed group” instead of “current book of business.” 12[avarietyof actuarial methods exist which can be used to calculate',
14098:'an actuarial liability. the “closed group” measure is not identical to the methods that would be used in pension accounting.',
14099:'see paragraph 97] page 32 sffas 17 fasab handbook, version 20 06/21 sffas 17 94. sffas no. 5 requires insurance',
14100:'programs, other than social insurance programs, to report the risk assumed amount if it differsfromthe amount recognized as a liability.',
14101:'sffas no. 5 exempts federal life insurance and loan guarantee programs from this disclosure requirement because the relevant accounting standards',
14102:'already incorporate a similar concept in determining the amount to be recognized in the financial statements. some people believe that',
14103:'it is useful to report this information, for the same reason that it is useful to report it forother kindsof',
14104:'government programs. thisreason wassummarized in a report on budgeting for federal insurance programs other than social insurance. although fasab is',
14105:'concerned with financial reporting, not budgeting, the underlying rationale is similar: as a general principle, decisionmaking is best informed if',
14106:'the government recognizes the costs of its commitments at the time it makes them. for most programs, cash based budgeting',
14107:'accomplishes this. however, for insurance programs, accrualbased budgeting, which would recognize the expected longterm cost of the insurance commitment at',
14108:'the time the insurance is extended, offers the potential to overcome a number of the deficiencies of cashbased budgeting by',
14109:'improving cost recognition. in concept, recognition inthebudget oftheriskassumedbythegovernment would permit policymakers to consider these costs in relation to other funding',
14110:'demands and would improve the measurement of a program’s impact on private economic behavior. in most cases, the riskassumed approach',
14111:'to accrual would be analogous to a premium ratesetting process in that it looks at the longterm expected cost of',
14112:'an insurance commitment at the time the insurance commitment is extended. the risk assumed by the government is essentially that',
14113:'portion of a full riskbased premium not charged to the insured.13 95. other people believe that, because there has been',
14114:'no intent for individuals or cohorts of individualsgenerationstomakecontributionscommensuratewiththebenefitstheyreceive as would be the case in other kinds of insurance programs, it',
14115:'would be misleading to report the amount of this intergenerational transfer implicit in social insurance. 96. the board believes that',
14116:'the closed group measure represents a reasonably good estimate of the net responsibility of future participants, undercurrent laws, topay benefitsto',
14117:'current participants. although this amount is subject to change due to changing longrange demographics, it is not as volatile as',
14118:'the computation under the “open group” method that includes all current and future participants over the next 75 years since',
14119:'it relates only to individuals who already are participating in the program. 13budget issues: budgeting for federal insurance programs, generalaccounting',
14120:'office, gao/aimd9716, sept. 30, 1997, p. 5. page 33 sffas 17 fasab handbook, version 20 06/21 sffas 17 transition costs',
14121:'97. some people note that the closed group measure, in addition to being an important factor in assessing the financial',
14122:'position and condition of the program and of the government, also represents a rough estimate of the maximum “transition cost”',
14123:'of the program if it were to move from the present payasyougo system to one that, like most pension plans,',
14124:'sets aside resources during workers’ careers to finance the benefits they will receive after they retire.14 the primary reason for',
14125:'reporting the size of this implicit liability in general purpose federal financial reports is to ensure that the financial report',
14126:'fairly presents the financial position, condition, and results of operations of the reporting entities involved. it isalso true, however, that',
14127:'this number is one way of quantifying the financing challenges relating to changing social insurance programs and is relevant to',
14128:'the concerns of users who are assessingoptionsfor dealing with thosechallenges. thenumber not onlydrawsattention to the challenge but also quantifies it',
14129:'in a way that can support further analysis and decision making. federal accounting and financial reporting attempt to address the',
14130:'needs of users and to inform them for their decisions, including decisions on these highly important and topical issues. 98.',
14131:'for example, the199496advisorycouncil onsocialsecurity expressedinterestinthree different approaches to restoring financial solvency and improving the rate of return on individual’s contributions',
14132:'to the social security system. the three plans were entitled “maintenance of benefits,” “individualaccounts,” and “personal securityaccounts psa.” the psaplan',
14133:'involved transition costs that the plan’s advocates explained as follows: transition costs arise because, under the present system, there are',
14134:'large unfunded accrued obligations—that is, benefits scheduled to be paid to current retirees and to workers who have already paid',
14135:'taxes in excess of assets on hand. under the plan, these obligations would be met as they mature.at the same',
14136:'time, the new fullyfunded component of the system would be implemented. during the phasein of the new system, the cost',
14137:'of meeting obligations under the existing system is sometimes referred to as the “transition cost.” 14several ways exist for measuring',
14138:'transition costs depending on, among other things, whether one assumes the current program will continue for current participants alongside a',
14139:'new program for new participants similar to federal employees continuing withthecivil serviceretirement system after thecreationof the federal employee retirement system',
14140:'in 1983. in such a transition, the older program would be closed to new entrants. another type of transition would',
14141:'be where the current participants will move on to the new system, with the transition cost being the amount owed',
14142:'them under the former program. the discussion of different methodologies for calculating transition cost is beyond the scope of this',
14143:'accounting standard; but see the stephen goss, “measuring solvency in the social security system,” prospects for social security reform, ed.',
14144:'olivia s. mitchell, robert j. myers, and howard young philadelphia: university of pennsylvania press, 1999, 1636. page 34 sffas 17',
14145:'fasab handbook, version 20 06/21 sffas 17 transition costs would be met with a combination of added taxes and added',
14146:'federal borrowing. the ssa[social securityadministration] actuaries project that a 1.52 percent supplement to the payroll tax would cover average longrange',
14147:'transition costs over the next 72 years.15 however, because the unfunded accrued obligations under the existing system are highest in',
14148:'the next couple of decades and taper off in later decades, there isa shortfall of revenues between about 2000 and',
14149:'2034 and an excess of revenuesthereafter. it isassumedthattheshortfallwouldbemetbyissuingbondsto the public for the next 40 years totaling an estimated $1.9 trillion',
14150:'in 2034, in 1995 dollars, and that these bonds would be fully repaid by the excess of tax revenues in',
14151:'the later period. [vol. 1, p. 32] 99. similarly,alan greenspan,chairman oftheboardofgovernors ofthefederalreserve system, has discussed the challenge confronting the social',
14152:'security system and the relevance of the transition amount: it has become conventional wisdom that the social security system, as',
14153:'currently constructed, will not be fully viable after the baby boom generation starts to retire this imbalance in social security',
14154:'stems primarily from the fact that, until very recently, payments into the social security trust accounts by the average employee,',
14155:'plus employer contributions and interest earned, were inadequate to fund the total of retirement benefits. this has started to change.',
14156:'under the most recent revisions to the law and presumably conservative economic and demographic assumptions, today’s younger workers will pay',
14157:'social security taxes over their working years that appear sufficient, on average, to fund their benefits during retirement. however, the',
14158:'huge liability for current retirees, as well as for much of the work force closer to retirement, leaves the system',
14159:'as a whole badly underfunded.16 100. in the course of discussing a variety of economic issues and policy options including',
14160:'“privatization” that transcend accounting, mr. greenspan continues: any move toward privatization will confront the problem of how to finance previously',
14161:'promised benefits. that would presumably involve making the implicit accrued unfunded liability of the current social security system to beneficiaries',
14162:'explicit if marketsperceivethatthisliabilityhasthe samestatusasexplicitfederaldebt, then one must presume that interest rates have already fully adjusted to the implicit contingent liability.',
14163:'however, if markets have not fully accounted for this implicit liability, then 15notethat this rate differs from the 2.17 percentincrease',
14164:'in the payrolltax that has been estimated to be necessary to maintain benefits under current law; see p. 25 of',
14165:'the 199496advisory council report, vol. 1. 16statementbyalangreenspan, chairman,boardofgovernors ofthe federalreservesystem, before thetaskforce on social security, committee on the budget, united',
14166:'states senate, nov. 20, 1997, p. 1. page 35 sffas 17 fasab handbook, version 20 06/21 sffas 17 making it',
14167:'explicit could lead to higher interest rates for u.s. government debt there isreasonto suspect, however, that if sucha liabilityismadeexplicit ina',
14168:'mannersimilar to the transition procedure in chile, each dollar of new liability will weigh far less on financial markets than',
14169:'a dollar of current public debt.17 101. mr. greenspan mentioned some reasons why the capital market’s reaction—though possibly substantial—might be',
14170:'muted if the government made this implicit liability more explicit. the federalreserve hasestimated that, usinga 2 percent realrateof discount and',
14171:'other assumptions, the value of all currently accrued legislated future social security retirement benefits would be roughly $9.5 trillion. 102.',
14172:'the assumptions, benefits, population, and actuarial approach covered by this estimate differ somewhat from those used by the social security',
14173:'trustees in the past to produce the closed group estimate comparable to the one called for by this statement. the',
14174:'calculation used for mr. greenspan’s testimony is an estimate of the actuarial present value of future benefits arising from individuals’',
14175:'covered employment to the date of calculation, without considering their expected future employment until they retire. the estimate for the',
14176:'closed group in thisstandardconsidersboth benefitstobeearnedand contributionsto be madefor current participants, in addition to benefits already earned or credited. also, mr.',
14177:'greenspan’s estimate is for oldage and survivors insurance only while this standard proposes that the closed group estimate for social',
14178:'security also include disability insurance. however, the numbers are roughly comparable. 103. the chairman concluded by saying we owe it',
14179:'to those who will retire after the turn of the century to be given sufficient advance notice to make what',
14180:'alterations in retirement planning may be required. if we procrastinate too long, the adjustments could be truly wrenching. our senior',
14181:'citizens, both current and future, deserve better.18 money’s worth 104. the board considered requiring a “money’s worth” measure. such a',
14182:'measure would show all contributionspaid and benefitsreceived by different age groupse.g., those born in 1920 compared with 1940. the 199496advisory',
14183:'council on social security recommended that social security meet a test of providing a reasonable money’s worth return on the',
14184:'17greenspan, p. 45. 18greenspan, p. 9. page 36 sffas 17 fasab handbook, version 20 06/21 sffas 17 contributions of younger',
14185:'workers and future generations, while taking into account the redistributive nature of the system. the council said that, although money’s',
14186:'worth return was only one measure among many, it was important to the longrange sustainability of the program for younger',
14187:'generations to believe that they were getting a reasonable return on their taxes. the council said, socialsecurityshould providebenefitsto each generation',
14188:'ofworkersthatbeara reasonable relationship to total taxes paid, plus interest. many important values served by a social security system are not',
14189:'fully captured by looking solely at money’s worth or rates of return. nevertheless, the council believes that it is important',
14190:'that young workers perceive that the system is fair. this perception suggests that the younger generation should be well treated',
14191:'in terms of the issue of money’s worth, taking into account the fact that within each generation there will be',
14192:'a redistribution toward the lower paid. [vol. 1, p. 17] 105. some argue that the money’s worth measure may be',
14193:'viewed as a good measure of potential future stress caused by the disparity between taxes and anticipated benefits. however, others',
14194:'argue that this measure is of questionable relevance given the basic design and breadth of the benefits available under some',
14195:'social insurance programs. for example, thesocialsecuritybenefitformulais designedto providerelativelyhigherbenefits forworkerswithlowerearnings. thisfeatureof the programisinconsistentwith apure focus on money’sworth. finally, ascommonlyreported, thismeasuredoesnot reflect',
14196:'some social insuranceprogramsand programfeaturessuchasbenefitsto thedisabled ordependentsin the event of the participant’s death. 106. the board considered the money’s worth measure',
14197:'and believes that it presents a useful perspective. however, the board decided not to require it because it fails to',
14198:'capture the complexity of social insurance programs and could be calculated from too many perspectives. the board recognizes the usefulness',
14199:'of the measure for policy analysis and management maywish toreport it voluntarilybut it goesbeyondwhat the board regardsas essential to present',
14200:'fairly the financial position, condition, and results of operations of the reporting entities involved including the governmentwide entity. accordingly, the',
14201:'board decided not to require rssi about money’s worth. trust fund ratio 107. the board also considered the “trust fund',
14202:'ratio” which is defined as the fund balance at the beginning of the year expressed as a percentage of the',
14203:'outgo during the year; or, in other words, the proportion of a year’s outgo that could be paid with the',
14204:'funds available at the beginning of the year.19 the trust fund ratio is one of several measures the social security',
14205:'19the 1997annual report of the board of trustees, federal oldage and survivors insurance and disability insurance trust funds, p. 221.',
14206:'page 37 sffas 17 fasab handbook, version 20 06/21 sffas 17 trustees use to evaluate the shortterm financial status of',
14207:'the trust funds. also, the 199496 social securityadvisory council advocated using the trust fund ratio as a gauge of longterm',
14208:'sustainability. the council recommended that, in addition to the actuarial balance over 75 years, the program should have a stable',
14209:'trust fund ratio over the final years of the 75year forecast horizon.20 the council believed thatthe trend oftrustfund ratio would',
14210:'indicate whether there would be cause for concern about the years beyond the 75year horizon.the council was concerned that all',
14211:'factors known at the time of the 75year projection be considered and reported, including whether there were problems beyond the',
14212:'75year projection period. for example, even as the trustees are reporting that the system is in actuarial balance over 75',
14213:'years, demographic trends could make the next 10 years beyond the 75year horizon more expensive. 108. the board decided not',
14214:'to recommend the trust fund ratio as rssi for a number of reasons. in particular, to be useful, the ratio',
14215:'would have to be used in conjunction with a projection that was in actuarial balance or nearly so. under the',
14216:'current “best estimate” projection, where fund balance is expected to be exhausted well before 75 years, the trust fund ratio',
14217:'would not be usable. although the board acknowledges that the ratio may be useful as an indicator of shortterm financial',
14218:'condition, it believes the projections and estimates in this standard will be more informative for accounting purposes. component & governmentwide',
14219:'perspectives 109. in developing these standards, the board attempted to address the component entity as wellasgovernmentwidereporting. fromthe perspectiveofthecomponent federalentity, the',
14220:'accounting and reporting includes assets in the form of treasury securities as well as interest thereon. these are not claims',
14221:'on third parties. the assets of the funds are offset by an identical liability of the u.s. treasury. like other',
14222:'intragovernmental assets and liabilities, they do not represent assets or liabilities of the federal government as a whole and are',
14223:'eliminated for governmentwide reporting. the nonmarketable treasury debt securities are evidence of the accumulation of excess cash receipts over cash',
14224:'disbursements within the social insurance program. 20see findings and recommendations, vol. 1, p. 17 jan. 1997. page 38 sffas 17',
14225:'fasab handbook, version 20 06/21 sffas 17 appendix b sample reporting for illustration only note the sample report sections in',
14226:'appendix b provide nonauthoritative illustrations of possible rssi that would comply with this standard. the narrative, charts, tables, and other',
14227:'information shown there are intended to be one approach among others to provide a full description of the programs and',
14228:'to supply the required information. the standard does not require any particular format or graph. most, but not all, of',
14229:'the data presented in appendix b would be required by pars. 27 and 32 of the standard e.g., the year',
14230:'the fund balance is exhausted [see par. 117] and the open group actuarial deficit as a percentage of taxable payroll',
14231:'[see par. 120] would not be required. this is done to illustrate that management may provide more supplementary information than',
14232:'is required by the standard. most data are taken from various reports for fy 1996 and are “actual data.” certain',
14233:'data are hypothetical. although the data are realistic, readers should not rely on the validity of the data in the',
14234:'sample reports. omb provides specific form and content guidance on financial reports. page 39 sffas 17 fasab handbook, version 20',
14235:'06/21 sffas 17 social security required supplementary stewardship information statement of social insurance oldage, survivors and disability insurance 75year projectiona',
14236:'as of september 30, 1996 [hypotheticaldata] dollars in trillions prior years 1996 1995 1994 1993 1992 actuarial present value of',
14237:'future benefit paymentsb during the 75year period to or on behalf of: current participants not yet having attained retirement agec',
14238:'$x $x $x $x $x current participants who have attained retirement agec x x x x x those expected to',
14239:'become participants i.e., new entrants x x x x x subtotal—benefit payments for the 75year period 19 x x x',
14240:'x less the actuarial present value of future contributions and tax income during the 75year period from and on behalf',
14241:'of: current participants not yet having attained retirement age y y y y y current participants who have attained retirement',
14242:'agec y y y y y those expected to become participants i.e., new entrants y y y y y subtotal—contributions',
14243:'and tax income for the 75year period 16 y y y y excess of actuarial present values of future benefit',
14244:'payments over future contributions and tax income for the 75year period d $3 $x $x $x $y notes to the',
14245:'statement: athe projection period for new entrants covers the next 75 years. the projection period for current participants or “closed',
14246:'group” wouldtheoreticallycoveralloftheirworkingandretirementyears,aperiodthatcouldbegreaterthan75yearsainfewinstances. as a practical matter the present values of future payments and contributions for/from current participants beyond 75 years',
14247:'are not material. b“benefit payments” include administrative expenses. cto calculate the actuarial net present value of the excess of future',
14248:'benefit payments to current participants that is, to the “closed group” of participants over future contributions and tax income from',
14249:'them or on their behalf, subtract the actuarial present value of future contributions and tax income by and on behalf',
14250:'of current participants from the actuarial present value of the future benefit payments to them or on their behalf. dthe',
14251:'calculation of the “close actuarial balance” used for analysis by the social security trustees differs from the calculation of the',
14252:'amount presented on this line. the trustees’ close actuarial balance calculation includes the fund balance at the beginning of the',
14253:'period as an item of cash inflow and the cost of about one year’s expenditure, as a target fund balance',
14254:'at the end of the period, as a cash outflow. the fund balance—which represents the accumulated excess of all past',
14255:'cash inflow, including interest on intragovernmental securities, over cash outflow within the social insurance program—for 1996 for the oasdi program',
14256:'is $ .6 trillion oasi, $ .5 trillion, and di $ .1 trillion. the fund balances for 19952, in trillions,',
14257:'were $.6, .5, .5, .4, respectively. the fund balance consists of a small amount of cash for current operations with',
14258:'the balance invested in treasury securities. when presented for redemption, these securities will represent a first claim on the resources',
14259:'of the government. page 40 sffas 17 fasab handbook, version 20 06/21 sffas 17 program description 110. the oldage, survivors,',
14260:'and disability insurance oasdi program, collectively referred to as “social security” or oasdi, provides cash benefits for eligible u.s. citizens',
14261:'and residents. during calendar year 1996, oasdi provided benefits to approximately 44 million beneficiaries. eligibility and benefit amounts are determined',
14262:'under the laws applicable for the period. current law provides that the amount of the monthly benefit payments for individuals,',
14263:'or dependent spouses and children, is based on the individuals’ taxable earnings up to the date when payments commence. 111.',
14264:'the amount of the effective monthly oasdi benefits may be altered by changes in laws governing the program. in 1983',
14265:'for example, up to onehalf of oasdi benefits became taxable; costoflivingadjustments colas were permanently delayed six months; and the age',
14266:'for full retirement benefits was gradually increased from 65 to 67 over a 24year period. 112. oasdi has been described',
14267:'as an income transfer program—that is, a program designed to reduce economic disparity by redistributing income between households. oasdi transfers',
14268:'income in at least two ways. first, its benefit structure is progressive in the sense that benefits during retirement for',
14269:'lowerincome workers replace a larger proportion of income earnedduring theirworking yearsthan isthe case forhigherincomeworkers. thisresultsin an income transfer among workers',
14270:'of the same age group but in different income groups. second, oasdi is financed largely on a payasyougo basis. the',
14271:'payroll taxes paid to oasdi each year by current workers are primarily used to pay the benefits provided during that',
14272:'year to current beneficiaries. this results in income transfers between current workers and current beneficiaries and therefore between younger workers',
14273:'and older retirees, the disabled, and surviving family members. program finances and sustainability 113. as discussed in note x to',
14274:'the consolidated financial statements, a liability of $34 billion is included in “other liabilities” on the balance sheet for unpaid',
14275:'amounts of oasdi benefits due to recipients for periods ended on or before september 30, 1996 $33 billion in fy',
14276:'1995. virtually allof thisamount was paid in october 1996.also, an asset is recognized for the “investments in treasury securities” as',
14277:'of september 30, 1996, of $550 billion $483 billion in fy 1995. this investment represents trust fund assets accumulated from',
14278:'the excess of payroll taxes over benefits in prior periods. this fund balance is available for oasdi’s use in future',
14279:'periods when a deficit occurs in the program. these investments are referred to as “trust fund assets” throughout the remainder',
14280:'of this disclosure. 114. no liability has been recognized on the balance sheet for future payments to be made to',
14281:'present and future program participants, beyond the unpaid amounts as of september 30, 1996. this is because the oasdi is',
14282:'accounted for as a social insurance program rather page 41 sffas 17 fasab handbook, version 20 06/21 sffas 17 than',
14283:'a pension program.accounting fora socialinsurance programrecognizesthe expense of benefits when they are actually paid or are due to be paid',
14284:'because benefit payments are primarily nonexchange transactions and are not considered deferred compensation as would employersponsored, employee’s pension benefits. accrual',
14285:'accounting for a pension program, by contrast, would recognize the retirement benefit expenses as they are earned during a worker’s',
14286:'career so that the full actuarial present value of the expected retirement benefits has been recognized by the time the',
14287:'worker retires. 115. supplementary stewardship information while no liability has been recognized on the balance sheet for future payments beyond',
14288:'those due at period end, actuarial estimates of future program activities are made annually to assess the financial condition and',
14289:'prospects for oasdi and are presented here as supplementary stewardship information. the statement presented above and the displays below represent',
14290:'the best estimate of future cash inflow and outflow based on the assumptions shown at the end of this section',
14291:'and considering future changes previously mandated by law. however, estimates extending so far into the future are inherently uncertain, and',
14292:'the uncertainty is greater for the later years in the period. this stewardship information includes: 1 actuarial present values of',
14293:'future benefits for and contributions and tax income from or on behalf of current and future program participants; 2 cashflow',
14294:'in nominal dollars and as percentages of taxable payroll and the gdp; 3 the ratio of contributors to beneficiaries or',
14295:'“dependency ratio” showing the longrange relationship between the program’s beneficiaries and contributors; and 4 an analysis of the sensitivity of',
14296:'the projections to changes in assumptions. 116. cashflow projections chart 1 below shows the actuarial estimate of oasdi cash inflow',
14297:'and outflow for each of the next 35 years, in nominal dollars, using data from the oasdi trustees’ annual report.',
14298:'the estimate is based on what the trustees refer to as the open group population i.e., all persons who will',
14299:'participate in the program as contributors or beneficiariesorbothoverthe next 35 years. thus,it includespaymentsfrom,andonbehalf of, employees who will enter the workforce',
14300:'during the next 35 years as well as those now in the workforce. 117. as chart 1 shows, present estimates',
14301:'indicate that, in nominal dollars, cash outflow would start to exceed total inflow including interest on intragovernmental borrowing/lending in about',
14302:'2019. this deficiency would continue at an increasing rate thereafter, require the redemption of investments in treasury securities held as',
14303:'assets by the trust fund, and result page 42 sffas 17 fasab handbook, version 20 06/21 sffas 17 in the',
14304:'exhaustion of accumulated asset balances in 2029.21 even before 2019, outflow would exceed cash inflow from the public i.e., excluding',
14305:'interest paid by treasury. estimates indicate this will happen in about 2012, as shown in chart 1. from about 2012',
14306:'forward, oasdi would pay more to the public than it would receive in taxes. this would increase the government’s financing',
14307:'needs. compared to a situation in which oasdi taxes equaled outgo, the government would have to finance this difference by',
14308:'increased borrowing from the public, spending cuts, tax increases, or some combination of these measures. 􀀀􀀀 􀀀 􀀀􀀀 􀀀􀀀􀀀 􀀀􀀀',
14309:'􀀀􀀀􀀀 􀀀􀀀 􀀀􀀀􀀀  􀀀􀀀􀀀 􀀀􀀀 􀀀􀀀 􀀀 􀀀􀀀 􀀀 􀀀􀀀         ',
14310:'          source: data from tables iii b1, b3, & c1, 1996',
14311:'oasdi trustee’s report. 21[please note: the standard does not require information on the year when the assets would be exhausted',
14312:'as the program is currently structured see par. 117. this information illustrates that management can provide data in addition to',
14313:'that required by the standard where it feels doing so would be useful to readers of the report.] page 43',
14314:'sffas 17 fasab handbook, version 20 06/21 sffas 17 terms used in chart 1 the following terms are used in',
14315:'chart 1: total inflow includes payroll taxes, income tax on certain oasdi benefits, interest income, and miscellaneous reimbursement from the',
14316:'general fund; cash inflow excluding interest is income exclusive of interest on trust fund assets; total outflow includes benefit payments,',
14317:'administrative expenses, net transfers to the railroad retirement program, and vocational rehabilitation expenses for disabled beneficiaries. 118. percentage of taxable',
14318:'payroll the excess of cash outflow over inflowis due to a variety of factors including the retirement of the “baby',
14319:'boom” generation and the relatively small number of people born during the subsequent period of low birth rate. as presently',
14320:'constructed, the program receives most of its cash inflow from the 6.2 percent payroll tax that employeesand employers each pay,',
14321:'for a total of 12.4 percent of taxable payroll. chart 2 below illustrates the rising annual cost of the program',
14322:'relative to its annual income as a percentage of taxable payroll. 􀀀   􀀀     ',
14323:'    ! 􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀 􀀀 􀀀 􀀀􀀀    source: data from tables iiia2, 1996 oasditrustee’s report.',
14324:'119. the total excess of cash outflow over inflow for oasdi over the next 75 years is estimated to be',
14325:'2.17 percent of taxable payroll; in other words, a tax increase today of about 1.09 percent of taxable payroll each',
14326:'on employees and employers, over the 6.2 percent they each now pay, would produce enough inflow over 75 years to',
14327:'pay all benefits due under page 44 sffas 17 fasab handbook, version 20 06/21 sffas 17 current law.22 there would',
14328:'be trust fund surpluses in the early years of the projection from which the trustees would acquire treasury securities to',
14329:'be used to pay benefits later. 120. stated in terms of actuarial present value, the 2.17 percent deficit equates to',
14330:'an excess of expenditures over contributions of about $3 trillion over the next 75 years from september 30, 1996. the',
14331:'accumulation and subsequent redemption of substantial trust fund assets have economic and public policy implications that go beyond the operation',
14332:'of the oasdi program itself. discussion of these broader issues is not within the scope of this report. 121. percentage',
14333:'of gdp in addition to analyzing oasdi operations as a percentage of taxable payroll, viewing them as a percentage of',
14334:'the gross domestic product gdp provides an additional perspective on these funds in relation to the capacity of the national',
14335:'economy to sustain them. the gdp represents the total value of goods and services produced in the united states. chart',
14336:'3 below shows oasdi’s cost as a percentage of gdp. 􀀀􀀀     􀀀    ',
14337:'source: data from tables iii c1, 1996 oasdi trustee’s report. 122. in 1996, federal spending for oasdi exceeded $350 billion,',
14338:'which was about 4.7 percent of gdp. by 2030, when most baby boomers will have retired, the program based on',
14339:'current law will consume nearly 50 percent more of gdp than it does today—6.4 percent. nearly 22[please note: the standard',
14340:'does not require information on the total excess of cash outflow over inflow as a percentage of taxable payroll. it',
14341:'requires a cashflow projection as a percentage of taxable payroll as in chart 2.] page 45 sffas 17 fasab handbook,',
14342:'version 20 06/21 sffas 17 all of the increase between now and 2030 will occur between 2010 and 2030, as',
14343:'retired baby boomers become eligible for those programs. 123. sensitivity analysis as indicated by the assumptions shown at the end',
14344:'of this section, the future cashflow of the oasdi program depends on many economic and demographic assumptions, including gdp, labor',
14345:'factors, unemployment, average wages and self employment earnings, interest rates on treasury securities, productivity, inflation, fertility, mortality, net immigration, marriage,',
14346:'divorce, retirement patterns, and disability incidence and termination. the cash inflow will depend on how these factors affect the size',
14347:'and composition of the working population and the level and distribution of wages and earnings. similarly, the outgo will depend',
14348:'on how these factors affect the size and composition of the beneficiary population and the general level of benefits. precise',
14349:'longrange projections of these factors is impossible. 124. this section illustrates the sensitivity of the longrange projections to changes in',
14350:'assumptions by analyzing five key individual assumptions: the real interest rate, the death and birth rates, net immigration, and the',
14351:'real wage differential. for this analysis the “best estimate” cost assumptions are used as the reference point, and each assumption',
14352:'is varied within it individually. 125. real interest rate the “bestestimate” longrange cashflow projections presented in chart 1 above assumea',
14353:'4 percent increase in consumer price indexcpiper yearaftertheyear 2000 as the inflation rate and a 2.3 percent real interest rate.',
14354:'the “real interest rate” is the difference between the interest on the treasury securities held by the trust fund and',
14355:'the inflation rate, as measured by the cpi. chart 4 below compares the estimated oasdi net cash outflow using the',
14356:'best estimate cost assumptions, including the 2.3 percent real interest rate, with the net cashflow that would result from decreasing',
14357:'the real interest rate to 1.5 percent and increasing it to 3 percent. page 46 sffas 17 fasab handbook, version',
14358:'20 06/21 sffas 17 􀀀    􀀀          ! !',
14359:'􀀀 􀀀 􀀀 􀀀 􀀀 􀀀 􀀀 􀀀            ',
14360:'               source: data regarding “best estimate”',
14361:'is from tables iii b1, b3, & c1, 1996 oasdi trustee’s report as stated above, the estimated total excess of',
14362:'oasdi cash outflow over cash inflow over thenext 75yearsis$3 trillion. ifthe annualrealinterest rate—that is,thedifferencebetween the interest on the treasury securities',
14363:'held by the trust fund and the inflation rate, as measured by the consumer price index cpi—is changed from the',
14364:'2.3 percent used for the best estimate projection to 1.5 percent, the total excess of cash outflow would increase to',
14365:'$3.8 trillion; if the rate were changed to 3 percent, the total excess would decrease to $2.5 trillion. 126. death',
14366:'rate chart 5 below shows the estimated oasdi cash inflow and outflow using a death rate above and below the',
14367:'rate used for the projection in chart 1 above. this analysis was developed by varying the percentage decrease in the',
14368:'death rate assumed to occur during 19962030. the rate used for chart 1 above assumes a 35 percent decrease. chart',
14369:'5 assumes 25 percent and 45 percent decreases. page 47 sffas 17 fasab handbook, version 20 06/21 sffas 17 􀀀',
14370:'   􀀀         ! ! 􀀀     ',
14371:'                !   $',
14372:'%  source: data regarding “best estimate” is from tables iii b1, b3, & c1, 1996 oasdi trustee’s report. regarding',
14373:'actuarial present values for a 75year projection period, if the decrease in the death rate is changed from the 35',
14374:'percent used for the best estimate projection to 15 percent, meaning that more people are dying, the total excess of',
14375:'cash outflow for the period would decrease to $2.1 trillion, from $3.0 trillion; if the rate were changed to 55',
14376:'percent, the total excess cash outflow would increase to $4.2 trillion. 127. birth rate table1 belowshowsthe estimatedtotalexcess oasdi cash outflowover',
14377:'inflow over a 75 year projection period using a birth rate above and below the rate used for the bestestimate',
14378:'projection. thisanalysiswasdevelopedbyvaryingthepercentageincrease in the birth rate assumed to occur during 19962070. the rate used for the best estimate projection assumes',
14379:'a ultimate birth rate in 2070 of 1.9 children per woman. chart 6 below shows the estimated oasdi cash inflow',
14380:'and outflow using a birth rate above and below the rate used for the projection in chart 1 above. chart',
14381:'6 belowcomparesthe estimated oasdi net cash outflow using the best estimate cost assumptions, including the 1.9 birth rate, with page',
14382:'48 sffas 17 fasab handbook, version 20 06/21 sffas 17 thenet cash outflowthat would result fromdecreasingthe rateto 1.6percent andincreasing it',
14383:'to 2.2 percent. 􀀀    􀀀         ! ! 􀀀 ',
14384:'                   ',
14385:'     !    $ % &  source: data regarding “best estimate” is from',
14386:'tables iii b1, b3, & c1, 1996 oasdi trustee’s report. table 1 presents the affect of using rates of 1.6',
14387:'and 2.2 on the excess of cash outflow over inflow during the projection period. the rate is assumed to increase',
14388:'gradually from its current level to reach the ultimate values in 2070. page 49 sffas 17 fasab handbook, version 20',
14389:'06/21 sffas 17 table 1: estimated total excess oasdi cash outflow over inflow with various birth rateassumptions valuation period: 19962070',
14390:'dollars in trillions ultimate birth rate per woman valuation period: 19962070 1.6 births 1.9 births from best estimate cost assumptions',
14391:'2.2 births excess of cash outflow over cash inflow $3.7 $3.0 $2.5 128. net immigration—chart7 below compares the estimated oasdi',
14392:'net cash outflow using the best estimate cost assumptions, including the 900,000 per year net immigration rate, with the net',
14393:'cashflow that would result from decreasing the rate to 750,000 and increasing it to 1,150,000. 􀀀    􀀀',
14394:'        ! ! 􀀀         ',
14395:'                 !  !!',
14396:'$  source: data regarding “best estimate” from tables iii b1, b3, & c1, 1996 oasdi trustee’s report. page 50',
14397:'sffas 17 fasab handbook, version 20 06/21 sffas 17 regarding actuarial present values over 75 years, table 2 below shows',
14398:'the estimated total excess of oasdi cash outflow over inflow with assumptions that differ from those used for the “best',
14399:'estimate” projection. table 2: estimatedtotal excess oasdi cash outflow over inflow withvarious net immigrationassumptions valuation period: 19962070 dollars in trillions',
14400:'net immigration per year valuation period: 19962070 750,000 900,000 from best estimate cost assumptions 1,150,000 excess of cash outflow over',
14401:'cash inflow $3.2 $3.0 $2.9 129. realwage differential chart 8 below compares the estimated oasdi net cash outflow usingthebest estimate',
14402:'costassumptions, includingthe 1percentrealwage differential, with the net cashflow that would result from decreasing the rate to .5 percent and increasing',
14403:'it to 1.5 percent. the realwage differential is the difference between the annual percentage increase in wages in covered employment',
14404:'and the inflation rate, as measured by the cpi. page 51 sffas 17 fasab handbook, version 20 06/21 sffas 17',
14405:'􀀀    􀀀         !$ 􀀀     ',
14406:'                   ',
14407:'   !    $ % $&$   source: data regarding “best estimate” is from tables',
14408:'iii b1, b3, & c1, 1996 oasdi trustee’s report. regarding actuarial present values over 75 years, table 3 below shows',
14409:'the estimated total excess of oasdi cash outflow over inflow with various assumptions about the realwage differential. table 3estimated total',
14410:'excess oasdi cash outflow over inflow with various realwageassumptions valuation period: 19962070 dollars in trillions ultimate percentage in wagescpi the',
14411:'first value in each of the pairs below is the assumed ultimate annual percentage increase in average wages in covered',
14412:'employment. the second value is the assumed ultimate annual percentage increase in the cpi. the difference between the two values',
14413:'is the realwage differential.] wagescpi 4.54.0 5.04.0 5.54.0 from best estimate cost assumptions excess cash $3.9 $3.0 $2.3 outflow over',
14414:'inflow page 52 sffas 17 fasab handbook, version 20 06/21 sffas 17 130. dependency ratio chart 9 below shows the',
14415:'estimated number of covered workers per oasdi beneficiary using the trustees’ best estimate.as defined by the trustees, covered workers are',
14416:'persons having earnings creditable for oasdi purposes on the basis of services for wages in covered employment and/or on the',
14417:'basis of receipts from covered selfemployment.aschart 6 shows, the numberof workersto beneficiarieswill decline from 3.3 per beneficiary in 1995 to',
14418:'2 per beneficiary in 2030 and 1.8 in 2075. 􀀀􀀀   􀀀       ',
14419:'  social securityassumptions assumptions used the estimates used in this presentation are based on the assumption that the programs',
14420:'will continue as presently constructed. they give effect to certain additional economic and demographic assumptions, including those in the following',
14421:'table: page 53 sffas 17 fasab handbook, version 20 06/21 sffas 17 average annualpercent change gdp wages cpi ave. annl.',
14422:'interest rate on treasurysecur. % ave. annl. unempl. rate ave. no. of children per woman death rate per 100,000 life',
14423:'expectancy men women 1996 2.0 4.0 2.0 6.0 5.0 2.0 757 72 79 2000 2.0 4.3 3.5 6.5 6.0 2.0',
14424:'731 73 79 2005 2.0 5.1 4.0 6.4 6.0 2.0 700 73 80 2010 1.8 5.0 4.0 6.3 6.0 2.0',
14425:'677 74 80 2020 1.3 5.1 4.0 6.3 6.0 1.9 638 75 81 2030 1.4 5.0 4.0 6.3 6.0 1.9',
14426:'603 76 81 these assumptions and the other values on which these displays are based represent the latest and most',
14427:'likely — or “best” — estimates of these values by the trustees. estimates made in certain prior years have changed',
14428:'substantially because of revisions to the assumptions due to changed conditions or experience, and to changes in actuarial methodology. it',
14429:'is reasonable to expect more changes for similar reasons in the future. unemployment insurance programs 131. the u. s. department',
14430:'of labor operates two programs classified under federal accounting standards as social insurance, the unemployment insurance program and the black',
14431:'lung disability benefits program. presented below is the required supplementary stewardship information for the unemployment insurance program. program description 132.',
14432:'the unemployment insurance ui program was created in 1935 to provide income assistance to unemployed workers who have lost their',
14433:'jobs through no fault of their own. the program protects workers during temporary periods of unemployment, through the provision of',
14434:'unemployment compensation benefits. these benefits replace part of the unemployed worker’s lost wages and, in so doing, stabilize the economy',
14435:'during recessionals periods by increasing the unemployed worker’s lost wages and purchasing power. the ui program operates counter cyclically, paying',
14436:'benefits during recessionary periods and collecting ui tax revenue during periods of recovery. 133. program administration and funding the ui',
14437:'program is administered through a unique system of federalstate partnerships, established in federal law but executed through conforming state laws',
14438:'by state officials. the federal government provides broad policy guidance and program direction through the oversight of the u.s. department',
14439:'of labor, while program details are established through individual state ui statutes, administered through state ui agencies. page 54 sffas',
14440:'17 fasab handbook, version 20 06/21 sffas 17 134. federal and state unemployment taxes the ui program is financed through',
14441:'the collection of federal and state unemployment taxes levied on subject employers and deposited in the unemployment trust fund utf.',
14442:'federal unemployment taxes are used to payforthe administrative costsoftheui program,includinggrantstoeachstatetocoverthe costs of state ui operations, as well as the federal',
14443:'share of extended ui benefits. federal unemployment taxes are also used to maintain a loan account within the utf, from',
14444:'which insolvent state accounts may borrow funds to pay ui benefits. state ui taxes are used exclusively for the payment',
14445:'of regular ui benefits, and the state’s share of extended benefits. these taxes and the utf established to account for',
14446:'their receipt, investment, and disbursement are discussed below. 135. federal unemployment taxes under the provisions of the federal unemployment taxact',
14447:'futa, a federal tax is levied on covered employers, at a current rate of 6.2 percent of the first $7,000',
14448:'in annual wages paid to each employee. this federal tax is reduced by a credit of up to 5.4 percent',
14449:'granted to employers paying state ui taxes under conforming state ui statutes. accordingly, in conforming states, employers pay an effective',
14450:'federal tax of .8 percent. federal unemployment taxes are collected by the internal revenue service. 136. state unemployment taxes in',
14451:'addition to the federal tax, individual states finance their ui programs through state tax contributions from subject employers on the',
14452:'wages of covered employees. three states also collect contributions from employees. within federal confines, state tax rates are assigned in',
14453:'accordance with an employer’s experience with unemployment. actual tax rates vary greatly among the states and among individual employers within',
14454:'the state. at a minimum, these rates must be applied to the federal tax base of $7,000; however, states may',
14455:'adopt a higher wage base than the minimum established by futa. state ui agencies are responsible for the collection of',
14456:'state unemployment taxes. 137. unemployment trust fund federal and state ui taxes are deposited into designated accounts within the utf.',
14457:'the utf was established under the authority of title ix, section 904 of the social securityact of 1935, as amended,',
14458:'to receive, hold, invest, loan, and disburse federal and state ui taxes. the u.s. department of the treasury invests amounts',
14459:'in excess of disbursing requirements in treasury securities. the utf is comprised of the following accounts: 138. federal accounts the',
14460:'employment securityadministrationaccount esaa was established pursuant to section 901 of the social securityact. all tax receipts collected underthe futaare appropriated',
14461:'to the esaaand usedtopaythe costsof federaland state administration of the ui program and veterans employment services, as well as 97',
14462:'percent of the costs of the state employment services. excess balances in esaa, as defined under the act, are transferred',
14463:'to other federal accounts within the fund, as described below. page 55 sffas 17 fasab handbook, version 20 06/21 sffas',
14464:'17 139. the federal unemploymentaccount fua was established pursuant to section 904 of the social securityact. fuais funded by any',
14465:'excesses from the esaaas determined in accordance with section 902 of the act. title xii, section 1201 of the act',
14466:'authorizes the fua to loan federal moniesto state accounts that are unable to make benefit payments because the state ui',
14467:'account balance hasbeen exhausted. title xii loans must be paid with interest. the fuamay borrow from the esaaor the extended',
14468:'unemployment compensation account euca, without interest, or may also receive repayable advances, with interest, from the generalfund of the u.s.',
14469:'treasurywhen the fuahas a balance insufficient to make advances to the states. 140. the extended unemployment compensationaccount euca was established',
14470:'pursuant to section 905 of the social securityact. eucaprovides for the payment of extended unemployment benefits authorized under the federal/state',
14471:'extended unemployment compensationact of 1970, as amended. under the extended benefits program, extended unemployment benefits are paid to individuals who',
14472:'have exhausted their regular unemployment benefits. these extended benefits are financed onehalf by state unemployment taxes and onehalf by futataxes',
14473:'obtained from the euca. the eucais funded by a percentage of the futatax transferred from the esaain accordance with section',
14474:'905b1 and 2 of the social securityact. the eucamay borrow from the esaa or the fua, without interest, or may',
14475:'also receive repayable advances from the general fund of the treasury when the eucahas a balance insufficient to pay the',
14476:'federal share of extended benefits. during periods of sustained high unemployment, the eucamay also receive payments and non repayable advances',
14477:'from the general fund of the treasury to finance emergency unemployment compensation benefits. emergency unemployment benefits require congressional authorization. 141.',
14478:'the federal employees compensationaccount feca was established pursuant to section 909 of the social securityact. fecaprovides funds to states for',
14479:'unemployment compensation benefits paid to eligible former federal civilian personnel and exservice members. generally, benefits paid are reimbursed to the',
14480:'fecaby the various federal agencies. any additional resources necessary to ensure that the account can make the required payments to',
14481:'states, due to the timing of the benefit payments and subsequent reimbursements, will be provided by non repayable advances from',
14482:'the general fund of the treasury. 142. state accounts separate state accounts were established for each state and territory depositing',
14483:'monies into the utf, in accordance with section 904 of the social securityact. state unemployment taxes are deposited into these',
14484:'individual accounts and may be used only to pay state unemployment benefits. states may receive repayable advances from the fuawhen',
14485:'their balances in the utf are insufficient to pay benefits. page 56 sffas 17 fasab handbook, version 20 06/21 sffas',
14486:'17 143. railroad retirement accounts the railroad uiaccount and railroad uiadministrative account were established under section 904 of the social',
14487:'securityact to provide for a separate unemployment insurance program for railroad employees. this separate unemployment insurance program is administered by',
14488:'the railroad retirement board, an agency independent of the department of labor dol. dol is not responsible for the administrative',
14489:'oversight or solvency of the railroad unemployment insurance system. receipts from taxes on railroad payrolls are deposited in the railroad',
14490:'uiaccount and the railroad uiadministrativeaccount to meet benefit payment and related administrative expenses. 144. ui program benefits the ui program',
14491:'provides regular and extended benefit payments to eligible unemployed workers. regular ui program benefits are established under state law, payable',
14492:'for a period not to exceed a maximum duration. in 1970, federal law began to require states to extend this',
14493:'maximum period of benefit duration by 50 percent, during periods of high unemployment. these extended benefit payments are paid equally',
14494:'from federal and state accounts. 145. regular ui benefits there are no federal standards regarding eligibility, amount, or duration of',
14495:'regular ui benefits. eligibility requirements, benefit amounts, and benefit duration are determined under state law. under state laws, worker eligibility',
14496:'for benefits depends on experience in covered employment during a past base period, which attempts to measure the workers’ recent',
14497:'attachment to the labor force. three factors are common to state eligibility requirements: 1 a minimum duration of recent employment',
14498:'and earnings during a base period to unemployment, 2 unemployment not the fault of the unemployed, and 3 availability of',
14499:'the unemployed for work. 146. benefit payment amounts under all state laws vary with the worker’s base period wage history.',
14500:'generally, states compute the amount of weekly ui benefits as a percent of an individual’s average weekly base period earnings,',
14501:'within certain minimum and maximum limits. most statessetthe durationof uibenefitsbytheamount of earningsan individualhas received duringthebase period. currently, all but two',
14502:'stateshave establishedthemaximum duration for regular ui benefits at 26 weeks massachusetts and washington state provide 30 weeks. regular ui benefits',
14503:'are paid by the state ui agencies from monies drawn down from the state’s account within the utf. 147. extended',
14504:'ui benefits the federal/state extended unemployment compensationact of 1970 provides for the extension of the duration of ui benefits during',
14505:'periods of high unemployment. when the insured unemployment levelwithin a state, orin some cases total unemployment, reaches certain specified levels,',
14506:'the state must extend benefit duration by 50 percent, up to a combined maximum of 39 weeks. fifty percent of',
14507:'the cost of extended unemployment benefits is paid from the eucawithin the utf, and 50 percent by the state, from',
14508:'the state’s utf account. page 57 sffas 17 fasab handbook, version 20 06/21 sffas 17 148. emergency ui benefits during',
14509:'prolonged periods of high unemployment, congress may authorize the payment of emergency unemployment benefits to supplement extended ui benefit payments.',
14510:'emergency benefits were last authorized in 1991 under the euca. emergency benefit payments in excess of $28 billion were paid',
14511:'over the three year period ending in 1994. emergency benefits were paid from the surplus of federal unemployment taxes in',
14512:'eucaand, once eucabalances were exhausted, from general revenues of the u.s. treasury. 149. federal ui benefits unemployment benefits to unemployed',
14513:'federal workers are paid from the fecawithin utf and then reimbursed by the responsible federal agency. they are not considered',
14514:'to be social insurance benefits. federal unemployment compensation benefits are not included in this discussion of social insurance programs. program',
14515:'finances and sustainability 150. at september 30, 1996, total assets within the utf exceeded liabilities by $54.0 billion.23 this fund',
14516:'balance approximates the accumulated surplus of tax revenues and earnings on these revenuesoverbenefit payment expensesandisavailabletofinancebenefit payments in future periods when',
14517:'tax revenues may be insufficient. treasury invests this accumulated surplus in federal securities. the net value of these securities at',
14518:'september 30, 1996, was $53.9 billion. these investments accrue interest, which is distributed to eligible state and federal accounts within',
14519:'the utf. interest income from these investments during fy 1996 was $3.4 billion. as discussed in note 1.b.3 to the',
14520:'consolidated financial statements, dol recognized a liability for regular and extended unemployment benefits to the extent of unpaid benefitsapplicable to',
14521:'the current period.accrued unemployment benefitspayable at september 30, 1996, were $506.4 million. 151. effect of projected cash inflows and outflows',
14522:'on the accumulated net assets of the utf the ability of the ui programs to meet a participant’s future benefit',
14523:'payment needs depends on the availability of accumulated taxes and earnings within the utf. the dol measures the effect of',
14524:'projected benefit payments on the accumulated net assets of the utf, under an open group scenario, which includes current and',
14525:'future participants in the ui program. future estimated cash inflows and outflows of the utf are tracked by dol for',
14526:'budgetary purposes. these projections allow the dol to monitor the sensitivity of the ui program to differing economic conditions, and',
14527:'to predict the program’s sustainability under varying economic assumptions. charts i through iv graphically depict the effect of varying economic',
14528:'conditions on the utf over the next 10 years. 23[please note: the standard does not require information on the total',
14529:'amount of securities held at the balance sheet date. this information illustrates that management canprovidedata in addition to that required',
14530:'by the standard when it feels doing so would be useful to readers of the report.] page 58 sffas 17',
14531:'fasab handbook, version 20 06/21 sffas 17 152. projected cash inflows and outflows under expected economic conditions chart i depictsprojected',
14532:'cashinflowandoutflowofthe utf overthe next10years,underexpected economic conditions. total cash inflow as well as cash inflow excluding interest earnings is displayed. dol’s',
14533:'current estimates were based on an expected unemployment rate of 5.1 percent during fy 1997, increasing to 5.5 percent in',
14534:'fy 2001 and thereafter. these projections indicate net cash inflow through fy 2004, with a crossover to net outflow in',
14535:'fy 2005. cashinflowscombined withinterestearningsexceed cashoutflowsfor each of the 10 yearspresented, although this net excessdecreases from $8.7 billion at the end',
14536:'of fy 1997 to $3.9 billion at the end of fy 2006. 􀀀  􀀀  􀀀 􀀀 􀀀 􀀀',
14537:'􀀀 􀀀                  ',
14538:'  ! 153. effect of expected cashflows on utf assets chart ii demonstrates the effect of the expected cash',
14539:'inflow and outflow on the net assets of the utf over the 10year period ending september 30, 2006. yearlyprojected total',
14540:'cash inflows, including interest earnings, and cash outflows are depicted, as well as the net effect of this cashflow on',
14541:'utf assets. under this scenario, total cash inflow exceeds cash outflow in each of the 10 years projected, although the',
14542:'margin of excess decreases by 55 percent from fy 1997 to fy 2006. net utf assets increase by 87 percent',
14543:'over the 10year period, from $62.5 billion in fy 1997 to $117.0 billion in fy 2006. page 59 sffas 17',
14544:'fasab handbook, version 20 06/21 􀀀    􀀀   􀀀 􀀀 􀀀 􀀀 􀀀 􀀀 􀀀 ',
14545:'􀀀  􀀀  􀀀  􀀀             ',
14546:'    􀀀    􀀀   􀀀 􀀀 􀀀 􀀀 􀀀 􀀀 􀀀  􀀀',
14547:' 􀀀  􀀀  􀀀              ',
14548:'   sffas 17 􀀀    􀀀   􀀀 􀀀 􀀀 􀀀 􀀀 􀀀 􀀀 ',
14549:'􀀀  􀀀  􀀀  􀀀             ',
14550:'    155. effect on utf assets of mild recession chart iii shows the projected effects of moderate',
14551:'recession on the cash inflow and outflow of the utf. under this scenario, which utilizes a rising unemployment rate peaking',
14552:'at 7.4 percent in fy 2002, net cash outflows are projected to begin in fy 2001, increasing to a maximum',
14553:'of $7.0 billion in fy 2002. net cash inflow is reestablished in fy 2004 with a drop in the unemployment',
14554:'rate to 6.4 percent. 156. effect on utf assets of deep recession chart iv showsthe effect ofsevere recession on the',
14555:'cash inflow and outflow of the utf. this scenario assumes a rising unemployment rate peaking at 10.2 percent in fy',
14556:'2002. under this scenario, net cash outflows are projected to begin early in fy 2000, increasing to $22.5 billion in',
14557:'fy 2002. during this twoyear period, the net assets of the utf decrease from $76.7 billion to $35.0 billion, a',
14558:'decline of $41.7 billion 54 percent. while aggregate utf balances remain positive, state accounts without sufficient reserve balances to absorb',
14559:'negative cashflows would be forced to borrows funds from the fuato meet benefit payment requirements. state borrowing demands could also',
14560:'deplete the fua, which borrows from the esaaand the eucauntil they were depleted. page 61 sffas 17 fasab handbook, version',
14561:'20 06/21 sffas 17 the fuawould then requireadvances fromthegeneralfund of the u.s. treasurytoprovide for state borrowing. see discussion of state',
14562:'solvency measures infra. 157. net cash inflows are reestablished early in fy 2003, with a drop in the unemployment rate',
14563:'to 7.82 percent. by the end of fy2006, this positive cashflow hasreplenished utf account balances to $73.6 billion, or to',
14564:'within $3.0 billion of their fy 2000 peak. this example demonstrates the countercyclical nature of the ui program, which experiences',
14565:'net cash outflows during periods of recession, to be replenished through net cash inflows during periods of recovery. 􀀀 ',
14566:'   􀀀   􀀀􀀀􀀀􀀀􀀀􀀀􀀀 􀀀 􀀀 􀀀 􀀀      158. tables containing the',
14567:'yearly cash inflow, interest earnings, and cash outflow for each scenario are presented in the following pages. page 62 sffas',
14568:'17 fasab handbook, version 20 06/21 u.s. department of labor required supplemental stewardship information cash inflow and outflow of the',
14569:'unemployment trust fund excluding the federal employees compensationaccount for the tenyear period ended september 30, 1996 1 expected unemployment rate',
14570:'dollars in thousands 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 balance, start of year $ 53,800,832 $',
14571:'62,495,644 $ 69,134,779 $ 75,410,218 $ 82,183,369 $ 89,188,172 $ 96,242,575 $ 102,591,615 $ 108,232,958 $ 113,075,913 cash inflow state',
14572:'unemployment taxes federal unemployment taxes deposits by the rrb 22,681,000 6,046,000 27,600 22,442,000 6,141,000 67,800 24,195,000 6,201,000 127,600 25,837,000 6,300,000',
14573:'136,600 27,011,000 6,332,000 101,000 27,927,000 6,428,000 70,000 28,666,000 6,474,000 75,100 29,217,000 6,545,000 102,400 29,792,000 6,616,000 109,800 30,439,000 6,690,000 91,400 total',
14574:'cash inflow ex. interest 28,754,600 28,650,800 30,523,600 32,273,600 33,444,000 34,425,000 35,215,100 35,864,400 36,517,800 37,220,400 interest on federal securities 3,744,328 4,179,810',
14575:'4,413,592 4,670,414 4,924,397 5,227,889 5,326,384 5,503,356 5,656,406 5,711,029 total cash inflow 32,498,928 32,830,610 34,937,192 36,944,014 38,368,397 39,652,889 40,541,484 41,367,756 42,174,206',
14576:'42,931,429 cash outflow state unemploymentbenefits state administrative costs federal administrative costs interest on tax refunds rrb withdrawals 20,179,000 3,357,406 165,641',
14577:'3,248 98,821 22,357,000 3,561,582 169,182 3,299 100,412 24,875,000 3,513,672 170,441 3,165 99,475 26,443,000 3,456,087 171,565 3,136 97,075 27,619,400 3,474,974 172,610',
14578:'3,035 93,575 28,831,233 3,498,455 172,612 3,011 93,175 30,329,870 3,591,026 174,589 2,984 93,975 31,765,260 3,687,876 176,885 3,017 93,375 33,267,761 3,787,445 179,237',
14579:'3,033 93,775 34,821,713 3,889,713 181,644 3,016 93,575 total cash outflow excess of total cash inflow ex. int. over total cash',
14580:'outflow excess of total cash nflow over total cash outflow 23,804,116 4,950,484 8,694,812 26,191,475 2,459,325 6,639,135 28,661,753 1,861,847 6,275,439 30,170,863',
14581:'2,102,737 6,773,151 31,363,594 2,080,406 7,004,803 32,598,486 1,826,514 7,054,403 34,192,444 1,022,656 6,349,040 35,726,413 137,987 5,641,343 37,331,251 813,451 4,842,955 38,989,661 1,769,261 3,941,768',
14582:'balance, end of the year $ 62,495,644 $ 69,134,779 $ 75,410,218 $ 82,183,369 $ 89,188,172 $ 96,242,575 $ 102,591,615 $',
14583:'108,232,958 $ 113,075,913 $ 117,017,681 total unemployment rate 5.09% 5.12% 5.38% 5.47% 5.50% 5.50% 5.50% 5.50% 5.50% 5.50% page 63',
14584:'sffas 17 fasab handbook, version 20 06/21 u.s. department of labor required supplemental stewardship information cash inflow and outflow of',
14585:'the unemployment trust fund excluding the federal employees compensationaccount for the tenyear period ended september 30, 1996 2 mild recessionary',
14586:'unemployment rate dollars in thousands 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 balance, start of year $',
14587:'53,800,832 $ 62,495,644 $ 69,134,779 $ 75,427,203 $ 78,997,497 $ 72,977,460 $ 65,947,568 $ 65,595,389 $ 74,470,094 $ 87,923,108 cash',
14588:'inflow state unemployment taxes 22,681,000 22,442,000 24,195,000 25,837,000 27,889,000 31,018,000 35,304,000 39,150,000 41,096,000 40,839,000 federal unemployment taxes 6,046,000 6,141,000 6,201,000',
14589:'6,169,000 6,139,000 6,177,000 6,224,000 6,335,000 6,462,000 6,549,000 deposits by the rrb 27,600 67,800 127,600 136,600 101,000 70,000 75,100 102,400 109,800',
14590:'91,400 total cash inflow ex. interest 28,754,600 28,650,800 30,523,600 32,142,600 34,129,000 37,265,000 41,603,100 45,587,400 47,667,800 47,479,400 interest on federal securities',
14591:'3,744,328 4,179,810 4,485,592 4,324,625 4,389,403 3,957,469 3,737,486 3,670,448 4,053,078 4,639,297 total cash inflow 32,498,928 32,830,610 35,009,192 36,467,225 38,518,403 41,222,469 45,340,586',
14592:'49,257,848 51,720,878 52,118,697 cash outflow state unemployment benefits 20,179,000 22,357,000 24,930,015 29,083,333 40,393,938 44,027,625 41,544,306 36,305,687 34,175,845 34,832,298 state administrative',
14593:'costs 3,357,406 3,561,582 3,513,672 3,541,887 3,875,374 3,956,055 3,877,026 3,804,276 3,816,045 3,861,112 federal administrative costs 165,641 169,182 170,441 171,565 172,610 172,612',
14594:'174,589 176,885 179,237 181,644 interest on tax refunds 3,248 3,299 3,165 3,071 2,943 2,894 2,869 2,920 2,962 2,953 rrb withdrawals',
14595:'98,821 100,412 99,475 97,075 93,575 93,175 93,975 93,375 93,775 93,575 total cash outflow 23,804,116 26,191,475 28,716,768 32,896,931 44,538,440 48,252,361 45,692,765',
14596:'40,383,143 38,267,864 38,971,582 excess of total cash inflow ex. interest over total cash outflow 4,950,484 2,459,325 1,806,832 754,331 10,409,440 10,987,361',
14597:'4,089,665 5,204,257 9,399,936 8,507,818 excess of total cash nflow over total cash outflow 8,694,812 6,639,135 6,292,424 3,570,294 6,020,037 7,029,892 352,179',
14598:'8,874,705 13,453,014 13,147,115 balance, end of the year $ 62,495,644 $ 69,134,779 $ 75,427,203 $ 78,997,497 $ 72,977,460 $ 65,947,568',
14599:'$ 65,595,389 $ 74,470,094 $ 87,923,108 $ 101,070,223 total unemployment rate 5.09% 5.12% 5.38% 5.60% 6.57% 7.43% 7.07% 6.42% 5.62%',
14600:'5.50% page 64 sffas 17 fasab handbook, version 20 06/21 u.s. department of labor required supplemental stewardship information cash inflow',
14601:'and outflow of the unemployment trust fund excluding the federal employees compensationaccount for the tenyear period ended september 30, 1996',
14602:'3 deep recessionary unemployment rate dollars in thousands 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 balance, start',
14603:'of year $ 53,800,832 $ 62,495,644 $ 69,134,779 $ 75,247,218 $ 76,661,227 $ 57,496,183 $ 34,990,203 $ 40,790,676 $ 51,029,964',
14604:'$ 61,156,933 cash inflow state unemployment taxes 22,681,000 22,442,000 24,195,000 25,837,000 27,001,000 33,246,000 40,275,000 44,151,000 46,310,000 45,904,000 federal unemployment taxes',
14605:'6,046,000 6,141,000 6,201,000 6,169,000 6,139,000 6,177,000 6,224,000 6,335,000 6,462,000 6,549,000 deposits by the rrb 27,600 67,800 127,600 136,600 101,000 70,000',
14606:'75,100 102,400 109,800 91,400 total cash inflow ex. interest 28,754,600 28,650,800 30,523,600 32,142,600 33,241,000 39,493,000 46,574,100 50,588,400 52,881,800 52,544,400 interest',
14607:'on federal securities 3,744,328 4,179,810 4,413,592 4,313,207 4,254,058 3,108,756 2,055,502 2,331,404 2,840,149 3,202,881 total cash inflow 32,498,928 32,830,610 34,937,192 36,455,807',
14608:'37,495,058 42,601,756 48,629,602 52,919,804 55,721,949 55,747,281 cash outflow state unemployment benefits 20,179,000 22,357,000 25,038,000 31,171,000 52,201,000 60,454,000 38,737,870 38,517,260 41,302,761',
14609:'38,980,713 state administrative costs 3,357,406 3,561,582 3,513,672 3,599,087 4,189,974 4,385,055 3,819,826 3,890,076 4,016,245 4,004,112 federal administrative costs 165,641 169,182 170,441',
14610:'171,565 172,610 172,612 174,589 176,885 179,237 181,644 interest on tax refunds 3,248 3,299 3,165 3,071 2,943 2,894 2,869 2,920 2,962',
14611:'2,953 rrb withdrawals 98,821 100,412 99,475 97,075 93,575 93,175 93,975 93,375 93,775 93,575 total cash outflow 23,804,116 26,191,475 28,824,753 35,041,798',
14612:'56,660,102 65,107,736 42,829,129 42,680,516 45,594,980 43,262,997 excess of total cash inflow ex. interest over total cash outflow 4,950,484 2,459,325 1,698,847',
14613:'2,899,198 23,419,102 25,614,736 3,744,971 7,907,884 7,286,820 9,281,403 excess of total cash nflow over total cash outflow 8,694,812 6,639,135 6,112,439 1,414,009',
14614:'19,165,044 22,505,980 5,800,473 10,239,288 10,126,969 12,484,284 balance, end of the year $ 62,495,644 $ 69,134,779 $ 75,247,218 $ 76,661,227 $',
14615:'57,496,183 $ 34,990,203 $ 40,790,676 $ 51,029,964 $ 61,156,933 $ 73,641,217 total unemployment rate 5.09% 5.12% 5.38% 6.65% 9.07% 10.15%',
14616:'7.82% 7.28% 7.05% 6.43% page 65 sffas 17 fasab handbook, version 20 06/21 sffas 17 159. states minimally solvent another',
14617:'measure ofthe sufficiency of accumulated utf assets to meet future benefit payment requirements analyzes the adequacy of each state’s accumulated',
14618:'net assets or reserve balance to provide a defined level of benefits over a defined period of time. to be',
14619:'consideredminimallysolvent, astate’sreserve balance should provide for one year’s projected benefit payment needs based on the highest levels of benefit payments',
14620:'experienced by the state over the last 20 years. aratio of 1.0 or greater indicates a state is minimally solvent.',
14621:'states below this level are the most vulnerable to exhausting their funding in a recession. states exhausting their reserve balance',
14622:'must borrow funds from the fuato make benefit payments. during periods of high sustained unemployment, balances in the fuamay be',
14623:'depleted. in these circumstances, fuais authorized to borrow from the treasury general fund. 160. chart v presents the statebystate results',
14624:'of this analysis at september 30, 1996, in descending order, by ratio. as the table illustrates, 23 states failed to',
14625:'meet the minimum solvency test of 1.0 at september 30, 1996. chart v minimally solvent not minimally solvent state ratio',
14626:'state ratio virgin islands 2.89 maryland 0.99 new mexico 2.43 alaska 0.94 new hampshire 2.18 nevada 0.94 vermont 2.17 alabama',
14627:'0.90 georgia 1.96 kentucky 0.71 mississippi 1.93 arkansas 0.64 oklahoma 1.86 ohio 0.63 utah 1.84 pennsylvania 0.62 delaware 1.74 massachusetts',
14628:'0.58 wyoming 1.65 michigan 0.57 kansas 1.63 minnesota 0.56 puerto rico 1.6 maine 0.54 virginia 1.58 north dakota 0.54 indiana',
14629:'1.57 california 0.53 florida 1.55 illinois 0.50 iowa 1.39 rhode island 0.47 nebraska 1.37 missouri 0.45 north carolina 1.32 dist.',
14630:'of col. 0.45 arizona 1.28 west virginia 0.42 page 66 sffas 17 fasab handbook, version 20 06/21 sffas 17 continued',
14631:'from previous page minimally solvent state ratio not minimally solvent state ratio idaho 1.26 texas 0.33 south carolina 1.24 connecticut',
14632:'0.31 louisiana 1.23 new york 0.13 oregon 1.2 wisconsin 1.18 montana 1.13 colorado 1.08 tennessee 1.08 washington 1.07 hawaii 1.06',
14633:'south dakota 1.06 page 67 sffas 17 fasab handbook, version 20 06/21 sffas 17 governmentwide entity perspective note: this pro',
14634:'forma illustration is a partial display featuring social security and medicare and is not intended to be the full consolidated',
14635:'presentation wherein all social insurance programs would be summarized and consolidated in accordance with par. 32. stewardship information: consolidated statement',
14636:'of social insurance 75year projectiona as of september 30, 1996 [hypotheticaldata] dollars in trillions prioryears 1996 1995 1994 1993 1992',
14637:'actuarial present value of future benefit paymentsb during the 75year period to or on behalf of: current participants not yet',
14638:'having attained retirement agec $x $x $x $x $x oasdi [x] [x] [x] [x] [x] hi [x] [x] [x] [x]',
14639:'[x] smi [x] [x] [x] [x] [x] other [x] [x] [x] [x] [x] current participants who have attained retirement agec',
14640:'x x x x x oasdi [x] [x] [x] [x] [x] hi [x] [x] [x] [x] [x] smi [x] [x]',
14641:'[x] [x] [x] other [x] [x] [x] [x] [x] those expected to become participants i.e., new entrants x x x',
14642:'x x oasdi [x] [x] [x] [x] [x] hi [x] [x] [x] [x] [x] smi [x] [x] [x] [x] [x]',
14643:'other [x] [x] [x] [x] [x] subtotal—benefit payments for the 75year period x x x x x less the actuarial',
14644:'present value of future contributions and tax income during the 75year period from and on behalf of: current participants who',
14645:'have not yet attained retirement agec y y y y y oasdi [y] [y] [y] [y] [y] hi [y] [y]',
14646:'[y] [y] [y] smi [y] [y] [y] [y] [y] other [y] [y] [y] [y] [y] current participants who have attained',
14647:'retirement agec y y y y y oasdi [y] [y] [y] [y] [y] page 68 sffas 17 fasab handbook, version',
14648:'20 06/21 sffas 17 continued from previous page dollars in trillions prior years 1996 1995 1994 1993 1992 hi [y]',
14649:'[y] [y] [y] [y] smi [y] [y] [y] [y] [y] other [y] [y] [y] [y] [y] those expected to become',
14650:'participants i.e., new entrants y y y y y oasdi [y] [y] [y] [y] [y] hi [y] [y] [y] [y]',
14651:'[y] smi [y] [y] [y] [y] [y] other [y] [y] [y] [y] [y] subtotal—benefit payments for the 75year period y',
14652:'y y y y excess of actuarial present values of future benefit payments over future contributions and tax income for',
14653:'the 75year period d $x $x $x $x $x notes to the statement: athe projection period for new entrants covers',
14654:'the next 75 years. the projection period for current participants or ’closed group” wouldtheoreticallycoveralloftheirworkingandretirementyears,aperiodthatcouldbegreaterthan75yearsainfewinstances. as a practical matter the present',
14655:'values of future payments and contributions for/from current participants beyond 75 years are not material. b“benefit payments” include administrative expenses.',
14656:'c the actuarial net present value of the excess of future benefit payments to current participants that is, to the',
14657:'“closed group” of participants over future contributions and tax income from them or paid on their behalf is calculated by',
14658:'subtracting the actuarial present value of future contributions and tax income by and on behalf of current participants from the',
14659:'actuarial present value of the future benefit payments to them or on their behalf. dthe fund balance—which represents the accumulated',
14660:'excess of all past cash inflow, including interest on intragovernmental securities, over all past cash outflowwithin the program—for fiscal year',
14661:'1996 is $ x1 trillion. the fund balances for 19952, in trillions, were $x2, x3, x4, x5, respectively. the accumulated',
14662:'excess of cash inflow over outflow at the valuationdateconsists of a small amount of cash for current operations with the',
14663:'balance invested in treasury securities. when presented for redemption, these securities will represent a first claim on the resources of',
14664:'the government. program description 161. asdiscussedinnote xtothe cfs,aliabilityof$75billionisincluded in “otherliabilities” on the balance sheet for unpaid amounts of oldage, survivors,',
14665:'disability insurance oasdi, medicare hi and smi, and other social insurance benefits due to recipients or service providersfor periodsendedonorbeforeseptember30, 1996.',
14666:'most ofthisamount waspaid in october 1996. 162. while no liability has been recognized on the balance sheet for future payments',
14667:'beyond the amount due as of september 30, actuarial estimates of future program activities have been preparedforthe social insuranceprograms. longterm',
14668:'actuarialviewsare a critical element in assessing the financial condition of social insurance programs. in addition, social insurance programs must be',
14669:'assessed as a large and growing part of the governmentwide page 69 sffas 17 fasab handbook, version 20 06/21 sffas',
14670:'17 financial entity where they impact the balance between future government obligations and resources. 163. by projecting receipts from all',
14671:'sources and outlays for all federal programs for all purposes—as is the goal when analyzing trends in the federal budget,',
14672:'and as shown for the shortterm in the current services estimate, which shows the current and six future years see',
14673:'page xx of this report—it is possible to examine whether there will be sufficient resources to support all the government’s',
14674:'ongoing responsibilities. it is also possible to see the interrelationship among the various types of government receipts e.g., income taxes,',
14675:'payroll taxes, exchange revenue and outlays e.g., social insurance, national defense, where increases/decreases in one area of the budget can',
14676:'be offset by decreases/increases in other areas. another perspective for assessing the financial condition of the government is its relationship',
14677:'to the national economy as measured by the gdp. 164. the actuarial present values and projections presented here for social',
14678:'security and medicare, which are by far the largest social insurance programs, use the best estimate of the programs’ actuaries',
14679:'of future costs over periods ranging up to 75 years. estimates extending so far into the future, however, are inherently',
14680:'uncertain; and the uncertainty is greater for the later years in the period. 165. as shown in chart 1, under',
14681:'current policies social security cash outflow will exceed inflow from the public in about 2012. page 70 sffas 17 fasab',
14682:'handbook, version 20 06/21 sffas 17 􀀀􀀀 􀀀 􀀀􀀀 􀀀􀀀􀀀 􀀀􀀀 􀀀􀀀􀀀 􀀀􀀀 􀀀􀀀􀀀  􀀀􀀀􀀀 􀀀􀀀 􀀀􀀀 􀀀 􀀀􀀀',
14683:'􀀀 􀀀􀀀                  ',
14684:' source: data from tables iii b1, b3, c1, 1996 oasdi trustee’s report. 166. the medicare hospitalinsurancehiprogramcash outflowexceededannual cashinflowin fy',
14685:'1996. using the actuaries’ best estimate, the hi program will be insolvent in 2001, as shown in chart 2 below.',
14686:'projected hi payroll tax will meet a declining share of cash outflow under present law. tax receipts are expected to',
14687:'equal 84 percent of cash outflow in 1997 and 74 percent in 2001 and would cover less than onethird of',
14688:'costs 75 years from now. page 71 sffas 17 fasab handbook, version 20 06/21 sffas 17 􀀀􀀀   ',
14689:'  􀀀 􀀀 􀀀􀀀 􀀀 􀀀􀀀 􀀀 􀀀􀀀 􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀 􀀀􀀀􀀀􀀀         ',
14690:'         !  source: data from table ii d3, 1997 hi trustee’s',
14691:'report. 167. the medicare supplementary medical insurance smi is funded by premiums paid by participants and annual general fund appropriations.',
14692:'current law provides for annual calculations of expected cost. premiums, which currently cover approximately 25 percent of the program’s cost,',
14693:'are expected to pay 16 percent by 2006 and decline further thereafter. 168. smi benefits have been growing rapidly. expenditures',
14694:'have increased 45 percent over the past five years. during this period the program grew about 14 percent faster than',
14695:'the economy as a whole, despite efforts to control costs. 169. as presently constructed, the hi program receives most of',
14696:'its income from the 1.45 percent payroll tax that employees and employers each pay, for a total of 2.9 percent',
14697:'of taxable payroll. chart 3 below illustrates the cost rate of thisprogram relative to its income rate asa percentage of',
14698:'taxable payroll. page 72 sffas 17 fasab handbook, version 20 06/21 sffas 17 􀀀􀀀      􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀',
14699:'􀀀􀀀􀀀 􀀀􀀀􀀀 􀀀 􀀀􀀀 􀀀􀀀􀀀 􀀀 􀀀􀀀 􀀀􀀀􀀀 􀀀 􀀀   source: data from table iia.2, 1997 oasdi trustee’s',
14700:'report. 170. medicare is currently paying and, from 2012 forward, oasdi would pay more to the public than they receive',
14701:'in taxes thereby increasing the government’s financing needs. compared to a situation in which taxes or other financing sources equalled',
14702:'cash outflow, the government will have to finance this difference by increased borrowing from the public, spending cuts, tax increases,',
14703:'or some combination of these measures. 171. growing disparity between rates of income and outgo the excess of oasdi and',
14704:'hi cash outflow over inflow and the decreasing percent of smi cost covered by premiums is due to the increasing',
14705:'cost of existing medical care; the increased utilization of existing and new health care techniques; and, in later years, the',
14706:'retirement of the “baby boom” generation and the relatively small number of people born during the subsequent period of low',
14707:'birth rate. for example, the oasdi trustees’ best estimate shows a longterm actuarial deficit over the next 75 years of',
14708:'2.17 percent of taxable payroll—in other words, a tax increase today of 1.09 percent of taxable payroll each for employees',
14709:'and employers, over the 6.2 percent they each now pay would produce enough revenue to pay benefits under page 73',
14710:'sffas 17 fasab handbook, version 20 06/21 sffas 17 currentlaw,over 75 years.24 increasingthepayrolltaxfrom12.4to 14.6 representsa payroll tax increase of about',
14711:'17 percent. the 2.17 percent deficit represents, in terms of present value, an excess of $3.1 trillion of expenditures over',
14712:'contribution. 172. social insurance in relation to the national economy the security of benefits and the distribution of financing costsfor',
14713:'social insurance programs cannot be determined solely on the basis of the financial and actuarial status of the programs by',
14714:'themselves. sustainability from the governmentwide entity perspective is better measured in terms of a healthy relationship between social insurance programs—and,',
14715:'indeed, the entire budget—and the national economy, as measured by the gdp. relative to the national economy, federal spending for',
14716:'oasdi, hi, and smi was 7 percent of gdp in 1996—$550 billion. by 2030, whenmost babyboomerswillhaveretired,theseprogramsareprojectedtoconsumenearly 100 percent more of',
14717:'gdp than they do today—14 percent, as shown in chart 4. 􀀀       􀀀 ',
14718:'      ! 􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀 􀀀􀀀􀀀 􀀀􀀀􀀀 􀀀 􀀀􀀀 􀀀􀀀􀀀 􀀀 􀀀􀀀 􀀀􀀀􀀀 􀀀 􀀀  ',
14719:'source: data from table iii c1, 1996 oasditrustee’s report and table iii b1, 1997 hi trustee’s report. 24[please note: the',
14720:'standard does not require information on the total excess of cash outflow over inflow as a percentage of taxable payroll.',
14721:'it requires a cashflow projection as a percentage of taxable payroll as in chart 3.] page 74 sffas 17 fasab',
14722:'handbook, version 20 06/21 sffas 17 173. this projected increase needs to be understood in the context of other projected',
14723:'future claims on future resources including general assistance programs e.g., medicaid and other federal programs. nearly all of the increase',
14724:'between now and 2030 in the oasdi, hi, and smi programs will occur between 2010 and 2030, as retired baby',
14725:'boomers become eligible for those programs. in terms of the number of workers to beneficiaries in the combined oasdi and',
14726:'hi programs, a decline will occur from about 3.5 per beneficiary in 1995 to 2 per beneficiary in 2030. 174.',
14727:'sensitivity analysis25 the future cashflow of the oasdi, medicare, and other social insurance programs depends on many economic and demographic',
14728:'assumptions. precise longrange projections of these factors is impossible. 175. this section illustrates the sensitivity of the longrange projections to',
14729:'changes by analyzing six key individual assumptions. for this analysis the “best estimate” cost assumptions are used as the reference',
14730:'point, and each assumption is varied within it individually. 176. death rate chart 5 below shows the estimated oasdi cash',
14731:'inflow and outflow using a death rate above and below the rate used for the projection in chart 1 above.',
14732:'this analysis was developed by varying the percentage decrease in the death rate assumed to occur 25[please note: this section',
14733:'provides examples of some of the sensitivity analysis that would be provided at the consolidated level. the consolidated entity would',
14734:'summarize the sensitivity analyses from the individual social insurance entities.] page 75 sffas 17 fasab handbook, version 20 06/21 sffas',
14735:'17 during 19962030. the rate used for chart 1 above assumes a 35 percent decrease. chart 5 assumes 25 percent',
14736:'and 45 percent decreases. 􀀀    􀀀         ! ! 􀀀',
14737:'                   ',
14738:'   ! !  $% ! source: data for “best estimate” is from tables iii b1, b3, c1,',
14739:'1996 oasdi trustee’s report. 177. real interest rate—the total excess of oasdi cash outflow over inflow on the basis of',
14740:'the best estimate cost assumptions is $3.0 trillion over the valuation period of 19962070. if the annual real interest rate',
14741:'fortreasury securities ischanged from the 2.3 percent used for the best estimate to 1.5 percent, the excessof cash outflowwould increase',
14742:'to $3.8 trillion; if the rate were changed to 3 percent, the excess of cash outflow would decrease to $2.5',
14743:'trillion. 178. birth rate table 1 shows the effect of using birth rates of 1.6 and 2.2 children per woman,',
14744:'insteadof the1.9rateusedforthe best estimateprojection, on thetotalexcessoasdi cash outflow over inflow over the period 19962070. the rate is assumed to increase',
14745:'gradually from its current level to reach the ultimate values in 2070. page 76 sffas 17 fasab handbook, version 20',
14746:'06/21 sffas 17 table 1estimated total excess oasdi cash outflow over inflow with various birth rateassumptions valuation period: 19962070 dollars',
14747:'in trillions ultimate birth rate per woman valuation period: 19962070 1.6 births 1.9 births from best estimate cost assumptions 2.2',
14748:'births excess of cash outflow over cash inflow $3.7 $3.0 $2.5 179. net immigration—table 2 below shows the total excess',
14749:'of oasdi cash outflow over inflow with various assumptions about the magnitude of net immigration. table 2estimated oasdi actuarial balances',
14750:'with various net immigration assumptions dollars in trillions net immigration per year valuation period: 19962070 750,000 900,000 from best estimate',
14751:'cost assumptions 1,150,000 excess of cash outflow over inflow $3.2 $3.0 $2.9 180. realwage differential table 3 below shows the',
14752:'total excess oasdi cash outflow over inflow with various assumptions about the realwage differential. the realwage differential is the difference',
14753:'between the annual percentage increase in wages in covered employment and the consumer price index. table 3estimated oasdi actuarial balances',
14754:'with various realwageassumptions valuation period: 19962070 dollars in trillions ultimate percentage in wagescpia wagescpi 4.54.0 5.04.0 5.54.0 from best estimate',
14755:'cost assumptions excess cash outflow over $3.9 $3.0 $2.3 inflow a [the first value in each of the pairs below',
14756:'is the assumed ultimate annual percentage increase in average wages in covered employment. the second value is the assumed ultimate',
14757:'annual percentage increase in the cpi. the difference between the two values is the realwage differential.] page 77 sffas 17',
14758:'fasab handbook, version 20 06/21 sffas 17 181. health care cost trend—chart 6 below shows the estimated hi and smi',
14759:'net cash outflow using a health care cost factor 1 percent above and 1 percent below that used for the',
14760:'“best estimate” projection. factors such as wage increases and price increases may simultaneously affect both hi payroll tax income and',
14761:'the costs incurred by hospitals and other providers of medical care to hi and smi beneficiaries. other factors, such as',
14762:'the utilization of services by beneficiaries or the relative complexity of the services provided, can affect provider costs without affecting',
14763:'hi payroll tax income. the sensitivity analysis shown in chart 6 illustrates the financial effect of any combination of such',
14764:'factors that results in aggregate provider costs increasing by 1 percent faster or slower than the “best estimate” assumptions. 􀀀',
14765:' 􀀀     􀀀 􀀀         ! $%%& 􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀 􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀􀀀',
14766:'􀀀  source: data for “best estimate” is from table iii b1, 1997 hi trustee’s report. page 78 sffas 17',
14767:'fasab handbook, version 20 06/21 sffas 17 appendix c historical background 182. practice prior to federal accounting standardsadvisory board fasab',
14768:'although this statement is applicable to other social insurance programs, social security historically has been the primary focus when considering',
14769:'accounting for social insurance. over the decades, the debates about social security have to some extent paralleled debates in the',
14770:'nonfederal accounting community about how to apply accrual concepts in accounting. during this time, a continual evolution in accounting practice',
14771:'has led to increased recognition on the face of the financial statements and disclosure in notes to financial statementsof formerly',
14772:'unreported commitments such as pensions and other postretirement benefits such as health care. 183. since the 1950s, the treasury department',
14773:'and the office of management and budget omb have been furnishing reports on federal contingencies and commitments. from the early',
14774:'1950s, the reports showed, among other commitments, the face value of loan guarantees and federal insurance but not the actuarial',
14775:'status of social insurance programs. 184. in 1967, congress began requiring a commitments and contingencies report liabilities and other financial',
14776:'commitments of the united states government that was to include liabilities of federal annuity programs and their actuarial status. the',
14777:'programs in that report included most of the social insurance programs that are the subject of these accounting standards: social',
14778:'security, medicare, railroad retirement, black lung, and unemployment insurance. the report was tied with the regular businesstype reporting of federal',
14779:'agencies required by the treasury department e.g., balance sheets, operating statement, supplemental schedules. 185. from 1976 until 1985, the “prototype”',
14780:'consolidated financial statements of the united states government cfs recognized a liability for social security using a calculation similar to',
14781:'that called for inapb 8 1966, which defined a variety of acceptable actuarial methods for measuring pension expense and required',
14782:'that any accumulated, unfunded pension expense be recognized as a liability. however, the expense shown on the cfs operating statement',
14783:'included only cash benefit payments and not what the cfs called the “noncash amount”—or the change in the unfunded liability.',
14784:'186. after 1966 the importance of information about pensions grew due to increases in the number of plans and amounts',
14785:'of pension assets and obligations. significant changes occurred in both the legal environment e.g., employee retirement income securityact and the',
14786:'economic environment e.g., higher inflation and interest rates. 187. apb 8 was superseded by fasb statement of financialaccounting standards sfas',
14787:'no. 87, employer’s accounting for pensions, published in december 1985. fasb noted the page 79 sffas 17 fasab handbook, version',
14788:'20 06/21 sffas 17 years of accounting controversy over measuring costs and liabilities resulting from defined benefit pension plans. after',
14789:'considering the range of comments on its preliminary views document and on its exposure draft, fasb concluded that, although it',
14790:'did not recognize the full projected benefit obligation on the balance sheet, sfas 87 represented a worthwhile improvement in financial',
14791:'reporting. sfas 87 made accounting for pensions more independent of thefinancing arrangements, provided morestandardization in measurement of the pension expense',
14792:'and liability, and required at least a “minimum liability” to be recognized in employers’ balance sheets. 188. the social security',
14793:'liability was derecognized in the cfs for 1985; but a similar closed group to new entrants, 26 “liability type” number',
14794:'continued to be disclosed in a footnote along with the open group, “cashflow” or “financing type” number. the closed group',
14795:'population includes all current participants, that is, retireesand covered workers. the “open group” includes all current participants plus all future',
14796:'participants over the next 75 years. disclosure of the closed group number was discontinued in the cfs after 1994. fasab',
14797:'exposure drafts on liabilities & stewardship 189. social insurance was addressed in the board’s exposure draft ed on accounting for',
14798:'the liabilities of the federal government in november 1994. the liabilities ed proposed defining a federal liability in terms generally',
14799:'similar to the definition used by privately owned entitiesin the united states: a probable and measurable future sacrifice of resourcesbased',
14800:'on a past transaction or event. however, to accommodate the unique circumstances of the federal government, both the liabilities ed',
14801:'and the subsequent statement of federal financialaccounting standards no. 5 distinguished between exchange and nonexchange transactions and provided distinct accounting',
14802:'for liabilities resulting from these two types of transactions. 190. private sector accounting concepts and standards distinguish between reciprocal transactions',
14803:'such as payments to an employee for services rendered and non reciprocal transactions such as contributions pledged to a notforprofit',
14804:'entity. this is generally analogous to the federal distinction between exchange and nonexchange transactions. private sector accounting standards, however, do',
14805:'not recognize liabilities differently based upon whether they arise from reciprocal or non reciprocal transactions. 191. for nonexchange transactions, the',
14806:'liabilities ed provided that a liability would be recognized for any unpaid amounts due and payable as of the reporting',
14807:'date. this includes 26“closed group” will be used synonymously with “closed group to new entrants.” page 80 sffas 17 fasab',
14808:'handbook, version 20 06/21 sffas 17 amounts due from the federal entity to pay for benefits, goods, or services provided',
14809:'under the terms of the program, whether or not such amounts have been reported to the federal entity e.g., estimated',
14810:'medicare payments due to health providers for service that has been rendered and that will be financed by the federal',
14811:'entity but that have not yet been reported to the federal entity. 192. after much debate, social insurance benefits were',
14812:'classified as nonexchange transactions. the liabilities ed proposed that such programs recognize the following as expense in the statement of',
14813:'net cost: 1 the benefits and expenses paid during the year except those accrued at the end of the prior',
14814:'year and 2 the benefits and expenses due and payable at the end of the year. the latter were to',
14815:'be recognized as liabilities on the balance sheet. the liabilities ed noted that the fasab contemplated a federal reporting model',
14816:'encompassing extensive disclosure and supplementary reporting and that the board was addressing such reporting for social insurance in a separate',
14817:'project. also, the liabilities ed contained an alternative view whereby a minimum liability—representing the actuarial present value of total lifetime',
14818:'benefits due to be paid to people eligible to receive social insurance benefits at the balance sheet date—would be recognized',
14819:'on the balance sheet. 193. the board considered the responses to the liabilities ed in conjunction with its continuing development',
14820:'of supplementary information for social insurance programs. the majority of respondentsfavored the alternative view, that is, recognition of a minimumliability.',
14821:'because the liabilities ed had focused on balance sheet presentation and did not contain any proposed supplementary disclosures and because',
14822:'the magnitude and complexity of the issues were so great, the board chose to issue a standard on liabilities without',
14823:'any additional requirements for social insurance and to expose the supplementary information for comment. inaugust 1995, the board released for',
14824:'comment proposed required supplementary information for social insurance programs in the exposure draft on supplementary stewardship reporting “stewardship ed”. 194.',
14825:'the stewardship ed did not change the recognition point for expenses and liabilities published in the liabilities ed. however, it',
14826:'proposed the following three liabilitytype measuresto be reportedasrequiredsupplementaryinformationaccompanyingthefinancial statements: 1 a “minimum liability” present value of benefits due to all',
14827:'currently eligible to receive them and 2 the actuarial net present value of benefits and payments to a the closed',
14828:'group that is, current program participants and b the “open group” current and future programparticipants for the next75 years. inaddition,itproposeda',
14829:'“money’sworth” measure data showing the change over time in the ratio of the net present value of actual or estimated',
14830:'average aggregate lifetime benefits paid to and contribution received from and on behalf of similarly aged participants. 195. the response',
14831:'to the stewardship ed’s required supplementary stewardship information package regarding social insurance was generally favorable. the majority of respondents page',
14832:'81 sffas 17 fasab handbook, version 20 06/21 sffas 17 said that the information was either very useful or useful.',
14833:'others, including representatives of the administrative agencies for social security and medicare, objected to reporting any information other than that',
14834:'based on the open group methods and assumptions. also, opposition arose from the agency administering unemployment insurance and black lung',
14835:'benefits,statingthat althoughitsprogramsshouldbeincludedassocialinsurance,therssi package designed for social security did not fit its programs because they involved short term benefits or had',
14836:'other unique aspects. 196. after deliberating the issues, the board concluded in may 1996 that additional investigation and further deliberation',
14837:'were required. the board noted: the strength of feelings on the issues with one side firmly believing that the closed',
14838:'group estimate is a liability that should be recognized on the consolidated balance sheet of the federal government and, at',
14839:'the opposite pole, others who firmly believe that the closed group estimate is meaningless, could be misleading, and should not',
14840:'be disclosed at all in federal financial reports; the magnitude and complexity of the issues; and that changes to social',
14841:'insurance programs were being studied and discussed frequently and seriously within government and by the public. 197. the board directed',
14842:'the staff to continue researching social insurance accounting, focusing especially on identifying the following: the characteristics of such programs, the',
14843:'appropriate display of information in the financial statements, and any additional information that should be required; the means for measuring',
14844:'financial data in such information; and the desirability of other indicators ratios of data to gross domestic product gdp or',
14845:'“covered payroll” to describe the status of programs. page 82 sffas 17 fasab handbook, version 20 06/21 sffas 17 the',
14846:'board instructed the staff to be mindful of developments in the policy studies of social security in structuring its research',
14847:'and its recommendations.27 in early 1997, the board began again to deliberate the issues. the standard is a product of',
14848:'this project. 27sffas no. 8, supplementary stewardship reporting, par. 117. the studies included the 199496 social security advisory council whose',
14849:'report, published in january 1997, reflected the lack of consensus on longterm financing for social security. the council members agreed',
14850:'on how to define the size of the financing problem by using the social securityadministration actuaries’“best estimate” projection toderiveanactuarial deficit',
14851:'of 2.17 percent of payroll over the next 75 years. they also agreed that two longrange goals should be 1',
14852:'to eliminate the 2.17 percent 75year deficit and 2 to have the fund in stable condition at the end of',
14853:'the 75year period. however, the council offered three sharply different models for the future of social security. these models did',
14854:'contain some common features e.g., all three would increase from 35 to 38 the number of years used to compute',
14855:'benefits and tax social security benefits in the same way that contributory definedbenefit pensions are treated under the federal income',
14856:'tax. in addition to the advisory council, academics and scholars were studying, for example, the chilean and united kingdom experiments',
14857:'with privatization of public pension plans. page 83 sffas 17 fasab handbook, version 20 06/21 sffas 17 appendix d glossary',
14858:'see also consolidated glossary in “appendix e: consolidated glossary.” page 84 sffas 17 fasab handbook, version 20 06/21 statement of',
14859:'federal financialaccounting standards 18: amendments toaccounting standards for direct loans and loan guarantees in statement of federal financial accounting standards',
14860:'no. 2 status issued may 17, 2000 effective date for fiscal periods beginning after september 30, 2000. affects sffas 2',
14861:'affected by sffas 19 sffas 32 amends paragraphs 10 and 11. related guidance tr 3 revised,auditing estimates for direct loan',
14862:'and loan guarantee subsidies under the federal credit reformact – amendments to technical release no. 3 preparing and auditing direct',
14863:'loan and loan guarantee subsidies under the federal credit reform act tr 6, preparing estimates for direct loan and loan',
14864:'guarantee subsidiesunderthefederalcreditreformact – amendments to technical release no. 3 preparing and auditing direct loan and loan guarantee subsidies under the',
14865:'federal credit reform act summary this statement presents amendments to certain portions of statement of federal financial accounting standards 2,',
14866:'accounting for direct loans and loan guarantees, sffas 2, which was issued inaugust 1993. the objectives of these amendments are',
14867:'to improve financial reporting for subsidy costs and performance of federal credit programs. during 1998 and early 1999, the board',
14868:'discussed issues related to reporting the credit subsidy expense and credit subsidy reestimates in general. the board concluded that certain',
14869:'portions of sffas 2 should be amended so that more useful information on credit programs’ subsidy costs and performance will',
14870:'be provided to citizens, congress, program managers, and other users of federal financial information. the amendments were proposed for public',
14871:'comment in an exposure draft published in march 1999. after considering comments, the board decided to adopt the following amendments:',
14872:'report subsidy reestimates in two distinct components: the interest rate reestimate and the technical/default reestimate. the former is a reestimate',
14873:'due to a change in interest rates from the rate assumed in budget preparation and used in calculating the subsidy',
14874:'expense to the rates that are prevailing at the time the direct or guaranteed loans are disbursed. the latter is',
14875:'a reestimate due to changes made in projected cash flows under the terms of the direct loans or loan guarantees',
14876:'after reevaluating all the risk factors as of the financial statement date, except for the effect of interest rate reestimates.',
14877:'page 1 sffas 18 fasab handbook, version 20 06/21 sffas 18 display a reconciliation between the beginning and the ending',
14878:'balances of the subsidy cost allowance for direct loans and the liability for loan guarantees, reported in an entity’s balance',
14879:'sheet. the reconciliation displays activities that affect the subsidy cost allowance or the loan guarantee liability, such as the subsidy',
14880:'expense for direct or guaranteed loans disbursed during the reporting period, subsidy reestimates, fees received, interest supplements paid, loans written',
14881:'off, claim payments made to lenders, recoveries obtained, and other adjustments. provide a description ofprogram characteristicsand disclose1 theamountsof direct or',
14882:'guaranteed loans disbursed in each program during the reporting year, 2 the estimated subsidy rates for the total subsidy and',
14883:'the subsidy components at the program level in the current year’s budget for the current year’s cohorts, 3 events and',
14884:'changes in economic conditions, other risk factors, legislation, credit policies, and subsidy estimation methodologies and assumptions, that have had a',
14885:'significant and measurable effect on subsidy rates, subsidy expense, and subsidy reestimates; and 4 events and changes in conditions that',
14886:'have occurred and are more likely than not to have a significant impact but the effects of which are not',
14887:'measurable at the reporting date. reporting entities should discuss how those events and changes have affected or wouldaffectcredit programs’subsidycosts, subsidyreestimates,',
14888:'andthesubsidyrates estimated in the budget. in addition to requiring reconciliation for the balances of direct loan allowance and loan guarantee',
14889:'liability on an entitywide basis as prescribed in this statement, the board recognizes that reconciliation on a programbyprogram basis can',
14890:'better reveal information relevant to program performance. since the programbyprogram reconciliation was not proposed for public comment in the march',
14891:'1999 ed, the board has not received input on this option. because the proposal appears to have merit, the board',
14892:'has decided to issue an exposuredraft topropose programbyprogram reconciliation for majorprogramsinaddition to the entitywide reconciliation. page 2 sffas 18 fasab',
14893:'handbook, version 20 06/21 sffas 18 table of contents page summary 1 introduction 4 purpose 4 background 4 effective date',
14894:'5 accounting standards for direct loansand loan guarantees 6 subsidyreestimatesanamendmenttosffas no. 28 6 reconciliation 7 disclosureanddiscussion 7 appendixa: basis for',
14895:'conclusions 9 subsidy reestimates 9 reconciliation 10 disclosing subsidy rates 14 disclosureanddiscussion 15 the effective date 19 voteforapproval 20 appendix',
14896:'b: illustrative reporting formats 21 appendix c: [reprint of sffas no. 2] 23 appendix d: glossary [see consolidated glossary inappendix',
14897:'e] 24 page 3 sffas 18 fasab handbook, version 20 06/21 sffas 18 introduction purpose 1. the purpose of this',
14898:'statement is to amend accounting standards for direct loans and loan guarantees by adding the following requirements: a report subsidy',
14899:'reestimates in two components: interest rate reestimates and technical/default reestimates, b display in a note to financial statements a reconciliation',
14900:'between the beginning and ending balances of loan guarantee liability and the subsidy cost allowance for direct loans, and c',
14901:'provide disclosure and discussion for changes in program subsidy rates, subsidy expense, and subsidy reestimates. background 2. during1998and1999,theboardhelddiscussionsonwhatimprovementscouldbemadeto financial reporting',
14902:'for credit subsidy rates, subsidy expense, and subsidy reestimates.1 during the discussions, the board directed its staff to conduct a',
14903:'survey in two issue areas: a how difficult is it for agencies to prepare and report subsidy data, and b',
14904:'what subsidy data are useful to users of federal agency financial reports. 3. in june 1998, representatives ofthesmallbusinessadministration andthedepartmentof education',
14905:'made presentations to the board on their experience and capabilities for preparing subsidy cost data for direct loans and loan',
14906:'guarantees. the presentations indicated that to meet the budgeting requirements, agencies must have systems and procedures to estimate for each',
14907:'cohort of direct loans or loan guarantees the subsidy rates, subsidyexpense, and subsidyreestimatesin componentsascurrentlyrequiredin preparing the budget. the presentations indicated',
14908:'that if a sound system is in place, the information on subsidy rates, subsidy expense, and subsidy reestimates can be',
14909:'retrieved and aggregated on a program or entity basis to meet the financial reporting requirements. 4. aquestionnaireondatausefulnesswassenttocongressionalstaffmemberswhohadbeen involved in federal',
14910:'credit programs. oral and written responses were received from a 1the discussions were initiated by the credit reform task force',
14911:'of theaccounting andauditing policy committee aapc which proposed that paragraph 25 in sffas no. 2 be amended to require disclosure',
14912:'of subsidy rates estimated in the budget for the current year cohorts in lieu of reporting the dollar amounts of',
14913:'the subsidy components. that proposal was discussed in the march 1999 ed. the board accepted the task force proposal for',
14914:'disclosing subsidy rates, but did not remove the requirement for reporting the dollar amounts of subsidy expense components. page 4',
14915:'sffas 18 fasab handbook, version 20 06/21 sffas 18 number of the staff membersand were presented to the board at',
14916:'its october 1998 meeting. all of those who responded indicated that for appropriation and oversight purposes, they needed more rather',
14917:'than less detailed data on subsidy costs for direct loans and loan guarantees. they preferred that subsidy data be reported',
14918:'by component in both rates and dollar amounts. furthermore, they said that they would like to compare initial budget expectations',
14919:'with current reestimates and to know causes that explain changes in subsidy rates. 5. the board agreed that the subsidy',
14920:'cost information reported by federal credit agencies couldbe improved byadoptingthe following requirements:areportsubsidyreestimatesby component, b display in a note to financial',
14921:'statements a reconciliation between the beginning and ending balances of the subsidy cost allowance for direct loans and the liability',
14922:'for loan guarantees, and c provide disclosure and discussion that would help the reader understand the changesin federalcredit programs’subsidycosts and',
14923:'performance. these requirements were proposed in the exposure draft issued in march 1999 the march 1999 ed. 6. the board',
14924:'received comments from twelve respondents. of those respondents, ten were from federal agencies including the cfo council of the federal',
14925:'government, and two were from the private sector. they were generally in favor of the board’s proposals to improve financial',
14926:'reporting for credit programs’ subsidy costs and performance. however, some of them expressed different views on some of the proposals,',
14927:'which are addressed in appendixa, basis for conclusions. after considering the comments, the board decided to issue in this final',
14928:'statement all of the amendments proposed in the march 1999 ed. 7. the board considered and agreed with the view',
14929:'that reconciliations for direct loan allowance and loan guarantee liability on a programbyprogram basis can better reveal variations in program',
14930:'characteristics and performance. since the programbyprogram reconciliation was not proposed for public comment in the march 1999 ed, the board',
14931:'has not received input on this option. because the proposal appears to have merit, the board will issue an exposure',
14932:'draft to propose reconciliation for major programs in addition to the entitywide reconciliation prescribed in this statement. effective date 8.',
14933:'the accounting standards prescribed in this statement are effective for periods beginning after september 30, 2000. earlier implementation is encouraged.',
14934:'page 5 sffas 18 fasab handbook, version 20 06/21 sffas 18 accounting standards for direct loansand loan guarantees subsidy reestimatesanamendment',
14935:'to sffas no. 2 9. paragraph 32 in sffas no. 2 is amended to read: credit programs should reestimate the',
14936:'subsidy cost allowance for outstanding direct loans and the liability for outstanding loan guarantees as required in this standard. there',
14937:'are two kinds of reestimates: a interest rate reestimates, and b technical/default reestimates.2 entitiesshould measure and disclose each program’s reestimates',
14938:'in these two components separately.an increase or decrease in the subsidy cost allowance orloan guarantee liability resulting from the reestimatesis',
14939:'recognized asan increase or decrease in subsidyexpense for the current reporting period. a an interest rate reestimate is a reestimate',
14940:'due to a change in interest rates from the interest rates that were assumed in budget preparation and used in',
14941:'calculating the subsidy expense to the interest rates that are prevailing during the time periods in which the direct or',
14942:'guaranteed loans are disbursed. credit programs may need to make an interest rate reestimate for cohorts from which direct or',
14943:'guaranteed loans are disbursed during the reporting year. if the assumed interest rates that were used in calculating the subsidy',
14944:'expense for those cohorts differ from the interest rates that are prevailing at the time of loan disbursement, an interest',
14945:'rate reestimate for those cohorts should be made as of the date of the financial statements. b atechnical/defaultreestimateisareestimateduetochangesinprojectedcashflowsof outstanding direct',
14946:'loans and loan guarantees after reevaluating the underlying assumptions and other factors that affect cash flow projections as of the',
14947:'financial statement date, except for any effect of the interest rate reestimates explained in a above. in making technical/default reestimates,',
14948:'reporting entities should take into consideration all factors that may have affected various components of the projected cash flows, including',
14949:'defaults, delinquencies, recoveries, and prepayments. the technical/default reestimate should be made each year as of the date of the financial',
14950:'statements. 2theterm “technical/default reestimate” used in thisstatement is identicalin meaningto the term “technical reestimate” used in omb circulara11, as revised',
14951:'in july 1999. page 6 sffas 18 fasab handbook, version 20 06/21 sffas 18 reconciliation 10. in a note to',
14952:'the financial statements, reporting entities should display a reconciliation between the beginning and ending balances of the subsidy cost allowance',
14953:'for outstanding direct loansand the liabilityforoutstanding loan guaranteesreported in the entities’balance sheet. the reconciliation is accomplished by adding to or',
14954:'subtracting from the beginning balance the dollar amounts of the following items: a the subsidy expense recognized in the four',
14955:'components as defined in paragraphs 25 through 29 for direct or guaranteed loans disbursed during the reporting year, b the',
14956:'two types of subsidy reestimates as defined in paragraph 32, and c other adjustments. for direct loans, the other adjustments',
14957:'include loan modifications, fees received, loans written off, foreclosed property or other recoveries acquired, and subsidy allowance amortization. for loan',
14958:'guarantees, the other adjustments include loan guarantee modifications, fees received, interest supplements paid, claim payments made to lenders, foreclosed property',
14959:'or other recoveries acquired, and interest accumulated on the loan guarantee liability. the requirement to display reconciliation applies to direct',
14960:'loans and loan guarantees obligated or committed on or after october 1, 1991, the effective date of the federal credit',
14961:'reform act of 1990. reporting entitiesare encouraged but not required to displayreconciliationsfor direct loans and loan guarantees obligated or committed',
14962:'prior to october 1, 1991, in schedules separate from the direct loans and loan guarantees obligated or committed after september',
14963:'30, 1991. the u.s. governmentwide financial statements need not disclose a reconciliation between the beginning and ending balancesof the subsidy',
14964:'cost allowance for the outstanding direct loans and the liability for outstanding loan guarantees reported in the u.s. governmentwide financial',
14965:'statements. disclosureand discussion 11. the disclosure and discussion requirements are prescribed in paragraphs 11a through 11c: a reporting entities should',
14966:'provide a description of the characteristics of the programs that they administer, and should disclose for each program: a the',
14967:'total amount of direct or guaranteed loans disbursed for the current reporting year and the preceding reporting year, b the',
14968:'subsidy expense by components as defined in paragraphs 25 through29,recognized forthedirect orguaranteedloansdisbursed inthoseyears, and c the subsidy reestimates by components',
14969:'as defined in paragraph 32 for those years. b reporting entities should also disclose, at the program level, the subsidy',
14970:'rates for the total subsidy cost and its components for the interest subsidy costs, default costs net of recoveries, fees',
14971:'and other collections, and other costs, estimated for direct loans page 7 sffas 18 fasab handbook, version 20 06/21 sffas',
14972:'18 and loan guarantees in the current year’s budget for the current year’s cohorts. each subsidy rate is the dollar',
14973:'amount of the total subsidy or a subsidy component as a percentage of the direct or guaranteed loans obligated in',
14974:'the cohort. entities may use trend data to display significant fluctuations in subsidy rates. such trend data, if used, should',
14975:'be accompanied with analysis to explain the underlying causes for the fluctuations. c reporting entities should disclose, discuss, and explain',
14976:'events and changes in economic conditions, other risk factors, legislation, credit policies, and subsidy estimation methodologies and assumptions, that have',
14977:'had a significant and measurable effect on subsidy rates, subsidy expense, and subsidy reestimates. the disclosure and discussion should also',
14978:'include events and changes that have occurred andare more likelythannot tohave a significant impact but the effectsofwhich are not measurable',
14979:'at the reporting date. changes in legislation or credit policies include, for example, changesinborrowers’eligibility, the levelsof fees or interest ratescharged',
14980:'to borrowers, the maturity terms of loans, and the percentage of a private loan that is guaranteed. the above listed',
14981:'disclosure requirements are not applicable to the u.s. governmentwide financial statements. sffas 32 provides for disclosures applicable to the u.s.',
14982:'government wide financial statements for these activities. page 8 sffas 18 fasab handbook, version 20 06/21 sffas 18 appendixa: basis',
14983:'for conclusions this statement may be affected by later statements. the fasab handbook is updated annually and includes a status',
14984:'section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections',
14985:'are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the',
14986:'basis for conclusions of the amending statement for the rationale for each amendment. subsidy reestimates 12. paragraph 32 in sffas',
14987:'no. 2, as amended, requires that entities measure and disclose reestimates in two components separately; namely, the interest rate reestimate',
14988:'and the technical/default reestimate. the former is a reestimate made for differences between interest rate assumptions at the time of',
14989:'budget formulation the same assumption is used at the time of obligation or commitment and the actual interest rates for',
14990:'the years of disbursement.3the later is areestimate due to changesinprojected cash flowsasreflected in the direct loan allowance and loan guarantee',
14991:'liabilities at the beginning of each fiscal year, after reevaluating the underlying assumptions and other factors that affect cash flow',
14992:'projections as of the financial statement date, except for any effect of interest rate reestimates. 13. as explained in the',
14993:'march 1999 ed, the rationale for separating the two reestimate components lies in the fact that interest rate reestimates and',
14994:'technical/default reestimates differ in nature. the interest rate reestimate depends on how close the assumed interest rate, which is initially',
14995:'used in the budget, is to the actual interest rates prevailing at the time of loan disbursement. the interest rate',
14996:'reestimate does not in itself indicate changes in the quality of loan assets or the overall risk of loan guarantees,',
14997:'nor does it have any implication for the quality of the agency’s subsidy estimation process. the technical/default reestimate, on the',
14998:'other hand, reflects the latest developments in risk and program characteristics and thus it indicates changesin the qualityof loanportfolioorthe overallriskof',
14999:'loan guarantees. in some instances, a large technical/default reestimate may indicate that the credit program management should find ways to',
15000:'improve its subsidy estimation process and/or its portfolio management. because of the difference in the nature of the two components,',
15001:'separate reporting would provide better information to users of the financial reports. 3see omb circulara11, sec. 85.5 a, revised in',
15002:'july 1999. the interest rate reestimate does not involve any change in original assumptions other than the interest rates. page',
15003:'9 sffas 18 fasab handbook, version 20 06/21 sffas 18 14. all of the 12 respondents to the march 1999',
15004:'ed agreed with the board’s proposal for reporting subsidy reestimates in those two components. the respondents believe that reporting the',
15005:'two reestimate components separately will provide information to reveal the causes of the reestimates. they believe that such information can',
15006:'help program managers improve credit program performance and subsidy estimation methodology. 15. although in support for the proposal, one respondent',
15007:'commented on the controllability argument. since it was discussed in the march 1999 ed that the magnitude of an interest',
15008:'rate reestimate is beyond agencies’ control, the respondent pointed out that some default factors, such as changes in economic conditions',
15009:'and natural disasters, are also beyond the control of credit programs. while it was stated in the march 1999 ed',
15010:'that “the assumed rate is determined bytheadministration and isbeyond the control of the agency,” that statement does not imply that',
15011:'credit programs can control changesin economicconditionsor all of the other events that would impact default rates. however, the board believes',
15012:'that a reliable assessment of the economic changes and other risk factors in making default subsidy reestimates, whether or not',
15013:'controllable by the agency, can help credit programs better manage program costs and performance. 16. another respondent stated that analyses',
15014:'performed by his agency indicated that in past years, changes in interest rates produced relatively minor changes in that agency’s',
15015:'overall subsidy rates. thus, the respondent suggested that the board consider whether it is cost beneficial to separate out the',
15016:'interest rate reestimates. 17. the interest rate reestimates vary in magnitude from year to year. for some years, the assumed',
15017:'and the actual rates may be fairly close, whereas in other years they differ significantly and could produce a material',
15018:'effect on the overall subsidy rate. for example, the subsidy reestimate data provided usdarural development water and waste direct loan',
15019:'program indicatedthat for fiscal years1992 through 1994, the amounts of interest rate reestimates exceeded the amounts of technical/default reestimates. in',
15020:'1995, the interest rate reestimate accounted for 84 percent of the total subsidy reestimate. in more recent years, the impact',
15021:'of interest rate reestimates was relatively small. in any case, we do not believe one can rely on the past',
15022:'experience for any particular year to make a conclusion about interest variations in future years. reconciliation 18. it is prescribed',
15023:'as an accounting standard in this statement that reporting entities display in a note to financial statements a reconciliation between',
15024:'the beginning and ending balances of the subsidy cost allowance for outstanding direct loans and the liability for outstanding loan',
15025:'guarantees reported in the entities’ balance sheet. page 10 sffas 18 fasab handbook, version 20 06/21 sffas 18 19. during',
15026:'its discussions about the subsidy expense and subsidy reestimates, the board held the view that it is not adequate or',
15027:'desirable to report annual subsidy expense and reestimates in an isolated fashion. the board concluded that additional information is needed',
15028:'to provide a full picture about a credit program’s performance. the board believes that the reconciliation can be used as',
15029:'an effective vehicle to provide such information. 20. asexplainedinthemarch1999ed,anadvantageofdisplayingthereconciliationistoshow in one place the activities that affect the subsidy cost allowance',
15030:'or the loan guarantee liability. in addition to the subsidy expense and reestimates, which are based on projections of future',
15031:'cash flows, the reconciliation schedule also displays data on actual performance, such as fees received, loans written off, claim payments',
15032:'made to lenders, and foreclosed property, loans receivable, or other recoveries acquired during the reporting year. these actual performance data',
15033:'and the data on subsidy cost estimates would be a useful tool to begin assessing the actual performance of a',
15034:'reporting entity’s lending or loan guarantee activities against its budget expectations. 21. theboardnotedasanotheradvantagethatthereconciliationprocesswouldenhancecredit agencies’ internal control. to comply with the',
15035:'requirement, entities must make the subsidy data elements consistent, accurate, and thus reconcilable. in conjunction with credit agencies’loan monitoring systems,',
15036:'the reconciliation process can serve asa tool to foster a discipline in organizing data related to subsidy costs and performance',
15037:'in a systematic manner. 22. amajorityoftherespondentssupportedtheboard’s proposalfor displayingthe reconciliation. they believed that the reconciliation will provide useful information to congress,',
15038:'program managers, and other users of financial statements. one respondent stated that once required as a part of the financial',
15039:'statements, the reconciliation will be subject to validation through audit and thus will become a reliable source of information for',
15040:'those who make decisions and evaluate results for credit activities. 23. several respondents, however, expressed disagreements or reservations about the',
15041:'proposed reconciliation. some of them commented that compiling the reconciliation data would be a burdensome process. we believe that performing',
15042:'the reconciliation would initially require some staff training and computer programming. however, the effort will be worthwhile because the process',
15043:'will help agencies organize the necessary data in an orderly manner. when properly programmed, the reconciliation process can become a',
15044:'routine and systematic process. in fact the reconciliation requires no more data than those that are necessary in deriving the',
15045:'ending balances of the subsidy cost allowance and loan guarantee liability from their beginning balances of a reporting period. thus,',
15046:'all the data necessary forthereconciliation should be available and verifiable if the ending balancesare accurate. page 11 sffas 18 fasab',
15047:'handbook, version 20 06/21 sffas 18 24. it should be noted that it is not unusual to require reconciliation in',
15048:'credit activities. in its industry guide no. 3, the securities and exchange commission sec requires bank holding companies to provide',
15049:'an analysis of the allowance of loan losses in their financial statements.4 the analysis is equivalent to the reconciliation of',
15050:'the subsidy cost allowance required in this statement. the sec guide requires that the beginning and ending balances of the',
15051:'allowance be reconciled with chargeoffsloans written off, recoveries, and additions charged to operations equivalent to subsidy reestimates. the chargesoffs and',
15052:'recoveries are displayed bytype of loanssuch asconsumerinstallments, commercial,realestate,and leasefinancing, as soforth. asimilar requirementisprescribedbythefinancial accounting standards board fasb in paragraph 20,',
15053:'fas no. 114, as amended by fas 118, for impaired loans accounted for on a present value basis: for each',
15054:'period for which results of operations are presented, a creditor also shall disclose the activity in the total allowance for',
15055:'credit losses related to loans, including the balance in the allowance at the beginning and end of each period, additions',
15056:'charged to operations, direct writedowns charged against the allowance, and recoveries of amounts previously charged off. the total allowance for',
15057:'credit losses related to loansincludesthose amounts that have been determinedin accordance with fasb statement no. 5,accounting for contingencies, and with',
15058:'this statement. 25. some of those who disagreed with the reconciliation proposal recognized merits in reconciling subsidy cost allowance for',
15059:'direct loans and liability for loan guarantees, but doubtedwhetherthereconciliationonan entitybasiswouldprovideusefulinformation. they pointed out that the programs their agencies administer vary',
15060:'in characteristics and subsidy rates,and that the reconciliation at theentitylevelwillaggregatetheprogramdataand, asa result, will not reveal the characteristics and operating results',
15061:'of individual programs. 26. the board was aware that programs administered by an agency often differ in characteristics and subsidy',
15062:'rates. the board agrees with the view that the entitywide reconciliation in itself would not reveal variations in program performance.',
15063:'the board thus decidedtoissue anexposuredraft, soon afterissuingthisstatement, toproposea displayof a programbyprogram reconciliation for major programs. nevertheless the board sees value',
15064:'in the entitywide reconciliation itself. with respect to the subsidy cost allowance and the loan guarantee liability reported on an',
15065:'entity’s balance sheet, the entitywide reconciliation shows changes in those balances. those changes indicate the entity’s aggregate performance results for',
15066:'all the credit activities under the entity’s management. 4sec accounting rules, ¶ 8303, 1984 commerce clearing house, inc. [additional reference:',
15067:'securitiesact guide 3 adopted in release no. 3412784, amended by release nos 336221, 336383, fr11, fr13 and fr27] page 12',
15068:'sffas 18 fasab handbook, version 20 06/21 sffas 18 27. theboardconsideredtwoprimaryreasonsforadoptingtheentitywidereconciliationinthis statement, rather than postpone it until the programbyprogram reconciliation',
15069:'is proposed andconsidered. first, bymaking theentitywidereconciliationeffectiveasearlyaspossible, agencies can begin to get their personnel and systems resources ready for implementing the',
15070:'requirement without further delay. second, by requiring the display of the entitywide reconciliation, it is likely that programbyprogram reconciliation data',
15071:'would be available for users. this is based on the rationale that in order to display the entity level reconciliation,',
15072:'thereportingentitywould normallyfirstreconcilethebalancesofindividualprograms. ifthey do so, program managers as well as auditors will have access to the program reconciliation data to',
15073:'validate the entitywide reconciliation and to usethe programbased data in program analysis and evaluation. if requested by congress, special reports',
15074:'for any particular program can also be made available to congress. 28. one respondent pointed out that loan guarantee programs',
15075:'sometimes acquire guaranteed loans for direct collection upon paying default claims for those loans. he asked whether the subsidy cost',
15076:'allowance of those loans should be reconciled in a separate schedule. under credit reform accounting, guaranteed loans acquired by the',
15077:'loan guarantee program upon paying default claimsare carried at their present value and the present value is reestimated annually before',
15078:'the loans are collected or written off. the amount of those loans and their allowance are reported in note 7',
15079:'in omb bulletin 9701, form and content of agency financial statements. since the acquired loans do not represent a primary',
15080:'line of business for loan guarantee programs, the board does not believe that a display of reconciliation for those acquired',
15081:'loans should be required. 29. one respondent asked whether the reconciliation requirement applies to precredit reform direct loans and loan',
15082:'guarantees as well as postcredit reform direct loans and loan guarantees. the board considered the issue and concluded that the',
15083:'reconciliation requirement applies only to postcredit reform direct loans and loan guarantees, i.e., direct loan and loan guarantees obligated or',
15084:'committed after september 30, 1991. one of the principal objectives for the reconciliation requirement is to provide information that can',
15085:'be used to compare initial budget expectations with operating results. this is achievable with direct loans and loan guarantees that',
15086:'were obligated or committed after september 30, 1991, because under credit reform, budgeting and financial reporting for credit activities are',
15087:'performed on the same present value basis. this is not the case with precredit reform direct loans and loan guarantees.',
15088:'30. however, aside from the basic objective discussed above, the other advantages of the reconciliation are valid for both pre',
15089:'and postcredit reform direct loans and loan guarantees. those advantages include: a revealing information on activities that affect the balances,',
15090:'and b enhancing accounting integrity and internal control. agencies are encouraged, but not required, to reconcile the direct loan allowance',
15091:'and loan guarantee liability balances for direct loans and loan guarantees obligated or committed prior to october 1, 1991. since',
15092:'the page 13 sffas 18 fasab handbook, version 20 06/21 sffas 18 measurement bases differ between pre and postcredit reform',
15093:'direct loans and loan guarantees, agencies should use separate reconciliation schedules for pre and postcredit reform direct loans and loan',
15094:'guarantees. disclosing subsidy rates 31. adisclosureprovisionhasbeenprescribedinthisstatementtorequirethatreportingentities disclose, at the program level, the rates for the total estimated subsidy cost and',
15095:'the subsidy cost components in the current year’s budget for the current year’s cohorts. each rate equals the amount of',
15096:'the total subsidy or a subsidy component divided by the amount of direct or guaranteed loans obligated in the cohort',
15097:'for the reporting year. the board members believed that the budget subsidy rates for the reporting year are highly important',
15098:'because they represent budget expectations that reflect the most recent program characteristics. 32. the standard provides that reporting entities may',
15099:'use trend data to display significant fluctuations in a program’s subsidy rates. to avoid excessive and purposeless presentation of historical',
15100:'data, the use of trend data should be limited to the subsidy rate for the total subsidy or for a',
15101:'subsidy component of a particular program that has experienced significant fluctuations in recent years. the presentation of trend data should',
15102:'be accompanied by analysis to explain causes of the fluctuations. 33. amajorityoftherespondentssupportedtheproposalfor disclosingthe estimatedsubsidy ratesforcohortsof thecurrent year. theargumentsfortheproposal theypresented include:',
15103:'a those subsidy rates estimated in the current year’s budget “give the reader the most upto date information on cohorts',
15104:'as established by appropriation law,” b those rates reflect the most recent program characteristics, and c the subsidy rates reported',
15105:'for a number of recent years can form a trend for comparison and analysis. 34. one respondent requested clarification for',
15106:'the phrase “in the current year’s budget for the currentyear’scohorts.” therequireddisclosure isforbudget subsidyratesfor thecohortsof the current reporting year, i.e., the',
15107:'year for which the financial reports are published. for example, in the financial reports for the 2001 fiscal year, the',
15108:'budget subsidy rates in the fy 2001 budget for the fy 2001 cohorts should be complied and disclosed at the',
15109:'program level. the standard does not require disclosure of subsidy rates for cohorts of previous years, although some of the',
15110:'cohorts may continue to disburse loans during the current reporting year. however, as provided in the standard, entities may use',
15111:'trend data to display significant fluctuations in subsidy rates over a number of the most recent years. 35. those who',
15112:'were opposed to the disclosure for subsidy rates presented the following arguments: a budget subsidy rates for all credit programs',
15113:'are published in the federal page 14 sffas 18 fasab handbook, version 20 06/21 sffas 18 credit supplement to the',
15114:'budget of the u.s. government,and itisunnecessarytoduplicate the same data in financial reports, b the inclusion of budget subsidy rates in',
15115:'financial reports would appear to invite calculation of subsidy costs by applying the subsidy rates to disbursements, and such calculation',
15116:'could produce confusing results, and c the subsidy rates in the budget are estimated before all the data concerning the',
15117:'reporting year are available, and are subject to changes. 36. the board was aware that the budget subsidy rates are',
15118:'published in the federal credit supplement to the budget of the u.s. government. however, the inclusion of those subsidy rates',
15119:'in the financial reports will provide the reader of the financial statements with an easy access to the budget data.',
15120:'the board was also aware that one cannot calculate the subsidy expense for the current year by applying the estimated',
15121:'subsidy rates of the current year cohorts to the amount of direct or guaranteed loans disbursed during the current year.',
15122:'such calculation may give erroneous results because some of the loans disbursed during the current year may belong to previous',
15123:'years’ cohorts. the disclosure of budget subsidy rates was initially proposed by theaapc credit reformaccounting task force. when proposing the',
15124:'disclosure, theaapc credit reformaccounting task force suggested that the disclosure be accompanied by a narrative explaining in conceptual terms how',
15125:'the total subsidy rate differs from the total subsidy expense recognized in the financial statements. the board believes that it',
15126:'is necessary to have such a narrative to avoid confusion between the subsidy rates of the current year cohorts and',
15127:'the subsidy expense recognized for the current reporting year. 37. it is true that the estimated subsidy rates for a',
15128:'program in the current year’s budget reflect budget expectations for that program, and do not reflect the program’s operating results',
15129:'for the current reporting year. the actual performance of a program can be viewed from such data assubsidyreestimates, loanswrittenoff,defaultclaimspaid, andfeesreceived.',
15130:'oneof the purposes for the disclosure of the budget subsidy rates is to provide an indication of budget expectations of',
15131:'the most recent cohorts. 38. the board believes that the disclosure for the subsidy rates for the cohorts of the',
15132:'current reporting year will prove beneficial as they are important indicators for management’s latest expectations reflecting the programs’ current characteristics.',
15133:'the disclosure requirement is adopted because the advantages of the disclosure outweigh its disadvantages. disclosureand discussion 39. the board holds',
15134:'the view that merely reporting the figures for the subsidy expense and subsidyreestimateswouldnot providecomplete andunderstandable informationto usersof federal agency financial',
15135:'reports. the board believes that to make the figures meaningful, significant events and changes in assumptions underlying the cost estimates',
15136:'should be page 15 sffas 18 fasab handbook, version 20 06/21 sffas 18 disclosed and their impact should be discussed.',
15137:'the disclosure and discussion should help explain the subsidy cost data. in other words, the board believes that it is',
15138:'necessary to tell the stories behind the figures. 40. reporting entities are required to provide a description of the programs',
15139:'that they administer and disclose at the program level the amounts of direct or guaranteed loans disbursed during the reporting',
15140:'year. thisinformation would provide the reader with an indication of the programs’characteristicsandthe magnitudeof their creditactivities. withthe informationon amounts disbursed, analysts',
15141:'can calculate the subsidy expense, or one of its components, as a ratio to the amount of the loans disbursed',
15142:'and compare the ratios among programs or over time. 41. reporting entities are required to disclose events and changes that',
15143:'have had a significant and measurable effect on subsidy costs. these would include changes in economic conditions and riskfactors, changes',
15144:'in legislation and policies regarding direct loansor loan guarantees, and changes in methodologies and assumptions used in making subsidy estimatesandreestimates.',
15145:'credit agenciesarealsorequiredtodiscloseanddiscussevents and changesthat have occurred and are more likelythannot to have asignificant impact on subsidy rates, subsidy expense, and',
15146:'subsidy reestimates but the effects of which are not measurable at the reporting date. these include events and changes that',
15147:'have occurred after the reestimation cut off date and will be taken into consideration in making reestimates for the following',
15148:'year. reporting entities should discuss how those events and changes have or would have impacted the various components of subsidy',
15149:'expense, subsidy rates, and subsidy reestimates. 42. the board noted in particular that changes in legislation and credit policies could',
15150:'significantly alter a program’s characteristics and thus affect its subsidy rates. these changes include, for example, changes in borrowers’ eligibility,',
15151:'the level of fees or interest rates charged borrowers, the maturity terms of loans, and the percentage of a private',
15152:'loan that is guaranteed. if such a change occurs during a reporting year, the reporting entity should disclose and explain',
15153:'the nature of the change and discuss its impact on program characteristics and its estimated subsidy rates. 43. most respondents',
15154:'supported the board proposal. they believed that to make the reported financial figures meaningful, significant events and changes in assumptions',
15155:'underlying those figures should be disclosed and their effect should be discussed. some of the respondents provided examples of events',
15156:'that can affect default rates. for example, drought, flood, tornadoes, and other natural disasters may affect some regions or some',
15157:'sectors of the economy, and consequently, affect borrowers’ ability to make loan payments. those respondents also noted that changes in',
15158:'economic conditions, such as interest and employment rates, could an also have a significant impact on credit risks and performance.',
15159:'some of them stated that legislative and policy changes could have a direct impact on the page 16 sffas 18',
15160:'fasab handbook, version 20 06/21 sffas 18 costs and performance of certain affected programs. they contend that without disclosing those',
15161:'events and changes and discussing their impact, the reader cannot fully understand the financial figures, such as subsidy rates, expenses,',
15162:'and reestimates. 44. one respondent noted that the same type of disclosure and discussion that is now required for credit',
15163:'subsidies is not usually required for many other operating costs, such as employees salary, rent, and computer service costs. the',
15164:'respondent questioned why the disclosure and discussion for credit activities are more critical than other costs reported in the statement',
15165:'of net cost. to address this issue, we can provide at least two reasons for this difference. first, unlike salary,',
15166:'rent, or the costs of other services, the credit subsidy costs are under a greater degree of uncertainty, astheyare exposed',
15167:'to manyriskfactorsexternal to the government. many factors discussed in the march 1999 ed and by other respondents, such as changes',
15168:'in interest and employment rates and disastrous events, would cause the subsidy costs to vary from their estimates in the',
15169:'budget. second, unlike most other cost items, the credit subsidy costs are reported in present values of future cash flows',
15170:'projected over the life of the underlying direct loans and loan guarantees. to a large extent, the reliability of the',
15171:'subsidy cost information depends on the factors considered in making the cash flow projections. the reliability is also affected by',
15172:'the quality of the agency’s data and its estimation methodology. the narrative disclosure and discussion would help the user to',
15173:'understand the factors that cause significant changes in the subsidy costs during the reporting year, which do not usually occur',
15174:'in salary, rent, or other operating costs. 45. two respondents, however, were opposed to the narrative disclosure and discussion requirement',
15175:'on the groundsthat itwouldbeburdensome forentitieswith variedprogramsto present the required information. these respondents may have come under a mis perception about',
15176:'the disclosure and discussion requirement. theymay have perceived that the standard wouldrequire an excessivelydetailed description of allthe technical aspectsof thesubsidyestimationmethodologiesandassumptions,',
15177:'andanextensiveanalysisof allrisk factors in the programs and even subprograms administered by the reporting entity. thus, they concluded the requirement is',
15178:'extremely burdensome. however, such detailed disclosure and discussion were not intended. it was stated in paragraph 50 of the march',
15179:'1999 ed: while the board members believe that the proposed disclosure and discussion are necessary, they prefer that entity financial',
15180:'reports are not overwhelmed with detailed numbers and ratios that may overburden the reader of the financial reports. the board',
15181:'membersbelieve that to the extent possible, the narrative discussion should be written in nontechnical language so that the average reader',
15182:'can understand the data and the explanations. page 17 sffas 18 fasab handbook, version 20 06/21 sffas 18 46. the',
15183:'primary emphasis of the disclosure and discussion requirement is on significant changesinsubsidyratesandreestimates.thedisclosureanddiscussionshouldbefocused on events that have occurred and have caused',
15184:'those significant changes. in addition, the disclosure anddiscussion shouldalsoincludeeventsthathave occurred and aremorelikely than not to have a significant impact on',
15185:'subsidy rates and reestimates but the effects for which are not measurable at the reporting date. 47. some respondents believed',
15186:'that the narrative disclosure and discussion should more appropriately belong to the management discussion andanalysis md&a section of financial reports.',
15187:'the board disagrees with this view. the narrative disclosure and discussion required in this statement should be specifically tailored to',
15188:'address credit subsidy activities. as such, it differs from the md&arequirements in breadth, depth, and detail. the board believes that',
15189:'the disclosure and discussion required in this statement belong in a note to financial statements, such as note 7 in',
15190:'omb bulletin 9701, the form and content of agency financial statements, in which all the data on direct loan assets,',
15191:'loan guarantee liabilities, subsidy rates, subsidy expenses, and reestimates are reported. by including the narrative disclosure and discussion in the',
15192:'same note, the reader would find all the information in one place. however, this does not preclude entity management from',
15193:'including a discussion and analysis to highlight credit activities in md&a, so long as entity management determines that such a',
15194:'discussion and analysis meets the md&a requirements in sffas 15. 48. audit efforts for information provided in a footnote to',
15195:'financial statements differ from those for information provided in md&a. md&ais regarded as required supplementary information rsi and is subject',
15196:'to less stringent audit than basic financial statements and their notes.5the board believes that program subsidy data should be reported',
15197:'in a note to agency financial statements because they are directly related to information reported in the financial statements. those',
15198:'program subsidy data should be audited as basic financial information. based on the preceding paragraph, it might appear that including',
15199:'the narrative disclosure and discussion in the same footnote with the subsidy data instead of in md&a would expand the',
15200:'audit burden associated with credit subsidies. however, since the auditor 5see statement of recommendedaccounting standards no. 15, management discussion and',
15201:'analysis, april 1999 par. 18. page 18 sffas 18 fasab handbook, version 20 06/21 sffas 18 already needs to test',
15202:'the reliability of the estimates and reestimates in the context of auditing the basic program subsidy data6, the board believes',
15203:'that there would be no substantial increase in audit burden from including the narrative disclosure and discussion in a footnote',
15204:'instead of in md&a. in fact, the process of generating the required disclosure and discussion for the footnote should provide',
15205:'information on risk factors underlying the subsidy estimates and reestimates and thus should facilitate the audit of the basic subsidy',
15206:'data. 49. one respondent commented that there may not be a basis to audit future events and their effect disclosed',
15207:'in the narrative. the required disclosure is for events that have occurred, but does not include events that are anticipated',
15208:'to occur. also, the provision does not require quantifying the effect of an event that has occurred but whose effects',
15209:'cannot be measured at the reporting date. the effective date 50. in the march 1999 ed, it was proposed that',
15210:'the amendments be made effective for periods beginning after september 30, 1999. two respondents requested that the effective date be',
15211:'made for periods beginning after september 30, 2000. they argued that many agencies were still having difficulties in implementing existing',
15212:'credit reform requirements and that the newrequirementswould require revisionsin accounting procedures and systems. the cfo council stated that manyagenciesare busy',
15213:'with resolvingy2k problems, and would not be able to initiate new systems changes until some time in year 2000. 51.',
15214:'there were arguments against postponing the effective date. first, the requirements prescribed in this statement do not require any new',
15215:'data. for example, the data needed for the reconciliation schedules should be in the system. without that data, agencies could',
15216:'not report the ending balances of the subsidy cost allowance and the loan guarantee liability at the end of each',
15217:'fiscal year. second, the proposed effective date, beginning with fiscal year 2000, provides adequate time because financial statements for that',
15218:'year will be issued in early calendar year 2001. 52. on the other hand, the board recognizes that staff training',
15219:'and computer reprogramming may be necessary to implement the new requirements. therefore, the board considered 6for example, federal financialaccounting andauditingtechnicalreleaseno.',
15220:'3, preparing and auditing direct loan and loan guarantee subsidies under the federal credit reform act july 1999, requires auditors',
15221:'to identify significant external and internal factors that may affect the credit subsidy estimates and reestimates. external factors include economic',
15222:'conditions, current political climate, and relevant legislation. internal factors include the size of the agency’s budget and accounting staff qualifications',
15223:'of key personnel, turnover of key personnel, and system capabilities. page 19 sffas 18 fasab handbook, version 20 06/21 sffas',
15224:'18 and granted a delay for the effective date to periods beginning after september 30, 2000. however, the board emphasizes',
15225:'that this should not be considered a precedent for postponing implementation of adopted accounting standards. the board encourages early implementation',
15226:'of the standards. vote forapproval 53. the accounting standards prescribed in this statement are approved by the board unanimously. page',
15227:'20 sffas 18 fasab handbook, version 20 06/21 sffas 18 appendix b: illustrative reporting formats the following two schedules illustrate',
15228:'the reconciliation between beginning and ending balances of the subsidy cost allowance for direct loans and the liability for loan',
15229:'guarantees. a: schedule for reconciling subsidy cost allowance balances dollars in thousands beginning balance, changes, and ending balance fy 2000',
15230:'fy 2001 beginning balance of the subsidy cost allowance $ $ add: subsidy expense for direct loans disbursed during the',
15231:'reporting years by component: a interest subsidy costs b default costs net of recoveries c fees and other collections d',
15232:'other subsidy costs total of the above subsidy expense components adjustments: a loan modifications b fees received c foreclosed property',
15233:'acquired d loans written off e subsidy allowance amortization f other ending balance of the subsidy cost allowance before reestimates',
15234:'add or subtract subsidy reestimates by component a interest rate reestimate b technical/default reestimate total of the above reestimate components',
15235:'ending balance of the subsidy cost allowance page 21 sffas 18 fasab handbook, version 20 06/21 sffas 18 b: schedule',
15236:'for reconciling loan guarantee liability balances dollars in thousands beginning balance, changes, and ending balance fy 2000 fy 2001 beginning',
15237:'balance of the loan guarantee liability $ $ add: subsidy expense for guaranteed loans disbursed during the reporting years by',
15238:'component: a interest subsidy costs b default costs net of recoveries c fees and other collections d other subsidy costs',
15239:'total of the above subsidy expense components adjustments: a loan guarantee modifications b fees received c interest supplements paid d',
15240:'foreclosed property and loans acquired e claim payments to lenders f interest accumulation on the liability balance g other ending',
15241:'balance of the loan guarantee liability before reestimates add or subtract subsidy reestimates by component: a interest rate reestimate b',
15242:'technical/default reestimate total of the above reestimate components ending balance of the loan guarantee liability page 22 sffas 18 fasab',
15243:'handbook, version 20 06/21 sffas 18 appendix c: theaccounting standards in sffas no. 2 see “statement of federal financialaccounting standards',
15244:'2:accounting for direct loans and loan guarantees.” page 23 sffas 18 fasab handbook, version 20 06/21 sffas 18 appendix d:',
15245:'glossary see consolidated glossary in “appendix e: consolidated glossary.” page 24 sffas 18 fasab handbook, version 20 06/21 statement of',
15246:'federal financialaccounting standards 19: technicalamendments toaccounting standards for direct loans and loan guarantees in statement of federal financialaccounting standards no.',
15247:'2 status issued march 20, 2001 effective date for periods beginning september 30, 2002 affects sffas 2 sffas 18 affected',
15248:'by none. related guidance tr 3 revised,auditing estimates for direct loan and loan guarantee subsidies under the federal credit reformact',
15249:'– amendments to technical release no. 3 preparing and auditing direct loan and loan guarantee subsidies under the federal credit',
15250:'reform act tr 6, preparing estimates for direct loan and loan guarantee subsidies under the federal credit reformact – amendments',
15251:'to technical release no. 3 preparing and auditing direct loan and loan guarantee subsidies under the federal credit reform act',
15252:'summary in this statement the board adopts a number of technical amendments to certain portions of the statement of federal',
15253:'financialaccounting standards 2, accounting for direct loans and loan guarantees sffas 2, which was issued inaugust 1993. the technical amendments',
15254:'serve the following purposes: a clarifythatthecashflowdiscountmethodusedintheaccountingstandardsprescribed in sffas 2 is consistent with the method required in the federal credit reformact',
15255:'of 1990, as amended in july 1997. b clarify that the effective interest rate of a cohort of direct loans',
15256:'or loan guarantees is theinterest rate adjusted forthe interest rate reestimate, asdefinedin paragraph 9a, sffas 18, amendments to accounting standards',
15257:'for direct loans and loan guarantees in sffas 2. c clarify the measurement principle for the default costs of direct',
15258:'loans and loan guarantees. page 1 sffas 19 fasab handbook, version 20 06/21 sffas 19 table of contents page summary',
15259:'1 introduction 3 background and purposes 3 effective date 4 technical amendments to sffas no. 2 4 cash flow discount',
15260:'method 4 effective interest rate 4 measuring default costs 5 appendixa: basis for conclusions 6 programbyprogram reconciliation 6 technicalamendments 7',
15261:'effective date 9 boardapproval 9 appendix b: theaccounting standards in sffas no. 2 10 page 2 sffas 19 fasab handbook,',
15262:'version 20 06/21 sffas 19 introduction background and purposes 1. inthisstatementtheboardadoptsanumberoftechnicalamendmentstocertainportionsof thestatementoffederalfinancialaccountingstandardsno. 2, accounting for direct loans and loan guarantees',
15263:'sffasno. 2,whichwasissuedinaugust1993. these amendments were proposed for public comment in an exposure draft ed issued in may 2000. the title',
15264:'of that ed is “credit program reconciliation and technical amendments to accounting standards for direct loans and loan guarantees in',
15265:'statements of federal financial accounting standards no. 2 and no. 18.” hereinafter the ed is referred to as the may',
15266:'2000 ed. 2. the technical amendments serve the following purposes: a clarifythatthecashflowdiscountmethodusedintheaccountingstandardsprescribed insffas no. 2isconsistent withthe method required inthefederalcredit reformact',
15267:'of 1990, as amended in july 1997. b clarify that the effective interest rate of a cohort of direct loans',
15268:'or loan guarantees is theinterest rate adjusted forthe interest rate reestimate, asdefinedin paragraph 9a, sffas no. 18, amendments to accounting',
15269:'standards for direct loans and loan guarantees in sffas no. 2. c clarify the measurement principle for the default costs',
15270:'of direct loans and loan guarantees. 3. the board received nine responses to the ed. all of the respondents were',
15271:'in support for the technical amendments, except for two respondents who commented on the proposed technical amendments related to the',
15272:'measurement of default costs. based on the comments, the board made a minor modification to the proposed measurement of default',
15273:'costsfordirectloans. this modificationis discussedinthisstatement’sappendixa,basis for conclusions. 4. in addition to the technical amendments, the board proposed a standard in the',
15274:'may 2000 ed, requiring that entities display a programbyprogram reconciliation for major credit programs between the beginning and ending balances',
15275:'of subsidy cost allowance for direct loans and the liability for loan guarantees. the board decided not to adopt that',
15276:'proposal based on costbenefit considerations. page 3 sffas 19 fasab handbook, version 20 06/21 sffas 19 effective date 5. the',
15277:'technical amendments adopted in this statement are effective for periods beginning after september 30, 2002. early implementation of the amendments',
15278:'is encouraged. technicalamendmentsto sffas no. 2 cash flow discount method 6. the amendments in a and b below are made',
15279:'to clarify that the accounting standards in sffas no. 2 areconsistent withthecashflowdiscountmethodrequired bythe amendment enactedinjuly1997tothe federalcreditreformact of1990. sec. 5025e oftheact,',
15280:'as amended, provides that “in estimating net present values, the discount rate shall be the average interest rate on marketable',
15281:'treasury securities of similar maturity to the cash flows of the direct loan or loan guarantee for which the estimate',
15282:'is being made.” a in paragraph 24, sffas no. 2, the phrase “with a similar maturity term” is changed to',
15283:'“with similar maturity to the cash flows.” b in footnotes 3, 4, 6, and 7, sffas no. 2, the phrase',
15284:'“the remaining maturity” is replaced with the phrase “the remaining cash flows.” effective interest rate 7. the following amendments are',
15285:'made to clarify that the effective interest rate of a cohort of direct loans or loan guarantees is the interest',
15286:'rate adjusted for the interest rate reestimate, as defined in paragraph 9a, sffas no. 18. the adjusted rate should be',
15287:'used for amortizing subsidy cost allowance, accruing and compounding interest on the liability for loan guarantees, determining the book value',
15288:'of modified direct loans and the book value of the liability for modified loan guarantees, and calculating the present value',
15289:'of assets acquired through foreclosure. a in paragraph 30, sffas no. 2, the first sentence is changed to: “the subsidy',
15290:'cost allowance for direct loans is amortized by the interest method using the interest rate that was used to calculate',
15291:'the present value of the direct loans when the direct loans were disbursed, after adjusting for the interest rate reestimate.”',
15292:'page 4 sffas 19 fasab handbook, version 20 06/21 sffas 19 b in paragraph 31, sffas no. 2, the first',
15293:'sentence is changed to: “interest isaccrued and compounded on the liabilityfor loan guaranteesat the interest rate that was used to',
15294:'calculate the present value of the loan guarantee liabilities when the guaranteed loans were disbursed, after adjusting for the interest',
15295:'reestimate.” c in paragraph 46, sffas no. 2, the phrase in the parentheses is changed to “the rate that was',
15296:'originally used to calculate the present value of the direct loans, when the direct loans were disbursed, after adjusting for',
15297:'the interest rate reestimate.” d in paragraph 50, sffas no. 2, the phrase in the parentheses is changed to “the',
15298:'rate that was originally used to calculate the present value of the liability, when the guaranteed loans were disbursed, after',
15299:'adjusting for the interest rate reestimate.” e in paragraphs 57 and 59, sffas no. 2, the words “adjusted for the',
15300:'interest rate reestimate” are added immediately after the words “the original discount rate.” measuring default costs 8. paragraph 27 in',
15301:'sffas no. 2 is replaced with the following two paragraphs: a thedefaultcostofdirectloansresultsfromprojecteddeviationsbytheborrowersfrom the payment schedules for principal, interest, and fee',
15302:'payments in the loan contracts. however, themeasurement ofdefault costsdoesnot include prepayments. thedefault cost is measured at the present value of',
15303:'projected payment deviations due to defaults minus projected net recoveries. projected net recoveries include the amounts that would be collected',
15304:'from borrowers at a later date or the proceeds from the sales of acquired assets minus the costs of foreclosing,',
15305:'managing, and selling the assets. b thedefaultcostofloanguaranteesresultsfrompayinglenders’claimsupondefaultof the guaranteed loans. the default cost of loan guarantees is measured at the',
15306:'present value of projected payments to lenders required by the guarantee, plus uncollected fees, minus interest supplements not paid as',
15307:'the result of the default, and minus projected net recoveries as defined in paragraph 8a. page 5 sffas 19 fasab',
15308:'handbook, version 20 06/21 sffas 19 appendixa: basis for conclusions this statement may be affected by later statements. the fasab',
15309:'handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within',
15310:'the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to',
15311:'reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale for each',
15312:'amendment. programbyprogram reconciliation 9. in the may 2000 ed, the board proposed a standard requiring that entities display a programbyprogram',
15313:'reconciliation for major credit programs between the beginning and ending balances of the subsidy cost allowance for direct loans and',
15314:'the liability for loan guarantees. nine respondents to the ed commented on the proposal. five of them supported the proposal',
15315:'and the remaining four were opposed to the proposed standard. 10. those who supported the proposal believed that the display',
15316:'of a programbyprogram reconciliation would enhance disclosure for program costs and performance. one of the respondents said that the programbyprogram',
15317:'reconciliation would reveal actual program performance information, such asdirect loanswritten off, default claimspaid, feesreceived, andinterestsupplementspaid. reportingthiskindofinformationonaprogrambyprogram basis is not required',
15318:'by the existing standards. if the data were reported, they could be useful in analyzing a program’s operating results and',
15319:'providing feedback to the program’s budget expectations. another respondent pointed out that when program data are aggregated, increases and decreases',
15320:'in program costs would offset each other. thus, without a display of programbyprogram reconciliation, entitywide reconciliation alone would not disclose',
15321:'variations in program performance. 11. among those who were opposed to the proposal, the chief financial officer cfo of us',
15322:'department ofagriculture usda said that the proposed standard was unnecessary because usdahasreported subsidy costsbycredit areas. theusdacfoandseveral other respondents expressed their',
15323:'concern that the proposed display of programbyprogram reconciliation would make the disclosure too lengthyand complexand thusreduce its information value to',
15324:'the users of generalpurpose financial reports. 12. after considering the comments, the board decided not to adopt the proposed standard.',
15325:'the board concluded that sffas no. 2 and sffas no. 18 already require sufficient program information. paragraph 32 in sffas',
15326:'no. 2, as amended by sffas no. 18, requires that entities disclose each program’s interest rate reestimates and technical/default reestimates.',
15327:'more extensive disclosure is required in sffas no. 18. page 6 sffas 19 fasab handbook, version 20 06/21 sffas 19',
15328:'paragraph 11a in sffas no. 18, for example, requires that entities provide a description of the characteristics of the programs',
15329:'that they administer. it also requires disclosure of the amount of direct or guaranteed loans disbursed for each program during',
15330:'the reporting year as well as each program’s subsidy expense, and subsidy reestimates. paragraph 11b requires disclosure of each program’s',
15331:'subsidy rates for direct loans and loan guarantees in the current year’s cohort. furthermore, paragraph 11c requires that reporting entities',
15332:'disclose, discuss, and explain events and changes in economic conditions, other risk factors, legislation, credit policies, and subsidy estimation methodologies',
15333:'and assumptions, that have had a significant and measurable effect on subsidy rates, subsidy expense, and subsidy reestimates. the board',
15334:'believes that in the process of producing the program based information required by paragraph 11c, an entity will naturally describe',
15335:'important changes in the actual performance of its credit programs; e.g., default claims paid, loans written off, etc. thus, the',
15336:'board concluded that the programbased disclosure and discussion required by the existing standards should provide sufficient information about creditactivitiesattheprogramlevel. inaddition,althoughtheincrementalcostofproducing',
15337:'the programbased reconciliation would be quite small for most agencies, the board believes that requiring the display of programbased reconciliation',
15338:'would add length and complexity to the financial reports that are already detailed and complex. as a result of these',
15339:'benefit and cost considerations, the board concluded that requiring the display of a programbyprogram reconciliation was not justified. technicalamendments 13.',
15340:'the board adopted three groups of technical amendments to sffas no. 2. the first group affects paragraph 24 and footnotes',
15341:'3, 4, 6, and 7 of sffas no. 2. these amendments clarify that the accounting standards are consistent with the',
15342:'cash flow discount method required by the federal credit reformact of 1990, as amended in july 1997.1as required in section',
15343:'502 5e of theact, the amended standards require using as the discount rate the average interest rate on treasury securities',
15344:'of similar maturity to the cash flows of a direct loan or loan guarantee. none of the respondents to the',
15345:'ed objected to these amendments. 14. the second group of amendments affects paragraphs 30, 31, 46, 50, 57, and 59',
15346:'of sffas no. 2. these amendments are related to interest rate reestimates. the amendments clarify that the effective interest rate',
15347:'of a cohort of direct loans and loan guarantees is the interest rate adjusted by the interest rate reestimate, as',
15348:'defined in paragraph 9a, sffas no. 18. the adjusted rate should be used for amortizing subsidy cost allowance, accruing 1officeofmanagement',
15349:'andbudget ombhasimplementedthe amendmentincirculara11,preparationand submission of budget estimates, july 1999 and in its recent release of a new credit subsidy calculator.',
15350:'page 7 sffas 19 fasab handbook, version 20 06/21 sffas 19 and compounding interest on the liability for loan guarantees,',
15351:'determining the book value of modified direct loans and the book value of the liability for modified loan guarantees, and',
15352:'calculating the present value of assets acquired through foreclosure. none of the respondents to the ed objected to these amendments.',
15353:'15. thethirdgroupofamendments,proposedinedparagraphs10aand10b,concernsthe measurement of default costs discussed in paragraph 27, sffas no. 2. ed paragraph 10a addressed the default costs',
15354:'of direct loans. the proposed amendment in that paragraph would include the effect of shortterm delinquenciesin the “other costs” category,',
15355:'rather than the “default costs” category. 16. theusdacfoandigobjectedtotheexclusionof shortterm delinquencies from default costs. theysaidthatthe commoditycreditcorporationanusdaunituses theinter agencycountryriskassessmentsystem icrastoestimatedefault costs. theicras,',
15356:'usedforlending to foreigncountries, includesshorttermdelinquenciesinmeasuring default costs. thus, the proposed amendment would create a difference from that practice. 17. the board',
15357:'understands that practices differ among lending institutions in treating delinquencies. they may or may not regard a payment delay within',
15358:'a certain time frame as default. the board is of the view that the variation would not distort the measurement',
15359:'of credit subsidy costs, if each practice is followed consistently. in this regard, it is better that the accounting standard',
15360:'leaves some leeway for the agencies that are responsible for developing subsidy estimate models and methodologies. thus, the board deleted',
15361:'the words related to “delinquencies” in paragraph 8a of this statement on default costs of direct loans. 18. paragraph 8b',
15362:'of this statement addressed the measurement of default costs for loan guarantees. the paragraph reads as follows: the default cost',
15363:'of loan guarantees results from paying lenders’claims upon default of the guaranteed loans. the default cost of loan guarantees is',
15364:'measured at the present value of projected payments to lenders required by the guarantee, plus uncollected fees, minus interest supplements',
15365:'not paid as the result of the default, and minus projected net recoveries as defined in paragraph 10a. 19. theusdacfocommentedontherequirementforincludinguncollectedfeesand',
15366:'“interest supplements notpaid” inmeasuringdefault costs. the usdacfostatedthat although those cash flow components are specified in the omb credit subsidy calculator,',
15367:'omb would give agencies flexibility in implementation with regard to those cash flow components. the usdacfo pointed out that realigning',
15368:'those cash flow components might entail substantial changes inagencies’ credit subsidy models. shealsoindicatedproblemswithprivate lender restrictions and workload increases. she suggested',
15369:'that agencies be allowed page 8 sffas 19 fasab handbook, version 20 06/21 sffas 19 flexibility to determine whether those',
15370:'cash flow components are to be included in default costs. 20. the board believes the amended standard provides a sound',
15371:'methodology for measuring the default costs for loan guarantees. uncollected fees are a direct result of default itself and therefore',
15372:'should be included in measuring the default costs. the interest supplements not paid are also a direct result of defaults.',
15373:'when a guaranteed loan is in default, the government pays the default claim to the lender and stops paying interest',
15374:'supplement for that loan. thus, the interest supplements that are saved due to default should be subtracted from the default',
15375:'costs. the board concluded that the categorization of these cash flow components should be uniform across the government so that',
15376:'they can be comparableamongprograms. however,asdiscussedinthefollowingparagraph,theboard has decided to delay the implementation of the technical amendments for one year. this delay',
15377:'should help resolve some of the problems raised by the usdacfo. effective date 21. the proposed effective date for the',
15378:'technical amendments was for periods beginning after september 30, 2001, which means fy 2002. the board realized that that the',
15379:'subsidy expenses to be reported for fy 2002 would be based on the budget submission for that year. however, there',
15380:'would not be sufficient time to implement the amendments for the fy 2002 budget. therefore, the board decided to make',
15381:'the effective date for periods beginning after september 30, 2002, and the board encourages earlier implementation. boardapproval 23. this statement',
15382:'was approved by the board with a vote of eight members in approval of its issuance. one member submitted a',
15383:'written dissent, which is available for inspection at the fasab office. page 9 sffas 19 fasab handbook, version 20 06/21',
15384:'sffas 19 appendix b: theaccounting standards in sffas no. 2 presentedinthisappendix arethestandardsoriginallyprescribedin sffasno. 2. the paragraphs and their numbers reproduced',
15385:'in thisappendixare the same asthose that appear in sffas no. 2, and are presented here for reference purposes only. the',
15386:'bolded words, paragraphs, and footnotes are those that have been amended by sffas no. 182 or by this statement. explanation',
15387:'21. these standards concern the recognition and measurement of direct loans, the liability associated with loan guarantees, and the cost',
15388:'of direct loans and loan guarantees. the standards apply to direct loansand loan guarantees on a group basis, such as',
15389:'a cohort or a risk category of loans and loan guarantees. present value accounting does not apply to direct loans',
15390:'or loan guarantees on an individual basis, except for a direct loan or loan guarantee that constitutes a cohort or',
15391:'a risk category. accounting standards post1991 direct loans 22. direct loans disbursed and outstanding are recognized as assets at the',
15392:'present value of their estimated net cash inflows. the difference between the outstanding principal of the loans and the present',
15393:'value of their net cash inflows is recognized as a subsidy cost allowance. post1991 loan guarantees 23. for guaranteed loans',
15394:'outstanding, the present value of estimated net cash outflows of the loan guarantees is recognized as a liability. disclosure is',
15395:'made of the face value of guaranteed loans outstanding and the amount guaranteed. 2sffas no. 18 amended paragraph 32 in',
15396:'sffas no. 2. page 10 sffas 19 fasab handbook, version 20 06/21 sffas 19 subsidy costs of post1991 direct loans',
15397:'and loan guarantees 24. for direct or guaranteed loans disbursed during a fiscal year, a subsidy expense is recognized. the',
15398:'amount of the subsidy expense equals the present value of estimated cash outflows over the life of the loans minus',
15399:'the present value of estimated cash inflows, discounted at the interest rate of marketable treasury securities with a similar maturity',
15400:'term applicable to the period during which the loans are disbursed hereinafter referred to as the applicable treasury interest rate.',
15401:'25. for the fiscal year during which new direct or guaranteed loans are disbursed, the components of the subsidy expense',
15402:'of those new direct loans and loan guarantees are recognized separately among interest subsidy costs, default costs, fees and other',
15403:'collections, and other subsidy costs. 26. the interest subsidy cost of direct loans is the excess of the amount of',
15404:'the loans disbursed overthe present value of the interest and principal paymentsrequired by the loan contracts, discounted at the applicable',
15405:'treasury rate. the interest subsidy cost of loan guarantees is the present value of estimated interest supplement payments. 27. the',
15406:'default cost of direct loans or loan guarantees results from any anticipated deviation, other than prepayments, by the borrowers from',
15407:'the payments schedule in the loan contracts. the deviations include delinquencies and omissions in interest and principal payments. the default',
15408:'cost is measured at the present value of the projected paymentdelinquenciesand omissionsminusnetrecoveries. projected net recoveries include the amounts that would',
15409:'be collected from the borrowers at a later date orthe proceeds from the sale of acquired assets minus the costs',
15410:'of foreclosing, managing, and selling those assets. 28. the present value of fees and other collections is recognized as a',
15411:'deduction from subsidy costs. 29. other subsidy costs consist of cash flows that are not included in calculating the interest',
15412:'or default subsidy costs, or in fees and other collections. they include the effect of prepayments within contract terms. subsidyamortization',
15413:'and reestimation 30. the subsidy cost allowance for direct loans is amortized by the interest method using the interest rate',
15414:'that was originally used to calculate the present value of the page 11 sffas 19 fasab handbook, version 20 06/21',
15415:'sffas 19 directloans when thedirectloans weredisbursed. theamortizedamountisrecognized as an increase or decrease in interest income. 31. interest is accrued and',
15416:'compounded on the liability of loanguarantees atthe interest rate that was originally used to calculate the present value of the',
15417:'loan guarantee liabilities when the guaranteed loans were disbursed. the accrued interest is recognized as interest expense. 32. the subsidy',
15418:'cost allowance for direct loans and the liability for loan guarantees are reestimated each yearasofthedateofthefinancialstatements. sincetheallowance orthe liability represents the',
15419:'present value of the netcash outflows of the underlying direct loans or loan guarantees, the reestimation should take into account',
15420:'all factors that may have affected the estimate of each component of the cash flows, including prepayments, defaults, delinquencies, and',
15421:'recoveries. any increase or decrease in the subsidy cost allowance or the loan guarantee liability resulting from the reestimates should',
15422:'be recognized as a subsidy expense or a reduction in subsidy expense. reporting the subsidy cost allowance of direct loans',
15423:'or the liability of loan guarantees and reestimates by component is not required. criteria for default cost estimates 33. the',
15424:'criteria for default cost estimates provided in this and the following paragraphs apply to both initial estimates and subsequent reestimates.',
15425:'default costs are estimated and reestimated for each program on the basis of separate cohorts and risk categories. the reestimates',
15426:'take into account the differences in past cash flows between the projected and realized amounts and changes in other factors',
15427:'that can be used to predict the future cash flows of each risk category. 34. in estimating default costs, the',
15428:'following risk factors are considered: 1 loan performance experience; 2 current and forecasted international, national, or regional economic conditions that',
15429:'may affect the performance of the loans; 3 financial and other relevant characteristics of borrowers; 4 the value of collateral',
15430:'to loan balance; 5 changes in recoverable value of collateral; 6 newly developed events that would affect the loans performance;',
15431:'and 7 improvements in methods to reestimate defaults. 35. each credit program should use a systematic methodology, such as an',
15432:'econometric model, to project default costs of each risk category. if individual accounts with significant amounts carry a high weight',
15433:'in risk exposure, an analysis of the individual accounts is warranted in making the default cost estimate for that category.',
15434:'page 12 sffas 19 fasab handbook, version 20 06/21 sffas 19 36. actual historical experience of the performance of a',
15435:'risk category is a primary factor upon which an estimation of default cost is based. to document actual experience, a',
15436:'database should be maintained to provide historical information on actual payments, prepayments, late payments, defaults, recoveries, and amounts written off.',
15437:'revenues and expenses 37. interest accrued on direct loans, including amortized interest, is recognized as interest income. interest accrued on',
15438:'the liability of loan guarantees is recognized as interest expense. interestduefromtreasuryonuninvestedfundsisrecognizedasinterestincome. interest accrued on debt to treasury is recognized as',
15439:'interest expense. 38. costs for administering credit activities, such as salaries, legal fees, and office costs, that are incurred for',
15440:'credit policy evaluation, loan and loan guarantee origination, closing, servicing, monitoring, maintaining accounting and computer systems, and other credit administrative',
15441:'purposes, are recognized as administrative expense. administrative expenses are not included in calculating the subsidy costs of direct loans and',
15442:'loan guarantees. pre1992 direct loans and loan guarantees 39. the losses and liabilities of direct loans obligated and loan guarantees',
15443:'committed before october 1, 1992, are recognized when it is more likely than not that the direct loans will not',
15444:'be totally collected or that the loan guarantees will require a future cash outflow to pay default claims. the allowance',
15445:'of the uncollectible amounts and the liability of loan guarantees should be reestimated each year as of the date of',
15446:'the financial statements. in estimating losses and liabilities, the risk factors discussed in the previous section should be considered. disclosure',
15447:'is made of the face value of guaranteed loans outstanding and the amount guaranteed. 40. restatement of pre1992 direct loans',
15448:'and loan guarantees on a present value basis is permitted but not required. modification of direct loans and loan guarantees',
15449:'41. the term modification means a federal government action, including new legislation or administrative action, that directly or indirectly alters',
15450:'the estimated subsidy cost and the present value of outstanding direct loans, or the liability of loan guarantees. page 13',
15451:'sffas 19 fasab handbook, version 20 06/21 sffas 19 42. direct modifications are actions that change the subsidy cost by',
15452:'altering the terms of existing contracts or by selling loan assets. existing contracts may be altered through such means asforbearance,',
15453:'forgiveness, reductions in interest rates, extensions of maturity, and prepayments without penalty. such actions are modifications unless they are considered',
15454:'reestimates, or workouts as defined below, or are permitted under the terms of existing contracts. 43. indirect modifications are actions',
15455:'that change the subsidy cost by legislation that alters the way in which an outstanding portfolio of direct loans or',
15456:'loan guarantees is administered. examples include a new method of debt collection prescribed by law or a statutory restriction on',
15457:'debt collection. 44. the term modification does not include subsidy cost reestimates, the routine administrative workoutsof troubled loans,and actionsthatarepermittedwithintheexistingcontractterms. workouts',
15458:'are actions taken to maximize repayments of existing direct loans or minimize claims under existing loan guarantees. the expected effects',
15459:'of workouts on cash flows are included in the original estimate of subsidy costs and subsequent reestimates. a. modification of',
15460:'direct loans 45. with respect to a direct or indirect modification of pre1992 or post1991 direct loans, the cost of',
15461:'modification is the excess of the premodification value3 of the loans over their postmodification value4. the amount of the modification',
15462:'cost is recognized as a modification expense when the loans are modified. 46. when post1991 direct loans are modified, their',
15463:'existing book value is changed to an amount equal to the present value of the loans net cash inflows projected',
15464:'under the modified terms from the time of modification to the loans maturity and discounted at the original discount rate',
15465:'the rate that was originally used to calculate the present value of the direct loans, when the direct loans were',
15466:'disbursed. 3the term premodification value is the present value of the net cash inflows of direct loans estimated at the',
15467:'time of modification under premodification terms and discounted at the interest rate applicable to the time when the modification occurs',
15468:'on marketable treasury securities that have a comparable maturity to the remaining maturity of the direct loans under premodification terms',
15469:'simply stated, the premodification terms at the current rate. 4the term postmodification value is the present value of the net',
15470:'cash inflows of direct loans estimated at the time of modification under postmodification terms and discounted at the interest rate',
15471:'applicable to the time when the modification occurs on marketable treasury securities that have a comparable maturity to the remaining',
15472:'maturity of the direct loans under postmodification terms simply stated, the postmodification terms at the current rate. page 14 sffas',
15473:'19 fasab handbook, version 20 06/21 sffas 19 47. when pre1992 direct loans are directly modified, they are transferred to',
15474:'a financing account and their book value is changed to an amount equal to their postmodification value. any subsequent modification',
15475:'is treated as a modification of post1991 loans. when pre1992 direct loans are indirectly modified, they are kept in a',
15476:'liquidating account. their bad debt allowance is reassessed and adjusted to reflect amounts that would not be collected due to',
15477:'the modification. 48. the change in book value of both pre1992 and post1991 direct loans resulting from a direct or',
15478:'indirect modification and the cost of modification will normally differ, due to the use of different discount rates or the',
15479:'use of different measurement methods. any difference between the change in book value and the cost of modification is recognized',
15480:'as a gain or loss. for post1991 direct loans, the modification adjustment transfer5 paid or received to offset the gain',
15481:'or loss is recognized as a financing source or a reduction in financing source. b. modification of loan guarantees 49.',
15482:'with respect to a direct or indirect modification of pre1992 or post1991 loan guarantees, thecostofmodificationisthe excessofthe postmodificationliability6ofthe loanguarantees over their',
15483:'premodification liability7. the modification cost is recognized as modification expense when the loan guarantees are modified. 50. the existing book',
15484:'value of the liability of modified post1991 loan guarantees is changed to an amount equal to the present value of',
15485:'net cash outflows projected under the modified terms from the time of modification to the loans maturity, and discounted at',
15486:'the original discount rate the rate that was originally used to calculate the present value of the liability when the',
15487:'guaranteed loans were disbursed. 5 omb instructions provide that if the decrease in book value exceeds the cost of modification,',
15488:'the reporting entity receives from thetreasury an amount of modification adjustment transfer equal to the excess; and that if the',
15489:'cost of modification exceeds the decrease in book value, the reporting entity pays to the treasury an amount of modification',
15490:'adjustmenttransfer to offsettheexcess. see omb circulara11. 6the term postmodification liability is the present value of the net cash outflows of',
15491:'the loan guarantees estimated at the time of modification under the postmodification terms, and discounted at the interest rate applicable',
15492:'to the time when the modification occurs on marketable treasury securities that have a comparable maturity to the remaining maturity',
15493:'of the guaranteed loans under postmodification terms simply stated, the postmodification terms at the current rate. 7 the term premodification',
15494:'liability is the present value of the net cash outflows of loan guarantees estimated at the time of modification under',
15495:'the premodification terms and discounted at the interest rate applicable to the time when themodificationoccurs onmarketabletreasury securities that have acomparablematurity',
15496:'to theremaining maturity of the guaranteed loans under premodification terms simply stated, the premodification terms at the current rate. page',
15497:'15 sffas 19 fasab handbook, version 20 06/21 sffas 19 51. when pre1992 loan guarantees are directly modified, they are',
15498:'transferred to a financing account and the existing book value of the liability of the modified loan guarantees is changedtoanamountequaltotheirpostmodificationliability.',
15499:'anysubsequentmodification is treated as a modification of post1991 loan guarantees. when pre1992 direct loan guarantees are indirectly modified, they are',
15500:'kept in a liquidating account. the liability of those loan guarantees is reassessed and adjusted to reflect any change in',
15501:'the liability resulting from the modification. 52. the change in the amount of liability of both pre1992 and post1991 loan',
15502:'guarantees resulting fromadirect orindirect modification andthecost of modificationwillnormallydiffer, duetotheuseofdifferentdiscountratesortheuseofdifferentmeasurementmethods. the difference between the change in liability and the cost of',
15503:'modification is recognized as a gain or loss. for post1991 loan guarantees, the modification adjustment transfer8 paid or received to',
15504:'offset the gain or loss is recognized as a financing source or a reduction in financing source. c. sale of',
15505:'loans 53. the sale of post1991 and pre1992 direct loans is a direct modification. the cost of modificationisdeterminedonthe basisof the',
15506:'premodificationvalueoftheloanssold. ifthe premodification value of the loans sold exceeds the net proceedsfrom the sale, the excess is the cost of',
15507:'modification, which is recognized as modification expense. 54. for a loan sale with recourse, potential losses under the recourse or',
15508:'guarantee obligations are estimated, and the present value of the estimated losses from the recourse is recognized as subsidy expense',
15509:'when the sale is made and as a loan guarantee liability. 55. the book value loss or gain on a',
15510:'sale of direct loans equals the existing book value of the loans sold minus the net proceeds from the sale.',
15511:'since the book value loss or gain and the cost of modification are calculated on different bases, they will normally',
15512:'differ. any difference between the book value loss or gain and the cost of modification is recognized asa gain orloss.9forsalesof',
15513:'post1991 direct loans, the modificationadjustment transfer10 8 omb instructionsprovide that if the increase in liability exceedsthe cost of modification, the',
15514:'reporting entity receives from the treasury an amount of modification adjustment transfer equal to the excess; and that if the',
15515:'cost of modification exceeds the increase in liability, the reporting entity pays to the treasury an amount of modification adjustmenttransfer',
15516:'to offsettheexcess. see omb circulara11. 9 if there is a book value gain, the gain to be recognized equals the',
15517:'book value gain plus the cost of modification. 10 see footnote no. 7 for an explanation for modification adjustment transfer.',
15518:'page 16 sffas 19 fasab handbook, version 20 06/21 sffas 19 paid or received to offset the gain orlossis recognized',
15519:'asa financing source or a reduction in financing source. d. disclosure 56. disclosure is made in notes to financial statements',
15520:'to explain the nature of the modification of direct loans or loan guarantees, the discount rate used in calculating the',
15521:'modification expense, and the basis for recognizing a gain or lose related to the modification. foreclosure of post1991 direct and',
15522:'guaranteed loans 57. when property is transferred from borrowers to a federal credit program, through foreclosure or other means, in',
15523:'partial or full settlement of post1991 direct loans or as a compensation for losses that the government sustained under post1991',
15524:'loan guarantees, the foreclosed propertyisrecognizedasan asset at thepresent value of itsestimated future net cash inflows discounted at the original discount',
15525:'rate. 58. if a legitimate claim exists by a third party or by the borrower to a part of the',
15526:'recognized value of the foreclosed assets, the estimated amount of the claimisrecognized as a special contra valuation allowance. 59. at',
15527:'a foreclosure of guaranteed loans, a federal guarantor may acquire the loans involved. the acquired loans are recognized at the',
15528:'present value of their estimated net cash inflows from selling the loans or from collecting payments from the borrowers, discounted',
15529:'at the original discount rate. 60. when assets are acquired in full or partial settlement of post1991 direct loans or',
15530:'guaranteed loans, the present value of the governments claim against the borrowers is reduced by the amount settled as a',
15531:'result of the foreclosure. writeoff of direct loans 61. when post1991 direct loans are written off, the unpaid principal of',
15532:'the loans is removed from the gross amount of loans receivable. concurrently, the same amount is charged to the allowance',
15533:'for subsidy costs. prior to the writeoff, the uncollectible amounts should havebeen fullyprovided forinthe subsidycost allowance through the subsidycost estimate',
15534:'or reestimates. therefore, the writeoff would have no effect on expenses. page 17 sffas 19 fasab handbook, version 20 06/21',
15535:'statement of federal financialaccounting standards 20: elimination of certain disclosures related to tax revenue transactions by the internal revenue service,',
15536:'customs,andothers,amendingsffas7,accountingforrevenue and other financing sources status issued september 29, 2001 effective date for periods beginning after september 30, 2000 affects',
15537:'sffas 7 affected by none. summary statement of federal financialaccounting standards sffas 7, accounting for revenue and other financing sources,',
15538:'became effective in fiscal year 1998 and included detailed provisions that apply to entities collecting taxes on behalf of the',
15539:'federal government. the two entities collecting the vast marjority of federal taxes are the internal revenue service irs and the',
15540:'u.s. customs service customs. the board is issuing this standard to rescind paragraph 65.2 of sffas 7. absent very detailed',
15541:'explanations, the provisions of paragraph 65.2 could result in information being given to readers of the financial statements that they',
15542:'might misinterpret. the board believes that paragraph 65.2 would not accomplish what it purports to accomplish, and would impose costs',
15543:'unnecessarily on both the preparer and auditor without a significant benefit. the boardsreasoningisexplained more fully inappendixa, basis forconclusions. this amendment',
15544:'is effective for periods beginning after september 30, 2000. page 1 sffas 20 fasab handbook, version 20 06/21 sffas 20',
15545:'table of contents page summary 1 introduction 3 accounting standard 3 appendixa: basis for conclusions 5 appendix b: paragraph 65',
15546:'of sffas 7 11 page 2 sffas 20 fasab handbook, version 20 06/21 sffas 20 introduction purpose 1. this standardrescinds',
15547:'paragraph65.2ofstatementoffederalfinancialaccounting standards sffas 7 and makes other conforming changes. background 2. sffas 7 became effective in fiscal year 1998 and',
15548:'included, along with other provisions, detailed provisions that apply to entities collecting taxes on behalf of the federal government. paragraph',
15549:'65.2 of that standard required disclosure of “revenuerelated transactions affecting the beginning and endofperiod balances of accounts receivables, accounts payable',
15550:'for refunds, and the allowance for uncollectible amounts.” 3. subsequent to the issuance of the standard questions arose as to',
15551:'the usefulness of the information as well as to the practicality of producing it. after discussing the issues and options,',
15552:'the board issued, in november 1998, an exposure draft of a standard rescinding paragraph 65.2. ultimately, the board agreed that',
15553:'more study was needed, and in january 1999 it deferred the effective date of paragraph 65.2 until october 1, 2000',
15554:'sffas 13, deferral of paragraph 65.2 – material revenuerelated transactions disclosures. 4. in november 2000, the board issued a second',
15555:'exposure draft, elimination of disclosures related to tax revenue transactions by the internal revenue service, customs, and others, amending sffas',
15556:'7. based on comments received and further consideration, the board is now rescinding paragraph 65.2. effective date 5. this amendment',
15557:'is effective for periods beginning after september 30, 2000. accounting standard 6. paragraph 65.2 of sffas 7 is repealed and',
15558:'rescinded. page 3 sffas 20 fasab handbook, version 20 06/21 sffas 20 7. other conforming changes: a. the last sentence',
15559:'of paragraph 107 of sffas 7 is changed to delete “65.2 and” from the parenthesis. b. the last sentence of',
15560:'footnote 41, paragraph 187.1 of sffas 7 is changed to delete “in its disclosures required by para. 65.2”. page 4',
15561:'sffas 20 fasab handbook, version 20 06/21 sffas 20 appendixa: basis for conclusions this statement may be affected by later',
15562:'statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend',
15563:'this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not',
15564:'be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the',
15565:'rationale for each amendment. 8. this appendix summarizes some of the considerations deemed significant by the board in reaching the',
15566:'conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight',
15567:'to some factors than to others. 9. the board issued an exposure draft in november 1998 proposing to rescind paragraph',
15568:'65.2. commentswerereceivedduringaminimalcommentperiodthatendeddecember12, 1998. in january 1999, the board deferred the effective date of paragraph 65.2, sffas 7, until october 1,',
15569:'2000.1 10. indecember1998,theboardagreedthatfurtherstudywasneededregardingtherelevance of the information discussed in paragraph 65.2. additionally, the board was concerned about the relatively short exposure',
15570:'period approximately 30 days for the ed. the board decided to defer the effective date for implementing paragraph 65.2 and',
15571:'revisit the issue of eliminating the requirement at a later date. 11. following the decision to defer the disclosure requirement,',
15572:'the board did not take up research on the issue immediately. in december 1999, the board reviewed its agenda and',
15573:'weighed whether it should devote scarce resources to this issue or simply allow the provisions of paragraph 65.2 to take',
15574:'effect for fiscal year 2001 financial statements. to assist in making this decision, the board sent a letter to the',
15575:'internal revenue service irs asking what additional information might be available to aid the board in considering the issue. 12.',
15576:'the irs responded with additional information based on its two additional reporting years’ experience with sffas 7 requirements. in addition,',
15577:'the irs provided a briefing to the board regarding its collections process and systems modernization. the irs renewed the request',
15578:'that the board rescind the provisions of paragraph 65.2. its auditor, the general accounting office, supported this rescission. 1 sffas',
15579:'13, deferral of paragraph 65.2 – material revenuerelated transactions disclosures, amending sffas 7 accounting for revenue and other financing transactions,',
15580:'january 1999. page 5 sffas 20 fasab handbook, version 20 06/21 sffas 20 13. in november 2000, the board issued',
15581:'a second exposure draft, elimination of disclosures related to tax revenue transactions by the internal revenue service, customs, and others,',
15582:'amending sffas 7, that proposed to eliminate paragraph 65.2. because of the interest in the relevance of this information, the',
15583:'board mailed copies to potential users, for example, congresspersons and staff directors of key committees. the board received comment letters',
15584:'on the exposure draft from the following sources: federal nonfederal internal external users, academics, others 2 auditors 2 1 preparers',
15585:'and financial managers 4 responses to the exposure draft 14. therespondentswerecloselydividedwiththemajoritysupportingtheproposedelimination of paragraph 65.2. it is important to note that',
15586:'the board did not rely on the number in favor or opposed to a given position. information about the majority',
15587:'view is provided only as a means of summarizing the comments. the board considered the arguments in each response and',
15588:'weighed the merits of the points raised. the board summarizes the respondents’ arguments below. respondents supporting the ed 15. several',
15589:'respondents stated that paragraph 65.2 disclosures would not be useful, and could be misleading, to general purpose readers. arespondent stated',
15590:'that any attempt to reconcile the elements required by paragraph 65.2 could be misleading due to timing differences between assessments',
15591:'and collections and the definitions of revenue receipts and taxes receivable. 16. some respondents said that the irs currently provides',
15592:'sufficient detailed information about federaltaxrevenues,unpaidassessments, andrefundsinitsannualfinancialreport through footnote disclosures, supplementary information and in its management’s discussion and analysis md&a. other',
15593:'respondents said that the disclosure requirements of paragraph 65.2 far exceed what should be required in general purpose financial statements.',
15594:'another respondent concurring with the elimination of paragraph 65.2 stated that fasab clearly documented its case in the ed’s basis',
15595:'for conclusions. page 6 sffas 20 fasab handbook, version 20 06/21 sffas 20 respondents opposing the ed 17. other respondents',
15596:'had a different view. one respondent stated that the disclosure in sffas 7 was intended to overcome some of the',
15597:'practical limitations of the tax collection system and make the tax revenue recognition closer to what would be reported with',
15598:'fuller accrual accounting. he submitted that the information required in paragraph 65.2 is relevant and useful in assessing the efficiency',
15599:'and effectiveness of the tax system, not merely the administrative practices, and can be explained satisfactorily so as not to',
15600:'be misleading. 18. severalrespondentsstatedthatinsufficientevidencehasbeenofferedregardingthelackof relevanceandunderstandabilityofthe informationtowarranteliminatingtheparagraph65.2 disclosures, and doing so would weaken sffas 7. these respondents recommended extending the deferral',
15601:'period for the standard, further research, and a hearing, as necessary, prior to the issuance of a final standard. one',
15602:'respondent stated that the ed did not convincingly explain why the information called for in paragraph 65.2 is so complex',
15603:'that it could not be clearly explained. the respondent stated that sffac 1, par. 158, provides that general purpose financial',
15604:'reports should not exclude essential information merely because it is difficult to understand or because some report users choose not',
15605:'to use it. the board’s discussion 19. in conjunction with redeliberating the issues presented in the exposure draft and carefully',
15606:'considering the respondents’ comments, the board notes that sffas 7 represents a major accomplishmentinestablishingfederalaccountingstandards. sffas7presentsstandards forclassifying,recognizing, andmeasuringresourceinflowsaswellasconceptsforfinancial reporting and makes',
15607:'other significant contributions. many provisions of that statement are now fundamental to federal accounting. however, the board believes that paragraph',
15608:'65.2 of sffas 7 is flawed because the information required therein might be misinterpreted, would not accomplish what it purports',
15609:'to accomplish, and would be difficult to produce. information that could be misinterpreted 20. paragraph65.2requiresdisclosureofinformationaboutthebeginningandendingbalances of accounts receivable and related',
15610:'accounts, as well as material types of revenue transactions that relate to the collecting entity’s custodial responsibilities. the minimum information',
15611:'required would include “assessments by the entity,” “penalties,” “interest,” and “abatements.” in the two exposure drafts on this issue november',
15612:'1998 and november 2000 the board has discussed the complexity of the assessment and abatement process. the board has discussed',
15613:'the various irsinitiated tax collection actions, including compliance assessments; the enforcement workinprocess status of the assessment page 7 sffas 20',
15614:'fasab handbook, version 20 06/21 sffas 20 database; the possible timing difference between the period to which the tax relates,',
15615:'the eventual assessment of the tax and penalties and interest, and the final collection or abatement of the assessment; and',
15616:'other complicating factors. many assessments, penalties, and interest are made for enforcement purposes, are often overstated due to incompleteinformation, andaresubject',
15617:'to change basedonreceipt of additionalinformation from the taxpayer. thus, they do not always precede a receivable2 in an accounting sense.',
15618:'the board believes that the user could misinterpret assessment reporting because increases or decreases in assessments do not lead necessarily',
15619:'to increases or decreases in receivables or revenue. further, developing meaningful categories of assessments that would permit a user to',
15620:'analyze whether enforcement assessments are likely to lead to revenues would not be costbeneficial when one considers the remaining reporting',
15621:'required under sffas 7 as amended. 21. theboardalsohasdiscussedthecomplications oftheabatementprocess. abatementisa reductionorcancellationofanassessedtax. abatementsaremadeformyriadreasonsand in some cases there is no correlation between',
15622:'the original assessment and the final reason for the abatement. for example, taxpayers can carry back losses to prior years',
15623:'and reduce prior year taxes that were correctly assessed by the irs. such reductions are classified as abatements but are',
15624:'not the same as abatements where the tax assessment itself was in error. 22. moreover, taxpayers also file amended returns',
15625:'that can require abatement of the original amount they reported, including taxpayer requests to abate particular types of penalty assessments',
15626:'due to reasonable causes. for example, during 1998 a new law required the irs to disallow certain dependents and credits',
15627:'claimed if the taxpayer did not include a social security number for a dependent child or a taxpayer identification number',
15628:'for a childcare provider. in each case the irs posted an assessment, accrued penalties and interest pending provision of the',
15629:'information, and subsequently abated the assessment when the taxpayer provided the required verification. this change in law increased the total',
15630:'assessments, interest, penalties, and abatements to enforce a reporting requirement rather than to collect additional tax revenue. one could be',
15631:'misled since both assessments and abatements were “overstated” in the sense that it wasanticipated at the time of assessment that,',
15632:'in the majority of cases, the assessment would be abated. 23. there are many different reasons for abatements with varying',
15633:'transactions potentially covering 10 years of assessments, each affecting the balances to be disclosed under paragraph 65.2. the board believesthatreportingontotalassessments,',
15634:'including penalties 2per sffas 7, paragraph 53, accounts receivable should be recognized when a collecting entity establishes a specifically identifiable,',
15635:'legally enforceable claim to cash or other assets through its established assessment process to the extent the amount is measurable.',
15636:'page 8 sffas 20 fasab handbook, version 20 06/21 sffas 20 and interest thereon, and abatements could be misinterpreted in',
15637:'the context of disclosures purporting to be transactions affecting the beginning and ending balances of accounts receivable and related accounts.',
15638:'moreover, the board believes that attempts to reconcile the elements required in paragraph 65.2 could be misinterpreted due to timing',
15639:'differences between assessments and collections and the definitions of revenue receipts and taxes receivable. 24. the board concludes that the',
15640:'paragraph 65.2 information is not relevant for reconciling the beginning and ending balances of accounts receivable and related accounts, which',
15641:'paragraph 65.2 purports to do. some of the required information is beyond the scope of those accountssince activitydoesnot result in',
15642:'orrelate torevenueorreceivables, precedes the recognition of taxes receivable, or relates solely to tax administration or enforcement. 25. whenconsideringwhethertoretainparagraph65.2,theboardconsideredthematerialityof taxesreceivable. theirs’',
15643:'taxesreceivablearenotlargeinrelationtoannualtaxrevenue. for fy2000, approximately $20 billion in irs receivables represent three days of collections. other information required 26. the board',
15644:'calls attention to other sffas 7 paragraphs and to other fasab standards that require disclosures and supplemental information that the',
15645:'board believes accomplish the objectives of sffas 7 as stated in paragraph 187.1 and elsewhere. paragraph 65.1 requires disclosure of',
15646:'factors affecting collectability and timing of categories of accounts receivable and the amounts involved. paragraph 65.3 requires disclosure of cumulative',
15647:'cashcollectionsandrefundsbytaxyearandtaxtype. paragraph67requiressupplemental information about the estimated realizable value of compliance assessments and preassessment workinprocess; about other claims for taxrefundsthat are',
15648:'not yet accrued but are likely to be accrued when administrative actions are completed; and, about the amount of assessments',
15649:'that the entity still has statutory authority to collect but that have been written off and thus excluded from accounts',
15650:'receivable. sffas 15, management’s discussion and analysis, requires discussion, among other things, of performance goals, objectives, results, systems, controls, and',
15651:'legal compliance. conclusion 27. the board actively sought comments from potential users. in addition to the fasab distribution list, the',
15652:'board sent the ed to all those who had commented on the prior ed of november 1998 and to potential',
15653:'decisionmakers, including especially house and senate committees and subcommittees. also, in setting february 16, 2001, as the cutoff date for',
15654:'comments, the board provided an extended period for respondents to submit comments. despite the board’s efforts to reach users the',
15655:'response to the ed did not demonstrate a page 9 sffas 20 fasab handbook, version 20 06/21 sffas 20 demand',
15656:'from users to have the information. only one respondent said the information was useful and necessary. other respondents who oppose',
15657:'eliminating paragraph 65.2 at this time said that the board did not offer enough evidence regarding relevance and understandability to',
15658:'warrant eliminating paragraph 65.2, not that they themselves found it useful or relevant and for what purposes. due to the',
15659:'cost of the information, the availability of other information on this topic, the requests from the preparer and auditor communities,',
15660:'and lack of a response from users of the information, the board does not believe the paragraph should be retained.',
15661:'28. the board believes that sufficient evidence has been produced to conclude that the informationrequiredbyparagraph65.2could bemisinterpretedbyusersof generalpurpose financial statements and',
15662:'that it does not accomplish what it purports to accomplish. the board does not exclude essential information merely because it',
15663:'is difficult to understand or because some report users choose not to use it. in this instance, however, the complexity',
15664:'of the tax collection process in conjunction with the context of accounts receivable reconciliation renders paragraph 65.2 defective and, therefore,',
15665:'not relevant. the objective of sffas 7 is to tell users what is happening at the tax collection entities, and',
15666:'the board believesthe standard isachieving thisobjective without paragraph 65.2, andthat paragraph 65.2 could in fact be misinterpreted. this amendment of',
15667:'sffas 7 is limited to the problem of disclosures in paragraph 65.2 being misinterpreted. vote forapproval 29. the amendment of',
15668:'sffas 7 prescribed in this statement is approved by a vote of seven members in favor and one member dissenting',
15669:'only eight members voted due to a vacancy on the board. the dissent is available for review at the fasab',
15670:'offices. page 10 sffas 20 fasab handbook, version 20 06/21 sffas 20 appendix b: paragraph 65 of sffas 7 65.',
15671:'entities that collect taxes and duties should disclose the following relating to future cash flows, revenuerelated transactions, and custodial responsibilities:',
15672:'65.1accounts receivable. factors affecting collectibility and timing of categories of accounts receivable and the amounts involved. 65.2 material revenuerelated transactions.',
15673:'revenuerelated transactions affecting the beginning and endofperiod balances of accounts receivable, accounts payable for refunds, and the allowance for uncollectible',
15674:'amounts should be disclosed. all material types of revenue transactions which relate to the custodial responsibilities of the collecting entities',
15675:'should be disclosed. the disclosure should be comprehensive enough to include as a minimum: selfassessments by taxpayers or importers; assessments',
15676:'by the entity; penalties; interest; cash collections applied to taxpayer accounts and unapplied collections; refunds, refund offsets, and drawbacks; abatements;',
15677:'accounts receivable written off during the reporting period as uncollectible; and provisions made to the allowance for uncollectible amounts. 65.3',
15678:'cumulative cash collections and refunds by tax year and type of tax. cash collectionsand refunds by tax year and type',
15679:'of tax should include cash collectionsand cash refunds for the reporting period and for sufficient prior periods to illustrate 1',
15680:'the historical timing of tax collections and refunds, and 2 any material trends in collection and refund patterns. sufficient prior',
15681:'periods for each type of tax are the periods which endwhen the statutoryperiod forcollection ends. collectingentitiesmayshorten these periods if evidence',
15682:'for prior tax years indicates that a shorter period would reflect at least 99 percent of the collectible taxes. page',
15683:'11 sffas 20 fasab handbook, version 20 06/21 statementoffederal financialaccounting standards 21: reporting corrections of errors and changes in accounting',
15684:'principles,amendment of sffas 7, accounting for revenue and other financing sources status issued october 16, 2001 effective date for periods',
15685:'beginning after september 30, 2001 affects sffas 7 affected by none. summary this statement amends the standard on prior periodadjustments',
15686:'contained in statement of federal financialaccounting standards 7, accounting for revenue and other financing sources sffas 7, which was issued',
15687:'inapril 1996. paragraph 76 of sffas 7, entitled prior periodadjustments, addresses accounting changes and errors that affect prior period financial',
15688:'statements. it does not permit reporting entities, when presenting prior period financial statements for comparative purposes, to restate prior period',
15689:'financial statements to show the effect of the accounting errors. the unforeseen result is that reporting entities that have material',
15690:'errors in their prior period financial statements are unable to present them for comparative purposes without creating both a dilemma',
15691:'for auditors and confusion for users. the dilemma for the auditors is that they would have to qualify their opinion',
15692:'on the prior period financial statements whether or not they had been restated. if prior period statements were presented that',
15693:'contained a material error, auditors would have to qualify their opinion. on the other hand, if prior period statements were',
15694:'presented and balances had been corrected for an error, auditors would still have to qualify their opinion because such restatement',
15695:'would not be in accordance with the existing standard. the confusion for the user derives from the difficulty inherent in',
15696:'comparing the financial statements for two or more periods when the effect of the error is not shown in the',
15697:'prior periods’ financial statements. to correct this situation, the amendment requires that when material errors are discovered in prior period',
15698:'financial statements, all statements presented must be restated to correct the error. the board has retained the current requirement that',
15699:'prior period financial statements not be restated for changes in accounting principles, unless otherwise specified in the transitioninstructionssectionofanewfasabstandard. thelanguageaddressingthe page',
15700:'1 sffas 21 fasab handbook, version 20 06/21 sffas 21 requirements, however, has been revised to improve clarity and to',
15701:'require certain disclosures. page 2 sffas 21 fasab handbook, version 20 06/21 sffas 21 table of contents page summary 1',
15702:'introduction 4 accounting standard 6 appendixa: basis for conclusions 8 page 3 sffas 21 fasab handbook, version 20 06/21 sffas',
15703:'21 introduction 1. statementoffederalfinancialaccountingstandards no. 7, accounting for revenue and other financing sources, became effective for fiscal year 1998. it',
15704:'includes a section describing how reporting entities should handle prior period adjustments. 2. thesectionon priorperiodadjustments states: 76. prior period adjustments',
15705:'should be limited to corrections of errors and accounting changes with retroactive effect, including those occasioned by the adoption of',
15706:'new federalfinancialaccounting standards, and should be recognized and measured under applicable standards. adjustments should be recognized as a change in',
15707:'cumulative results of operations rather than as an element of net results of operations for the period. prior period financial',
15708:'statements should not be restated for prior period adjustments recognized in the current period. 3. when sffas no. 7 was',
15709:'issued, the board believed that having reporting entities restate prior period financial statements for prior period adjustments would create an',
15710:'unnecessary burden at a time when fasab was still establishing a basic framework of standards. 4. however, disallowing restatement of',
15711:'prior period financial statements has had the effect of preventing reporting entities from presenting comparative financial statements when the prior',
15712:'period financial statements contain a material error that is discovered in the current period. 5. the board has amended the',
15713:'standard to require that reporting entities restate prior period financial statements for material errors discovered in the current period, if',
15714:'such statements are providedforcomparative purposes, and if the effect of the errorwould be material to the financial statements in either',
15715:'period. 6. the board has chosen to retain the current methodology that prior period financial statements not be restated for',
15716:'changes in accounting principles, unless otherwise specified in the transition instructions section of a new fasab standard. the language addressing',
15717:'the requirements, however, has been revised to improve clarity and to require certain disclosures. 7. the language in the standard',
15718:'has also been revised to distinguish between corrections of errors andchanges inaccountingprinciples. achangeinaccountingprinciple shouldbe identified as such and no longer',
15719:'reported as a prior period adjustment. page 4 sffas 21 fasab handbook, version 20 06/21 sffas 21 effective date 8.',
15720:'this amendment would be effective for periods beginning after september 30, 2001, with earlier implementation encouraged. page 5 sffas 21',
15721:'fasab handbook, version 20 06/21 sffas 21 accounting standard 9. paragraph 76 of sffas no. 7, accounting for revenue and',
15722:'other financing sources, sectionpriorperiodadjustments,issuperceded andreplacedbyparagraphs10through13 below. corrections of errors 10. “errors in financial statements result from mathematical mistakes, mistakes in',
15723:'the application of accounting principles, or oversight or misuse of facts that existed at the time the financial statements were',
15724:'prepared.”1 when errors are discovered after the issuance of financial statements, and if the financial statements would be materially misstated',
15725:'absent correction of the errors, corrections should be made as follows: a if only the current period statements are presented,',
15726:'then the cumulative effect of correcting the error should be reported as a prior period adjustment. the adjustment should be',
15727:'made to the beginning balance of cumulative results of operations, in the statement of changes in net position. b ifcomparativefinancialstatementsarepresented,thentheerrorshouldbecorrectedin',
15728:'the earliest affected period presented by correcting any individual amounts on the financialstatements. iftheearliestperiodpresentedisnottheperiodinwhichtheerror occurred and the cumulative effect is',
15729:'attributable to prior periods, then the cumulative effect should be reported as a prior period adjustment. the adjustment should be',
15730:'made to the beginning balance of cumulative results of operations, in the statement of changes in net position for the',
15731:'earliest period presented. c the nature of an error in previously issued financial statements and the effect of its correction',
15732:'on relevant balances should be disclosed. financial statements of subsequent periods need not repeat the disclosures. 11. prior period financial',
15733:'statements should only be restated for corrections of errors that would have caused any statements presented to be materially misstated.',
15734:'1accounting principles board opinion no. 20, par. 13. page 6 sffas 21 fasab handbook, version 20 06/21 sffas 21 changes',
15735:'inaccounting principles 12. achangeinaccountingprincipleis achangefrom onegenerally acceptedaccounting principle to another one that can be justified as preferable. for the purposes',
15736:'of this standard,changesinaccountingprinciplesalsoincludethoseoccasionedbytheadoptionof new federal financial accounting standards. 13. unless otherwise specified in the transition instructions section of a new',
15737:'fasab standard, for all changes in accounting principles that would have resulted in a change to prior period financial statements:',
15738:'a the cumulative effect of the change on prior periods should be reported as a “change in accounting principle.” the',
15739:'adjustment should be made to the beginning balance of cumulative results of operations in the statement of changes in net',
15740:'position for the period that the change is made. b prior period financial statements presented for comparative purposes should be',
15741:'presented as previously reported; and c the nature of the changes in accounting principle and its effect on relevant balances',
15742:'should be disclosed in the current period. financial statements of subsequent periods need not repeat the disclosure. the provisionsofthisstatement need',
15743:'not be applied to immaterial items. page 7 sffas 21 fasab handbook, version 20 06/21 sffas 21 appendixa: basis for',
15744:'conclusions this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section',
15745:'directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are',
15746:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
15747:'for conclusions of the amending statement for the rationale for each amendment. 14. this appendix summarizes some of the considerations',
15748:'deemed significant by the board in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches',
15749:'and rejecting others. individual members gave greater weight to some factors than to others. 15. theboardreceivedsixteenresponsestotheed. allbutonerespondentwereinsupportof the amendment. the',
15750:'board did not rely on the number in favor of or opposed to a given position. information about the respondent’s',
15751:'majority view is provided only as a means of summarizing the comments. the board considered the arguments in each response',
15752:'and weighed the merits of the points raised. the respondent’s comments are summarized below. federal nonfederal users, academics, others auditors',
15753:'2 preparers and financial managers 12 16. seven respondents approved the amendment without further comment. four approved the amendment but',
15754:'requested clarifying language, which has been incorporated into the standard. two approved the amendment but would have preferred that the',
15755:'standard allow restatement for changes in accounting principles. 17. one respondent disapproved of the amendment because they believe the amendment',
15756:'will create additional confusion regarding the closing of prior period accounts and the subsequent issuance of financial statements. corrections of',
15757:'errors 18. when sffas no. 7 was issued, the board believed that having reporting entities restate prior period financial statements',
15758:'for prior period adjustments would create an unnecessary page 8 sffas 21 fasab handbook, version 20 06/21 sffas 21 burden',
15759:'at a time when fasab was still establishing a basic framework of standards. changes in the federal accounting environment in',
15760:'the ensuing years have lessened these concerns. with the government’s increasing ability to produce accurate and sophisticated financial statements, the',
15761:'board is more concerned with encouraging reporting entities to produce financial statements that are most useful to managers and other',
15762:'users. 19. although comparative financial statements are not required by any of the accounting standards setting boards, it is generally',
15763:'held that “the presentation of comparative financial statements in annual and other reports enhances the usefulness of such reports and',
15764:'brings out more clearly the nature and trends of current changes affecting the enterprise.”2 20. reporting entities also recognize that',
15765:'presenting comparative statements greatly enhances the overall usefulness of financial statements. despite the advantages of providing comparative statements, however, at',
15766:'least one governmental entity has been constrained from presenting its prior year statements because they contain a material error. 21.',
15767:'the board has deliberated on the effects of the existing standard precluding restatement to correcterrorsonpresentationofcomparativefinancialstatements. althoughitbelievesthat the considerations in effect',
15768:'at the time the existing standard was issued were valid, it has concluded that potentially losing or delaying the benefit',
15769:'of comparative statements now outweighs these considerations. 22. theboardconcludedthatthestandardfor prior periodadjustments shouldbeamendedto specifically require that prior period financial statements presented',
15770:'for comparative purposes be restated to correct material errors, and that restatement should be limited to only material errors. changes',
15771:'inaccounting principles 23. although the board has chosen to retain the current methodology for reporting changes in accounting principle, it',
15772:'has revised the language to improve clarity and to require certain disclosures. the board may consider exceptions to this decision,',
15773:'if warranted, for accounting standards issued in the future. it may also further examine issues raised by respondents regarding changes',
15774:'in accounting principles. 2accounting research bulletin 43, chapter 2a, paragraph 101. page 9 sffas 21 fasab handbook, version 20 06/21',
15775:'sffas 21 otheraccounting changes 24. although accounting estimates and changes in reporting entity are identified as accounting changesinotheraccountingliterature, theboarddid notaddresstheseissuesbecause',
15776:'they require further study and were not addressed in paragraph 76 of sffas no. 7. boardapproval 25. this statement was',
15777:'approved by unanimous vote of the board. page 10 sffas 21 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards 22: change in',
15778:'certain requirements for reconciling obligations and net cost of operations,amendment of sffas 7,accounting for revenue and other financingsources rescinded status',
15779:'issued october 22, 2001 effective date for periods beginning after september 30, 2000 affects sffas 7 affected by sffas 53',
15780:'rescinded sffas 22 in its entirety. summary sffas 53, budget and accrual reconciliation: amending sffas 7, and 24, and rescinding',
15781:'sffas 22 rescinded sffas 22 in its entirety. page 1 sffas 22 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards23: eliminating the',
15782:'category national defense property, plant, and equipment rescinding sffas no. 11, amendments to property, plant, and equipment definitional changes amending',
15783:'sffas no. 8, supplementary stewardship reporting amending sffas no. 6, accounting for property, plant, and equipment status issued may 8,',
15784:'2003 effective date this statement is effective for accounting periods beginning after september 30, 2002, with earlier implementation encouraged. affects',
15785:'sffas 6, accounting for property, plant and equipment for additional pp&e discussion and cleanup cost standards sffas 8, supplemental stewardship',
15786:'reporting rescinds the prefatory box preceding paragraph 52 of sffas 8 and paragraphs 52 through 70 of sffas 8. affected',
15787:'by sffas 35 amends paragraphs 10, 12, 13, 15, 16 and footnote 5 sffas 35 adds paragraph 13aand footnote 4a',
15788:'sffas 35 rescinds paragraphs 11, 17, 18 and footnote 6 sffas 50 amends par. 10 and rescinds par. 1118. summary',
15789:'prior to this amendment, the acquisition costs for items classified as national defense nd property, plant, and equipment pp&e were',
15790:'expensed in the period incurred. in addition, valuation using either an historical or latest acquisition cost valuation method, condition, and',
15791:'deferred maintenance information for these items was to be presented offbalance sheet. the amendments in this statement make the following',
15792:'changes. the term “nd pp&e” is rescinded. all items previously considered nd pp&e are classified as general pp&e. accordingly, the',
15793:'cost of theseitemsshould becapitalized and, with theexceptionof the cost of land and land improvements that produce permanent benefits, depreciated. this',
15794:'statement also notes that all entities are permitted to use the composite or group depreciation methodology to calculate depreciation. the',
15795:'amendments in this statement take effect for accounting periods beginning after september 30, 2002. page 1 sffas 23 fasab handbook,',
15796:'version 20 06/21 sffas 23 table of contents page summary 1 introduction 3 background 3 summaryofamendments 4 effective date 4',
15797:'accounting standards 5 amendments to existing standards 5 implementation guidance 6 appendixa: basis for conclusions 7 page 2 sffas 23',
15798:'fasab handbook, version 20 06/21 sffas 23 introduction 1. thepurposeofthisstatementistoamendcertainstandardswithregardtonationaldefense nd property, plant, and equipment pp&e. the standards being amended',
15799:'are contained in statement of federal financialaccounting standards sffas no. 11, amendments to accounting for property, plant, and equipment definitional',
15800:'changes december 1998; sffas no. 8, supplementary stewardship reporting june 1996; and, sffas no. 6, accounting for property, plant, and',
15801:'equipment november 1995. background 2. pursuanttosffasno. 6,coststoacquire,replaceorimprovendpp&e1wererecognized2 as an expense in the period incurred. consistent with the treatment of the',
15802:'acquisition cost of ndpp&e,sffasno. 6 alsorequiredthatthetotalestimatedcleanup costberecognized as an expense and a liability established in the period the nd pp&e',
15803:'item is placed in service. afurther requirementofsffasno. 6, as amendedbysffasno. 14,isthat deferred maintenance amounts be presented as required supplementary information',
15804:'rsi.3 3. thesupplementarystewardshipreportingstandardsinsffasno. 8requiredpresentinga valuation of nd pp&e. the following values were to be presented: a. a beginning value balance',
15805:'for nd pp&e; b. the dollar values for nd pp&e acquired during the reporting period; c. the dollar values for',
15806:'nd pp&e withdrawn during the reporting period; 1originally, nd pp&e was defined in sffas no. 6 as federal mission pp&e.',
15807:'subsequent to the issuance of sffas no. 6, many agencies suggested that the federal mission pp&e category would be appropriate',
15808:'for agency pp&e not considered by the board in developing the category. to prevent confusion, inconsistency, and unintended application, the',
15809:'board replaced the definition of federal mission pp&e with the definition of nd pp&e currently contained in sffas no. 11',
15810:'to clarify that only dod and the maritimeadministration’s national defense reserve fleet pp&e would be categorized as nd pp&e. 2',
15811:'“recognize” means torecordanamountin entity accounts and to report a dollar amount on the face of the statement of net costs',
15812:'or the balance sheet either individually or so that the amounts are aggregated with related amounts. 3 this amendment does',
15813:'not change any requirements for deferred maintenance. page 3 sffas 23 fasab handbook, version 20 06/21 sffas 23 d. the',
15814:'increase or decrease in values resulting from revaluation of assets using the latest acquisition cost lac; and, e. the endofyear',
15815:'values by major type or category of nd pp&e. the values were to have been determined using either an historical',
15816:'or lac valuation method. 4. in addition to the values, condition information was required. the valuation and condition information was',
15817:'presented as required supplementary stewardship information rssi – that is, outside of the principal financial statements. 5. currentboardmembersacknowledgethatthestewardshipapproachwasadopted,notasa convenience or',
15818:'temporizing expedient, but as a technically desirable approach. however, an increasing governmentwide focus on the cost of operations and operating',
15819:'performance in relation to the implications of the government performance and results gpraact, combined withtheboard’sand department of defense’s dodextensive study',
15820:'andgreater understanding about national defense pp&e, provide a clear indication that the operating performance objective is relevant for nd pp&e.',
15821:'accordingly, the board rescinds sffas no. 11 and amends sffas nos. 6 and 8. summary ofamendments 6. the amendments in',
15822:'this statement: a. rescind the term “nd pp&e” and its definition ; b. classify all assets previously considered to be',
15823:'nd pp&e as general pp&e and, the provisionsforgeneralpp&eandassociatedcleanupcostsforgeneralpp&econtained in sffas no. 6, as amended, are to be applied; and, c.',
15824:'continue to permit the composite or group depreciation methodology to depreciate general pp&e. effective date 7. thisstatementiseffectiveforaccountingperiodsbeginningafterseptember30,2002,with earlier implementation encouraged.',
15825:'page 4 sffas 23 fasab handbook, version 20 06/21 sffas 23 accounting standards amendments to existing standards 8. the amendments',
15826:'to accounting standards for assets previously identified as national defense nd property, plant, and equipment pp&e and implementation guidance are',
15827:'presented in paragraphs 9 through 18 that follow. 9. the amendments affect existing standards, for periods beginning after september 30,',
15828:'2002 or upon early implementation of this statement, in the following manner: a. sffas no. 11 is rescinded in its',
15829:'entirety; b. the prefatory box preceding paragraph 52 of sffas no. 8 is rescinded; c. paragraphs 52 through 70 of',
15830:'sffas no. 8 are rescinded; d. paragraph 21 of sffas no. 6 is amended by rescinding the category name federal',
15831:'mission property, plant, and equipment; e. paragraphs 46 through 56 of sffas no. 6 and the accompanying heading federal mission',
15832:'property, plant, and equipment; which precedes these paragraphs, are rescinded; f. sffas no. 6 is amended by adding the following',
15833:'sentence to paragraph 35 as a separate bulleted line item: acompositeor groupdepreciationmethodology4,wherebythecostsofpp&eare allocated using the same allocation rate, is permissible.',
15834:'4the composite methodology is a method of calculating depreciation that applies a single average rate to a number of heterogeneous',
15835:'assets that have dissimilar characteristics and service lives. the group methodology is a method of calculating depreciation that applies a',
15836:'single, average rate to a number of homogeneous assets having similar characteristics and service lives. page 5 sffas 23 fasab',
15837:'handbook, version 20 06/21 sffas 23 implementation guidance initial capitalization 10. see sffas 6 for implementation guidance applicable to all',
15838:'general pp&e. [paragraph 1118 were rescinded by sffas 50. ]5 the provisions of this statement need not be applied to',
15839:'immaterial items. 5 footnote 5 was rescinded by sffas 50. page 6 sffas 23 fasab handbook, version 20 06/21 sffas',
15840:'23 appendixa: basis for conclusions this statement may be affected by later statements. the fasab handbook is updated annually and',
15841:'includes a status section directing the reader to anysubsequent statements that amend this statement. within the text of the statements,',
15842:'the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the reader',
15843:'can review the basis for conclusions of the amending statement for the rationale for each amendment. 19. this appendix summarizes',
15844:'some of the considerations deemed significant by the board in reaching the conclusions in this statement. it includes the reasons',
15845:'for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others. introduction 20.',
15846:'the board issued an exposure draft ed, eliminating the category national defense property, plant, and equipment, to rescind sffas no.',
15847:'11, amendments to property, plant, and equipment definitional changes and to amend sffas no. 8, supplementary stewardship reporting and sffas',
15848:'no. 6, accounting for property, plant, and equipment in marchof2002. twentycommentletterswerereceivedduringacommentperiodthatended may 20, 2002. the majority of respondents supported the',
15849:'proposals presented in the ed. concerns raised by the respondents dealt mostly with providing additional guidance for the valuation and',
15850:'consumption of items. two other concerns dealt with the impact of the statement on contractor costs and the effective date',
15851:'of the statement. background information pertaining to the development of this statement and discussions on the concerns raised by respondents',
15852:'are addressed in the following paragraphs. background 21. thefederalaccountingstandardsadvisoryboardfasabhasstudied accounting and reporting approaches for property, plant, and equipment pp&e for',
15853:'a number of years. fasab’s initial standards for pp&e began with the development of sffas no. 6, accounting for property,',
15854:'plant, and equipment, and followed with sffas no. 8, supplementary stewardship reporting. 22. sffas no. 6 requires that general pp&e',
15855:'be recognized as assets in the basic financial statements and, except for land and land improvements that produce permanent benefits,',
15856:'be charged to expense through depreciation over their useful life. sffas no. 6, paragraph page 7 sffas 23 fasab handbook,',
15857:'version 20 06/21 sffas 23 122, states that allocation of the cost of general pp&e, excluding land, among accounting periods',
15858:'was essential to assessing operating performance. the boards federal financial reporting objectives concept statement, statement of federal financialaccounting concepts sffac',
15859:'no.1, focuses on relating costs to accomplishments in reporting an entitys operating performance. to meet the operating performance objective for',
15860:'general pp&e, the board sought to provide accounting standards that would result in: a. relevant and reliable cost information for',
15861:'decisionmaking by internal users; b. comprehensive, comparable cost information for decisionmaking and program evaluation by the public; and, c. information',
15862:'to help assess the efficiency and effectiveness of asset management. 23. the board, however, found that for some pp&e, the',
15863:'depreciation effect of the asset on operating performance was not the predominant reporting objective. instead, stewardship was important. therefore, three',
15864:'categories of assets i.e., national defense pp&e nd pp&e,6 heritage assets, and stewardship land are referred to collectively as stewardship',
15865:'pp&e. 24. the purpose of sffas no. 8 was to establish standards for reporting on the federal governmentsstewardshipovercertainresourcesentrustedtoit,andcertainresponsibilities assumed by',
15866:'it. among these standards are standards for reporting on stewardship pp&e. stewardship pp&e consistsof items whose physical properties resemble those',
15867:'of general pp&e traditionally capitalized in financial statements. however, the nature of these federal physical assets that are classified as',
15868:'stewardship pp&e differs from general pp&e in that their values may be indeterminable or may have little meaning e.g., museum',
15869:'collections, monuments, assets acquired in the formation of the nation or that allocating the cost of such assets e.g., nd',
15870:'pp&e to accounting periods that benefit from the ownership of such assetsisnotmeaningful. specifically,forndpp&ethemajorityoftheboarddidnotbelieve applying depreciation accounting for these assetswould contribute',
15871:'to measuring the cost of outputs produced, or to assessing operating performance, in any given accounting period. the board believed',
15872:'that these assets were developed, used, and retired in a manner that did not lend itself to a systematic and',
15873:'rational assignment of costs to accounting periods i.e., depreciation accounting and, ultimately, to outputs. 6 prior to the issuance of',
15874:'sffas no. 11, amendments to accounting for property, plant, and equipment – definitional changes, amending sffas nos. 6 and 8',
15875:'the board referred to nd pp&e as federal mission pp&e. the reasons leading to that change are not relevant to',
15876:'this ed but may be understood by reading sffas no. 11. this document uses the amended title and definition in',
15877:'referring to the existing provisions. page 8 sffas 23 fasab handbook, version 20 06/21 sffas 23 25. accordingly,oneresultofsffasnos. 6and8wastoremovethepp&ecomponentsofnd pp&e',
15878:'from the balance sheet. to accomplish this, sffas no. 6 as amended required that the cost to acquire nd pp&e',
15879:'components be expensed when incurred. sffas no. 8 as amended, required presenting nd pp&e as stewardship information and included the',
15880:'following information by major type or category of nd pp&e: a. a beginning value balance, using either a historical or',
15881:'latest acquisition cost lac valuation method; b. the dollar value acquired during the reporting period; c. the dollar value withdrawn',
15882:'during the reporting period; d. the increase or decrease in value resulting from revaluation of assets using the lac; and,',
15883:'e. the endofyear value. 26. in addition to presenting values, sffas no. 8 required that condition information be presented. thepresentationofvalueandconditioninformationwasdoneoffbalancesheet',
15884:'as required supplementary stewardship information rssi. in addition to value and condition, sffas no. 6, as amended, required deferred maintenance',
15885:'information to be presented as required supplemental information rsi for nd pp&e. february 1998 ed 27. in early 1998, the',
15886:'fasab issued an exposure draft ed to amend sffas nos. 6 and 8. the exposure draft was initiated 1 to',
15887:'refine the definition of nd pp&e, and 2 in recognition of the need to provide a transition plan due to',
15888:'the dod’s inability to comply with the provisions of sffas no. 8. during the process, the board reconsidered whether sffas',
15889:'no. 8 was an appropriate end goal. ultimately, the 1998 exposure draft included, among other suggestions, proposals to replace the',
15890:'requirement to present cumulative cost information in the supplementary stewardship report with a requirement to present nd pp&e annual acquisition',
15891:'costs for each of the previous five years i.e., annual trend information rather than cumulative costs, quantities, and condition information.',
15892:'28. besides considering the written comments in response to this 1998 ed, the board held a public hearing on these',
15893:'proposals to explore further the concerns expressed by some respondents. becauseofthedivergentviewsofbothrespondentsandboardmembers,the board did not reach a final conclusion on revisions',
15894:'to the reporting requirements for nd pp&e in sffas no. 8. the board’s continued deliberations on the proposed standards highlighted',
15895:'the differences of opinion on this subject among the board members. since page 9 sffas 23 fasab handbook, version 20',
15896:'06/21 sffas 23 neither the standards in sffas no.8 nor the proposed amendments were acceptable to a majority of the',
15897:'board members, the board decided that the accounting for and reporting on nd pp&e requirements should be revisited. dod voluntarily',
15898:'undertook a study to address 1 users information needs relative to nd pp&e, 2 the current systems capabilities within dod,',
15899:'and 3 an assessment of alternative means to meet the reporting objectives set by the board. 29. the board acknowledges',
15900:'that the sffas no. 8 stewardship approach was adopted, not as aconvenienceortemporizingexpedient,butasatechnicallydesirableapproach. however, an increasing governmentwide focus on the cost',
15901:'of operations and operating performance in relation to the implications of the government performance and results gpraact, combined with the',
15902:'board’s and dod’s extensive study and greater understanding about national defense pp&e, provides a clear indication that the operating performance',
15903:'objective is relevant for nd pp&e. september 2001 ed 30. in september 2001, the fasab issued an ed that proposed',
15904:'incremental movement from the stewardship reporting of sffas no.8 towards information focused on operating performance. the amendments proposed in that',
15905:'ed would have made the following changes. the definition of nd pp&e would have been amended. nd pp&e would have',
15906:'consisted of 2 separate categories of items within the amended definition: a major end items and b mission support items.',
15907:'major end items would have been subject to a presentation of the number of units and condition assessment information by',
15908:'asset type or category. in addition, major end items would have been capitalized but not depreciated, while mission support items',
15909:'would have been capitalized and depreciated. also, data for the ten largest current acquisition programs would have been disclosed. 31.',
15910:'the board issued the 2001 ed because it believed that the proposals in that ed were the best that could',
15911:'be achieved given the acknowledged shortcomings of dod accounting and othermanagement information systems, aswellasdodsfirmbelief that certain information would not be',
15912:'useful for management purposes. the 2001 ed would have achieved one of the current boards objectives, which was to establish',
15913:'monetary accountability over military assets. however, because the 2001 ed did not require depreciation of some major assets, theseptember2001fasabedonndpp&efellshortofcomprehensivepp&eaccounting. in',
15914:'addition, it would not have fully achieved the objective of sffas no. 4, managerial cost accountingconceptsandstandardsforthefederalgovernment,toaccountforthefullcost of programs with a',
15915:'focus on relating costs to accomplishments in reporting an entitys operating performance. page 10 sffas 23 fasab handbook, version 20',
15916:'06/21 sffas 23 march 2002 ed 32. while there were divergent views on the proposals in the september 2001 ed,',
15917:'many respondentsbelievedndpp&eshouldbe capitalizedanddepreciatedasisgeneralpp&e. many board members had wanted to make this change for some time. this caused the boardtoreconsidertheproposalspresentedintheseptember2001ed. theoutcomefrom',
15918:'the deliberationswasa consensusof the board to make the proposalin the march 2002 ed to classify, capitalize, and depreciate nd pp&e',
15919:'as general pp&e. the board believed its proposal would put discipline into the asset management process. many members of the',
15920:'board believe depreciation, impairment, deferred maintenance, and condition are interrelated judgments that should result jointly from periodic estimation of the',
15921:'remaining useful service potential of assets. the board believes periodic analysis of the sources of asset diminutionisasimportant,perhapsmoreso,fornationaldefenseassetsthanforother assets. 33. the',
15922:'board also notes that a second purpose of depreciation accounting is to provide information for measuring the full cost of',
15923:'producing outputs e.g., deterrence, readiness, training. full cost, including the depreciation of nd pp&e, would be available for use in',
15924:'assessing the operating performance of responsibility segments for producing outputs and to meet the goals of sffac no. 1 and',
15925:'sffas no. 4. in addition, the board believes that classifying all dod pp&e as general pp&e would improve the public’s',
15926:'understanding of federal accounting, add consistency to the application of standards throughout the federal government, reduce the dod’s cost of',
15927:'development and operation of accounting systems, and preclude the standard setting costs that would be necessary to resolve onoff balance',
15928:'sheet questions. accordingly, the board proposed to rescind sffas no.11 and amend sffas nos. 6 and 8. 34. although the',
15929:'september 2001 ed on nd pp&e proposed three special disclosures for nd pp&e, the board decided not to include them',
15930:'in the march 2002 ed. the three special disclosures proposed in the september 2001 ed were: a. unit information by',
15931:'type or category of major end item7; b. condition assessment information for major end items; and, 7 the accounting for',
15932:'national defense pp&e and associated cleanup costs ed, dated september 2001, defined majorenditems tobe: 1items thatlaunch, release, carry, orfireaparticular piece',
15933:'ofordnance,and2 items that carry weaponssystemsrelatedproperty,equipment,materials,orpersonnel. majorenditems ahaveanindeterminateor unpredictable useful life due to the manner in which they are used, improved,',
15934:'modified, or maintained and b are subject to premature destruction or obsolescence e.g., aircraft, ships, combat vehicles, etc. also, included',
15935:'in this category are vessels held in a preservation status by the maritime administrations national defense reserve fleet. page 11',
15936:'sffas 23 fasab handbook, version 20 06/21 sffas 23 c. actual and planned acquisition program costs and unit information for',
15937:'the ten largest current national defense pp&e8 acquisition programs. 35. these proposed information requirements were developed and proposed after years',
15938:'of deliberation and with varying recognition and measurement requirements for the principal financial statements. the board decided not to propose',
15939:'these three special information requirements as part of the march 2002 ed after reviewing responses to the september 2001 ed.',
15940:'the board concluded that these areas may deserve further studyor development for the following reasons: a. unit information as originally',
15941:'proposed was tied to the major end item definition. respondents questioned the definition’s effectiveness. b. unit and condition information has',
15942:'been determined to be “sensitive” information9. c. many respondents suggested that further research in the area of condition and deferred',
15943:'maintenance presentation is needed to develop consistent and comparable measurementandreportingcriteria. however,respondentsfoundconditioninformation to be a useful supplement to deferred maintenance. d.',
15944:'one respondent suggested that the proposed reporting on the ten largest acquisition programs would confuse users since the cost of',
15945:'assets recognized on the balance sheet would be different from budget cost measurements. 36. given the resources that have been',
15946:'devoted to resolving the fundamental recognition and measurement guidance for nd pp&e and the substantial efforts underway at dod to',
15947:'modernize its systems, the board does not believe it would be useful to withhold this statement while it deliberates on',
15948:'the merits of any further pp&e information. 37. inthemeantime,theboarddoesnotbelievetheabsenceofthepreviouslyproposedspecial information requirements would outweigh the benefits to be gained through this',
15949:'statement. with regard to the stewardship objective and the need for unit information, the board notes that thestewardship objective isbeingmet',
15950:'for general pp&e without thisspecial disclosure. 8sffas no. 11 defined nd pp&e as being pp&e [that] are 1 the pp&e',
15951:'components of weapons systems and support pp&e owned by the department of defense or its component entities for use in',
15952:'the performance of military missions and 2 vessels held in a preservation status by the maritimeadministrations national defense reserve fleet.',
15953:'9any information, theloss, misuse, or unauthorized access to which would or could adversely affect the organizational and/or national interest but',
15954:'which does not meet classification criteria specified in dod 5200.1r reference c . source: dod 5200.1m;acquisition systems protection program; 16',
15955:'march 1994. page 12 sffas 23 fasab handbook, version 20 06/21 sffas 23 through the course of the audit, existence',
15956:'of pp&e and the completeness of pp&e records are verified. this satisfies the basic stewardship function that the double entry',
15957:'system offers. 38. withregardtoconditioninformation,theboardnotesthatdeferredmaintenanceinformation is currently required. further, the assessment of useful life needed to assure depreciation is reasonable would',
15958:'result in greater discipline in information associated with the condition of pp&e. 39. the board expects to revisit these areas',
15959:'as it considers a project on integrating depreciation, impairment, and deferred maintenance reporting and other fixed asset accounting issues at',
15960:'a future date. the effort would be a governmentwide undertaking. concerns with march 2002 ed valuation and consumption 40. various',
15961:'respondents suggested that additional guidance be included in this statement for the valuation and consumption or use of items previously',
15962:'classified as national defense nd property, plant, and equipment. examples of the types of additional guidance suggested include the following:',
15963:'a. the cost elements of research, testing, development, and evaluation rtd&e should be described and specific guidance provided on capitalization.',
15964:'b. definitions for terms such as modifications, modernizations, and improvements are needed. c. more discussion of the desired accounting for',
15965:'the losses of items considered part of a group asset account of nd pp&e during testing, development, or evaluation phases',
15966:'is needed. d. more guidance for determining the capitalized costs to be removed from a group asset account when a',
15967:'unit is destroyed, becomes obsolete, or is otherwise disposed of is needed. e. the role of subordinate systems needs to',
15968:'be addressed, along with a description of how the costs of the subordinate systems would be relieved of costs assigned',
15969:'to the higher level system. page 13 sffas 23 fasab handbook, version 20 06/21 sffas 23 f. adiscussionof appropriatetreatmentfor thecostsofadiscontinuedsubordinate',
15970:'system is needed. g. the use of depreciation to reflect the full cost of operating nd pp&e items has to',
15971:'be tailored to the unique attributes and uses of nd pp&e. h. the useful lives of certain classes of nd',
15972:'pp&e should be defined and measured in units such as operating hours. i. additional guidance and criteria is needed regarding',
15973:'the use of composite and group depreciation methodologies. j. specific reference to abnormal disposition issues should be added to the',
15974:'standard. 41. in response to these issues, the board members reiterated that the board is responsible for promulgatingaccounting standardsand that',
15975:'it istheresponsibilityof individualentitiesto set policy and provide operating guidance on how to implement the standards. the board believes these issues',
15976:'can and should be addressed by individual entities in the context of existing basic principles and practices. composite and group',
15977:'depreciation methodologies are already considered acceptable methods under generally accepted accounting principles. the existing principles and practices are used by',
15978:'many different industries, including the airline, electrical cooperative, railroad, real estate, and cruise line industries. 42. the board also expects',
15979:'that many of these concerns raised by respondents will be addressed by dod as the standards are implemented. one example',
15980:'may be on the cost elements of research, testing, development, and evaluation rtd&e to be capitalized. determining whether to include',
15981:'a particular cost in the capitalized cost of pp&e should be guided by general guidance in sffas nos. 4 and',
15982:'6 regarding the types of costs to capitalized. in the event, however, that dod is unable to resolve issues ,',
15983:'the board and its staff will be available to consider implementation guidance. contractor costs 43. two respondents raised concerns regarding',
15984:'application of existing general pp&e accounting standards to pp&e formerly classified as national defense pp&e but held by contractors. since',
15985:'the current pp&e definition explicitly includes pp&e in the hands of others paragraph 18, sffas nos. 6 and 8 as',
15986:'amended created reporting requirements for general pp&e and national defense pp&e. both existing standards require cost information. 44. one respondent,',
15987:'apparently unaware of the aforementioned provisions of sffas nos. 6 and 8, encouraged the board to develop standards that address',
15988:'this property. the page 14 sffas 23 fasab handbook, version 20 06/21 sffas 23 respondent asserted, “accounting control over this',
15989:'property is deplorable.” information provided by the respondent shows that as early as 1981 issues were raised regarding the need',
15990:'to improveaccountabilityforassetsincluding pp&e providedbythegovernment at no cost to the contractor for use in contract performance. 45. another respondent, an industry',
15991:'group including major defense contractors, suggests that the elimination of the national defense pp&e category “will impose costly accounting change',
15992:'requirements on government contractors that will increase the costs of goods and services acquired by the government.” the respondent raised',
15993:'concerns about 1 application of standards to immaterial items, 2 provisions for accounting for software modifications, 3requirementsforworkinprocessreporting, and4designationofspecific cost elements',
15994:'for capitalization sffas no. 6, para 26. some aspects of these and other issues raised by the respondent appear to',
15995:'the board to be based on misinterpretations of the existing standards. therefore, the board does not believe there are insurmountable',
15996:'issues raised. 46. rather, the board believes that significant efforts are needed to clarify the standards for contractors and to',
15997:'determine specific reasonable policies for providing information. it is clearthat, despite theexistence of standardsfor contractorheld assetssince late 1995,little progresshasbeenmadeinresolvingtheissue. theboarddoesnotbelievethatdeferralof',
15998:'standards related to vast amounts of pp&e will facilitate resolution of the contractual and administrative details needed to reasonably comply',
15999:'with generally accepted accounting principles. effective date 47. one respondent commented that the effective date, for periods beginning after september',
16000:'30, 2002, is unrealistic. the board acknowledges that full implementation of the standards willrequiretimeandcommitment. theboardunderstandsthatdodiscurrentlydeveloping systems needed to fully implement',
16001:'any pp&e standards, comprehensive training needs to be provided, policies and procedures need to be revised and contractors may need',
16002:'to modify how they do things. however, the board believes dod financial statements will be incomplete without consistent and comparable',
16003:'accounting for pp&e. in addition, a practical issue arises. dod has not yet identified property as national defense pp&e. therefore,',
16004:'it wouldbeproblematicto determinewhichcomponentsof generalpp&ewerenot yet subject to the provisions of sffas no. 6, which became effective for fiscal year 1998.',
16005:'boardapproval 48. the board approved this recommendation by a vote of 6 members approving its issuance and 1 member opposing',
16006:'its issuance. although the board is comprised of 9 members, only page 15 sffas 23 fasab handbook, version 20 06/21',
16007:'sffas 23 7 members cast a vote. this is because the term of two board members had expired and the',
16008:'appointment of successors had not been finalized. the dissent of the board member who opposed the issuance of this statement',
16009:'is presented in paragraphs 49 through 51. 49. mr. calder dissents from this standard because 1 more guidance on asset',
16010:'capitalization and use of composite or group depreciation methods is needed and 2 additional disclosures are important to meeting reporting',
16011:'objectives for national defense pp&e. 50. mr. calder believes that deliberations uncovered serious issues regarding identification of costs to be',
16012:'capitalized and application of composite or group depreciation methods to complex weapons systems. comments showed there is diversity of understanding',
16013:'among financial statement users, preparers and auditors on these issues. he believes additional guidanceshouldhavebeenprovided regarding thecomponentsof asset cost thatshouldbe capitalized;',
16014:'especially the accounting treatment for research, development, testing and evaluation. he does not believe the guidance in this regard in',
16015:'statement nos. 4 and 6 is adequate to resolve complex and diverse situations unique to defense assets. he also believes',
16016:'the new statement lacks guidance regarding the appropriate use of composite or group depreciation and could result in unacceptable diversity',
16017:'in its application. 51. in addition, mr. calder believes that the statement should have required disclosure of unit information for',
16018:'significant categories of assets and budget/actual data on major acquisitions programs in progress. unit information has been deliberated at length',
16019:'by the board over a number of years because some members and commentators believed the unit information is critical to',
16020:'an understanding of whether dod has assets sufficient to carry out its mission. information on budget/actual data on major acquisitionsprograms',
16021:'isconsidered bymany to be vital to assessing performance in acquiring assets through complex and lengthy acquisition programs. in addition, tracking',
16022:'progress against plans would aid in determining the financialstatusof the programs. these two additional disclosures would enhance users’ understanding of',
16023:'the nation’s financial condition and future security. page 16 sffas 23 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards24: selected standards for',
16024:'the consolidated financial report of the united states government status issued january 27, 2003 effective date for periods beginning after',
16025:'september 30, 2001 affects none. affected by sffas 53, amending interentity cost provisions, amends paragraph 9 summary most statements of',
16026:'federal financialaccounting standards sffas do not state whether they apply to the government as a whole or components thereof, or',
16027:'both. this standard clarifies that all parts of all sffas apply to all federal entities including the consolidated entity unless',
16028:'a standard specifically provides otherwise. in addition, certain requirements of sffas 7, accounting for revenue and other financing sources and',
16029:'concepts for reconciling budgetary and financial accounting, are not relevant for the consolidated financial report of the united states government',
16030:'cfr. sffas 7 requires information on budgetary resources and a reconciliation of obligations and other resources used with the net',
16031:'cost of operations. these requirements, while relevant for agencies executing the budget, are not required for the cfr. this standard',
16032:'requires that new statements be presented in the cfr, but not agency or departmental financial statements, regarding net operating revenue',
16033:'or cost, budget surplus or deficit,and cash. the new statementsare principalcfr financial statements, and theyare to be presented on a',
16034:'comparative basis. page 1 sffas 24 fasab handbook, version 20 06/21 sffas 24 table of contents page summary 1 introduction',
16035:'3 materiality 3 effective date 3 accounting standard 4 appendixa: basis for conclusions 6 appendix b: illustrative statement: reconciliation 12',
16036:'appendix c: illustrative statement: statement of changes in cash balance 13 appendix d: statement of budgetary resources 14 appendix e:',
16037:'statement of financing 16 glossary 18 page 2 sffas 24 fasab handbook, version 20 06/21 sffas 24 introduction 1. statements',
16038:'offederalfinancialaccountingstandards sffas usuallydonotstate explicitly whether they apply to the government as a whole, its component entities e.g., departments, agencies, etc.,',
16039:'or both. statement of federal financialaccounting concepts sffac 1, objectives of federal financial reporting, uses the term “entity” generically to',
16040:'refer, depending on the context, to the u.s. government as a whole, organizational component units of the government, e.g., an',
16041:'agency, or to other kinds of potential reporting units such as programs. 2. some have assumed that the standards apply',
16042:'to both component entities and the governmentasawhole,unlessotherwisestated. sffas1, accounting for selected assets and liabilities of the federal government, states that',
16043:'it applies to the government and its departments and agencies, as does sffas 8, supplementary stewardship reporting. sffac 2, entity',
16044:'and display, states that federal entities aggregate into the government entity, which encompasses all the resources and responsibilities existing within',
16045:'the component entities. 3. this standard clarifies that all existing and future standards apply to all federal entities unless a',
16046:'standard specifically provides otherwise. 4. this standard also exempts the cfr from certain provisions of sffas 7, accounting for revenue',
16047:'and other financing sources and concepts for reconciling budgetary and financial accounting, requiring information about budgetary resources and a reconciliation',
16048:'of budgetaryobligationswiththe cost of operationsfromthe proprietaryaccounting system. such information is relevant and meaningful for entities financed with budgetary resources but',
16049:'not for the government as a whole. 5. in addition, this standard requires new information for the cfr but not',
16050:'component entity financial statements that reconciles the annual proprietary net cost with the unified budget surplus or deficit, and explains',
16051:'the changes in the government’s cash balance. the information is to be presented in new cfr principal financial statements that',
16052:'are to be presented on a comparative basis. materiality 6. the provisions of this accounting standard need not be applied',
16053:'to immaterial items. effective date 7. this amendment is effective for periods beginning after september 30, 2001. page 3 sffas',
16054:'24 fasab handbook, version 20 06/21 sffas 24 accounting standard standards for the consolidated financial report of the u.s. government',
16055:'8. statementsoffederalfinancialaccountingstandardssffasapplytoallfederalentities, that is, to the government as a whole and to component entities terms defined in the glossary appear',
16056:'initially in boldface, unless provision is made for different accounting treatment in a current or subsequent sffas. budgetary information not',
16057:'required for the government as a whole 9. paragraphs 7782 of sffas 7 are not applicable to the consolidated financial',
16058:'report of the u.s. government as a whole.1 reconciliation information 10. the financial report of the government as a whole',
16059:'should provide a financial statement reconciling net operating revenue or cost and the annual unified budget surplus or deficit. the',
16060:'financial statement should highlight: the components of net operating revenue or cost that are not part of the unified budget',
16061:'surplus or deficit, including the accrued and amortized expenses not included in budget outlays and the accrued or other revenue',
16062:'not included in budget receipts; and the components of the unified budget surplus or deficit that are not part of',
16063:'net operating revenue or cost, including budget receiptsand outlaysthat are not included in net operating revenue or cost. 11. appendix',
16064:'b provides an illustration of how the reconciliation data could be displayed. the illustration is not intended to be prescriptive.',
16065:'1footnote rescinded by sffas 53. page 4 sffas 24 fasab handbook, version 20 06/21 sffas 24 information about the unified',
16066:'budget surplus or deficit and cash 12. thegovernmentasawholeshouldprovideafinancialstatementexplaininghowtheannual unified budget surplus or deficit relates to the change in the government’s',
16067:'cash. the financial statement should highlight: the components of the unified budget surplus or deficit that are not part of',
16068:'the annual change in cash, including noncash budget outlays; and items affecting the government’s cash balance that are not included',
16069:'in the budget outlays or receipts. the statement should prominently display the cash inflow and outflow related to the changes',
16070:'in debt held by the public and interest accrued and interest paid on debt held by the public. 13. appendix',
16071:'c provides an illustration of how this information could be displayed. the illustrations are not intended to be prescriptive. principal',
16072:'financial statements presented on a comparative basis 14. the financial statements required in paragraphs 1013 immediately above are principal financial',
16073:'statements. these statements and all other principal financial statements in the consolidated financial report of the government as a whole',
16074:'should be presented on a comparative basis. the current fiscal year amounts should be presented in a column adjacent to',
16075:'the amounts for the previous fiscal year. page 5 sffas 24 fasab handbook, version 20 06/21 sffas 24 appendixa: basis',
16076:'for conclusions a1. this appendix summarizes some of the considerations deemed significant by the board in reaching the conclusions in',
16077:'this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some',
16078:'factors than to others. this statement may be affected by later statements. the fasab handbook is updated annually and includes',
16079:'a status section directing the reader to any subsequent statements that amend this statement. within the text of the statements,',
16080:'the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the readercan',
16081:'reviewthe basisforconclusionsof theamendingstatement for therationale for each amendment. a2. fasab published the exposure draft selected standards for the consolidated financial',
16082:'report of the united states government, in march 2002. the exposure draft included questions about each of the three areas',
16083:'of interest: 1 whether standards should apply to the government as a whole as well as to component entities; 2',
16084:'whether the cfr should be exempt from the requirement for a statement of budgetary resources and a statement of financing;',
16085:'and 3 whether new statements should be required for the government as a whole. a3. the board received 16 responses',
16086:'as follows: category federal civilian federal military nonfederal users, academics, and others2 5 auditors 1 1 preparers and financial managers',
16087:'8 1 standardsapply to the government as a whole as well as to component entities a4. in statementoffederalfinancialaccountingconcepts sffac1 objectives',
16088:'of federal financial reporting, the board uses the term “entity” generically to refer, depending on the context, to the government',
16089:'as a whole, organizational component units of the government, e.g., an agency, or to other kinds of potential reporting units',
16090:'such as programs.3 sffac 2, 2 this category includes professional organizations, academics, and private citizens. 3 sffac 1, fn. 23,',
16091:'and par. 212. page 6 sffas 24 fasab handbook, version 20 06/21 sffas 24 entity and display, states that federal',
16092:'entities aggregate into the federal government entity, which encompasses all the resources and responsibilities existing within the component entities.4 a5.',
16093:'althoughstatement offederalfinancialaccountingstandardssffas1, accounting for selected assets and liabilities of the federal government,statesthatitisapplicabletoboth the government as a whole and component entities5,',
16094:'other standards have not explicitly addressed the subject unless different treatment was specified. sffas 6, accounting for property, plant, and',
16095:'equipment, refers the reader to sffac 2, entity and display, for guidance on the general applicability of federal accounting standards.',
16096:'sffas 8, supplementary stewardship reporting,6 explicitly states that it applies to the government and its departments and agencies; and sets',
16097:'an effective date for its applicability to component entities but not for the consolidated financial report of the u.s. government',
16098:'cfr because more time isneeded to delineate how the stewardship information would be aggregated. sffas8alsorequiresa “currentservicesassessment” forthecfrbutnotfor individual reports of',
16099:'its component units. likewise in sffas 17, social insurance, applicability is addressed because certain requirements for component entities are not',
16100:'applicable to, and summarization of certain data is allowed for, the cfr. a6. this standard clarifies that sffas apply to',
16101:'all federal entities unless a current or subsequentstandardspecificallyprovidesotherwise. alloftherespondentswhoaddressed the issue agreed that the fasab standards should apply to the',
16102:'cfr. several respondents requested more guidance regarding whether the proposed standard affected the fasab policy whereby “financial statements [prepared] in',
16103:'accordance with accounting standards published by [the financialaccounting standards board fasb] also may be regarded as in accordance with gaap',
16104:'for those entities that have in the past issued such financial statements.”7 the board did not intend to change and',
16105:'is notchanging this policy at this time. consolidated financial report exemption from requirements to report certain budgetary information a7. all',
16106:'but one of the respondents who addressed the issue agreed that the cfr should be exempt from certain provisions of',
16107:'sffas 7, accounting for revenue and other financing sources and concepts for budgetary and financial accounting, requiring a statement of',
16108:'budgetary resources sbr and the statement of financing sof. one respondent 4 sffac 2, par. 38. 5sffas 1, par. 14.',
16109:'6 sffas 8, par. 3839. 7 fasab news, jan.march 2000, p. 2. page 7 sffas 24 fasab handbook, version 20',
16110:'06/21 sffas 24 disagreed, saying that the same information, based on one single set of standards, required for components should',
16111:'be required for the cfr, and vice versa. that respondent believes that the cfr should present the sbr and sof,',
16112:'because such combined budgetary information is relevant and useful to the user of the cfr. likewise, the component entities should',
16113:'be required to prepare the new statements, the necessary changes being made, as well as the sbr and sof. a8.',
16114:'sffas 7 requires entities “whose financing comes wholly or partially from the budget” to provide information on budgetaryresources and the',
16115:'statusof resources, which is presented in the sbr.8 it also calls for a reconciliation of budgetary resources obligated by the',
16116:'entity with the net cost of operations, which is presented in the sof.9 a9. the board continues to believe that',
16117:'such information is less relevant or meaningful at the level of the cfr. resources differ between the government as a',
16118:'whole and individual component entities. the exchange and nonexchange revenue and borrowing from the public are the main sources of',
16119:'financing for the government as a whole.10 for component reporting entities, however, the sources of financing are provided through the',
16120:'budget process and are largely financing sources other than revenue. appropriations and other budget authority provide an agency with the',
16121:'authority to incur obligations to acquire goods and services or to provide benefits and grants. budgetary resources are not earned',
16122:'by an entity’s operations and have a different character than both exchange revenue and non exchange revenue.11 federal entities report',
16123:'as an asset their fund balance with treasury, which is the aggregate amount of funds in the entity’s accounts with',
16124:'treasury for which the entity is authorized to make expenditures and pay liabilities. this is an intragovernment item. fromtheperspectiveofthegovernmentasawhole,itisnotanasset. itrepresentsa',
16125:'commitment to makeresourcesavailabletofederaldepartments,agencies,programs, etc.12 8 sffas 7 pars. 7779 requires information, which is presented in the sbr, that includes 1',
16126:'total budgetary resources available, 2 the status of the budgetary resources, including obligations incurred, the available appropriation, borrowing and contract',
16127:'authority at the end of the period, any restrictions on the use of unobligated balances of budget authority, the amount',
16128:'of any capital infusion during the period, etc. ; and 3 outlays. in addition, the entities are required to provide',
16129:'this information for each of their major budget accounts as supplementary information. 9sffas 7 pars. 8082 also requires a reconciliation',
16130:'of budgetary obligations and proprietary accounting information, whichis presentedinthesof. thereconciliationexplainstherelationshipbetween 1budgetaryresourcesobligated by the entity duringtheperiod and other financingsources suchas imputed',
16131:'financing, transfers of assets, etc., not included in budget receipts, and 2 the net cost of operations. 10 “exchangerevenue” ariseswhenan',
16132:'entityprovidesgoodsandservicesfor aprice. “nonexchange revenue” arises primarily from the exercise of the government’s sovereign power to demand payment from the public,',
16133:'such as taxes, duties, fines, etc. 11 sffas 7, par. 24. 12 sffas 1, par. 31. page 8 sffas 24',
16134:'fasab handbook, version 20 06/21 sffas 24 a10. the budget process provides the principalbasis forplanning and controlling obligationsand outlays by',
16135:'government entities. budget execution tracks the flow of budgetary resources from the congressional authorizing and appropriating process, to apportionment, allotment,',
16136:'and obligation of the budgetary resources, to the outlay of cash to satisfy those obligations. for the most part, obligations',
16137:'and cash, rather than accrual accounting, are the bases for budgeting and reporting on budget execution.13 a11. accrual accounting is',
16138:'the basis for proprietary accounting in the federal government. proprietary accounting and budgetary accounting are complementary. proprietary accounting provides an',
16139:'understanding of the entity’s net position and cost of operations during a period. federal government financial statements have not been',
16140:'used for planning and control as much as they might be. in part, this is because general purpose financial reports',
16141:'have not presented budget information with the financial statements in a way that helped users relate these two important, but',
16142:'different, types of financial information.14 the board’s objective in requiring new statements in the cfr addresses this issue. the government',
16143:'as a whole should provide information about net operating revenue or cost, the budget surplus or deficit, and cash a12.',
16144:'the information now required in two new statements serves the basic objectives of federal accounting. objective 115 provides that federal',
16145:'financial reporting should assist in fulfilling the federal government’s duty to be publicly accountable for the money raised through taxesandothermeans,and',
16146:'fortheirexpenditureinaccordancewiththe appropriation laws. subobjective 1c provides that federal financial reporting should provide information that helps the reader to determine how',
16147:'information on the use of budgetary resources relates to information on the costs of program operations and whether information on',
16148:'the status of budgetary resources isconsistent with other accounting information on assetsand liabilities. a13. in a new statement of concepts',
16149:'issued contemporaneously with this standard, the board recognizes that the cfr should be understandable to the average citizen. the new',
16150:'statements required in this standard were designed with this objective in mind. a14. although budgetary and proprietary accounting information are',
16151:'complementary, both the typesofinformation andthe timing of theirrecognition aredifferent,caused bydifferencesin the basis of accounting.16 13 sffas 7, par. 25. 14',
16152:'sffas 7, par. 26. 15 sffac 1, pars. 112, 119. 16 sffac 7, par. 80. page 9 sffas 24 fasab',
16153:'handbook, version 20 06/21 sffas 24 a15. the new statements required by this standard focus on three important elements: 1',
16154:'the net operating revenue or cost from the proprietary accounting system, 2 the unified budget surplus or deficit, and 3',
16155:'the change in the government’s cash during the period. the information is presented in two parts: 1 a reconciliation of',
16156:'the net operating revenue or cost to the unified budget surplus or deficit, and 2 a statement of changes in',
16157:'cash balance from budget and other activities. a16. the purpose of the reconciliation information is to report how the proprietary',
16158:'net operating revenue or cost and the unified budget surplus or deficit relate to each other. the premise of the',
16159:'reconciliation is that the proprietary and budget accounting bases share much data. the reconciliation presents the differences between the two',
16160:'systems as reconciling items while moving from the proprietary amount to the unified budget surplus or deficit. a17. the primary',
16161:'purpose of the statement of changes in cash balance from budget and other activities is to report how the annual',
16162:'unified budget surplus/deficit relates to the change in the government’s cash balance and debt held by the public. it explains',
16163:'why the unified budget surplus or deficit normally would not result in an equivalent change in the government’s cash balance.',
16164:'a18. all of the respondents who addressed the issue agreed that the new information should be required. most of these',
16165:'respondents offered some comments on one or both of the proposed illustrations. a19. with respect to the terminology used in',
16166:'the statements, several respondents said that the term “budget” was unclear. one respondent noted that the statements use the unified',
16167:'budgetconcept,i.e.,bothonandoffbudgetactivityisincluded. therespondentnotedthat there are several other alternatives approaches, including onbudget only, the president’s proposed budget, and the enacted budget. another',
16168:'respondent noted that, in the non federal environment, a budget is a plan, but for the illustrative statements it indicatesactual',
16169:'results on a budget accounting basis. also, several respondents objected to the use of the term “budget surplus” as being',
16170:'inaccurate since there is no surplus on hand to finance future activities at the reporting date, as the statement illustrates;',
16171:'and, that the word “surplus” has been eliminated from private sector accounting terminology. a20. the board has modified the terminology',
16172:'based on these comments. the word “unified” now accompanies “budget surplus or deficit” wherever that phrase is used. in addition,',
16173:'the word “actual” has been added to the budget line items in the statements. a21. with respect to the term',
16174:'“budget surplus,” the board notes that the term is used pervasively in federal finance and in the popular media. it',
16175:'is defined comprehensively in budget publications. the board believes that most users of the cfr have at least a working',
16176:'understanding of the term as an excess of the fiscal year’s budget receipts over budget outlays. the statement of changes',
16177:'in cash balance from budget and other activities will page 10 sffas 24 fasab handbook, version 20 06/21 sffas 24',
16178:'illustrate how the surplus or deficit and other activity affected the government’s cash balance. the glossary for this standard will',
16179:'provide the definition. a22. with respect to the illustrative statement about changes in the cash balance appendix cin the exposure',
16180:'draft of march 2002, versionsaand b therein, most respondents who addressed the question preferred version b. they said that it',
16181:'would be more understandable to the intended users because its groupings and subtotal were more logical. a23. one respondent said',
16182:'the fasab should provide detailed authoritative guidance regarding theformatofthereconciliationandcashstatementsbeforerequiringthem. therespondent was concerned that the reporting requirements are not fully developed,',
16183:'and that the fasab should not require such information until it develops and prescribes an authoritative format. the board weighed',
16184:'the benefits of prescribing the format of the statements against the drawbacks of placing constraints on the treasury department’s future',
16185:'development of the statements. the board believes that it is better at this time to be flexible so that the',
16186:'most meaningful display can evolve. a24. another respondent asked the board to clarify that the new statements would be principal',
16187:'financial statements. additional wording to this effect has been added to the standard. a25. several respondents urged the board to',
16188:'tie the change in cash on the new statement of changes in cash balance to the balance sheet line item',
16189:'and accompanying note disclosure, and/or to include beginning and ending cash balances on the statement. the board decided that such',
16190:'information would improve the statement and has included it in the illustration inthestandard, but doesnotbelievethat it isnecessarytorequire it aspart of',
16191:'the standard. a26. one respondent said there should be some direct reference to the stewardship information on the balance sheet',
16192:'similar to the reference to the notes because this would inform the reader about important information not included on the',
16193:'balance sheet. also, this respondent submitted that the term “national debt” is unclear. although the board does not view this',
16194:'standard as a vehicle to address these concerns, it acknowledges the need for additional clarity and user friendliness for the',
16195:'cfr. the board notes that the treasury department continues to improve the cfr, including the presentation of stewardship information. implementation',
16196:'date a27. several respondents said that the fy 2002 implementation date for the statements would afford insufficient time to prepare',
16197:'the new statements. however, since the treasury department was a leader in developing the statements and is able to prepare',
16198:'them in fy 2002, and since no additional information is required from component entities, this should not be an issue.',
16199:'page 11 sffas 24 fasab handbook, version 20 06/21 sffas 24 appendix b: illustrative statement: reconciliation hypotheticaldata reconciliation ofnetoperatingrevenueor cost',
16200:'and unified budgetsurplusor deficit for theperiod ending sept.30,20x2in billionsofdollars [footnotes below would be to notes to the financial statements and',
16201:'are not provided for this illustration.] fy20x2fy20x1net operatingrevenueorcost46.050.0 components of net operating revenue or cost not part of the of',
16202:'the budget surplus: add excessofaccrualbasisexpensesover budgetoutlays: civilian &militaryemployee benefitsnote x1 pensions andretiredpay75.574.0retireehealthbenefits14.614.7otherbenefits4.74.6 subtotal civilian & military employeebenefits94.893.3veteran compensation notex162.559.0environmentalcleanup note',
16203:'x219.618.5otherbenefitprogramsnote x34.04.5 other18.517.5subtotal excessofaccrualbasis expensesover budgetoutlays199.4192.8add amortized expensesnotincluded in budgetoutlays: depreciation note x715.415.0add other expensesthatare notreported asbudgetoutlays: premiumspaid on buybackoftreasurydebtnote',
16204:'x105.51.6subtractexcessofaccrualbasisrevenue over budgetreceipts: accrued taxrevenuenote x50.60.7 otheraccruedrevenue notex81.0subtractother revenueand gainsthatare notbudgetreceipts: otherrevenue and gains2.32.2 subtotal:componentsofnetoperating revenue costnotpart ofbudgetsurplus217.4207.5 components of',
16205:'the budget surplus that are not part of net operating revenue or cost: add budgetreceiptsnotincluded innetoperating revenue or cost: principalrepaymentson',
16206:'precreditreformloans24.024.5decreasein accountsreceivable note x32.73.0subtractbudgetoutlaysnotincluded in netoperatingrevenue orcost: acquisitionofcapitalassetsnote x731.643.0 acquisitionofinventorynote x611.912.0 acquisitionofotherassets5.47.0 subtotal componentsofthebudgetsurplusthatarenotpartof net operating revenueor cost22.234.5 other: prior',
16207:'period adjustmentnote x174.2 unifiedbudgetsurplusdeficitactual237.0123.0 page 12 sffas 24 fasab handbook, version 20 06/21 sffas 24 appendix c: illustrative statement: statement',
16208:'of changes in cash balance statement of changes in cash balance from unified budget and other activities for the years',
16209:'ended september 30, 20x2 and 20x1 in billions of dollars [hypothetical data] [footnotes below would be to notes to the',
16210:'financial statements and are not provided for this illustration.] 20x2 20x1 cash flow from unified budgeted activities total unified budgetary',
16211:'receipts actual 2,025.0 1,827.0 total unified budgetary outlays actual 1,788.0 1,703.0 unified budget surplus or deficit actual 237.0 124.0 adjustments',
16212:'for noncash outlays included in the unified budget: interest accrued on treasury debt held by the public 186.0 185.0 subsidy',
16213:'expense accrued under direct loan & guarantee programs note x1 3.0 4.0 subtotal adjustment for noncash transactions in unified budget',
16214:'189.0 189.0 cash flow from activities not included in unified budget inflows: repayment of principal on direct loans 19.0 15.0',
16215:'decrease/increase in miscellaneous assets note x2 1.6 1.6 seignorage 2.3 2.2 outflows: interest paid by treasury on debt held by',
16216:'the public 184.4 187.8 new direct loans disbursed 40.0 34.0 other direct loan transactions 0.7 1.0 premium on buyback of',
16217:'treasury debt held by the public note x3 5.5 default payments on guaranteed loans 4.3 5.0 other guaranteed loan transactions',
16218:'0.5 0.3 increase/decrease in deposit fund liability balances note x4 1.2 0.1 increase/decrease in miscellaneous liabilities note x4 0.9 0.5',
16219:'cash flow from nonbudget activities 214.6 211.9 cash flow from monetary transactions decrease in reserve position in the imf note',
16220:'x5 6.3 1.2 decrease in loans to the imf 0.5 increase in special drawing rights note x5 4.0 2.2 increase/decrease',
16221:'in other monetary assets note x5 0.9 0.4 cash flow from monetary transactions 1.4 0.1 cash flow from financing borrowing',
16222:'from the public note x6 2,010.8 2,002.0 repayment of debt held by the public note x6 2,233.5 2,090.0 cash flow',
16223:'from financing 222.7 88.0 increase decrease in cash balance 9.9 13.0 beginning cash balance note x7 52.7 39.7 ending cash',
16224:'balance note x7 42.8 52.7 page 13 sffas 24 fasab handbook, version 20 06/21 sffas 24 appendix d: statement of',
16225:'budgetary resources from omb bulletin 0109, september 25, 2001 appendix d: statement of budgetary resources from omb bulletin 01 09,',
16226:'september 25, 2001 department/agency/reporting entity combined statement of budgetary resources page 1 of 2 for the years ended september 30,',
16227:'20x2 and 20x1 in dollars/millions 20x2 20x2 20x1 20x1 nonbudgetary nonbudgetary credit program credit program budgetary financing accounts budgetary financing',
16228:'accounts budgetary resources: 1. budget authority: 1a. appropriations received $ xxx $ xxx $ xxx $ xxx 1b. borrowing authority',
16229:'xxx xxx xxx xxx 1c. contract authority xxx xxx xxx xxx 1d. net transfers +/ xxx xxx xxx xxx 1e.',
16230:'other xxx xxx xxx xxx 2. unobligated balance: 2a. beginning of period xxx xxx xxx xxx 2b. net transfers, actual',
16231:'+/ xxx xxx xxx xxx 2c. anticipated transfers balances xxx xxx xxx xxx 3. spending authority from offsetting collections: 3a.',
16232:'earned 1. collected xxx xxx xxx xxx 2. receivable from federal sources xxx xxx xxx xxx 3b. change in unfilled',
16233:'customer orders 1. advance received xxx xxx xxx xxx 2. without advance from federal sources xxx xxx xxx xxx 3c.',
16234:'anticipated for rest of year, without advances xxx xxx xxx xxx 3d. transfers from trust funds xxx xxx xxx xxx',
16235:'3e. subtotal xxx xxx xxx xxx 4.recoveries of prior year obligations xxx xxx xxx xxx 5.temporarily not available pursuant to',
16236:'public law xxx xxx xxx xxx 6. permanently not available xxx xxx xxx xxx 7. total budgetary resources $ x,xxx',
16237:'$ x,xxx $ x,xxx $ x,xxx page 14 sffas 24 fasab handbook, version 20 06/21 sffas 24 department/agency/reporting entity combined',
16238:'statement of budgetary resources page 2 of 2 for the years ended september 30, 20x2 and 20x1 in dollars /millions',
16239:'20x2 20x2 20x1 20x1 nonbudgetary nonbudgetary credit program credit program budgetary financing accounts budgetary financing accounts status of budgetary resources:',
16240:'8. obligations incurred: 8a. direct $ xxx $ xxx $ xxx $ xxx 8b. reimbursable xxx xxx xxx xxx 8c.',
16241:'subtotal xxx xxx xxx xxx 9. unobligated balance: 9a. apportioned xxx xxx xxx xxx 9b. exempt from apportionment xxx xxx',
16242:'xxx xxx 9c. other available xxx xxx xxx xxx 10. unobligated balance not available xxx xxx xxx xxx 11. total',
16243:'status of budgetary resources x,xxx x,xxx x,xxx x,xxx relationship of obligations to outlays: 12. obligated balance, net, beginning of period',
16244:'xxx xxx xxx xxx 13. obligated balance transferred, net +/ xxx xxx xxx xxx 14. obligated balance, net, end of',
16245:'period: 14a. accounts receivable xxx xxx xxx xxx 14b. unfilled customer orders from federal sources xxx xxx xxx xxx 14c.',
16246:'undelivered orders xxx xxx xxx xxx 14d. accounts payable xxx xxx xxx xxx 15. outlays: 15a. disbursements xxx xxx xxx',
16247:'xxx 15b. collections xxx xxx xxx xxx 15c. subtotal xxx xxx xxx xxx 16. less: offsetting receipts xxx xxx xxx',
16248:'xxx 17. net outlays $ x,xxx $ x,xxx $ x,xxx $ x,xxx page 15 sffas 24 fasab handbook, version 20',
16249:'06/21 sffas 24 appendix e: statement of financing from omb bulletin 0109, september 25, 2001 appendix e: statement of financing',
16250:'from omb bulletin 0109, september 25, 2001 department/agency/reporting entity consolidated statement of financing page 1 of 2 for the years',
16251:'ended september 30, 20x2 and 20x1 in dollars /millions 20x2 20x1 resources used to finance activities: budgetary resources obligated 1.',
16252:'obligations incurred $ xxx $ xxx 2. less: spending authority from offsetting collections and recoveries xxx xxx 3. obligations net',
16253:'of offsetting collections and recoveries xxx xxx 4. less: offsetting receipts xxx xxx 5. net obligations xxx xxx other resources',
16254:'6. donations and forfeitures of property xxx xxx 7. transfers in/out without reimbursement +/ xxx xxx 8. imputed financing from',
16255:'costs absorbed by others xxx xxx 9. other +/ xxx xxx 10. net other resources used to finance activities xxx',
16256:'xxx 11. total resources used to finance activities x,xxx x,xxx resources used to finance items not part of the net',
16257:'cost of operations 12. change in budgetary resources obligated for goods, services and benefits ordered but not yet provided +/',
16258:'xxx xxx 13. resources that fund expenses recognized in prior periods xxx xxx 14 .budgetary offsetting collections and receipts that',
16259:'do not affect net cost of operations 14a. credit program collections which increase liabilities for loan guarantees or allowances for',
16260:'subsidy xxx xxx 14b. other xxx xxx 15. resources that finance the acquisition of assets xxx xxx 16. other resources',
16261:'or adjustments to net obligated resources that do not affect net cost of operations +/ xxx xxx 17. total resources',
16262:'used to finance items not part of the net cost of operations xxx xxx 18. total resources used to finance',
16263:'the net cost of operations x,xxx x,xxx page 16 sffas 24 fasab handbook, version 20 06/21 sffas 24 department/agency/reporting entity',
16264:'consolidated statement of financing page 2 of 2 for the years ended september 30, 20x2 and 20x1 in dollars /millions',
16265:'20x2 20x1 components of the net cost of operations that will not require or generate resources in the current period:',
16266:'components requiring or generating resources in future periods: 19. increase in annual leave liability xxx xxx 20. increase in environmental',
16267:'and disposal liability xxx xxx 21. upward/downward reestimates of credit subsidy expense +/ xxx xxx 22. increase in exchange revenue',
16268:'receivable from the public xxx xxx 23. other +/ xxx xxx 24. total components of net cost of operations that',
16269:'will require or generate resources in future periods xxx xxx components not requiring or generating resources: 25. depreciation and amortization',
16270:'xxx xxx 26. revaluation of assets or liabilities +/ xxx xxx 27. other +/ xxx xxx 28. total components of',
16271:'net cost of operations that will not require or generate resources xxx xxx 29. total components of net cost of',
16272:'operations that will not require or generate resources in the current period x,xxx x,xxx 30. net cost of operations x,xxx',
16273:'$ x,xxx page 17 sffas 24 fasab handbook, version 20 06/21 sffas 24 glossary see consolidated glossary in “appendix e:',
16274:'consolidated glossary.” page 18 sffas 24 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 25: reclassification of stewardship',
16275:'responsibilities and eliminating the current servicesassessment status issued july 17, 2003 effective date reclassifies “riskassumed” information and eliminates the “current',
16276:'servicesassessment” for reporting periods beginning after september 30, 2002. reclassifies the “statement of social insurance” and other information about social',
16277:'insurance for reporting periods beginning after september 30, 2004. affects sffas 5, summary, paragraph 106, paragraph 186, paragraph 190 sffas',
16278:'8 summary, paragraph 1416; appendix b sffas 17 summary, paragraph 27 3, paragraph 323 affected by sffas 26 rescinded paragraph',
16279:'6. sffas 28 rescinded parts of paragraph 7. summary this statement of federalfinancialaccountingstandardssffaschanges the classificationof information about stewardship responsibilities required',
16280:'by federal accounting standards. it also eliminates the requirement to present certain information about stewardship responsibilities, known as the “current',
16281:'servicesassessment,” previously required by sffas 8. scope of this statement this statement deals with riskassumed information required by sffas 5,',
16282:'accounting for liabilities of the federal government the current services assessment csa required by sffas 8, supplementary stewardship reporting, and',
16283:'social insurance information required by sffas 17, accounting for social insurance. information about stewardship responsibilities is currently designated required supplementary',
16284:'stewardship information rssi, a category unique to federal financial reporting. pursuant to this sffas, information about riskassumed will become required',
16285:'supplementary information rsi. the statement of social insurance sosi will become a basic financial statement, while the remaining information about',
16286:'social insurance required by sffas 17 is addressed in sffas 26 as amended by sffas 28. page 1 sffas 25',
16287:'fasab handbook, version 20 06/21 sffas 25 reasons for issuing this statement for reasons explained inappendixa, the board decided to',
16288:'review the classification of all rssi required by federal accounting standards. the board eliminated use of rssi to report information',
16289:'about weapons systems when it issued sffas 23, eliminating the category “national defense property, plant, and equipment.” classification of other',
16290:'items of information currently designated rssi stewardship land, stewardship investments, and heritage assets maybedealtwithinoneormorefutureexposuredrafts. theboardalsodecidedtoeliminatethe requirement to present the csanow,',
16291:'because timely issuance of federal financial reports, a practicethatwasnot possible whensffas 8waspublished, willmakeit infeasibletopresentthe csainthegovernment’sannualfinancial report. thesameinformation will, however,continue to',
16292:'be publicly available in the budget of the united states government. how the changes in this statement improve federal financial',
16293:'reporting these changeswillimprove the clarityand significance of federalfinancial reporting in two ways: 1 by defining the sosi as essential to',
16294:'fair presentation and 2 by using reporting categories that are well defined in existing professional literature and familiar to report',
16295:'users. the effective date the requirement to report the csawill be eliminated effective for reporting periods beginning after september 30,2002.',
16296:'informationaboutriskassumedshallbepresented as rsifor reporting periods beginning after september 30, 2002. page 2 sffas 25 fasab handbook, version 20 06/21 sffas',
16297:'25 table of contents page summary 1 introduction 5 standards of federal financialaccounting 6 riskassumed 6 currentservicesassessment 6 social insurance',
16298:'6 effective date 6 appendixa: basis for conclusions 7 page 3 sffas 25 fasab handbook, version 20 06/21 sffas 25',
16299:'abbreviations aga association ofgovernmentaccountants aicpa americaninstituteofcertifiedpublicaccountants at attestationstandardscodified andpublishedbyaicpa au auditstandardscodifiedandpublishedbyaicpa cbo congressional budget office cfr consolidated financial report of',
16300:'the u.s. government formerly the “cfs” cms centers for medicare and medicaid services formerly hcfa csa currentservicesassessment fasab federalaccountingstandardsadvisoryboard gaap',
16301:'generallyacceptedaccountingprinciples gaas generallyacceptedauditingstandards gao generalaccountingoffice gasb governmentalaccountingstandards board oai otheraccompanyinginformationalsoknownas “other supplementaryinformation” – i.e., supplementary information not required by gaap',
16302:'omb office of management and budget pcie president’s council on integrity and efficiency inspectors general rsi required supplementary information as',
16303:'used in sfas 25 and other accounting standards and inau section 558 rssi required supplementary stewardship information as used in',
16304:'sffas 5, 8 and 17 sfac statementoffinancialaccountingconcepts sffac statementoffederalfinancialaccountingconcepts sfas statementoffinancialaccountingstandards sffas statementoffederalfinancialaccountingstandards ssa socialsecurityadministration page 4 sffas 25 fasab',
16305:'handbook, version 20 06/21 sffas 25 introduction 1. federal accounting standards require the following information to be reported regarding stewardship',
16306:'responsibilities: riskassumed information required by sffas 5, accounting for liabilities of the federal government, the current services assessment csa required',
16307:'by sffas 8, supplementary stewardship reporting, and social insurance information required by sffas 17, accounting for social insurance. 2. this',
16308:'information is currently designated required supplementary stewardship information rssi. rssi is a reporting category unique to federal accounting. pursuant to',
16309:'this statement, riskassumed information will become required supplementary information rsi1,andthecsawill notberequired after fy2002. for fy2005thestatementof social insurance sosi will become',
16310:'a basic financial statement, essential for fair presentation in conformity with generally accepted accounting principles gaap. other social insurance information',
16311:'required by sffas 17 shall be presented as rsi rather than as rssi, except to the extent that the preparer',
16312:'elects to include some or all of that information in notes that are presented as an integral part of the',
16313:'basic financial statements. appendixapresents background information and the reasons for these changes. 3. thisstatementamendssffas5andsffas17byreclassifyingriskassumedinformation and social insurance information. those standards',
16314:'would remain unchanged in all other respects. therequirementinsffas8toreportthe csais rescinded. 1rsiwas addedtotheaccountingliteraturebystatement of financialaccountingstandardssfas 25, suspension of certain accounting requirements',
16315:'for oil and gas producing companies, published by the financialaccounting standardsboardfasbin1979. thatstatementhas beenamended,butthersicategory continues tobeusedina variety of standards published by',
16316:'thefasb, thegovernmentalaccountingstandards boardgasb, andthefasab. the auditor’s responsibility for rsi is discussedinsectionau558of thecodificationofprofessional auditing standards published byaicpa. page 5 sffas 25',
16317:'fasab handbook, version 20 06/21 sffas 25 standards of federal financialaccounting riskassumed 4. informationaboutriskassumed,requiredbysffas5andpreviouslydesignatedrequired supplementarystewardshipinformationrssi,shallbedesignatedrequiredsupplementary information rsi. current servicesassessment 5.',
16318:'chapter 8 and paragraphs 1416 of sffas 8 are rescinded, as is the associated illustration of the current servicesassessment inappendix',
16319:'b of sffas 8. social insurance 6. [rescinded by sffas 26.] effective date 7. chapter 8 and paragraphs 1416 of',
16320:'sffas 8 are rescinded, as is the associated illustration of the current servicesassessment inappendix b of sffas 8, effective for',
16321:'reporting periods beginningafter september 30,2002. informationaboutriskassumedshallbe presented as rsi for reporting periods beginning after september 30, 2002. the provisions of',
16322:'this statement need not be applied to immaterial items. page 6 sffas 25 fasab handbook, version 20 06/21 sffas 25',
16323:'appendixa: basis for conclusions this appendix summarizes the considerations deemed significant by the board in reaching the conclusionsinthisstatement. itincludesreasonsforacceptingcertainapproachesandrejecting others.',
16324:'individual board members gave greater weight to some factors than to others. this statement may be affected by later statements.',
16325:'the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this',
16326:'statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be',
16327:'updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale',
16328:'for each amendment. background 8. in sffas 8, fasab stated: akey aspect of the stewardship objective requires that federal reporting',
16329:'provide information that helps users determine 1 whether the governments financial condition improved or deteriorated over the period and 2',
16330:'whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come due.',
16331:'information on ‘stewardship responsibilities’ will aid in these determinations. it will provide an essential perspective on the governments commitment to',
16332:'discretionary and mandatory programs.2 these objectives have not changed. however, for reasons discussed below, the board believes that information about',
16333:'stewardship responsibilities should be reported in the context of the basic financial statements, the associated notes,3 and required supplementary information,',
16334:'rather than as rssi. the board eliminated use of rssi to report information about weapons systems when it issued sffas',
16335:'23, eliminating the category “national defense property, plant, and equipment.” the board will consider in other projects the proper classification',
16336:'of other items that are now classified as rssi. 2 sffas 8, paragraphs 14 and 15. 3 the notes are',
16337:'regarded as an integral part of the basic financial statements, essential for fair presentation in conformity with gaap. page 7',
16338:'sffas 25 fasab handbook, version 20 06/21 sffas 25 9. the board originally contemplated that gao and omb would provide',
16339:'special guidance regarding the audit procedures or “fieldwork” to be performed on rssi. at the same time, the board expected',
16340:'that the auditor would report on this information in much the same way as on the basic financial statements, in',
16341:'the sense that the auditor would qualify or disclaim anopinionwhentherssiwasomittedormateriallymisstated. thecategorywasseenasa response to the unique aspects of the federal accounting',
16342:'and reporting environment, and to thebroadobjectivesoffederalfinancialreporting. itwasintendedtopermitflexibilityonthe part of preparers and auditors that would facilitate reporting relevant, reliable information, including',
16343:'nonfinancial and nonhistorical information.4 10. some members became concerned that users: 1 may pay insufficient attention to some important information',
16344:'because it is called “supplementary,” and 2 may be confused by complicated reports in which information is reported in various',
16345:'places. they believed this might impede users’ understanding and reduce the credibility of federal financial reports. some members believed that',
16346:'fasab’s use of the rssi category invites suspicion of accountinginwhichitemsthatareasimportantasthebasicfinancialstatementsare labeled “supplementary.” accordingly, in preliminary views on eliminating the category',
16347:'“required supplementary stewardship information” december 2000,the board proposed to eliminate the rssi categorybyreviewingand reconsidering the appropriate classificationof each item classified',
16348:'as rssi. 11. in deciding to review the classification of components of rssi, some members were influenced bythe fact that',
16349:'existing audit standards do not discuss rssi. therefore, auditors do not knowwhattodowithrespecttoinformationinthiscategorywithoutconsultingfederal publications that provide additional guidance on how to',
16350:'conduct or contract for audits of federalfinancialstatements. furthermore,aspracticeevolved,itwasnotclearthatauditors would qualify or disclaim their opinion on the basic financial statements when',
16351:'rssi was missing or misstated, because it was not clear to everyone that the information was essential to fair presentation',
16352:'in conformity with gaap. some fasab members were concerned that, under these circumstances, even sophisticated users might not understand fullythesignificanceofcertaininformationclassifiedasrssi.',
16353:'somemembersbelievedthat it would be desirableforfasab to use categoriesthat arewidelyunderstood bythe broader accounting and auditing professions, particularly now that fasab has',
16354:'been recognized by aicpaas the body that promulgates generally accepted accounting principles for the federal government. 4see the implementation guide',
16355:'to statement of federal financial accounting standards no. 7: accounting for revenue and other financing sources, june 1996, paragraphs 2224,',
16356:'the diagram on page 15, and minutes of associatedboarddiscussions. seealsosffas 8, supplementary stewardship reporting,june1996,paragraphs21, 34, 111115, and minutes of associated',
16357:'board discussions. page 8 sffas 25 fasab handbook, version 20 06/21 sffas 25 12. theboardreceived29writtencommentsonitsdecember2000 preliminary views fromthe following sources:',
16358:'16 preparers all federal, 8auditors threenonfederal, includingaicpa, 5 others. this category includes academics, retired federal employees, and the association of',
16359:'governmentaccountants aga, a professional association of federal and nonfederal accountants and auditors. 13. thecommentsreflectedtheviewsofmorethan29people. commentsfromthepresident’s council on integrity and efficiency',
16360:'pcie,aga, federal agencies, andaicpawere the work of numerous individuals. twenty of the respondents would have retained the rssi category, at',
16361:'least for some period. some typical concerns expressed include the following: eliminationofthecategorywouldprovidelessstewardshipinformationtousers,leadto a qualified opinion that would send a lessclear',
16362:'signal to users than is available with current and potential alternatives, and raise audit costs. the category provides a clear',
16363:'and unique method to prominently display stewardship information essential to meeting taxpayer accountability. the category has been successful in communicating',
16364:'our financial condition. the separate category and section of the report is an effective and practical means of reporting. it',
16365:'is appropriate for the unique environment and objectives of federal financial reporting. approaches to providing audit assurance over rssi are',
16366:'evolving. fasab should work with specialists in the relevant disciplines to define common units of reporting for items not expressed',
16367:'in monetary terms. unique aspects of the federal financial reporting environment and objectives led the board to create the new',
16368:'category. if used properly, the category should be a mechanismtoprovidemuchneeded informationto decisionmakers, includingcitizens, when they consider the consequences of decisions',
16369:'relating to public lands, heritage assets, and similar items. 14. inapril2001theboardheldapublichearingtodiscussthe preliminary views proposal with interested parties. fourteen individuals, representing',
16370:'seven organizations, made presentations and discussed issues with the board. comments were similar to those expressed in the 29 comment',
16371:'letters. 15. after considering these comments, the board continued to believe that federal accounting standards may be able to address',
16372:'the objectives of federal financial reporting, including accountability and reporting on stewardship, without a unique category. the board noted that',
16373:'eliminating the rssi category need not result in a reduction of information required by existingstandards. theboardsubsequentlydecidedtorescindtherequirementtopresent the csain the annual',
16374:'consolidated financial report of the u.s. government cfr for other page 9 sffas 25 fasab handbook, version 20 06/21 sffas',
16375:'25 reasons, which are explained on page, but the information will continue to be available to the public. furthermore, the',
16376:'board noted, preparers will continue to have the option of voluntarily presenting supplementary information beyond what is required. this “other',
16377:'accompanying information” would be unaudited,unlessspecialarrangementsweremade to extend the auditor’s work in the context of a particular audit. 16. the board',
16378:'continued to believe that avoiding use of the rssi category where it is not essential would eliminate some potential confusion',
16379:'and ambiguity. in particular, it should clarify the board’s expectation that when material information that is essential to fair presentation',
16380:'is missing or materially misstated, the auditor should consider whether a qualified or adverse opinion is appropriate regarding whether the',
16381:'basic financial statements are preparedinconformity withgaap. after consultationwithaicpastaff,the board concluded that this result could best be assured by designating such',
16382:'information as an integral part of the basic financial statements. 17. accordingly, in february 2002, the board published an exposure',
16383:'draft entitled reclassification of stewardship responsibilities and eliminating the current services assessment. theexposuredraftproposedtoeliminatethecurrentservicesassessment, reclassify information about riskassumed as rsi, and',
16384:'reclassify all social insurance information as an integral part of the basic financial statements. the board received 22 comment letters',
16385:'from the following sources: 11 preparers all federal, 7auditors 6federal andaicpa, 4 others. this category includes an academic, two former',
16386:'board members, and the aga. 18. some letters reflected the views of an organization, while others were from individuals. comments',
16387:'generally supported or did not oppose eliminating the csaand reclassifying riskassumedinformationasrsi. somelettersdidexpressconcernaboutthefeasibilityof auditing social insurance information as an integral part',
16388:'of the basic financial statements and/or questioned whether the benefit of doing so would outweigh the cost. in response to',
16389:'these concerns, the board consulted with representatives ofaicpa, and decided 1 to designate only the sosi as a basic financial',
16390:'statement, while classifying other social insurance information as rsi, and 2 to extend the time allowed to implement thischange. more',
16391:'detailed explanation of the basis for the board’s conclusions follows. page 10 sffas 25 fasab handbook, version 20 06/21 sffas',
16392:'25 conclusions regarding each type of stewardship responsibilityinformation 19. figure 2 on page 19 presents a list of general factors',
16393:'that one or more board members considered relevant for the classification choices. specific decisions on each of the three types',
16394:'of stewardship responsibility information are discussed in the remainder of this appendix. risk assumed 20. theboardagreedthatinformationaboutriskassumedshouldbersi rather thanan integral part',
16395:'of the basic financial statements, because the amounts are not sufficiently reliable and measurement methods are still experimental. this information',
16396:'is potentially valuable, but it is not yet a suitable basis for recognition or disclosure.5 the office of management and',
16397:'budget omb, the governmentaccountability office gao, and the congressional budget office cbo have considered the use of riskassumed information as',
16398:'a basis for budgeting for insurance programs. these agencies have concluded that more experience is needed before the measurements can',
16399:'be regarded as sufficiently reliable for budgeting. similar considerations lead the fasab to conclude that information about riskassumed should be',
16400:'included in financial reports as rsi, at least until agencies and auditors have more experience with this information. 21. the',
16401:'board believes that analogies with insurance offered by private insurers, where, for example, an expected premium deficiencyon longduration contracts such',
16402:'aslife insurance is recognized, may be misleading due to differences in the length of the policy coverage, nature of insured',
16403:'risk, or other relevant variables. the board believes that additional guidance from fasab on definition and measurement of “riskassumed” would',
16404:'be necessary before it would be feasible to require recognition or disclosure of this information as an integral part of',
16405:'the basic financial statements. developing and promulgating such guidancewouldrequireaseparateproject. beforetheboardundertakessuchaproject,itis desirable to encourage continued improvement in agencies’ data systems and',
16406:'modeling capabilities tosupportreportingriskassumed. the rsi requirementhas theeffectof providing this encouragement in an appropriate, costbeneficial manner. the board notes thatthe “stateoftheart”',
16407:'forsuchprojectionsisconstantlyevolving. shouldtheboardinthe 5 fasab uses the term “disclosure” to refer to information that is not recognized on the face of',
16408:'the basic financial statements but is regarded as an integral part of the basic financial statements, essential for fair presentation',
16409:'in conformity with generally accepted accounting principles gaap. normally such disclosures are presented in footnotes, but federal accountingstandards publishedby fasab',
16410:'donot currently prescribetheformat for presentation ofsuchdisclosures. gaapdoes notprohibitformattingor combiningpieces ofinformationin appropriate ways to direct the reader’s attention, provided that the',
16411:'results are not misleading. page 11 sffas 25 fasab handbook, version 20 06/21 sffas 25 future decide that it would',
16412:'be desirable to develop more specific criteria for reporting risk assumed, the board will be able to learn from this',
16413:'ongoing experience. current services assessment csa 22. thecsaprovidesreceipt and outlaydataonthebasis ofthepresident’sprojectionsof future activities pursuant to current law. it is relevant',
16414:'for assessing the sustainability of programs established by current law; that is, relevant for assessing the sufficiency of future resources',
16415:'to sustain public services and to meet obligations as they come due. the csa focuses on the totality of government',
16416:'operations rather than on individual programs. it providesan analytical perspective on the government because it showsthe shortand longterm direction of',
16417:'current programs. 23. sffas8definesthecsabyreferencetowhatispublishedinthepresident’sbudget. the board did not then foresee the possibility that the cfr would be published before the',
16418:'budget. because the board now expects that within a few years the cfr will be published before the president’s budget',
16419:'is available, the requirement to include the csain the cfr will expireinfy2002i.e.,thecsawill notberequiredinthecfr after fy2002. inorder to continue to require',
16420:'something comparable to the csaas part of the cfr when the cfr is published before the budget, federal accounting standards',
16421:'would need to define the csa in some way other than by reference to the budget. developing the criteria for',
16422:'such a projection is beyond the scope of this project. 24. the board considered the alternative of including omb’s current',
16423:'services estimates prepared for the “midsession review.” the board concluded that certain technical problems would make this alternative problematic. furthermore,',
16424:'supplementary reporting on this basis would not add value, because the estimates are publicly available in any event, and because',
16425:'the base year actual data published in the budget would not be subject to review by the auditor. 25. theboardnotesthatomb,cbo,andothersregularlypublishsimilarprojections;therefore,',
16426:'similar information will continue to be available, regardless of whether it is required to be part of the cfr. the',
16427:'board also notes that the “state of the art” for such projections is constantly evolving. should the board in the',
16428:'future decide that it would be desirable to developcriteriafor sucha projectionasa part of federalfinancial reporting, theboardwillbe able to learn from',
16429:'this ongoing experience. social insurance 26. the board believes that the sosi should be treated as a basic financial statement',
16430:'because it is essential to fair presentation and is important to achieve the objectives of federal financial reporting. the related',
16431:'stewardship objectives include helping users to assess the page 12 sffas 25 fasab handbook, version 20 06/21 sffas 25 impact',
16432:'on the country of the governments activities, determine whether the governments financial position improved or deteriorated over the period, and',
16433:'predict whether future budgetary resources will likely be sufficient to sustain public services and meet obligations as they come due.',
16434:'in that regard, the multitrillion dollar obligations associated with social insurance over the next 75 years could significantly exceed the',
16435:'largest liabilities currently recognized in the u.s. government balance sheet. 27. the board acknowledges that there is great uncertainty inherent',
16436:'in long term projections, but believesthat if the uncertaintyissuitably disclosedasis required bysffas 17it need not preclude designating the information as',
16437:'a basic financial statement, essential for fair presentationinconformitywithgaap. theboardrejectstheideathatinformationbasedon projections cannot be an integral part of the basic financial statements.',
16438:'fasab has not limited the content of federal financial statements to historical information. 28. even within the context of historical',
16439:'financial reporting, the board notes that accrualbasis “historical” financial statements include many measurements that involve assumptions about the future. the',
16440:'distinction between reporting on the financial effects of events that haveoccurred andtheeffects of future eventsdepends, obviously, upon the definitionof the',
16441:'event. theinformationrequiredbysffas17reportsonthefinancialeffectsofexistinglaw and demographic conditions and assumptions, just as the pension obligation at a point in time is based on',
16442:'existing conditions. in that sense, social insurance information can be viewed as reflecting events that have occurred and, therefore, as',
16443:'“historical.” 29. measuring the future effects of existing law and conditions for social insurance involves projections of economic and demographic',
16444:'trends, just as measuring the pension benefit obligation at a point in time involves assumptions about future salary progression. it',
16445:'is true that sffas 5specifiesadifferent measurement method for pensionsand retiree healthcare than the method sffas 17 specifies for social insurance.',
16446:'it is also true that social insurance measurementsaremoresensitivetoassumptionsaboutthemostdistantyearsof the projection period. nevertheless, the board believes that it is appropriate to',
16447:'report the sosi asa basicfinancial statement, essential for fair presentation in conformity with gaap. 30. classifying the sosi as a',
16448:'basic financial statement will mean that auditors will consider a modificationoftheir opinionifthisinformationismaterially misstated. amodificationwould send a clear and appropriate signal',
16449:'to users in such a circumstance. the board understands that some added audit expense will be incurred as a result',
16450:'of this change in status for social insurance information, and added demands may be made on the accounting and actuarial',
16451:'staff of agencies that report social insurance information. the board believes that the benefits in this case outweigh the expense.',
16452:'the sosi is important to those who would understand the government’s financial condition and its impact on the financial condition',
16453:'of individual citizens, interesting to the public, and essential to fair presentation. page 13 sffas 25 fasab handbook, version 20',
16454:'06/21 sffas 25 31. the exposure draft proposed to reclassify all social insurance information as an integral part of the',
16455:'basic financial statements. in response to concerns expressed about the cost and feasibility of auditing this information, the board decided',
16456:'to define only the sosi as a basic financial statement, and provided additional time for implementation. the impact of the',
16457:'change in audit status for the sosi should be mitigated by the fact that preparers and users have experience with',
16458:'similar information. also, much of the actuarial and audit work can be done before the end of the fiscal year,',
16459:'if the preparer and auditor prefer. sffas 17 provides for considerable flexibility in selecting the measurement date. paragraph 26 of',
16460:'sffas 17 states: all projections and estimates required in these standards should be made as of a date the valuation',
16461:'date as close to the end of the fiscal year being reported upon “current year” as possible and no more',
16462:'than one year prior to the end of the current year. this valuation date should be consistently followed from year',
16463:'to year. conclusions regarding effective date 32. the standard eliminates the requirement to present the csa, and does not change',
16464:'the definition,presentationguidelines, or auditstatus for riskassumedinformation. rssiis currentlytreatedasrsiforauditpurposes,pursuanttoinstructionsinomb’saudit bulletin. no delay is needed as a result of the changes regarding',
16465:'these two items. accordingly, these changes are effective immediately. 33. audit status for the sosi would change; however, as noted',
16466:'above, the information is not new. most of the relevant agencies have produced similar information for several years, andanalystsandpublicofficialshaveroutinelyusedthisinformation. also,theimpactofthe',
16467:'audit requirement on the auditor andpreparer should be reduced bythe flexibilitysffas 17 provides in selecting a measurement date for social',
16468:'insurance. the board consulted with aicparegardingthetime neededtodevelopappropriateauditguidance. theboardalso noted that federal agencies will be confronted with a challenging requirement for',
16469:'accelerated financial reporting in fy 2004. as a result, the board concluded that the sosi should be presented as a',
16470:'basic financial statement for reporting periods that begin after september 30, 2004, with earlier implementation encouraged. distinguishing rsi from the',
16471:'basic financial statements andassociated notes 34. to help readers understand the board’s deliberations, this section provides more details about some',
16472:'practical and conceptual factors that affected the board’s decision whether to page 14 sffas 25 fasab handbook, version 20 06/21',
16473:'sffas 25 designate an item as rsi or as an integral part of the basic financial statements. the basic financial',
16474:'statements include the principal financial statements and associated notes on which the auditor expresses an opinion as to whether the',
16475:'information is presented in conformity with gaap. the terms “basic financial statements” and “principal financial statements” have been used synonymously',
16476:'in federal accounting. 35. fasb tends to use the term “basic financial statements” or simply “financial statements” consistentwiththedefinitioninfasbconceptsstatement5, recognition and',
16477:'measurement in financial statements of business enterprises: . . . a financial statement is a formal tabulation of names and',
16478:'amounts of money derived from accounting records that displays either financial position of an entity at a moment in time',
16479:'or one or more kinds of changes in financial position of the entity during a period of time. items that',
16480:'are recognized in financial statements are financial representations of certain resources assets of an entity, claims to those resources liabilities',
16481:'and owners’ equity, and the effects of transactions and other events and circumstances that result in changes in those resources',
16482:'and claims. the financial statements of an entity are a fundamentally related set that articulate with each other and derive',
16483:'from the same underlying data. sfac 5, paragraph 5, footnote omitted. aicpatends to use the term “basic financial statements” or',
16484:'simply “financial statements” also to encompass footnotes that are regarded as an integral part of the basic financial statements as',
16485:'defined in sfac 5. depending on the context, fasab may use the term either way. the following discussion focuses on',
16486:'the distinction between information on which the auditor expresses an opinion whether reported on the face of the basic statements',
16487:'or in the notes to the statements and supplementary information that is also required by gaap. operational differences between the',
16488:'basic financial statements and rsi 36. figure 1 on page 16 identifies some operational differences under current auditing standards. given',
16489:'these operational differences between basic financial statements and rsi, the board must determine whether it would be more appropriate for',
16490:'a given item of required information to be deemed an integral part of the basic financial statements or rsi. the',
16491:'appropriateness depends on the particular benefits based on various federal financial reporting objectives and the costs preparing, auditing, user processing,',
16492:'other of making it subject to audit vs. more limited procedures and varying the potential audit opinion treatment qualification vs.',
16493:'mere mention in the auditor’s report. page 15 sffas 25 fasab handbook, version 20 06/21 sffas 25 figure 1 basic',
16494:'financial comparison dimension statements rsi is the information required to be in the yes usuallya financial report? that is, it',
16495:'is either an integral part of the basic financial statements or it must accompany them. is the information deemed essential',
16496:'if the yes no financial statements are to “present fairly” in conformity with gaap? what auditfieldworkis required? audit limitedprocedurespursuanttoau558 auditor’s',
16497:'report positiveassurance regarding “fair presentation” silent, no explicit assurance unless engaged to audit the rsi. however, if the rsi is',
16498:'financial information that has been subjected to audit proceduresin connectionwithauditingthe basic financial statements, the auditor may express assurance“inrelationtothefinancialstatements taken as',
16499:'a whole.” what audit report mention is required if the qualified or mention in report; no qualification of opinion on',
16500:'information is missing or not prepared in adverse opinion the basic financial statements. conformity with guidelines? ain some cases, rsi',
16501:'need not physically accompany the basic financial statements in the same document; certain gasb standards permit reference to another publiclyavailable',
16502:'report as an option for specified rsi. 37. it should be noted that the value of information to users and',
16503:'the value added by auditing it are separate, though certainly related, considerations. for example, some information may be valuable to',
16504:'some users, yet auditing it might add little value. on the other hand, some information e.g., aggregated financial information for',
16505:'a federal agency as a whole may not be used directly by decision makers as input to a particular “decision',
16506:'model,” but auditing it might provide some degree of valuable assurance about other information e.g., detailed program cost or budgetary',
16507:'expenditure information or objectives of interest e.g., internal accounting control and financerelated legal compliance. auditing financial statements may also deter',
16508:'fraud and unintentional errors of various sorts in other, more timely reports. page 16 sffas 25 fasab handbook, version 20',
16509:'06/21 sffas 25 footnote vs. rsi section 38. although not required by auditing standards, rsi has customarily been located in',
16510:'a separate section of the financial report, to aid in distinguishing it from audited information.6 thispracticehascontinuedwithrssi,evidentlyinpart becausefederalpreparersthoughtit was necessary, or',
16511:'at least desirable, to report “stewardship” items together. it is possible that placement of information in different sectionsof the financialreport',
16512:'leadssome typesof readers to pay more or less attention to the information. although the magnitude of these differencesis an open',
16513:'question, research has shownthat formatting can matterto individual users. 6au 558.10 states: “ordinarily, the required supplementary information should be distinct',
16514:'from the audited financial statements anddistinguished from other information outside the financial statements that is not required by the fasb,',
16515:'gasb, or fasab. however, management may choose not to place the required supplementary information outside the basic financial statements. in',
16516:'such circumstances, the information should be clearly marked as unaudited. if the information is not clearly marked as unaudited, the',
16517:'auditors report on the audited financial statements should be expanded to include a disclaimer on the supplementary information.” in practice,',
16518:'notes and rsi generally have not been commingled. indeed, in discussing the location of rsi it requires, fasb said, “reporting',
16519:'specialized information on oil and gas producing activities in a single location within a financial report is a desired objective',
16520:'of this statement so as to make the relationship among the different types of information easier to analyze.” fas 69,',
16521:'par. 117 in theory, rsi might be integrated with related audited information, provided the unaudited information was suitably labeled. whether',
16522:'this would be feasible and desirable in practice may be debatable. concern on the part of independent cpas about litigation',
16523:'risk has been among the factors that encouraged physical separation of audited information from unaudited information. another practical consideration may',
16524:'be introduced by recent guidance fromaicpaintended to clarify the auditor’s ability to offer some limited assurance “in relation to the',
16525:'financial statements” on certain rsi. this could imply a need todistinguishthersifor whichsuchassuranceis offeredfromothertypesof supplementaryinformation, both required and voluntary. some comments',
16526:'regarding fasab’s preliminary views on eliminating the category “required supplementary stewardship information” suggested that some people believe there are conceptual',
16527:'as well as practical reasons to report different kinds of information separately. page 17 sffas 25 fasab handbook, version 20',
16528:'06/21 sffas 25 auditaspects of basic vs. rsi 39. both footnote disclosures and required supplementary information are viewed as being',
16529:'sufficiently relevant to be required to accompany the basic financial statementsin financial reports,7 though only the notes are regarded as',
16530:'required for fair presentation in conformity with gaap. as discussed previously, one major difference between the two types of information',
16531:'is the extent and nature of the auditor’s scrutiny and responsibility for the information; another is the nature of the',
16532:'auditor’s report and the kind of “signal” it sends. thus, the cost and value added by audit are factors to',
16533:'consider. the main question is: for what types of information, users, and objectives would the benefits of making an item',
16534:'an integralpart of the basicfinancial statementsinsteadofrsi exceedtheincrementalcostsof audit, compared with reviewing pursuant toau 558’s limited procedures? factors to consider 40.',
16535:'in deciding whether a given item should be classified as rsi or as an integral part of the basic financial',
16536:'statements, one might consider a variety of factors, such as those listed in figure 2. they are not listed in',
16537:'any particular order, and some “overlap” or convey similar ideas. different people assign different weight to each factor. some people',
16538:'may not consider some of the factors at all, and some people may consider factors that are not listed. likewise,',
16539:'different people may evaluate each item to be reported differently on each dimension. therefore, figure 2 is not a decision',
16540:'tree, hierarchy, or precise algorithm for classifying items, but a general framework for each individual’s judgment. 7as noted, certain gasb',
16541:'standards permit reference to another publiclyavailable report as an option for specified rsi. page 18 sffas 25 fasab handbook, version',
16542:'20 06/21 sffas 25 figure 2 low implies rsi +high implies basic relevance to fair presentation connection with elements of',
16543:'financial reporting use of historical financial data or financial transaction data preparers’ discretion in preparing and presenting the information strength',
16544:'of signal board wishes to be sent in the financial report significance, relevance or importance of the item in light',
16545:'of objectives strength of the signal the board wishes to be sent in the auditor’s report relevance to measuring financial',
16546:'position or changes in financial position extent to which the information interests a wide audience rather than specialists extent to',
16547:'which there are not alternative sources of reliable information agreement on criteria that permit comparable and consistent reporting experience among',
16548:'users, preparers, and auditors with the information extent to which the information is aggregated lacking in detail benefit/cost ratio of',
16549:'using resources to ensure accuracy connection with basic financial statements reliability and/or precision possible reliability and/or precision needed low implies',
16550:'rsi +high implies basic 41. different people will assign different importance to each factor. however, a consensus did emerge during',
16551:'the board’s deliberations on the proper classification of social insurance information that three related factors are particularly important for that',
16552:'decision: 1 the board agreedthatthesosiis “essentialtofair presentation.” aset offinancialstatements could not be said to “present fairly” when the sosi is',
16553:'missing or materially misstated. for this reason, it is important 2 that this signal clearly be communicated to the reader',
16554:'of the financial report and 3 to the reader of the auditor’s report. other factors listed also were deemed relevant,',
16555:'and were deemed consistent with “basic” status; for example, a wide audience is interested in this information. 42. theboardultimatelydecidedtorescindtherequirementtopresentthecsafor reasons',
16556:'discussed in paragraph 2225, but not before it considered the proper classification of the csa. the amount of discretion available',
16557:'to the preparer was deemed especially important to the decision about how to classify the csa. if there is very',
16558:'little discretion in preparing the information, the value of auditing may be modest. an example is sffas 8’s requirement to',
16559:'reprint information as it was presented in the president’s budget, without independent criteria for evaluating it. on the other hand,',
16560:'if there is great discretion, questions may arise about whether the resulting information would be sufficiently reliable, page 19 sffas',
16561:'25 fasab handbook, version 20 06/21 sffas 25 comparable, and consistent without auditing. another factor, relevant both to the decision',
16562:'initially to classify the information as rsi and to the decision eventually to terminate the requirement, is that there are',
16563:'other, credible sources of similar information. as noted, omb and cbo routinely publish intermediate and longterm projections that are scrutinized',
16564:'by congress and by analysts in the private sector. 43. because sffas 5 does not include detailed criteria for defining',
16565:'and measuring risk assumed,preparershaveconsiderablediscretionincalculatingit. thismightseemtoimply that audit would be desirable. however, auditors may have concerns about expressing positive assurance on',
16566:'information for which specific definitions and measurement criteria have not been defined. in other words, there may not be sufficient',
16567:'agreement on criteria that permit comparable and consistent reporting to permit classifying riskassumed as an integral part of the basic',
16568:'financial statements. another example where this concern has affected classification is information about the condition of stewardship assets and deferred',
16569:'maintenance of property, plant and equipment. even when auditors do provide assurance, in some cases they may wish to express',
16570:'special qualifications, explanations, or caveats in their report. an example might be an auditor’s report on an examination of prospective',
16571:'financial information where there is great inherent uncertainty, or an examination of other assertions by management about matters where management',
16572:'has great discretion. 44. concerningthe “significance” factor:thebasicfinancialstatementsincludingnotesthatare regarded as an integral part of the financial statements and rsi are both',
16573:'important enough to be required items in financial reports. with respect to the audit status of the information, it would',
16574:'seem that, by itself, the importance of an item need not automatically imply that the information should be audited. rather,',
16575:'one would also consider the extent of the informationpreparer’s discretion as well as the cost of auditing the information item.',
16576:'however, itdoesseemthat themore importantthe item, the more likelyitshouldbeaudited, if the information preparer had a significant degree of discretion. one would',
16577:'be willing to incur more audit costs to avoid misstatement of very important information items that could affect users’ decisions.',
16578:'furthermore,themoreimportanttheitem,the more likelyit would be deemed essential to fair presentation, thus implying a need to qualify the auditor’s opinion if',
16579:'the information were missing or misstated. 45. concerning the “reliability and/or precision” factors: these factors are intertwined, and all affect',
16580:'the extent to which one would prefer audited information to rsi. “reliability and/or precision needed” asks one to evaluate the',
16581:'users’ tolerance for imprecise measures of a relevant item. since auditing is likely to increase precision either through inducing more',
16582:'precise measures by the preparer or by reducing the variance in the measures by audit procedures, the less tolerance for',
16583:'imprecision that users have concerning an information item, the more likely that the board would want to make the item',
16584:'a required note disclosure instead of rsi. page 20 sffas 25 fasab handbook, version 20 06/21 sffas 25 46. “reliability',
16585:'and/or precision possible” deals with the very nature of the information item being reported. precision about measures of past events',
16586:'seems inherently more possible than precision about estimates of future events. to the extent that there is a fundamental minimum',
16587:'amount of imprecision in certain information items, the cost of increasing audit effort might not be justified. for some board',
16588:'members, this consideration was among the factors along with others such as cost/benefit that imply “riskassumed” information should properly be',
16589:'classified as rsi at this time. at the same time, however, uncertainty need not preclude classifying information as an integral',
16590:'part of the basic financial statements when other factors indicate this is appropriate, as is the case with the sosi.',
16591:'uncertainty should be disclosed and described to the extent feasible. 47. some other listed factors also relate to the nature',
16592:'of the information. for example, some people may define the domain of accounting and/or financial reporting or categories within that',
16593:'domain in terms of the nature of information involved e.g., as limited to “historical” financial information or to certain defined',
16594:'“elements” of financial reporting, or to certain concepts such as “financial position”. fasb has emphasized the role of “elements of',
16595:'financial reporting” in defining the financial statements and notes. fasb and gasb also emphasize the concept of net assets or',
16596:'financial position in defining financial statements and notes. 48. other people may define financial reporting, and its component categories, in',
16597:'terms of the comparative advantage unique to reporting based on the information system for processing financial transactions. sfac 5, recognition',
16598:'and measurement in financial statements of business enterprises, says that the “financial statements . . . articulate with each other',
16599:'and derive from the same underlying data par. 5. some believe this idea is rooted in the basic “bookkeeping” paradigm',
16600:'of accounting see sffac 1, objectives of federal financial reporting, paragraphs 166168. such a definition might be expected to lead',
16601:'to accounting standards that would define the basic financial statements in a narrow or traditional way, with other kinds of',
16602:'information e.g., performance indicators or management’s assertions about internal control being reported as rsi. 49. others may define the domain',
16603:'of financial reporting, and categories within that domain, morebroadly. abroader definitionmight, for example,beexpressedintermsofthe objectives of federal financial reporting, or the',
16604:'comparative advantage of the annual reporting and audit cycle, which assures the production and examination of information that gaap say',
16605:'is essential to fair presentation, where gaap reporting is mandated by law, contract, or market forces. this kind of broader',
16606:'definition might be expected to lead to standards that would define more types of information e.g., performance indicators or management’sassertionsabout',
16607:'internalcontrolsasapart of the basicfinancialstatements. 50. more generally, the “benefit/cost ratio of using resources to assure accuracy” asks one to assess',
16608:'the costs of producing auditable information and auditing it versus the benefits that page 21 sffas 25 fasab handbook, version',
16609:'20 06/21 sffas 25 could be achieved by merely preparing the information as rsi and applying the procedures specifiedatau558. other',
16610:'thingsbeingequal, one wouldavoidauditingwhere thecost of auditingisquitehigh. similarly,totheextentthatalternative,crediblesourcesofinformation exist, the cost of auditing the information may exceed its benefits. boardapproval and',
16611:'dissent 51. this statement was adopted by the affirmative votes of seven members of the board. mr. anania dissented. mr.',
16612:'kull abstained. 52. mr. ananiadissentsfrom this statementbecausehebelieves theboardsdecision tohave the information required by par. 273 and 323 of sffas l7',
16613:'presented as a basic financial statement is premature and is not supported by a change in circumstances or appropriate technical',
16614:'considerations by the board. 53. theboardissuedsffas17inaugust1999after more thanfour years ofdebateand consideration of many major issues including: 1 definition of a',
16615:'federal liability with weight given to the unique circumstances of the federal government, including its sovereign powers, 2 nature of',
16616:'social insurance laws and practices, 3 significance of social insurance programstoindividualtaxpayers, and 4longtermsustainabilityof theprograms as currently constructed. 54. in sffas17,appendixa',
16617:'basis for conclusions section2,the argumentsarepresented for par. 7379 and against par. 6572 recognition, disclosure or supplementary reporting of social insurance',
16618:'programs. the boards conclusion par. 8083 acknowledges there were two polarized views. these sentences from sffas 17 summarize those views',
16619:'and the boards decisions related to disclosure and measurement of social insurance obligations: . . . on the one side',
16620:'are those who believe that social insurance programs especially social security and medicare constitute a liability of the federal government',
16621:'that should be recognized on the consolidated balance sheet and that the closed group is the best measure of it',
16622:'at the opposite pole are those who firmly believe that the closedgroupmeasureismeaninglessoreven potentiallymisleadingand shouldnot be disclosed at all in the',
16623:'financial report par. 80. . . .although both sides make strong arguments, no empirical evidence has been offered that would',
16624:'prove one side right and the other wrong. the board believes the best approach to resolve this issue is for',
16625:'the closed group data to be reported off the balance sheet as a part of a balanced rssi package of',
16626:'disclosures about the social security and other social insurance programs par. 81. page 22 sffas 25 fasab handbook, version 20',
16627:'06/21 sffas 25 the board believes that a more complete picture of the financial condition of the government can be',
16628:'provided by a forwardlooking assessment of whether it can ‘sustain public service and meet obligations as they come due’ par.',
16629:'85. . . . 55. mr.ananiabelievesthekeyissuesdebatedbytheboardprior totheissuanceofsffas17 remain significant and unresolved. he believes the board should reconsider the technical aspects',
16630:'of the social insurance programs from an accounting and reporting perspective before making the change that is called for by',
16631:'this statement. he cites the following issues as some, but not all, of the issues the board should deliberate while',
16632:'keeping the original sffas 17 requirements in place: 1 whether the distinction between exchange and non exchange transactions in the',
16633:'boards concepts is relevant to a liability recognition, 2 whether the closed group current participants population is the most meaningful',
16634:'focus for either recording a liability or for disclosure, and 3 whether the notions of a constructive liability or an',
16635:'in substance plan concept require consideration. 56. further, he is concerned that not enough consideration and debate in connection with',
16636:'the issuance of this statement was focused on the uncertainty inherent in the open group population current and future participants',
16637:'actuarial present values required by par. 27 3 c, f and g. while he acknowledges that the use of assumptions',
16638:'and estimates is accepted in the recording and/or disclosure of financial information, he has serious reservations as to whether the',
16639:'open group actuarial projections that include estimates for future participants in the plans can meet the reliability test. those projections',
16640:'include receipts and outlays for people expected to be born or immigrate to the u.s. during the projection period currently',
16641:'75 years, as well as individuals under 15 years of age at the time of the projection. he believes it',
16642:'is imperative that this issue be fully considered before the statement of social insurance sosi is reclassified as a basic',
16643:'financial statement. 57. mr.ananiaalsopointsoutthatauditcoverageofthesosiandotherinformationrequiredby sffas 17 has been discussed with members of theamerican institute of certified public accountants aicpa fasab',
16644:'liaison taskforce and social insurance taskforce. to date, there is no clear indication from theaicpaas to the nature of the',
16645:'audit coverage and audit report that would be forthcoming from the independent accountants engaged to audit the social securityadministration ssa',
16646:'financial statements, including the sosi information. he believes there is a direct correlation and linkage between the reliability of measurement',
16647:'for recognition purposes and the independent auditors ability to render a meaningful report on those elements in financial statements. the',
16648:'links include the use of relevant empirical data, reasonability of and support for assumptions used, and the extent to which',
16649:'the information used can be objectively verified. the reliability of the projection methodology should be further explored before the results',
16650:'of those calculations are made an integral part of the basic financial statements. page 23 sffas 25 fasab handbook, version',
16651:'20 06/21 sffas 25 58. the open group projection that is used to estimate the future financing shortfall in social',
16652:'insurance programs is inherently more sensitive to assumptions about the distant future than is true for the closed group calculations',
16653:'that are used to account for employee pensions and retiree healthcare costs. this is inevitably true, despite the best efforts',
16654:'of actuaries,economists,andotherprofessionalsinvolvedinmakingtheseprojections. thisis mainly caused by the fact that a closed group dwindles over time, so that uncertainty about what',
16655:'will happeninthedistant future haslessimpact than isthe case for an open groupthat grows larger during the projection period. currently, the sosi',
16656:'is presented in the ssa financial report and in the consolidated financial report of the united states government cfr based',
16657:'on 75year projections under the intermediate assumptions sometimes referred to as the “best estimate” of the board of trustees of',
16658:'the federal oldage and survivors insurance and disability insurance trust funds generally referred to as social security and corresponding assumptions',
16659:'of the other social insurance programs for which the sosi is required. 59. mr.ananiaobservesthatfasbstatementoffinancialaccountingconceptsno. 7provides adistinctionbetweenestimatedcashflowsandexpectedcashflows. thelatterreferstothe sum of probabilityweighted',
16660:'amounts in a range of possible estimated amounts; the estimatedmeanor average. itis believedbysome, includingmr. anania, thataprobabilitybasedapproachisamoreeffectivemeasurementtoolinmanysituations. ssaiscurrently experimenting with methods',
16661:'that might better incorporate and communicate probabilities anduncertainties, as hasbeenrecommendedbyits technical review panels.8 mr. anania believesthat fasab shouldstudythisfurtherin consultationwith others,',
16662:'includingactuaries from ssaand the centers for medicare and medicaid services, before elevating the sosi 8 for example, the report of',
16663:'the 1999 technical panel includes the following observations available at http://www.ssab.gov/rpt99iii.htmlpgfid1005309 under the heading, “illustrating uncertainty”: “the current system of',
16664:'presenting lowand highcost alternatives to the intermediate assumptions is inadequate. the alternatives are useful indemonstratingthesensitivity of the forecast to the',
16665:'underlying parameters section ii.g of the trustees report. however, without any model of the probabilities of the underlying parameters taking',
16666:'on the alternativevalues,thereis noway tousethealternatives toformadistributionofpossible outcomes. itisinadequate to show any forecast without an indication of the uncertainty that surrounds',
16667:'it. we follow previous panels in strongly recommending efforts toward stochastic modeling or similar techniques that are better able to',
16668:'capture the interrelationship among assumptions. we are not dogmatic in the recommendation, as we recognize that even stochastic modeling requires',
16669:'some set of assumptions about the variance in future outcomesfor example in fertility ratesthat are hard to estimate. however, the',
16670:'assumptions are in some way embedded in current methods of projection in any case. “some modeling techniques allow for graphical',
16671:'presentations that are better at displaying the range of uncertainty. what we seek is a method of displaying to policy',
16672:'makers and the public just how uncertain is some average cost outcomeor date of exhaustionof thetrust funds, andwhat are theprobabilities',
16673:'that events will be close to or far from that result. that the system might have a very high probability',
16674:'of being out of balance by 2 or more percent of taxable payroll, for instance, may be worth knowing regardless',
16675:'of whether it has attained actuarial balance under some set of intermediate assumptions.” page 24 sffas 25 fasab handbook, version',
16676:'20 06/21 sffas 25 ascurrentlydefinedtothestatusofabasicfinancialstatement. mr.ananiabelievesthatthe opengroup projections that are the basis of the sosi are more sensitive to assumptions',
16677:'about uncertain future events than is true for most, if not all, longterm liabilities and basic financial statement disclosures in',
16678:'both private and governmental financial reporting today. 60. mr.ananiabelievesthereisafurther,significantissuethatrequiresconsiderationbeforethe sosi is reclassified as a basic statement. the concept is articulation',
16679:'of the elements of the required financial statements. articulation refers to the linkage of an item in one financial statement',
16680:'to an item reported on a different financial statement. articulation demonstrates the interrelationships of the various financial statements. that linkage',
16681:'is demonstrated in appendix 1athru 1f of sffac 2, entity and display. the concept of linkage described therein as “the',
16682:'order and flow of data in the financial statements” is also very clearly depicted in a chart on page 43',
16683:'of the 2001 consolidated financial report of the united states government cfr. since the other statements outlined in sffac 2',
16684:'are prepared on an accrual basis, there is no linkage articulation, as traditionally understood, between the basic financial statements described',
16685:'in sffac 2 and the sosi. while that condition may be tolerable in a compromise standard that requires disclosure as',
16686:'required supplementary stewardship information rssi, mr. anania does not believe that condition is technically sound or tolerable in basic financial',
16687:'statements. 61. finally,mr. ananiadoes notbelievethe usersofthessaandcfrfinancial reports, particularly citizens and citizen intermediaries, will be better served by the change required',
16688:'by this statement. he is concerned that the lack of linkage to the otherbasic statements will notbeeasilyunderstood byuserswilling to studythe',
16689:'informationwith reasonablediligence. elevating the sosi information to become a basic financial statement without accruing a liability or recognizing an expense',
16690:'based on that information might increase confusion of users of government reports. 62. mr. ananiadoes notdissenttopar. 4ofthis statementinwhichtheinformationaboutrisk assumed is',
16691:'reclassified from rssi to requiredsupplementaryinformation rsior to par. 5, which rescinds the current requirements for the current servicesassessment. 63. mr.',
16692:'kull will abstain from voting on this statement. he will not dissent, as he believes that social insurance information should',
16693:'be included in the basic financial statements and notes andshouldbesubjecttoaudit. however, hesharesmr. ananiasconcerns,andfurther believes these and other concerns need to',
16694:'be resolved before full implementation takes effect, including the development of appropriate audit standards, and the need for items in',
16695:'the financial statements to be grounded in appropriate definitions of the elements of financial reporting. his abstention from voting is',
16696:'intended as an expression of his assessment that the board has not completed work on this matter. page 25 sffas',
16697:'25 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards 26: presentationofsignificantassumptionsforthestatementof social insurance:amending sffas 25 status issued november 1, 2004 effective date',
16698:'for periods beginning after september 30, 2008 affects sffas 25, par. 6. affected by sffas 28 amended the effective date',
16699:'presented in par. 6. summary thisstandard amendsstatement of federalfinancialaccounting standards25, reclassification of stewardship responsibilities and eliminating the current services assessment,',
16700:'to require disclosure of significant assumptions underlying the statement of social insurance sosi. “disclosure” means “reportinginformation in notesor narrative regardedasan',
16701:'integralpart of the basic financial statements.” thus, this amendment reclassifies significant assumptions as basic information rather than as required supplementary',
16702:'information rsi. page 1 sffas 26 fasab handbook, version 20 06/21 sffas 26 table of contents page summary 1 introduction',
16703:'3 standards 4 appendix a: basis for conclusions 5 appendix b: abbreviations 8 page 2 sffas 26 fasab handbook, version',
16704:'20 06/21 sffas 26 introduction 1. in july of 2003, the board issued sffas 25, reclassification of stewardship responsibilities and',
16705:'eliminating the current services assessment, and included changes addressing many of the issues identified in responses to the exposure draft',
16706:'ed preceding it. one change to theproposalinthe exposure draftprecedingsffas25 shifted information otherthan thesosi from disclosure torsi status “disclosure” means “reportinginformation',
16707:'in notes or narrative regarded as an integral part of the basic financial statements.”1 rsi is notpartof thebasicfinancialstatementsandiscustomarilypresented asa separate',
16708:'section accompanying the financial statements.another change to the proposal in the exposure draft preceding sffas 25 delayed the effective date',
16709:'to permit the development of audit guidance. 2. thetaskforceoftheamericaninstituteofcpasaicpachargedwithdevelopingthataudit guidance takes exception to the fact that sffas 25 permits the',
16710:'preparer to present the significant assumptions underlying sosi, a basic financial statement, as rsi.2 the task force concluded that disclosure',
16711:'related to sosi would be inadequate if management elects not to disclose significant assumptions in the notes to the financial',
16712:'statements. the task force believesthat inadequate disclosure should result in aqualification of the audit opinion. the task force has proposed',
16713:'audit guidance that would require a qualification in the event significant assumptions are not disclosed. 3. the board believes that',
16714:'generally accepted accounting principles gaap should be clear withrespect to adequatedisclosure. in thisinstance, theboard agreesthat disclosure of the significant assumptions',
16715:'underlying the sosi is necessary to an understanding of the sosi and through this statement amends sffas 25. 1in accounting',
16716:'literature “disclosures” also may be referred to as “notes” or “footnotes.” this statement presents excerpts from other documents with these',
16717:'terms. there is no difference in meaning rather different authors used different terms with the same meaning. 2sffas 25affordsmanagementtheoptionofdisclosingthesignificantassumptions. par.',
16718:'6ofsffas 25providesthat “other informationrequiredby sffas 17shallbepresentedas rsi, except totheextentthat thepreparer electsto include some or all of that information in notes',
16719:'that are presented as an integral part of the basic financial statements.” emphasis added. page 3 sffas 26 fasab handbook,',
16720:'version 20 06/21 sffas 26 standards amendment of sffas 25 4. paragraph 6 of sffas 25 is rescinded. 5. theinformationrequiredbyparagraphs273and323ofsffas17shallbepresentedas',
16721:'a basic financial statement rather than as required supplementary stewardship information rssi. the underlying significant assumptions shall be included in',
16722:'notes that are presented as an integral part of the basic financial statement. other information required by sffas 17including the',
16723:'sensitivity analysis required in par. 274 and 324shall be presented as required supplementary information, except to the extent that the',
16724:'preparer elects to include some or all of that information in notes that are presented as an integral part of',
16725:'the basic financial statements. effective date 6. this standard is effective for periods beginning after september 30, 2005. the provisions',
16726:'of this statement need not be applied to immaterial items. page 4 sffas 26 fasab handbook, version 20 06/21 sffas',
16727:'26 appendixa: basis for conclusions this appendix discusses factors considered significant by board members in reaching the conclusions in this',
16728:'standard. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors',
16729:'than to others. the standards enunciated in this proposed statementnot the material in this appendixwould govern the accounting for specific',
16730:'transactions, events or conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes',
16731:'a status section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the',
16732:'authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can',
16733:'review the basis for conclusions of the amending statement for the rationale for each amendment. a1. the board issued this',
16734:'standard to ensure that significant assumptions are presented as note disclosures to the statement of social insurance so that well',
16735:'established expectations regarding adequate disclosure would be met. concepts statements from many standard setters explain the requirement for adequate disclosure',
16736:'as follows: a. financial reporting should include explanations and interpretations to help users understand financial information provided. … moreover, financial',
16737:'reporting often provides information that depends on, or is affected by, managements estimates and judgment. investors, creditors, and others are',
16738:'aided in evaluating estimates and judgmental information by explanations of underlying assumptions or methods used, including disclosure of significant uncertainties',
16739:'about principal underlying assumptions or estimates. financial reporting may, of course, provide information in addition to that specified by financial',
16740:'accounting standards, regulatory rules, or custom. financialaccounting standards board, con 1, objectives of financial reporting by business enterprises, par. 54',
16741:'b. information disclosed in notes or parenthetically on the face of financial statements, such assignificantaccountingpoliciesoralternativemeasuresforassetsorliabilities,amplifiesor explains information recognized in the',
16742:'financial statements.4 that sort of information is essential to understanding the information recognized in financial statements and has long been',
16743:'viewed as an integral part of financial statements prepared in accordance with generallyacceptedaccountingprinciples. [4forexample,notesprovideessentialdescriptive information for longterm obligations, including what',
16744:'amounts are due, what interest they bear, and whether important restrictions are imposed by related covenants. for inventory, notes provide',
16745:'information on the measurement method usedfifo cost, lifo cost, current market value, etc. for an estimated litigation liability, an extended',
16746:'discussion of the circumstances, counsels opinions, and the basis for managements judgments may all be page 5 sffas 26 fasab',
16747:'handbook, version 20 06/21 sffas 26 provided in the notes. for sales, useful information about revenue recognition policies may appear',
16748:'only in the notes. fasb statement no. 47, disclosure of longterm obligations; arb no. 43, chapter 4 inventorypricing, statement 8;',
16749:'fasb statement no. 5,accounting for contingencies, par. 10; andapb statement 4, par.199] con 5, recognition and measurement in financial statements',
16750:'of business enterprises, par. 7a c. financial information is also conveyed with accompanying footnotes, which are an integral part of',
16751:'the financial statements. footnotes typically provide additional disclosures that are necessary to make the financial statements more informative and not',
16752:'misleading. fasab, sffac 2, entity and display, par. 68 d. financial reporting should be reliable; that is, the information presented',
16753:'should be verifiableandfreefrombiasandshouldfaithfullyrepresentwhatitpurportstorepresent. to be reliable, financial reporting needs to be comprehensive. nothing material should be omitted from the information',
16754:'necessary to faithfully represent the underlying events and conditions, nor should anything be included that would cause the information to',
16755:'be misleading. reliability does not imply precision or certainty. reliability is affected by the degree of estimation in the measurement',
16756:'process and by uncertainties inherent in what is being measured; financial reporting may need to include narrative explanations about the',
16757:'underlying assumptions and uncertainties inherent in this process. under certain circumstances some financialinformationisbased onreasonableestimates. aproperly explained estimate provides more meaningful',
16758:'information than no estimate at all. governmentalaccounting standards board, concept statement 1, par. 64 a2. the board believes that the',
16759:'underlying significant assumptions are essential to fair presentation. the board believes that generally accepted accounting principles should result in disclosure',
16760:'of the significant assumptions upon which sosi is based. disclosures are an integral part of the basic financial statements while',
16761:'rsi is not an integral part of the basic financial statements. rsi accompanies the basic financial statements. placing the significant',
16762:'assumptions in the disclosures associated with the sosi serves two purposes. first, the significant assumptions inform the reader about the',
16763:'basis for the projections presented in the sosi. second, the reader has ready accessto the significant assumptions through association with',
16764:'a principal financial statement. a3. theboardreceived8responsestoitsmarch12,2004exposuredraftonthissubject. ofthe responses, 5 were from federal respondents and 3 were from nonfederal respondents. seven',
16765:'of the eight respondents supported the proposal. however, two supported the proposal contingent on suggested changes. a4. one recommended that',
16766:'the board also include in the note disclosure an explanation of the uncertainty inherent in the process. the recommendation is',
16767:'not without merit but cannot be adopted absent an exposure draft proposing the change. the board is not actively pursuing',
16768:'page 6 sffas 26 fasab handbook, version 20 06/21 sffas 26 thisadditional amendment to sffas 25. the board believes the',
16769:'nature of the information is adequately explained by the: a. required summary of significant accounting policies, b. disclosure of the',
16770:'significant assumptions, c. language in the auditors report on sosi explaining that there will be differences between the forecasts and',
16771:'actual results, and d. presentation of the sensitivity analysis as required supplementary information. a5. another respondent requested that the board',
16772:'defer the effective date of this amendment andsffas 25. occasionally,the boardhasdeviated fromtheproposedeffectivedatewhen finalizing standards proposed in an exposure draft and',
16773:'this is not considered a deviation significant enough to warrant reexposure of the proposal. however, to alter the effective date',
16774:'of a previously issued standard in this case sffas 25 due process requires that the board seek input on that',
16775:'change through an exposure draft proposing such a change. one example of this is the deferral of sffas 4, managerial',
16776:'cost accounting standards for the federal government. a6. since the board is unable to alter the effective date of sffas',
16777:'25 through this amendment, the board is proceeding with the earlier effective date for this amendment to ensure consistency with',
16778:'sffas 25. the board is considering the request for deferral of sffas 25. an exposure draft was issued on july',
16779:'20, 2004 proposing a oneyear deferral of both sffas 25 and this standard. the board will consider comments on the',
16780:'exposure draft and may issue a statement amending the effective dates. boardapproval a7. this statement was approved for issuance by',
16781:'all members of the board. page 7 sffas 26 fasab handbook, version 20 06/21 sffas 26 appendix b:abbreviations aicpa americaninstituteofcertifiedpublicaccountants',
16782:'fasab federalaccountingstandardsadvisoryboard gaap generallyacceptedaccountingprinciples rsi required supplementary information rssi required supplementary stewardship information sffac statementoffederalfinancialaccountingconcepts sffas statement of federal financial',
16783:'page 8 sffas 26 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards 28: deferral of the effective date of reclassification of the',
16784:'statement of social insurance:amending sffas 25 and status issued effective date affects affected by january 6, 2005 effective upon issuance.',
16785:'sffas 25, par. 7 sffac 26, par. 6 none. summary this standard defers for one year the effective dates of',
16786:'statement of federal financial accounting standards sffas 25, reclassification of stewardship responsibilities and eliminating the current services assessment, as well',
16787:'as sffas 26, presentation of significant assumptions for the statement of social insurance: amending sffas 25. the provisions of these',
16788:'standards will be effective for periods beginning after september 30, 2005. page 1 sffas 28 fasab handbook, version 20 06/21',
16789:'sffas 28 table of contents summary 1 introduction 3 standards 4 appendixa: basis for conclusions 5 appendix b: sffas 26',
16790:'7 appendix c: abbreviations 8 page 2 sffas 28 fasab handbook, version 20 06/21 sffas 28 introduction 1. in july',
16791:'of 2003, the board issued sffas 25, reclassification of stewardship responsibilities and eliminating the current services assessment. sffas 25 requires',
16792:'that the statement of social insurance sosi be presented as a basic financial statement. sffas 261, presentation of significant assumptions',
16793:'for the statement of social insurance: amending sffas 25, requires disclosure of significant assumptions underlying the sosi. both statements were',
16794:'to be effective for periods beginning after september 30, 2004. 2. three federal agencies – the office of management and',
16795:'budget omb, the social security administration ssa and the department of health and human services hhs requested that the implementation',
16796:'of sffas 25 and 26 be deferred for one year. each agency cites the fact that audit guidance was not',
16797:'finalized in time to support the original implementation date. 3. whilenotingtheimportanceofreclassifyingsosiandrelateddisclosures,theboardagrees that the current effective date is not feasible in',
16798:'light of the delayed audit guidance. therefore, the effective date is deferred for one year. for ease of reference,appendix b',
16799:'presents the text of sffas 26 as amended by this standard. 1the relevant text of sffas 26 marked with amendments',
16800:'is presented asappendix b. page 3 sffas 28 fasab handbook, version 20 06/21 sffas 28 standards amendment of sffas 25',
16801:'4. par. 7ofstatementoffederalfinancialaccountingstandardssffas25is amendedas follows: chapter 8 and paragraphs 1416 of sffas 8 are rescinded, as is the associated illustration',
16802:'of the current servicesassessment inappendix b of sffas 8, effective for reporting periods beginning after september 30, 2002. information about',
16803:'risk assumed shall be presented as rsi for reporting periods beginning after september 30, 2002. the information required by paragraphs',
16804:'273 and 323 of sffas 17 shall be presented as a basic financial statement for periods beginning after september 30,',
16805:'2004, with earlier implementation encouraged. other information required by sffas 17 shall be presented as rsi, except to the extent',
16806:'that the preparer elects to include some or all of that information in notes that are presented as an integral',
16807:'part of the basic financial statements, for periods beginning after september 30, 2004. amendment of sffas 26 5. par. 6',
16808:'of sffas 26 is amended as follows: consistent with the effective date of sffas 25, this this standard is effective',
16809:'for periods beginning after september 30, 2004 2005. effective date 6. this standard is effective upon issuance. the provisions of',
16810:'this statement need not be applied to immaterial items. page 4 sffas 28 fasab handbook, version 20 06/21 sffas 28',
16811:'appendixa: basis for conclusions this appendix discusses factors considered significant by board members in reaching the conclusions in this standard.',
16812:'it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than',
16813:'to others. the standards enunciated in this statementnot the material in this appendixgovern the accounting for specific transactions, events or',
16814:'conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section',
16815:'directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are',
16816:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
16817:'for conclusions of the amending statement for the rationale for each amendment. a1. theboardconferredwiththeaicparegardingtheneedfor auditguidanceprior toissuing sffas 25. in late',
16818:'2003, a task force of theaicpawas formed to develop audit guidance. an exposure draft of the guidance was issued by',
16819:'theaicpain march 2004. the final guidance was not issued in sufficient time to prepare for the initial implementation date despite',
16820:'the extensive efforts of theaicpa. a2. the board issued an exposure draft proposing this deferral on july 21, 2004. comments',
16821:'were received from the following sources: federal nonfederal internal external users, academics, others 2 auditors 2 1 preparers and financial',
16822:'5 managers a3. all ten respondents supported the proposed deferral. structure of theamendment a4. sffas 25, par. 7 contained provisions',
16823:'concerning the sosi as well as an effective date for the provisions. sffas 26 replaces the reclassification provisions of sffas',
16824:'25 related to thesosiandprovidesaneffectivedatefortherevisedprovisions. theamendmentsinthis standard replace the prior effective dates concerning the sosi reclassification and page 5 sffas 28',
16825:'fasab handbook, version 20 06/21 sffas 28 information in the prior statements with a new effective date of periods beginning',
16826:'after september 30, 2005.” appendix b presents sffas 26 as amended by this standard. reasons for the deferral a5. agencies',
16827:'requesting the deferred implementation identified the following consequences of the delayed audit guidance: a. agency staff was not able to',
16828:'prepare for the audit process due to the uncertainty absent final audit guidance on the process. b. agency staff was',
16829:'engaged in deliberations with theaicpatask force and unable to begin tentative preparations for the audit. c. contracts for audit engagements',
16830:'have not been expanded to encompass the audit process to be required relative to the sosi. d. funding for the',
16831:'expanded audit engagements could not be included in fiscal year 2005 budget submissions. a6. the board believes that a oneyear',
16832:'delay is reasonable, necessary and appropriate in light of the delayed audit guidance. boardapproval a7. this statement was approved for',
16833:'issuance by all members of the board. page 6 sffas 28 fasab handbook, version 20 06/21 sffas 28 appendix b:',
16834:'sffas 26 paragraphs4through 6ofsffas26arepresented with therevisions included foreaseof reference. amendment of sffas 25 a1. paragraph 6 of sffas 25 is',
16835:'rescinded. a2. theinformationrequiredbyparagraphs273and323ofsffas17shallbepresentedas a basic financial statement rather than as required supplementary stewardship information rssi. the underlying significantassumptionsshallbe includedinnotesthatarepresented as',
16836:'an integral part of the basic financial statement. other information required by sffas 17– includingthe sensitivityanalysisrequiredinpar. 274 and324shallbepresentedas required supplementary',
16837:'information, except to the extent that the preparer elects to include some or all of that information in notes that',
16838:'are presented as an integral part of the basic financial statements. effective date a3. consistent with the effective date of',
16839:'sffas 25, thisthis standard is effective for periods beginning after september 30, 2004 2005. the provisions of this statement need',
16840:'not be applied to immaterial items. page 7 sffas 28 fasab handbook, version 20 06/21 sffas 28 appendix c:abbreviations aicpa',
16841:'american institute of certified publicaccountants fasab federal accounting standardsadvisory board gaap generallyaccepted accounting principles hhs department of health and human',
16842:'services rsi required supplementary information rssi required supplementary stewardship information sffac statement of federal financialaccounting concepts sffas statement of federal',
16843:'financialaccounting standards ssa social securityadministration sosi statement of social insurance page 8 sffas 28 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards27:',
16844:'identifying and reporting funds from dedicated collections status issued december 28, 2004 effective date for periods beginning after september 30,',
16845:'2005 affects sffas 7 sffac 2 sffac 3 affected by sffas 43 amends paragraphs 1139. summary this statement defines and',
16846:'addresses “earmarked funds.” note that this statement uses the term “earmarked” only as it is defined below. this statement does',
16847:'not use the term “earmarked” as it is sometimes used to refer to setasides of appropriations for specific purposes. scope',
16848:'of this statement theboard’sproposedstandardfor “fiduciaryactivities” andthisstandardon “earmarked funds” together address all activities or funds considered “dedicated collections” by statement of',
16849:'federalfinancialaccountingstandards sffas7. whenfinalized,the fiduciary activities standard will rescind the “dedicated collections” provisions in sffas 7. this standard supersedesthe “dedicated collections”',
16850:'provisions in sffas 7 paragraphs8387 for earmarked funds. earmarked funds are financed by specifically identified revenues, often supplemented by other',
16851:'financing sources, which remain available over time. these specifically identified revenues and other financing sources are required by statute to',
16852:'be used for designated activities, benefits or purposes, and must be accounted for separately from the government’s general revenues. the',
16853:'three required criteria for an earmarked fund are: astatute committingthefederalgovernmenttousespecificallyidentifiedrevenues and other financing sources only for designated activities, benefits or',
16854:'purposes; explicit authority for the earmarked fund to retain revenues and other financing sources not used in the current period',
16855:'for future use to finance the designated activities, benefits, or purposes; and page 1 sffas 27 fasab handbook, version 20',
16856:'06/21 sffas 27 arequirementtoaccountfor and report on thereceipt, use,andretentionoftherevenues and other financing sources that distinguishes the earmarked fund from the',
16857:'government’s general revenues. an earmarked fundmaybeclassified in the unified budget asa trust, special, orpublicenterprise fund. application of this standard, however,',
16858:'should not be based on whether a statute or the unifiedbudgetlabelsanearmarkedfundasacertaintypeoffund. rather,theboardintendsthat the term earmarked fund be applied based on',
16859:'the substance of the statute and consistent with the three criteria set forth in the standard. reporting requirements the component',
16860:'entity will show earmarked nonexchange revenue and other financing sources, including appropriations, and net cost of operations separately on the',
16861:'statement of changes in netposition. thecomponententityalsowillshowtheportionofcumulativeresultsofoperations attributable to earmarked fundson the statement of changesin net position and on the balance',
16862:'sheet. at the governmentwide level, earmarked revenue, other financing sources and net cost of operations will be shown separately on',
16863:'the u.s. government statement of operations and changes in net position. the u.s. government balance sheet will show separately the',
16864:'portion of net position attributable to earmarked funds. this standard requires that every component entity disclose the earmarked funds for',
16865:'which it has program management responsibility. it also requires condensed information on assets, liabilitiesand cost for all earmarked funds, althoughit',
16866:'permitsinformation on fundsnot presented individually to be aggregated. in addition, it requires disclosure of any legislation that changed the purpose',
16867:'of or redirected a significant portion of an earmarked fund. required note disclosures at the component entity level will clarify',
16868:'the fact that investments in treasury securities held by the component entity are not assets for the government as a',
16869:'whole. that is, the investments in treasury securities are available for authorized expenditures and are thus assets of the managing',
16870:'component entity. however, financing will be needed by the government as a whole when those investments in treasury securities are',
16871:'redeemed to make expenditures. in addition, this standard addresses those situations where several component entities each have program management responsibility',
16872:'for separate, identifiable portions of the earmarked fund. by requiring each component entity to report on only its portion of',
16873:'the earmarked fund, the standard assists report users in evaluating the service efforts, costs and accomplishments of the component entity.',
16874:'page 2 sffas 27 fasab handbook, version 20 06/21 sffas 27 effective date the provisions of this standard are effective',
16875:'for periods beginning after september 30, 2005. early adoption is not permitted. in the year this standard becomes effective, entities',
16876:'should not restate the prior period columns of the basic financial statements and related disclosures. page 3 sffas 27 fasab',
16877:'handbook, version 20 06/21 sffas 27 table of contents page summary 1 introduction 5 scope 7 effective date 7 accounting',
16878:'standards 7 definition of earmarked funds 7 reporting for earmarked funds 11 basis ofaccounting 16 effective date and implementation 16',
16879:'effect on existing standards 17 appendixa: basis for conclusions 18 appendix b: glossary 26 appendix c: pro forma illustrations 27',
16880:'appendix d: example of note disclosure summary financial information for component entity 34 appendixe: listofabbreviations 36 page 4 sffas 27',
16881:'fasab handbook, version 20 06/21 sffas 27 introduction 1. this statement defines and addresses “earmarked funds.1” note that this statement',
16882:'uses the term “earmarked” only as it is defined below. this statement does not use the term “earmarked” as it',
16883:'is sometimes used to refer to setasides of appropriations for specific purposes. 2. this statement amendsstatement offederalfinancialaccountingstandardssffas7, accounting for revenue',
16884:'and other financing sources. this statement defines and addresses earmarked funds and differentiates between earmarked funds and fiduciary activity. this',
16885:'statement requires that earmarked funds be identified and shown separately on the statement of changes in net position for u.s.',
16886:'governmentwide, the statement of operations and changes in net position and the balance sheet. it also requires the componententityto identifyall',
16887:'earmarked fundsfor which it hasmanagement responsibility, by either a list by official title or a statement indicating where the information',
16888:'can be obtainedandtoprovidespecificinformationonearmarkedfundsincluding revenuesources, assets and liabilities, and changes in net position. 3. earmarked revenue and other financing sources are',
16889:'accounted for in earmarked funds with widelydisparate characteristics. ina2001report,thegovernmentaccountabilityoffice gao identified three hundred and ninetytwo possible earmarked funds.2 annual revenues',
16890:'and other financing sources for those earmarked funds range from negligible amounts to over half a trillion dollars. accumulated balances',
16891:'range from zero to over a trillion dollars. 4. earmarked funds are financed by specifically identified revenues and other financing',
16892:'sources such as appropriations and serve a variety of purposes. revenue sources may be exchange or nonexchange and include but',
16893:'are not limited to payroll taxes, excise taxes, customs duties, fees, user charges, sales of goods and services and interest',
16894:'earned. in addition, although earmarked funds are usually the responsibility of a single entity, management responsibility for some earmarked funds',
16895:'is shared by two or more entities. 5. thepurposeofearmarkedfundsrangesfromthelongtermcommitmentsfinancedbysocial insurance taxes, such as social security, to businesstype activities financed mainly',
16896:'by 1words first appearing in boldface are defined inappendix b: glossary. 2 gao, federal trust and other earmarked funds,january2001, gao01199sp,',
16897:'p. 12. theterm “earmarkedfunds” used by gao in its survey differs from that established by this standard and was not',
16898:'intended to reflect standards for financial reporting. the term “earmarked funds” as used in either the gao report or other',
16899:'governmental issuances shall not govern the application of this standard. page 5 sffas 27 fasab handbook, version 20 06/21 sffas',
16900:'27 exchangetransactions,suchastheemployeeslifeinsurancefund. everydepartmentand many independent agencies have at least one earmarked fund. therefore, earmarked funds affect a wide array of',
16901:'programs, including commerce, income security, natural resources, administration of justice, agriculture, education, science and technology, the environment, healthcare, housing credit',
16902:'and insurance. 6. despite the differences among earmarked funds they do share certain characteristics. earmarked funds are financed by specifically',
16903:'identified revenues, often supplemented by other financing sources, which remain available over time, are required by statute to be used',
16904:'for designated activities, benefits or purposes, and must be accounted for separately from the government’s general revenues. 7. the following',
16905:'chart shows fund types used in reporting to the treasury financial management service fms and the office of management and',
16906:'budget omb. it is intended only to show the general relationship between fund groups and earmarked funds as classified in',
16907:'this statement. regardless of classification for reporting to the treasury fms or the omb, funds meeting the definition of earmarked',
16908:'funds promulgated in this standard should be so classified and funds not meeting the definition should not be so classified.',
16909:'table 1. fund groups used in federal reporting to the treasury fms and the omb generally are generally are not',
16910:'subject to the subject to the reporting reporting fund groups and major classes requirements of this standard requirements of this',
16911:'standard general funds ……………… 00003999 x revolving funds…………… 40004999 intragovernmental revolving funds x public enterprise funds: credit reform financing funds',
16912:'x all other public enterprise funds x special funds …………….…. 50005999 x deposit funds .……………….60006999 x trust funds ……………….… 80008999',
16913:'x page 6 sffas 27 fasab handbook, version 20 06/21 sffas 27 8. funds that receive earmarked revenue and other',
16914:'financing sources include special funds, trust funds both revolving and nonrevolving and public enterprise funds. the general fund is used',
16915:'to carry out the general purposes of government rather than being restricted by law to a specific program. it consists',
16916:'of all collections not earmarked by law to finance otherfunds, includingvirtuallyall income taxesand manyexcisetaxes, andallexpenditures financed by these collections and',
16917:'by general u.s. treasury borrowing.3 while intragovernmentalfunds, whicharerevolvingfundsthatconductbusinesstypeoperations primarily within and between government agencies, share the characteristics of an earmarked',
16918:'fund, they are excluded from the reporting requirements of this standard. credit financing accounts and fiduciary funds are also excluded.',
16919:'scope 9. this statement provides accounting and reporting standards for earmarked funds in the general purpose financial statements of reporting',
16920:'entities and the u.s. governmentwide financial report. this statement does not affect reporting in the budget of the united states',
16921:'government or any other special purpose type of report. effective date 10. this statement is effective for periods beginning after',
16922:'september 30, 2005. early adoption is not permitted. in the year this standard becomes effective, entities should not restate the',
16923:'prior period columns of the basic financial statements and related disclosures. accounting standards definition of funds from dedicated collections 11.',
16924:'generally, funds from dedicated collections are financed by specifically identified revenues3a, provided to the government by nonfederal sources, often supplemented',
16925:'by other financing sources, which remain available over time. these specifically identified 3analytical perspectives, budget of the united states government,',
16926:'fiscal year 2005, p. 339. 3asuch specifically identified revenue can be either exchange or nonexchange. page 7 sffas 27 fasab',
16927:'handbook, version 20 06/21 sffas 27 revenues and other financing sources are required by statute to be used for designated',
16928:'activities, benefits or purposes, and must be accounted for separately from the government’s general revenues. the three required criteria for',
16929:'a fund from dedicated collections are: 1. astatutecommittingthefederalgovernmenttousespecificallyidentified revenues and/or other financing sources that are originally provided to the federal',
16930:'government by a nonfederal source3b only for designated activities, benefits or purposes; 2. explicit authority for the fund to retain',
16931:'revenues and/or other financing sources not used in the current period for future use to finance the designated activities, benefits,',
16932:'or purposes; and 3. arequirementto accountfor andreport4onthe receipt,use, and retention ofthe revenues and/or other financing sources that distinguishes the fund',
16933:'from the federal government’s general revenues. application of the definition 12. the requirement to account for revenues and other financing',
16934:'sources that are statutorily availableonlyfordesignatedactivities,benefitsorpurposesisusuallycreatedbystatute. a fund from dedicated collections may be classified in the statute, the unified budget, or',
16935:'both, asatrust,special,orpublicenterprisefund. applicationofthisstandard,however,shallnot be based on how a statute or the unified budget labels the fund. rather, the board intends',
16936:'that the term “funds from dedicated collections” be applied based on the substance of the statute and consistent with the',
16937:'three criteria described above. 13. fund in this statement’s definition of funds from dedicated collections refers to a “fiscal and',
16938:'accounting entity with a selfbalancing set of accounts recording cash and other financial resources, togetherwith allrelatedliabilities and residualequitiesorbalances, andchanges therein,',
16939:'which are segregated for the purpose of carrying on specific activities or attaining 3bin some cases, specifically identified revenues or',
16940:'other financing sources are collected from a nonfederal source by one agency and transferred or appropriated to another. for example,',
16941:'social security taxes are collected from non federal entities employees and employers by the internal revenue service. those amounts are',
16942:'subsequently appropriatedandtransferredtothesocialsecurityadministration. this internalprocess does not change the nature of the revenue or other financing source i.e., specifically identified revenues',
16943:'or other financing sources originally collected from a nonfederal source. 4a“report” may be something other than standalone financial statements for',
16944:'the fund from dedicated collections. page 8 sffas 27 fasab handbook, version 20 06/21 sffas 27 certain objectives in accordance',
16945:'with special regulations, restrictions, or limitations.”5 classificationandreportingshouldbemadeatthelevelofanindividualfund. afundshould be classified as a “fund from dedicated collections” if it meets the',
16946:'criteria in paragraphs11.2 and 11.3 and either: 1. its predominant sources of revenue and other financing sources are nonfederal sources',
16947:'meeting the paragraph 11.1 criterion, or 2. it has nonfederal sources of revenue and other financing sources meeting the paragraph',
16948:'11.1 criterion5a that are material to the reporting entity. for example, as currently funded, medicare parts b and d do',
16949:'not have nonfederal sources as described in paragraph 11 as their predominant revenue and other financing sources. however, medicare parts',
16950:'b and d do have revenue and other financing sources material to the reporting entity that meet the criteria in',
16951:'paragraph 11. therefore, medicare parts b and d should be classified as funds from dedicated collections. distinct from the general',
16952:'fund 14. whereas funds from dedicated collections are financed by specifically identified revenues and other financing sources, the general fund',
16953:'is financed by receipts not dedicated by law for a specific purpose and the proceeds of general borrowing. although there',
16954:'are exceptions, funding decisions regarding activity financed from general receipts usually govern one fiscal year and are made as part',
16955:'of the process of enacting one of the annual appropriations acts. in contrast, legislation establishing funds from dedicated collections reflects',
16956:'a longer if not indefinite government commitment to collect, hold and spend identified revenues for a designated activity, benefit or',
16957:'purpose. funds from dedicated collectionsmaybegivenauthoritytomakeexpendituresbymeansofapermanent indefinite appropriation, often enacted by authorizing legislation. if not, an appropriation provided in annualappropriationactsisnecessarytomakeexpenditures. whetherthebudgetauthority',
16958:'is provided by authorizing legislation or annual appropriations acts, the funds are reserved or restricted to the designated activity, benefit',
16959:'or purpose. 5 national council on governmentalaccounting statement 1, par. 16. 5a in situations where there is a mixed source',
16960:'of funding so that not all of the revenue and other financing sources meet the criteria in paragraph 11 and',
16961:'the proportion and/or amounts vary from year to year so that it is difficult to determine a predominant source and/or',
16962:'assess materiality, acceptable options for classification include but are not limited to: 1. longterm expectations rather than periodic results that',
16963:'may fluctuate 2. 36month averages changes in classification of funds from year to year should be disclosed. page 9 sffas',
16964:'27 fasab handbook, version 20 06/21 sffas 27 distinct from fiduciary activities 15. the activity of funds from dedicated collections',
16965:'differs from fiduciary activities primarily in thatinfunds from dedicatedcollections assets aregovernmentowned. afiduciaryactivity is the collection or receipt, management, protection, accounting,',
16966:'investment and disposition by the federal government of cash or other assets in which nonfederal individuals or entities have an',
16967:'ownership interest that the federal government must uphold.6 therefore, even though a fund from dedicated collections is designated exclusively for',
16968:'a specific activity, benefit or purpose, the federal government does not have a fiduciary relationship with the individuals or groups',
16969:'who potentially will benefit from the fund. distinct from private sector trust funds 16. althoughfundsfromdedicatedcollectionsarepredominantlyinfundsthataredesignatedby law as trust funds, the',
16970:'meaning of the term “trust” in the federal government differs significantly from its meaning in the private sector. whereas funds',
16971:'from dedicated collections in the federal government are distinct from fiduciary activities, a trust in the private sector necessarily involves',
16972:'a fiduciary relationship. 17. afundfrom dedicatedcollectionsshouldnotbecharacterizedasa “trust” ingeneral purpose external financial reports of federal entities. the use of the term',
16973:'“trust fund” is acceptable only in the fund’s official title. exclusions from reporting requirements 18. certain categories of funds are',
16974:'excluded from the reporting requirements of this standard. intragovernmental funds are excluded because they are revolving funds that conduct businessprimarilywithinandbetweengovernmentagencies.',
16975:'creditfinancingaccountsare also excluded. credit financing accounts are nonbudgetary funds that do not accumulate results of operations; they primarily serve as',
16976:'clearing accounts for cash activity relating to federal credit programs. fiduciary funds, which are not governmentowned, are also excluded. funds',
16977:'established to account for pensions, other retirement benefits, other postemployment benefits, and other employee benefits provided to federal employees civilian',
16978:'or military should not be classified as funds from dedicated collections because such funds account for employeremployee transactions and requirements',
16979:'tailored to those transactionsare providedbysffas5,accounting forliabilitiesof thefederalgovernment, paragraphs 5696.6a in addition, because these funds recognize significant longterm liabilities, the large',
16980:'negative net position offsets much of the generally positive net position 6see sffas 31, accounting for fiduciary activities, for more',
16981:'on fiduciary activity in the federal government and the differences between private trust funds and federal government trust funds. 6abecause',
16982:'classification and reporting should be made at the level of an individual fund, portions of funds, such as the federal',
16983:'employees compensationaccount portionof theunemploymenttrust fund, should not be excluded because of this provision. page 10 sffas 27 fasab handbook, version',
16984:'20 06/21 sffas 27 of other funds from dedicated collections. the result at the governmentwide level is that the large',
16985:'negative net position of these funds obscures the large cumulative amount that needs to be repaid by the general fund',
16986:'in order for the dedicated collections to be used for their intended purposes. reporting for funds from dedicated collections financial',
16987:'statement presentation and disclosures for component entities financial statement presentation 19. the portion of cumulative results of operations and unexpended',
16988:'appropriations attributable to funds from dedicated collections should be shown separately on the balance sheet. this standard does not require',
16989:'funds from dedicated collections to be separately shown on the statement of net cost. nonexchange revenue and other financing sources,',
16990:'including appropriations, and net cost of operations for funds from dedicated collections should be shown separately on the statement of',
16991:'changes in net position if: 1. dedicated collections are the predominant source of revenue and other financing sources for the',
16992:'component entity, or 2. one or more of the entity’s funds from dedicated collections a. is of immediate concern to',
16993:'constituents of the fund, b. is politically sensitive or controversial, c. is accumulating large balances, or d. the information provided',
16994:'in the financial statements would be a primary source of financial information for the public for example, the social security',
16995:'and medicare programs are of immediate concern to their constituents; both programs have a direct current or future impact on',
16996:'the majority of the general public. 19a. entities may present combined or consolidated amounts and the presentation must be labeled',
16997:'accordingly. page 11 sffas 27 fasab handbook, version 20 06/21 sffas 27 19b. component entities that do not separately show',
16998:'amounts from dedicated collections on the statement of changesin net position should refer on the face of the statement of',
16999:'changesin net position to the note on funds from dedicated collections. 20. most revenues and other financing sources that are',
17000:'dedicated collections are reported in the basic financial statements of the entity carrying out the program and responsible for administration',
17001:'of the fund. if more than one component entity is responsible for carrying out the program financed with revenues and',
17002:'other financing sources that are dedicated collections, and the separate portions of the program can be clearly identified with a',
17003:'responsible component entity, then each component entity should report its portion in accordancewiththerequirementsofthisstandard. ifseparateportionscannotbeidentified, the component entity with program management',
17004:'responsibility should report the fund.7 disclosure 21. acomponent entity shoulddisclose8allfunds fromdedicatedcollections forwhichithas programmanagement responsibilitybyeitheralist byofficialtitle, or astatement indicating wherethe listcanbeobtainede.g.,',
17005:'awebsitereferenceor contactinformation. afund from dedicated collections should not be characterized as a “trust” in general purpose external financial reports of',
17006:'federal entities. the use of the term “trust fund” is acceptable only in the fund’s official title. 22. information should',
17007:'be disclosed for each individual fund from dedicated collections. an exception is provided for component entities having numerous individual funds',
17008:'from dedicated collections. paragraph 24 discusses criteria to consider in selecting individual funds for disaggregated disclosure. the following information should',
17009:'be disclosed for selected individual funds from dedicated collections, in aggregate for all remaining funds from dedicated collections, and in',
17010:'total for all the entitys funds from dedicated collections: 1. condensed information about assets and liabilities showing investments in treasury',
17011:'securities, other assets, liabilities due and payable, other liabilities, cumulative results of operations and net position. 2. condensed information providing',
17012:'gross cost, exchange revenue, net cost of operations, nonexchange revenues by major type and all other, other financing sources by',
17013:'major type and all other, and change in net position. 7 to determine program management/accounting responsibility, agencies should consider the',
17014:'legislation authorizing the program; the memorandum of understanding that establishes responsibilities; and the provisions of sffac 2, entity and display,',
17015:'as amended by this standard. 8disclosure is reporting information in notes or narrative regarded as an integral part of the',
17016:'basic financial statements. page 12 sffas 27 fasab handbook, version 20 06/21 sffas 27 entities may present combined or consolidated',
17017:'amounts and the presentation must be labeled accordingly. the information required by this paragraph may be presented separately on the',
17018:'face of the entitys basic financial statements or disclosed in the accompanying notes. the information must be in sufficient detail',
17019:'to support reporting requirements for the u.s. governmentwide financial statements in paragraphs 29 and 30. information for funds not presented',
17020:'individually may be aggregated. the total net position shown in the note disclosure should agree with the total net position',
17021:'for funds from dedicated collections shown on the face of the component entity’s balance sheet.9 23. the following information should',
17022:'be disclosed for each individually reported fund from dedicated collections, or portion thereof, for which a component entity has program',
17023:'management responsibility see paragraph 24.. 1. adescription of each funds purpose, how the entity accounts for and reports the fund,',
17024:'and its authority to use those revenues and other financing sources. 2. thesourcesofrevenueorotherfinancingfortheperiodandanexplanationofthe extent to which they are inflows of',
17025:'resources to the government or the result of intragovernmental flows. 3. any change in legislation during or subsequent to the',
17026:'reporting period and before the issuance of the financial statements that significantly changes the purpose of the fund or that',
17027:'redirects a material portion of the accumulated balance. 24. selecting funds from dedicated collections to be presented individually requires judgment.',
17028:'the preparer should consider both quantitative and qualitative criteria. acceptable criteria include but are not limited to: a. quantitative factors',
17029:'such as 1. the percentage of the reporting entitys revenues from dedicated collections or 2. cumulative results of operations from',
17030:'such funds; and b. qualitative factors such as 1. whetherafundfromdedicatedcollectionsisofimmediateconcerntoconstituents of the fund, 9 footnote 9 was rescinded by sffas',
17031:'43, revisions to identifying and reporting funds from dedicated collections: amending statement of federal financial accounting standards 27. page 13',
17032:'sffas 27 fasab handbook, version 20 06/21 sffas 27 2. whether it is politically sensitive or controversial, 3. whether it',
17033:'is accumulating large balances, or 4. whether the information provided in the financial statements would be the primary source of',
17034:'financial information for the public. 25. the total net position of all funds from dedicated collections shown in the note',
17035:'disclosure should agree with the net portion of funds from dedicated collections shown on the face of the component entity’s',
17036:'balance sheet. 26. in accordance with the provisions of paragraph 20 or footnote 5a of paragraph 13, if a component',
17037:'entity reports a different portion of a program funded by dedicated collections than it reported in prior years, it should',
17038:'not restate its prior year financial statements. it should disclose the change. this applies if a component entity does not',
17039:'report a fund from dedicated collections that it reported in the previous year. it also applies if a component entity',
17040:'reports a fund from dedicated collections that it did not report in the previous year. note on investments 27. investments',
17041:'in treasury securities for funds from dedicated collections should be accompanied by a note that explains the following issues: the',
17042:'u.s. treasury does not set aside assets to pay future expenditures associated with funds from dedicated collections. instead, the cash',
17043:'generated from such funds is used by the u.s. treasury for general government purposes. treasury securities are issued to the',
17044:'fund as evidence of dedicated collections and provide thefund with the authorityto draw upon the u.s. treasuryfor future authorized expenditures',
17045:'although for some funds, this is subject to future appropriation. treasury securities held by a fund from dedicated collections are',
17046:'an asset of the fund and a liability of the u.s. treasury, so they are eliminated in consolidation for the',
17047:'u.s. governmentwide financial statements. when the fund from dedicated collections redeems its treasury securities to make expenditures, the u.s. treasury',
17048:'will finance those expenditures in the same manner that it finances all other expenditures. 28. below is one example of',
17049:'a note that addresses the points in paragraph 27 above. intragovernmental investments in treasury securities the federal government does not',
17050:'set aside assets to pay future benefits or other expenditures associated with funds from dedicated collections or name/s of fund/s.',
17051:'the page 14 sffas 27 fasab handbook, version 20 06/21 sffas 27 dedicated cash receipts collected from the public into',
17052:'the fund are deposited in the u.s. treasury, which uses the cash for general government purposes. treasury securities are issued',
17053:'to the component entity as evidence of its receipts. treasury securities are an asset to the component entity and a',
17054:'liability to the u.s. treasury. because the component entity and the u.s. treasury are both parts of the government, these',
17055:'assets and liabilities offset each other from the standpoint of the government as a whole. for this reason, they do',
17056:'not represent an asset or a liability in the u.s. governmentwide financial statements. treasury securities provide the component entity with',
17057:'authority to draw upon the u.s. treasury to make future benefit payments or other expenditures. when the component entity requires',
17058:'redemption of these securities to make expenditures, the government finances those expenditures out of accumulated cash balances, by raising taxes',
17059:'or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. this is the',
17060:'same way that the government finances all other expenditures. financial statement presentation and disclosures for the u.s. governmentwide financial statements',
17061:'financial statement presentation 29. funds from dedicated collections should be shown separately on the u.s. government statement of operations and',
17062:'changes in net position. the portion of net position attributable to funds from dedicated collections should be shown separately on',
17063:'the u.s. governmentbalancesheet.10 seeappendixc: proformaillustrationsforexamples of accounting entries and financial reporting. disclosure 30. specific information should be disclosed for selected',
17064:'funds from dedicated collections. paragraph 24 discusses criteria to consider in selecting individual funds for disaggregated disclosure. the following information',
17065:'should be provided for selected individual funds from dedicatedcollections, inaggregateforall remaining fundsfromdedicatedcollections, andin total for all funds from dedicated collections:',
17066:'1. condensed information about assets, liabilities and net position. 10 netpositioniscomposedofunexpendedappropriationsandcumulativeresultsofoperationsforcomponententities. since unexpended appropriations are not applicable at the u.',
17067:'s. governmentwide level, net position equals cumulative results of operations. page 15 sffas 27 fasab handbook, version 20 06/21 sffas',
17068:'27 2. condensed information on gross cost, exchange revenue, net cost, nonexchange revenues and other financing sources, and change in',
17069:'net position. the disclosure may present combined or consolidated amounts and the presentation must be labeled accordingly. 31. the information',
17070:'for funds from dedicated collections should be disclosed in the notes accompanying the basic financial statements. information for funds not',
17071:'shown individually maybeaggregatedseeparagraph24. atotalcolumnshouldbepresentedthatrelatesthe disaggregated data to the data on the face of the principal financial statements. the net position',
17072:'shown in the note disclosure should agree with the portion of net position attributable to funds from dedicated collections shown',
17073:'on the face of the balance sheet. 32. anotedisclosureshouldprovideareferencetocomponentreportsforadditionalinformation about individual funds from dedicated collections. 33. anotedisclosureshouldprovide ageneraldescriptionoffunds from dedicatedcollections',
17074:'and an explanation of how the federal government asa whole could provide the resources represented by the balance in treasury',
17075:'securities held by funds from dedicated collections. 34. afundfrom dedicatedcollectionsshouldnotbecharacterizedasa “trust” ingeneral purpose external financial reports of federal entities. the',
17076:'use of the term “trust fund” is acceptable only in the fund’s official title. basis ofaccounting 35. allamountsreportedanddisclosedinthereportingentity’sbasicfinancialstatementsorthe notes thereto,',
17077:'as required in paragraphs 19 through 34, should be recognized and measured using the standards provided in generally accepted accounting',
17078:'principles applicable to the federal government. effective date and implementation 36. this standard is effective for periods beginning after september',
17079:'30, 2005. early adoption is not permitted. in the year this standard becomes effective, entities should not restate the prior',
17080:'period columns of the basic financial statements and related disclosures. page 16 sffas 27 fasab handbook, version 20 06/21 sffas',
17081:'27 effect on existing standards 37. [paragraph37wassupersededbyparagraph34ofsffas31,whichrescindedparagraphs 83 through 87 of sffas 7.] 38. this standardamendsstatement offederalfinancialaccountingconceptssffac2, entity and display',
17082:'footnote 3, as follows: for some trust funds, the collection of the revenuesis performed byan organizational entity acting in a',
17083:'custodial capacity that differs from the organizational entity that administers the trust fund. in those instances, the organizational entity that',
17084:'collects the revenue would be responsible for reporting only the collection and subsequent disposition of the funds. the organizational entity',
17085:'responsible for carrying out the programs financed by a trust fund, or inthe caseof multipleresponsibleentities, theentitywiththe preponderance of fund activity,',
17086:'will report all assets, liabilities, revenues and expenses of the fund, notwithstanding the fact that another entity has custodial responsibility',
17087:'for the assets. in the case of multiple responsible entities, if the separate portions of the program can be clearly',
17088:'identified with a responsible component entity, then each component entity should report its portion in accordance with the requirements of',
17089:'sffas 27, identifying and reporting earmarked funds. if separate portions cannot be identified, the component entity with program management responsibility',
17090:'should report the fund. 39. this standard amends sffac 3, management’s discussion and analysisconcepts, paragraph 26 as follows: financial results,',
17091:'position and conditionmd&ashould help those who read it to understand the entitys financial results and financial position and the entitys',
17092:'effect on the financial position and condition of the government. it should give readers the benefit of managements understanding of',
17093:'the significance and potential effect from both a shortand a longterm perspective of: the variations discussed in paragraph 14 in',
17094:'terms of major changes in types or amounts of assets, liabilities, costs, revenues, obligations and outlays; particularbalancesandamountsshowninthebasicfinancialstatements,includingthe notes,suchasthosedealing withdedicatedcollectionsor trustfunds',
17095:'earmarkedfunds, if relevant to important financial management issues and concerns; and the entitys required supplementary stewardship information because rssi describes',
17096:'economic conditions that cannot be expressed in the basic financial statements. the provisions of this statement need not be applied',
17097:'to immaterial items. page 17 sffas 27 fasab handbook, version 20 06/21 sffas 27 appendixa: basis for conclusions this appendix',
17098:'discusses factors considered significant by board members in reaching the conclusions in this statement. it includes the reasons for accepting',
17099:'certain approaches and rejecting others. individual members gave greater weight to some factors than to others. the standards enunciated in',
17100:'this statement – not the material in this or other appendices– should govern the accounting for specific transactions, events or',
17101:'conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section',
17102:'directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are',
17103:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
17104:'for conclusions of the amending statement for the rationale for each amendment. a1. fasab published the exposure draft identifying and',
17105:'reporting earmarked funds on october 16, 2003. upon release of the exposure draft, notices and/or press releases were provided to:',
17106:'the federal register; the fasab news, the journal of accountancy, aga today, the cpa journal, government executive, the cpa letter,',
17107:'government accounting and auditing update, and jfmip news; the cfo council, the presidents council on integrity and efficiency, the financial',
17108:'statementaudit network, the federal financial managers council; and committees of professional associations generally commenting on exposuredrafts inthepast. apublic hearingwasheldonmarch4,2004. sixteen',
17109:'letters were received from the following sources; three respondents supplemented their written responses with oral testimony at the public hearing.',
17110:'comment letters and/or oral federal nonfederal testimony provided by: internal external users, academics, others 3 auditors 1 2 preparers and',
17111:'financial managers 10 response to comments received a2. the majority of the respondents concurred with most of the provisions of',
17112:'the proposed standard. several sources expressed the opinion that all of the disclosures should be placed in the notes to',
17113:'the financial statements. the board’s reasons for requiring some reporting on the face of the financial statements is provided in',
17114:'the section, “reporting treatment,” which begins at paragraph 59 of thisappendix. page 18 sffas 27 fasab handbook, version 20 06/21',
17115:'sffas 27 a3. several respondents requested guidance regarding criteria to consider in selecting earmarked funds for disaggregated disclosure; additional guidance',
17116:'has been included in this standard. a4. several respondents questioned the term, “accounting mechanism,” and asked why this termwasusedinsteadofamorespecificterm,suchastreasuryaccountfundsymbol. this',
17117:'standard eliminatesreferencestoaccountingmechanismsandstatesthattheboard’sintent is to establish a principlebased standard that is not dependent upon funding terminology that is subject to change.',
17118:'a5. tworespondents requestedthattheexamplesinappendix cdifferentiatebetweenthe treasurygeneralfundandthetreasurybureauofpublicdebt. theexamplesinappendix c now include that distinction. a6. two respondents asked for more detail regarding mixedactivity',
17119:'funds and the word “primarily.” however, the board considers the definition criteria and the term “primarily” to be sufficiently clear',
17120:'regarding the classification of mixedactivity funds. a7. one respondent identified credit financing accounts as a category of funds that would',
17121:'be covered by the standard, based upon definition criteria, that should not be included. credit financing accounts are nonbudgetary funds',
17122:'that do not accumulate results of operations; they primarily serve as clearing accounts for cash activity relating to federal credit',
17123:'programs. the standard includes an “exclusions” paragraph paragraph 18 which excludes credit financing accounts from the reporting requirements of this',
17124:'standard. a8. three respondents had questions about earmarked funds that have exchange revenue. appendix c has been expanded to include',
17125:'both exchange and nonexchange revenue. a9. two respondents had questions about the reporting requirements for earmarked funds managed by multiple',
17126:'agencies. footnote 7, which provides factors to consider in determining program management, has been added. paragraph 38, which amends sffac',
17127:'2, “entity and display,” has also been added. existingaccounting standard needs clarification a10. the objective of this standard is to',
17128:'define earmarked funds and provide accounting and reporting guidance for them. in the existing standard, sffas 7, revenue and other',
17129:'financing sources, paragraphs 83 through 87, the term “dedicated collections” includes revenue earmarked or dedicated to finance or help finance',
17130:'specific federal programs as well as revenue being held for the exclusive benefit of specific, identifiable nonfederal parties.11 page 19',
17131:'sffas 27 fasab handbook, version 20 06/21 sffas 27 a11. sffas 7 did not differentiate between a governmentowned revenue and',
17132:'other financing sources earmarked to finance or help finance specific federal programs earmarked funds and b cash and other assets',
17133:'being held for the exclusive benefit of specific, identifiable nonfederal parties who have ownership interest in the assets fiduciary activities.',
17134:'the board believes separate standards based on the unique characteristics of these two types of “dedicatedcollections” areneeded. inapril2003theboardissuedanexposuredraftofa proposed standard,',
17135:'accounting for fiduciary activities,toaddressthoseactivitiesrelatingto thecollectionorreceipt,management,protection,accounting,investment anddispositionby the federal government of cash or assets in which nonfederal individuals or entities have',
17136:'an ownership interest that the federal government must uphold. a12. the boards proposed standard for fiduciaryactivities and this standard on',
17137:'earmarked funds together address allactivities or funds considered dedicated collections bysffas 7. when finalized, the fiduciary activities standard will rescind',
17138:'the dedicated collections provisions in sffas 7. this standard supersedes the “dedicated collections” provisions in sffas 7 paragraphs 8387 for',
17139:'earmarked funds. a13. sffas 7 classifies funds as “dedicated collections” based on the term “trust” as used in the u.s.',
17140:'government budget. it states that the standard covered “all funds within the budget classified as trust funds,” and “those funds',
17141:'within the budget that are classified as special funds but that are similar in nature to trust funds.”12 the board',
17142:'found this definition was insufficiently precise to ensure that all earmarked funds were reported as intended. the definitioninthisstandardprovidesasubstantivebasisforclassifyingfundsinsteadofrelying on terms',
17143:'used in the budget.13 specialaccountability a14. although the federal government does not have a fiduciary relationship as defined by the',
17144:'proposed standard, accounting for fiduciary activities14 with the potential beneficiaries of earmarked funds,theunique nature of earmarked fundsnecessitatesadditional explanation and disclosure',
17145:'in the basic financial statements. in sffas 7, accounting for revenue and other financing sources, special accountability reporting provisions were',
17146:'applied to all 11 sffas 7, par. 83. 12ibid. 13the exposure draft, accounting for fiduciary activities, discusses the differences between',
17147:'private trust funds, federal government trust funds designated as trusts by congress, and fiduciary funds. 14the exposure draft, accounting for',
17148:'fiduciary activities, was issued in march 2003. page 20 sffas 27 fasab handbook, version 20 06/21 sffas 27 “dedicatedcollections” regardlessof',
17149:'whetherornot theyinvolvedgovernmentownedfunds or private funds. the concept of special accountability applies to earmarked funds. a15. all earmarked funds have characteristics',
17150:'that justify special accountability. while many government programs raise implied commitments for the future, there is a more explicit commitment',
17151:'associated with the statutory establishment of earmarked funds. the government raises an expectation on the part of the publicthat the',
17152:'government willuse the amounts collected from specific sources and accumulated in earmarked funds for their stated purpose. there is often',
17153:'a direct link between the source of fund revenues and designated activities, benefits or purposes in an effort to charge',
17154:'beneficiaries or users for benefits received. resource inflow is accounted for separately from general tax receipts, allowing the program’s status',
17155:'to be more easily examined. many earmarked funds receive permanent appropriations in an amount equal to these inflows that become',
17156:'available without recurrent action by congress through annual appropriations. a16. earmarked funds are of interest to a universeof contributors, taxpayers',
17157:'and recipients, who have an expectation that earmarked revenues will be used for the purposes specified in the law authorizing',
17158:'the collection of the revenues. for example, current contributors to social securityprogramsmayassume that theirearmarkedtaxesinexcessofpaymentstocurrent recipientswillbeavailabletofundfuturesocialsecuritybenefits. thelikelihoodofthepublic making this assumption may',
17159:'reasonablybe expected when the federal government issues projections of the availability of accumulated balances for future payments. identifying earmarked funds',
17160:'a17. the board considered whether any substantive difference exists between earmarked funds that are designated as “trusts” and those that',
17161:'are not. it also considered whether any substantive difference exists between earmarked funds that conduct businesstype operations and those that',
17162:'do not. the board did not find a substantive difference in either case. therefore, all earmarked funds that meet the',
17163:'special accountability criteria in paragraph 11 of the standard are subject to the provisions of the standard, regardless of whether',
17164:'they are labeled as “trusts” or not and regardless of whether they conduct businesstype operations or not. a18. the board',
17165:'also considered whether intragovernmental funds should be included in the reporting requirements for earmarked funds. although intragovernmental funds may meet',
17166:'the criteria of the definition of an earmarked fund, the board does not believe intragovernmental funds warrant special accountability to',
17167:'the public because these funds conduct businesstype operations primarily within and between government agencies. intragovernmentalbalancesareeliminatedintheconsolidationprocessinthepreparationof the u.s. governmentwide financial statements.',
17168:'page 21 sffas 27 fasab handbook, version 20 06/21 sffas 27 a19. the board also decided to exclude credit financing',
17169:'accounts from the reporting requirementsforearmarkedfunds. althoughcreditfinancingaccountsmaymeetthecriteria of the definition for earmarked funds, they primarily serve as clearing accounts for cash',
17170:'activity relating to federal credit programs and do not accumulate results of operations. fiduciary funds, which are not governmentowned, are',
17171:'also excluded. reporting treatment effect on net position a20. specialaccountability for earmarked funds is of increasing importance because the amount',
17172:'of revenue directed to earmarked funds has increased dramatically over the past two decades. it now constitutes a much greater',
17173:'proportion of the federal budget. just those earmarked funds designated as “federal trust funds” bycongress alone accounted for over fifty',
17174:'percent of receipts from the public in 2003. a21. in addition, the invested balances of earmarked funds have grown significantly',
17175:'over the past two decades. debt held by government accounts was approximately $2.85 trillion in 2003, a twelvefold increase from',
17176:'1983.15 a22. most of these balances are invested in treasury securities. the federal government does not set aside assets to',
17177:'pay future benefits or other expenditures associated with earmarked funds. the cash receipts collected from the public for an earmarked',
17178:'fund are deposited in the u.s. treasury, which uses the cash for general government purposes. treasury securities are issued to',
17179:'the earmarked fund as evidence of its receipts. treasury securities are an asset to the component entity and a liability',
17180:'to the u.s. treasury. because the componententityand theu.s. treasuryarebothpartsof thegovernment, theseassetsand liabilities offset each other from the standpoint of the',
17181:'government as a whole. for this reason, they do not represent an asset or a liability in the u.s. governmentwide',
17182:'financial statements. a23. treasury securities provide the component entity with authority to draw upon the u.s. treasury to make future',
17183:'benefit payments or other expenditures. when the component entity requires redemption of these securities to make expenditures, the government finances',
17184:'those expenditures out of accumulated cash balances, by raising taxes or other receipts, by borrowing from the public or repaying',
17185:'less debt, or by curtailing other expenditures. this is the same way that the government finances all other expenditures. 15',
17186:'fiscal year 2005 historical tables, budget of the u.s. government, pp. 118119. page 22 sffas 27 fasab handbook, version 20',
17187:'06/21 sffas 27 the investments in treasury securities an asset held by the various earmarked funds and the liability of',
17188:'the u.s. treasury to redeem the securities are treated as intragovernmental eliminations when the consolidated u.s. governmentwide financial statements are',
17189:'prepared. therefore, the consolidated net position of the federal government reported on the u.s. governmentwide financial statements does not include',
17190:'the effect of the claim on the u.s. treasury that the various funds hold, just as the consolidated net position',
17191:'does not include the effect of other intragovernmental claims. instead, the u.s. governmentwide financial statements include the cumulative results of',
17192:'operations of earmarked funds – currently a large positive balance – asan offset against the cumulative results of operations of',
17193:'the general fund – currently a large negative balance. the result is that the financing provided byearmarked fund operations to',
17194:'generalfund operations – which would otherwise be financed through the issuance of debt to the public, tax increases or other',
17195:'financing sources – is not shown on the face of the u.s. government balance sheet. a24. this standard requires component',
17196:'entities to show the total amount of cumulative results of operationsattributabletoearmarkedfundsonthe statementof changesinnetpositionand on the balance sheet. the u.s. governmentwide',
17197:'financial statements are subject to the same requirement, except that the u.s. governmentwide financial statements include the u.s. government statement',
17198:'of operations and changes in net position instead of the statement of changes in net position. net position at the',
17199:'component level is composed of unexpended appropriations and cumulative results of operations. since unexpended appropriations are not applicable at the',
17200:'governmentwide level, net position equals cumulative results of operations. under this standard the financial statements would thus present – in',
17201:'a transparent manner – the cumulative financing provided by earmarked funds to the general fund that will need to be',
17202:'repaid in order to use earmarked funds for the designated activities, purposes or benefits. a25. this standard also requires that',
17203:'component level financial statements include an explanation of earmarked fund investmentsintreasury securitiessimilar to the one given in paragraphs 27 and',
17204:'28. the u.s. governmentwide financial statements are required to include an explanation of how the government as a whole could',
17205:'provide the resources represented by the earmarked funds’ balance in treasury securities. a26. several respondents to the exposure draft recommended',
17206:'that all reporting requirements relating to earmarked funds should be limited to the financial statement notes. due to the impact',
17207:'of earmarked funds upon the financial position of the u.s. government as a whole, as discussed in this section, the',
17208:'board decided that certain basic disclosures, such as the impact upon net position, should appear on the face of the',
17209:'financial statements. page 23 sffas 27 fasab handbook, version 20 06/21 sffas 27 effect on flows a27. for component entities,',
17210:'earmarked nonexchange revenue and other financing sources and net cost of operations are required to be shown separately in the',
17211:'statement of changes in net position. for the u.s. governmentwide financial statements, the components of earmarked fundsactivity should be shown',
17212:'separatelyon the u.s. government statement of operations and changes in net position. the board believes that it is equally as',
17213:'important to showtheearmarkedfundsactivityduringthe period asit istoshowthecumulativeresults of operations. each gives a different and complementary perspective on the proportion of activity',
17214:'financed by general versus earmarked resources: the cumulative results of operations show the effect of all reporting periods up to',
17215:'a single point in time, whereas reporting of the earmarked funds activity shows the inflows and outflows during the reporting',
17216:'period. the relative importance indicated by each measure may differ because of trends in financing or special timing needs. disclosure',
17217:'a28. the board determined that a number of earmarked funds were not being reported as intended under the existing standard.',
17218:'therefore, in addition to clarifying the definition of earmarked funds, the standard requires that each component provide either a list',
17219:'of all earmarked funds for which it has program management responsibility or a statement as to where the information can',
17220:'be obtained. this requirement would ensure that no earmarked fund is omitted from the financial statements and that users could',
17221:'more easily locate information on a specific earmarked fund and determine its status. this information would not be required at',
17222:'the governmentwide level since program management responsibility does not reside at that level. a29. this standardrequirescondensedinformationonselected earmarkedfunds tobedisclosed individually, with',
17223:'aggregate condensed information required for all others. in response to several requests from respondents to the exposure draft, the board',
17224:'included, in paragraph 24 of this statement, examples of quantitative and qualitative factors to be considered in selecting earmarked funds',
17225:'to be presented individually. a30. acomponent entity is required to disclose any change in legislation that significantly changes the purpose',
17226:'of the fund or that redirects a significant portion of the accumulated balance. in the opinion of the board, the',
17227:'characteristic of special accountability requires that any significant change in the legislation governing the earmarked fund be disclosed in order',
17228:'to provide greater accountability for the earmarked revenues. page 24 sffas 27 fasab handbook, version 20 06/21 sffas 27 other',
17229:'changes a31. if more than one component entity is responsible for carrying out the program financed with earmarked revenuesand other',
17230:'financing sources, and the separate portionsof the program can be clearly identified with the responsible component entity, then each component',
17231:'entity should report its portion in accordance with this standard. in the existing standard, sffas 7, paragraph 87, requiresthat “if',
17232:'morethan onecomponent entityisresponsiblefor carrying out the program financed with the dedicated collections, then the entity with the largest share of',
17233:'the activity should be responsible for reporting all revenues, other financing sources, assets, liabilities, and costs of the fund.16” the',
17234:'board believes that this revision will assist users to evaluate the service efforts, costs and accomplishments of the component entity',
17235:'with actual program management responsibility, by relating relevant costs directly to the associated mission and performance. a32. for funds meeting',
17236:'the definition criteria of earmarked funds, paragraph 86 of sffas 7 is replaced by this standard. in the opinion of',
17237:'the board, the necessary guidance is provided in this standard in paragraph 35. implementation a33. early implementation of this standard',
17238:'is not permitted because of the difficulties that might arise when component financial statements are consolidated into the governmentwide financial',
17239:'statements. for example, a problem might arise if a component entity, which had previouslyreported allof theactivity of anearmarkedfund based on',
17240:'the requirementsof the existing standard, decided upon early implementation of the standard, which allows it to report only that portion',
17241:'of the earmarked fund for which it has program management responsibility. thischoicewouldcauseportionsoftheearmarkedfundnottobereportedin the consolidated financial statements unless the component entities',
17242:'with management responsibility for the other portions of the earmarked fund also chose early implementation of the standard. for the',
17243:'same reason, restatement of the prior period columns in the initial year of implementation is not permitted. boardapproval a34. this',
17244:'statement was approved for issuance by all members of the board. 16 sffas 7, accounting for revenue and other financing',
17245:'sources. page 25 sffas 27 fasab handbook, version 20 06/21 sffas 27 appendix b: glossary [see consolidated glossary in appendix',
17246:'e of this document.] page 26 sffas 27 fasab handbook, version 20 06/21 sffas 27 appendix c: pro forma illustrations',
17247:'table of illustrations transactions – component entity receives revenue and purchases securities 1.a. entries recording receipt of earmarked revenue by',
17248:'component entity 1.b. entries recording the component entity’s purchase of treasury securities 1.c. entries recording interest on treasury securities pro',
17249:'forma statements showing effect on component entity’s basic financial statement reporting 1.d. 1 component entity statement of changes in net',
17250:'position 1.d. 2 component entity balance sheet pro forma statements showing effect on the u.s. governmentwide financial statements 1.e. 1',
17251:'u.s. governmentwide consolidation worksheet: 1.e. 2 u.s. government statement of operations and changes in net position 1.e. 3 u.s. government',
17252:'balance sheet page 27 sffas 27 fasab handbook, version 20 06/21 sffas 27 transactions– component entity receives revenue and purchases',
17253:'securities 1. a. entries recording receipt of earmarked revenue collected by the component entity: dr cr component entity fund balance',
17254:'with treasury fbwt nonexchange revenue exchange revenue18 to record receipts credited to earmarked fund. 1,000 600 400 treasury general fund',
17255:'entity treasury general fund cash general fund’s liability for fbwt to record earmarked revenue collected by component entity. 1,000 1,000',
17256:'1.b. entries recording the component entity purchase of treasury securities: dr cr component entity investments in treasury securities fund balance',
17257:'with treasury 1,000 1,000 to record treasury securities purchased. 18this standard does not require exchange revenue for earmarked funds to',
17258:'be separately shown on the statement of net cost. page 28 sffas 27 fasab handbook, version 20 06/21 sffas 27',
17259:'treasury general fund entity general funds liability for fbwt component entity 1,000 general fund’s liability for fbwt treasury bpd 1,000',
17260:'to record payment to treasury bureau of public debt for securities purchased. treasury bureau of public debt entity fund balance',
17261:'with treasury 1,000 liability for intragovernmental debttreasury securities 1,000 to record sale of securities to component entity earmarked fund. 1.c.',
17262:'entries recording interest earned on treasury securities component entity fund balance with treasury fbwt 10 interest revenueexchange 4 interest revenuenonexchange19',
17263:'6 to record interest income on treasury securities. treasury bureau of public debt entity interest expense 10 fund balance with',
17264:'treasury fbwt 10 to record interest expense. treasury general fund entity general fund’s liability for fbwt treasury bpd 10 general',
17265:'fund’s liability for fbwt component entity 10 to record payment of interest to component entity by treasury bpd. 19for classification',
17266:'of exchange and nonexchange interest revenue, see sffas 7,appendix b, paragraphs 306308. page 29 sffas 27 fasab handbook, version 20',
17267:'06/21 sffas 27 pro forma statements showing effect of illustrative transactions on component entity’s basic financial statement reporting20 this is',
17268:'only one example of how the required information could be displayed. 1.d. 1 component entity statement of changes in net',
17269:'position cumulativeresultsofoperationssocialsecurityandotherearmarkedfundsallother beginning balance of net position $ $ budgetary financing sources: nonexchange revenue 606 net cost of operations [from',
17270:'statement of net cost] change in net position 404 1,010 ending balance of net position $ 1,010 $ 1.d. 2',
17271:'component entity balance sheet socialsecurityandotherearmarkedfundsallother assets fund balance with treasury investments in treasury securities total assets $ $ 10 1,000',
17272:'1,010 liabilities $ $ net position unexpended appropriations cumulative results of operations total net position total liabilities and net position',
17273:'$ $ 1,010 1,010 1,010 $ $ 20this standard does not require earmarked funds to be separately shown on the',
17274:'statement of net cost. page 30 sffas 27 fasab handbook, version 20 06/21 sffas 27 1.e. 1 consolidation worksheet for',
17275:'u.s. governmentwide financial statements assets treasury general fund cash account fund balance with treasury investments in treasury securities total assets',
17276:'liabilities treasurygeneralfundliability for fbwt treasury bpd liability for intragovernmental debt total liabilities net position net position of other funds net',
17277:'position of federal old age survivors insurance and other earmarked funds component entity treasury general fund treasury bpd eliminations gov’twide',
17278:'$ 10 1,000 $ 1,000 $ 990 $ 1,000 1,000 $ 1,000 $ 1,010 $ $ 1,000 $ 1,000 $',
17279:'990 $ 1,000 $ $ 1,000 1,000 $ 1,000 $ $ 1,010 $ 1,000 $ 1,000 $ 10 $ $',
17280:'$ 1,000 page 31 sffas 27 fasab handbook, version 20 06/21 sffas 27 pro forma statements showing effect of illustrative',
17281:'transactions on u.s. government wide financial reporting 1.e. 2 u.s. government statement of operations and changes in net position operating',
17282:'results: earmarked funds activity revenue: social security tax revenue $ 600 other revenue and other financing sources 400 total revenue',
17283:'1,000 less net cost of operations net operating revenue 1,000 generalactivities revenue less net cost of operations net operating cost',
17284:'total net operating revenue cost, all government activities $ 1,000 net position: net position, beginning of period social security and',
17285:'other earmarked funds $ all other net position, end of period social security and other earmarked funds 1,000 all other',
17286:'total net position $ 1,000 page 32 sffas 27 fasab handbook, version 20 06/21 sffas 27 1.e. 3 u.s. government',
17287:'balance sheet assets treasurygovernmentwidecashaccount $ 1,000 total assets $ 1,000 liabilities $ net position 1,000 social security and other earmarked',
17288:'funds 1,000 all other total liabilities and net position $ 1,000 page 33 sffas 27 fasab handbook, version 20 06/21',
17289:'sffas 27 appendix d: example of note disclosure summary financial information for component entity the following illustrates the component entity',
17290:'summary financial information required in paragraph 22. the illustration has been simplified by not showing prior year comparative statements. abc',
17291:'fund cde fund other total earmarked earmarked funds funds balance sheet as of september 30 in thousands assets fund balance',
17292:'with treasury $ 20,635 $ 15,000 $ 5,000 $ 40,635 investments 1,364,823 9,000,000 350,000 10,714,823 taxes and interest receivable 10,000',
17293:'10,000 totalassets $ 1,385,458 $ 9,015,000 $ 365,000 $ 10,765,458 liabilities and net position cumulative results of $ 1,385,458 $',
17294:'9,015,000 $ 365,000 $ 10,765,458 operations total liabilities and net position $ 1,385,458 $ 9,015,000 $ 365,000 $ 10,765,458 statement',
17295:'of net cost for the period ended september 30 program costs $ 383,547 $ 450,000 $ 247,000 $ 1,080,547 less',
17296:'earned revenues 5,000 5,000 net program costs 383,547 450,000 242,000 1,075,547 less earned revenues not attributable to programs net cost',
17297:'of operations $ 383,547 $ 450,000 $ 242,000 $ 1,075,547 page 34 sffas 27 fasab handbook, version 20 06/21 sffas',
17298:'27 statement of changes in net position for the period ended september 30 net position beginning of period $ 1,317,760',
17299:'$ 8,715,000 $ 287,000 $ 10,319,760 net cost of operations taxes and other nonexchange revenue 383,547 451,245 450,000 750,000 242,000',
17300:'320,000 1,075,547 1,521,245 change in net position 67,698 300,000 78,000 445,698 net position end of period $ 1,385,458 $ 9,015,000',
17301:'$ 365,000 $ 10,765,458 page 35 sffas 27 fasab handbook, version 20 06/21 sffas 27 appendix e: list ofabbreviations fasab',
17302:'federalaccounting standardsadvisory board gao government accountability office md&a management discussion and analysis omb office of management and budget rssi required',
17303:'supplementary stewardship information sffac statement of federal financialaccounting concepts sffas statement of federal financialaccounting standards treasury fms treasury financial management',
17304:'service u.s. united states page 36 sffas 27 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards29: heritageassets and stewardship land status issued',
17305:'july 7, 2005 effective date for reporting periods beginning after september 30, 2005, with the exceptionofthespecificparagraphslisted inpar. 43ofthestandard. full implementation',
17306:'of the standards is effective for periods beginning after september 30, 2008. affects sffas 6 sffas 8 sffas 14 sffas',
17307:'16 affected by sffas 42 affects paragraphs 26, 28, 41 and 42. sffas 59 transitionally amends paragraphs 33, 35, 39',
17308:'and 42; rescinds and replaces paragraph 40 and inserts new paragraphs 36a36d, 40aand 42a. related guidance tr 9, implementation guide',
17309:'for sffas 29 summary this standard changes the classification of information reported for heritage assets and stewardshiplandprovidedbystatement offederalfinancialaccountingstandards8. this standard',
17310:'reclassifies all heritage assets and stewardship land information as basic information. this standard requires that entities reference a note on',
17311:'the balance sheet that discloses information about heritage assets and stewardship land, but no asset dollar amount should be shown.',
17312:'instead, the note disclosure provides minimum reporting requirements consistent with the previous standards for heritage assets and stewardship land. these',
17313:'requirements include a description of major categories, physical unit information for the end of the reporting period, physical units added',
17314:'and withdrawn during the year, and a description of the methods of acquisition and withdrawal. this standard also requires two',
17315:'new disclosures for heritage assets and stewardship land. specifically, this standard requires additional reporting disclosures about entity stewardship policies and',
17316:'an explanation of how heritage assets and stewardship land relate to the mission of the entity. thisstandardalsoincludestherequirementsfortheu.s. governmentwidefinancialstatement. it provides',
17317:'for a general discussion and directs users to the applicable entities’ financial statements for more detailed information on heritage assets',
17318:'and stewardship land. page 1 sffas 29 fasab handbook, version 20 06/21 sffas 29 thisstandardamendsseveralexistingstandards. theamendmentsrescindcertainstandardsor parts of certain standards',
17319:'due to the classification change, as well as serve as a means to incorporate all standards specific to heritage assets',
17320:'and stewardship land into one document. table of contents summary 1 introduction 3 standards offederalfinancialaccounting 4 heritageassets includingmultiuseheritageassets 4 stewardship',
17321:'land 9 effective date 15 appendixa:basis for conclusions 17 page 2 sffas 29 fasab handbook, version 20 06/21 sffas 29',
17322:'introduction 1. the required supplementary stewardship information rssi category, as described in statement of federal financialaccounting standards sffas 8, was',
17323:'a response to the unique aspects of the federal accounting and reporting environment, and to the broad objectives of federal',
17324:'financial reporting. it was intended to permit flexibility on the part of preparersand auditors that would facilitate reporting relevant, reliable',
17325:'information, including nonfinancial and nonhistorical information.1 2. although some stewardship information may not link directly with the basic financial statements',
17326:'because the data to be reported may be other than in dollar terms, the federal accountingstandardsadvisoryboard theboardorfasabintendedthat rssi information would',
17327:'augment the basic financial statements and would receive commensurate audit scrutiny. 3. the board found, however, that in many cases',
17328:'the word “supplementary” in the rssi title caused certain readers to assume that the information was of secondary importance. since',
17329:'this was contrary to its intentions, the board decided to eliminate the rssi category and re categorize the stewardship elements',
17330:'within the reporting categories that are well defined in existing professional literature and familiar to report users. additionally, this standard',
17331:'clarifiesthe board’sexpectation that information essential to fair presentation will be subject to audit. 4. the main focus of this standard',
17332:'is the reclassification of heritage assets and stewardship land information. this standard reclassifies heritage assets and stewardship land information asbasicinformation.',
17333:'specifically, thisstandard requiresthat entitiesreference a note on the balance sheet that disclosesinformation about heritage assetsand stewardship land, but no asset',
17334:'dollar amount should be shown. the note disclosure provides minimum reporting requirements consistent with the previous standards for heritage assets',
17335:'and stewardshipland,whichincludesa descriptionof majorcategories, physicalunitinformation for the end of the reporting period, physical units added and withdrawn during the year,',
17336:'and a description of the methods of acquisition and withdrawal. 1 see the implementation guide to statement of federal financial',
17337:'accounting standards 7: accounting for revenue and other financing sources,par. 2224,thediagramonpage15,andminutesofassociatedboarddiscussions. see also sffas 8, supplementary stewardship reporting, par. 21,',
17338:'34, 111115, and minutes of associated board discussions. 2 [deleted.] page 3 sffas 29 fasab handbook, version 20 06/21 sffas',
17339:'29 5. although the most significant change within this standard is this reclassification, it also introduces certain changes to the',
17340:'disclosure requirements for heritage assets and stewardship land. specifically, the standard requires additional reporting disclosures about entity stewardship policies and',
17341:'an explanation of how heritage assets and stewardship land relate to the mission of the entity. 6. this standard also',
17342:'includes disclosure requirements applicable to the u.s. government wide financial statement. this financial statement must provide a general discussion of',
17343:'heritage assets and stewardship land and direct users to the applicable entities’ financial statements for more detailed information on these',
17344:'assets. 7. this standard also amends several existing standards. the amendments rescind certain standards or parts of certain standards due',
17345:'to the classification change, as well as serve as a means to incorporate all standards specific to heritage assets and',
17346:'stewardship land into one document. 8. the board believes by fully incorporating into this standard all requirements for heritage assets',
17347:'including multiuse heritage assets and stewardship land, readers will better understand all reporting requirements. however, the main issues deliberated by',
17348:'the board were the reclassification and presentation of heritage assets and stewardship land information. the board has not reconsidered the',
17349:'definition, recognition and measurement provisions of the existing standards. these provisions have been brought forward from those standards that were',
17350:'based on prior boards’ conclusions. 9. the board developed this standard for heritage assets and stewardship land based on the',
17351:'importance of the data in meeting the stewardship reporting objective as described in statement of federal financialaccounting concepts sffac 1,',
17352:'objectives of federal financial reporting. further information on the board’s considerations regarding this reclassification is included in the basis for',
17353:'conclusions. standards of federal financialaccounting heritageassets including multiuse heritageassets amendments to existing standards 10. sffas 6 par. 21 is amended',
17354:'as follows: page 4 sffas 29 fasab handbook, version 20 06/21 sffas 29 the following paragraphs provide recognition and measurement',
17355:'principles, and disclosure requirements for general pp&e. for standards relating to heritage assets, multiuse heritageassets and stewardship land, see sffas',
17356:'29, heritage assets and stewardship land. each category of pp&e. the categories identified are: general pp&e including land acquired for',
17357:'or in connection with other general pp&e, national defense pp&e, heritage assets, and stewardship land i.e., land not included in',
17358:'general pp&e. 11. sffas 6 par. 57 through 65 are rescinded. 12. sffas8chapter 2heritageassetsis rescindedin its entirety. 13. sffas 14',
17359:'par. 10 and 11 are rescinded. 14. sffas 16 is rescinded in its entirety. definitions 15. heritage assets are property,',
17360:'plant and equipment pp&e that are unique for one or more of the following reasons: historical or natural significance, cultural,',
17361:'educational, or artistic e.g., aesthetic importance; or significant architectural characteristics. heritage assets consist of 1 collection type heritage assets, such',
17362:'as objects gathered and maintained for exhibition, for example, museum collections, art collections, and library collections; and 2 noncollectiontype heritage',
17363:'assets, such as parks, memorials, monuments, and buildings. 16. heritage assets are generally expected to be preserved indefinitely. one example',
17364:'of evidence that a particular asset is heritage in nature is that it is listed on the national register of',
17365:'historic places. 17. some investments in heritage assets e.g., national parks will meet the definitions and be considered and reported',
17366:'as both heritage assets and stewardship land see stewardship landbelow. suchreportingwouldnotbeconsideredduplication,asthetypeofinformation reported for the physical unit would be different for',
17367:'each category of stewardship asset. page 5 sffas 29 fasab handbook, version 20 06/21 sffas 29 18. heritage assets may',
17368:'in some cases be used to serve two purposes—a heritage function and general government operations. in cases where a heritage',
17369:'asset serves two purposes, the heritage asset should be considered a multiuse heritage asset if the predominant use of the',
17370:'asset is in general government operations e.g., the main treasury building used as an office building. heritage assets having an',
17371:'incidental use in government operations are not multiuse heritage assets; they are simply heritage assets. recognition and measurement heritageassets 19.',
17372:'with the exception of multiuse heritage assets addressed in par. 22 the cost of acquisition, improvement, reconstruction, or renovation of',
17373:'heritage assets should be recognized on the statement of net cost for the period in which the cost is incurred.',
17374:'the cost3 should include all costs incurred during the period to bring the item to its current condition see par.',
17375:'26 of sffas 6 for examples of the costs to be considered. 20. with the exception of multiuse heritage assets',
17376:'addressed in par. 23 no amounts for heritage assets acquired through donation or devise4 should be recognized in the cost',
17377:'of heritage assets.5 21. with the exception of multiuse heritage assets addressed in par. 24 transfers of heritage assets from',
17378:'one federal entity to another do not affect the net cost of operations or net position of either entity. however,',
17379:'in some cases, assets included in general pp&e may be transferred to an entity for use as heritage assets. in',
17380:'this instance, the transferring entity should recognize a transferout of capitalized assets.6 multiuse heritageassets 22. the cost of acquisition, improvement,',
17381:'reconstruction, or renovation of multiuse heritage assetsshouldbecapitalizedasgeneralpp&eanddepreciatedoveritsestimatedusefullife. 3 for a full discussion of cost, including full cost, direct cost and',
17382:'indirect cost, see sffas 4, managerial cost accounting concepts and standards for the federal government. also, see par. 9495, sffac',
17383:'2, entity and display. 4awill or clause of a will disposing of property. 5sffas 7, accounting for revenue and other',
17384:'financing sources, par. 258259 explains that stewardship pp&e is “expensed if purchased, but no amount is recognized if it is',
17385:'received as a donation.” 6sffas 7, accounting for revenue and other financing sources, par. 74 and par. 345346. page 6',
17386:'sffas 29 fasab handbook, version 20 06/21 sffas 29 23. multiuse heritage assets acquired through donation or devise should be',
17387:'recognized as general pp&e at the assets fair value at the time received, and the amount should also be recognized',
17388:'as nonexchange revenues as defined in sffas 7, accounting for revenue and other financing sources. 24. transfers of multiuse heritage',
17389:'assets from one federal entity to another are transfers of capitalized assets. the receiving entity should recognize a transferin as',
17390:'an additional financing source and the transferring entity should recognize a transferout. the value recordedshouldbethetransferringentity’sbookvalueofthemultiuseheritageasset. ifthe receiving entity is not',
17391:'provided the book value, the multiuse heritage asset should be recorded at its estimated fair value7. disclosures and required supplementary',
17392:'information 25. entities withheritageassets shouldreference anote8onthebalancesheetthatdiscloses information about heritage assets, but no asset dollar amount should be shown9. the note',
17393:'disclosure related to heritage assets should provide the following: a. aconcise statement explaining how they relate to the mission of',
17394:'the entity. b. abriefdescriptionoftheentity’sstewardshippoliciesfor heritageassets. stewardship policies for heritage assets are the goals and principles the entity established to guide',
17395:'its acquisition, maintenance, use, and disposal of heritage assets consistent with statutory requirements, prohibitions, and limitations governing the entity and',
17396:'the heritage assets. c. aconcisedescriptionofeachmajor category ofheritage asset. theappropriatelevel of categorization of heritage assets should be meaningful and determined by',
17397:'the preparer based on the entity’s mission, types of heritage assets, and how it manages the assets. d. heritage assets',
17398:'should be quantified in terms of physical units. the appropriate level of aggregation and physical units10 of measure for each',
17399:'major category should be meaningful 7 see sffas 7, accounting for revenue and other financing sources, par. 74 for a',
17400:'discussion of transfers of assets. 8thisstandarddoesnot prescribeaspecificreferenceor lineitem entitled “heritageassets” asit maybeincludedwith other items for which no dollar amounts are',
17401:'recognized such as stewardship land and other items that in the future may require similar nonfinancial disclosure for presentation. instead,',
17402:'the standard allows entities flexibility in determining the best presentation. 9 no asset dollar amount is shown, except for multiuse',
17403:'heritage assets, which are capitalized and reported as part of general pp&e. see par. 22 through 24 and par. 27',
17404:'for additional explanation. 10 defining physical units as individual items to be counted is neither required nor prohibited. particularly for',
17405:'collectiontypeheritageassets, it may bemoreappropriate to define the physical unitas a collection, ora group of assets located at one facility, and',
17406:'then count the number of collections or facilities. page 7 sffas 29 fasab handbook, version 20 06/21 sffas 29 and',
17407:'determined by the preparer based on the entity’smission, types of heritage assets, andhow it manages the assets. for each major',
17408:'category of heritage asset identified in c. above the following should be reported: 1. the number of physical units by',
17409:'major category; major categories should be classified by collection or noncollection type heritage assets for which the entity is the',
17410:'steward as of the end of the reporting period; 2. the number of physical units by major category that were',
17411:'acquired and the number of physical units by major category that were withdrawn during the reporting period; and 3. adescription',
17412:'of the major methods of acquisition and withdrawal of heritage assets during the reporting period. this should include disclosure of',
17413:'the number of physical units by major category of transfers of heritage assets between federal entities and the number of',
17414:'physical units by major category of heritage assets acquired through donation or devise, if material. in addition, the fair value',
17415:'of heritage assets acquired through donation or devise during the reporting period should be disclosed, if known and material. 26.',
17416:'11,12 entities should include a reference to deferred maintenance and repairs information13 reported in required supplementary information. 27. entities should',
17417:'disclose that multiuse heritage assets are recognized and presented with general pp&e in the basic financial statements and that additional',
17418:'information for the multi use heritage assets is included with the heritage assets information. u.s. governmentwide financial statement disclosures14 28.',
17419:'the u.s. governmentwide financial statement should reference a note on the balance sheetthatdisclosesinformationaboutheritageassets, butnoassetdollaramountshouldbe shown. the note disclosure related to',
17420:'heritage assets should provide the following: 11footnote deleted by sffas 42. 12 footnote deleted by sffas 42. 13 see sffas',
17421:'42, deferred maintenance and repairs, amending statements of federal financial accounting standards 6, 14, 29 and 32 for informationregardingdefinition, measurement',
17422:'andrequiredsupplementaryinformation. 14 sffas 24, selected standards for the consolidated financial report of the united states government, clarifiedthat all existingandfuturestandards apply',
17423:'toall federalentities, includingtheu.s.governmentwidefinancialstatement, unless a standard specifically provides otherwise. page 8 sffas 29 fasab handbook, version 20 06/21 sffas 29',
17424:'a. aconcise statement explaining how they relate to the mission of the federal government. b. adescription of the broad categories',
17425:'of heritage assets of the federal government. c. ageneral reference to agency reports for additional information about heritage assets, such',
17426:'as agency stewardship policies for heritage assets, physical units by major categories of heritage assets. 29. the u.s. governmentwide financial',
17427:'statement should disclose that multiuse heritage assets are recognized and presented with general pp&e in the basic financial statements and',
17428:'that additional information for the multiuse heritage assets isincluded with the heritage assets information. stewardship land amendments to existing standards',
17429:'30. sffas 6 par. 66 through 76 are rescinded. 31. sffas 8 chapter 4 stewardship land is rescinded in its',
17430:'entirety. 32. sffas 14 par. 10 and 11 are rescinded. definitions 33. stewardshiplandincludesbothpublicdomain14.1 andacquiredlandandlandrights15 owned by the federal government intended',
17431:'to be held indefinitely. examples of stewardship land include land reserved, managed, planned, used, or acquired for16 14.1 public domain',
17432:'land is land that was originally ceded to the united states by treaty, purchase, or conquest in contrast to acquired',
17433:'lands, which have been purchased by, given to, exchanged with, or transferred through condemnation proceedings to the federal government. 15',
17434:'land rights are interests and privileges held by the entity in land owned by others, such as leaseholds, easements, water',
17435:'and water power rights, diversion rights, submersion rights, rightsofway, mineral rights, and other like interests in land. landrights such as',
17436:'easements or rightsofway that are for an unspecified period of time or unlimited duration areconsideredpermanentlandrights. temporary land rightsare those land',
17437:'rights that are fora specified period oftime or limited duration. 16 land used or acquired for or in connection with',
17438:'items ofgeneralpp&e but meeting thedefinition of stewardship land should be classified as stewardship land. page 9 sffas 29 fasab handbook,',
17439:'version 20 06/21 sffas 29 a. forests and parks; b. recreation and conservation; c. wildlife habitat and grazing; d. historic',
17440:'landmarks and/or the preservation of prehistoric and historic structures those listed on or eligible for listing on the national register',
17441:'of historic places; e. multiple purpose ancillary revenue generating activity for example, special use permits, mineral development activities, and timber',
17442:'production; and/or f. buffer zones for security, flood management, and noise and view sheds. 34. “land” is defined as the',
17443:'solid part of the surface of the earth. excluded from the definition are the natural resources that is, depletable resources,',
17444:'such as mineral deposits and petroleum; renewable resources, such as timber; and the outercontinental shelf resources related to land.17 35.',
17445:'land and land rights meeting the definition of general pp&e established in sffas 6, as amended, should be accounted for',
17446:'in accordance with sffas 6, as amended. 36. land and land rights owned by the federal government and not acquired',
17447:'for or in connection with items of general pp&e should be reported as stewardship land. 36a. acres of land held',
17448:'for disposal or exchange include land for which the entity has satisfied the statutory disposal authority requirements specific to the',
17449:'land in question.17.1 disposal includes conveyances of federal land to nonfederal entities not limited to sale, transfer, exchange, lease, publicprivate',
17450:'partnership, and donation, or any combination thereof. 36b.commercial use land subcategory includes land or land rights that are predominantly used',
17451:'to generate inflows of resources such inflows may be derived from the land itself or activities performed on the land',
17452:'and regardless of whether the use or activity is intended to produce a profit from nonfederal third parties, usually through',
17453:'special use permits, rightof 17 the board presently has an active project to address standards for natural resources, for which',
17454:'the board is considering developing individual standards for each type of natural resource separately. to begin the project, the boardwillbeaddressingoil',
17455:'andgas resources. theframework for the oil and gas resource phase of the projectwill be used as a model when addressing',
17456:'the other types or logical sets of natural resources e.g., timber, grazing land, solid leasable minerals in subsequent phases of',
17457:'the project. 17.1 entity decisions to identify and classify land as held for disposal or exchange often require public participation',
17458:'and diverse clearances, such as environmental and economic impact studies, surveys, and appraisals. page 10 sffas 29 fasab handbook, version',
17459:'20 06/21 sffas 29 way grants, and leases. such inflows may arise from exchange or nonexchange activities and may or',
17460:'may not be considered dedicated collections. examples include revenue or inflows derived from a. concession arrangements; b. grants for a',
17461:'specific project such as electric transmission lines, communication sites, roads, trails, fiber optic lines, canals, air rights, flumes, pipelines, reservoirs',
17462:'and dams; c. land sales or land exchanges; d. leases; e. permits for public use such as commercial filming and',
17463:'photography, advertising displays, agriculture, recreation residences and camping, recreation facilities, temporary use permits for construction equipment storage and assembly yards,',
17464:'well pumps, and other such uses; f. forest product sales such as timber, or sales arising from national forests and',
17465:'grasslands; and/or g. publicprivate partnerships. 36c. conservation and preservation land subcategory includes land or land rights that are predominantly used',
17466:'for conservation or preservation purposes. conservation and preservation, although closely linked, are distinct terms. each term involves a certain type',
17467:'or degree of protection. specifically, conservation is generally associated with the protectionandproperuseofnaturalresources, whereaspreservationisassociatedwiththe protection of buildings, objects, and landscapes from',
17468:'use. examples of land conserved or preserved for significant natural, historic, scenic, cultural, and recreational resources include the following: national',
17469:'parks geological resource sites wildlife and plant life refuges archeological resource sites localnativeamericanor ethnicculturalsites 36d. operational land subcategory includes land',
17470:'or land rights predominantly used for general or administrative purposes. for example, the following functions performed by entities would be',
17471:'included in this subcategory: page 11 sffas 29 fasab handbook, version 20 06/21 sffas 29 a. military functions include preparing',
17472:'for the effective pursuit of war and military operations short of war; conducting combat, peacekeeping, and humanitarian military operations; and',
17473:'supporting civilian authorities during civil emergencies. b. scientific functions include conducting and managing research, experimentation, exploration,andoperationsincludingthedevelopmentofcommercialcapabilities. broad scientific fields of',
17474:'study generally include 1 physical sciences physics, astronomy, chemistry, geology, metallurgy, 2 biological sciences zoology, botany, genetics, paleontology, molecular biology,',
17475:'physiology, and 3 social sciences psychology, sociology, anthropology, economics. c. nuclear functions include managing or regulating the use of nuclear',
17476:'energy, power plants, radioactive materials, radioactive material shipments, nuclear storage, and nuclear reactor decommissioning. d. other related functions include those',
17477:'that are administrative or other mission related in nature. for example,land used for readiness and training,office building locations, storage, or',
17478:'vacant properties fall under this category. recognition and measurement 37. the cost of acquisition of stewardship land should be recognized',
17479:'on the statement of net costfortheperiodinwhichthecostisincurred. thecostshouldincludeallcoststoprepare stewardship land for its intended use e.g., razing a building. in some cases,',
17480:'land may be acquired along with existing structures. the following treatments should apply: a. if the structure would be deemed',
17481:'a heritage asset and is significant in and of itself, the entity should use its judgment as to whether the',
17482:'acquisition cost should be treated as the cost of stewardship land, heritage asset, or both; b. if thestructureistobe usedinoperationsforexample, asgeneralpp&ebut',
17483:'1the value of the structure isinsignificant, or2 itsacquisition ismerelyabyproduct oftheacquisition of the land, the cost in its entirety should be',
17484:'treated as an acquisition of stewardship land; or c. significant structures that have an operating use e.g., a constructed hotel',
17485:'or employee housing block should be treated as general pp&e by identifying the cost attributable to general pp&e and segregating',
17486:'it from the cost of the stewardship land acquired. page 12 sffas 29 fasab handbook, version 20 06/21 sffas 29',
17487:'38. no amounts for stewardship land acquired through donation or devise18 should be recognized in the cost of stewardship land.19',
17488:'39. transfers of stewardship land from one federal entity to another, does not affect the net cost of operations or',
17489:'net position of either entity. the transferring and recipient entities should properly adjust for estimated acres of land information. disclosures',
17490:'and required supplementary information 40. the following [rsi information: fy 20222025][disclosures: fy2026]2121.1 should be provided for stewardship land and permanent',
17491:'land rights: a. a concise statement defining an entitys federal land, and explaining how stewardship land relates to the mission',
17492:'of the entity. b. a brief description of the entitys policies for stewardship land. policies for land are the goals',
17493:'and principles the entity established to guide its acquisition, maintenance, use, and disposal of land consistent with statutory requirements, prohibitions,',
17494:'and limitations governing the entity and the land. c. information of land use by subcategory. stewardship land and permanent land',
17495:'rights should be assigned to one of three subcategories based on predominant use21.1a and reported in estimated acres of land.',
17496:'the three subcategories are commercial use land; conservation and preservation land; and operational land. 18 awill or clause of a',
17497:'will disposing of property. 19 sffas 7, accounting for revenue and other financing sources, par. 258259 explains that stewardship pp&e',
17498:'is “expensed if purchased, but no amount is recognized if it is received as a donation.” 21 this standard does',
17499:'not prescribe a specific reference or line item entitled stewardship land as it may be included withother items for whichnodollar',
17500:'amounts are recognized such as heritage assets and other items that in the future may require similar nonfinancial disclosure for',
17501:'presentation. instead, the standard allows entities flexibility in determining the best presentation. 21.1 unless otherwise noted, [rsi information: fy 20222025]',
17502:'[disclosure: fy 2026] requirements are limited to the stewardship land category and are not required for each of the three',
17503:'subcategories of conservation and preservation land; operational land; and commercial use land. 21.1a predominant use of land. predominant use is',
17504:'the major or primary current use of an asset during the reporting period and does not include incidental or infrequent',
17505:'uses of the asset. moreover, predominant use can change between reporting periods. an assets predominant use should be consistent with',
17506:'the entitys authorizing legislation but may not always be consistent with the original intent or reason why the asset was',
17507:'initially acquired. page 13 sffas 29 fasab handbook, version 20 06/21 sffas 29 where stewardship land and permanent land rights',
17508:'have more than one use, the predominant use of the land should be used to subcategorize the land.21.1b i. acres',
17509:'of land. the estimated number of acres at the beginning of each reporting period among the three subcategories and the',
17510:'estimated number of acres at the end of each reporting period for land and permanent land rights. d. if applicable,',
17511:'the amount of estimated acres of land held for disposal or exchange and their predominant use. for purposes of this',
17512:'statement, stewardship land is considered held for disposal or exchange when the entity has satisfied the statutory disposal authority requirements',
17513:'specific to the land in question. e. stewardship land rights information should include a general description of the different types',
17514:'of rights acquired by the entity, whether such rights are permanent or temporary, and amounts paid during the year to',
17515:'maintain such rights. 40a. the financial statement balance sheet should reference a note that [presents rsi information: fy 20222025] [discloses:',
17516:'fy 2026] required at paragraph 40 a through e about stewardship land and permanent land rights but no asset dollar',
17517:'amount should be shown. existing disclosures21.2 should continue during the transition period through fiscal year 2025 and cease in fiscal',
17518:'year 2026 when superseded by the transition of the rsi information to note disclosures. if stewardship land and general pp&e',
17519:'land are presented in separate notes to the financial statements, include cross references between the notes. 41. 22, 23 entities',
17520:'should include a reference to the deferred maintenance and repairs information24 reported in required supplementary information. 21.1b aggregationandassignment ofland. thelevel',
17521:'ofaggregationof landandpermanent landrightsusedtodetermine predominant use should be determined by the preparer considering the entitys mission, types of land use and',
17522:'how it manages the assets. 21.2 for stewardship land, existing disclosures are those required by paragraph 40, titled disclosures and',
17523:'required supplementary information that are being rescinded 40.a through 40.d.3 effective fiscal year 2026. to the extent practical, duplicationofinformation,suchas statementsexplaining',
17524:'howstewardship land relates to the entitys mission or its slpolicies and procedures, should be avoided and should remain as basic',
17525:'note disclosure during the transitional period. 22 footnote deleted by sffas 42. 23 footnote deleted by sffas 42. 24 see',
17526:'sffas 42, deferred maintenance and repairs, amending statements of federal financial accounting standards 6, 14, 29 and 32 for informationregardingdefinition,',
17527:'measurement andrequiredsupplementaryinformation. page 14 sffas 29 fasab handbook, version 20 06/21 sffas 29 u.s. governmentwide financial statement disclosures25 42. the',
17528:'u.s. governmentwide financial statement should include the following information: a. a concise statement including a general description of the federal',
17529:'governments land explaining how its federal land relates to the mission of the federal government. b. [rsi information: fy 20222025]',
17530:'[a disclosure fy 2026] of the estimated acres of land by predominant use subcategories and estimated acres of land held',
17531:'for disposal or exchange by the federal government. c. ageneralreferencetoagencyreportsforadditionalinformationaboutstewardship land, such as agency policies and estimated acres of land.',
17532:'42a. the u.s. governmentwide financial statement balance sheet should reference a note that [presents rsi: fy 20222025] [discloses the fy',
17533:'2026] information about stewardship land and land rights required by paragraph 42, but no asset dollar amounts should be shown.',
17534:'existing disclosures25.1 shouldcontinue during the transition period throughfiscal year 2025 and cease in fiscal year 2026 when superseded by the',
17535:'transition of the rsi information to note disclosures. if stewardship land and general pp&e land are presented in separate notes',
17536:'to the financial statements, include cross references between the notes. effective date 43. thesestandardsareeffectiveforreportingperiodsbeginningafterseptember30,2005with the exception of the specific paragraphslisted',
17537:'below. these exceptionsprovide for a phase in of disclosure requirements being reported as basic information such that these standards will',
17538:'be fully implemented for reporting periods beginning after september 30, 2008. a. section c and section d1 in par. 25',
17539:'and 40 are effective for reporting periods beginning after september 30, 2007; b. section d2 and section d3 in par.',
17540:'25 and 40 are effective for reporting periods beginning after september 30, 2008; and 25.1 existing disclosures at paragraph 42',
17541:'are those which are in effect for reporting entities prior to the amendments contained at paragraphs 42 and 42a.to theextent',
17542:'practical, duplication of information, such as statements explaining how stewardship land relates to the entitys mission or its slpolicies and',
17543:'procedures, should be avoided and should remain as basic note disclosure during the transitional period. page 15 sffas 29 fasab',
17544:'handbook, version 20 06/21 sffas 29 c. information that is provided an exception described in par. a. and b. above',
17545:'to being reported as basic information during the phasein period is still required, but should be reported as rsi until',
17546:'the exceptions expire. 44. full implementation of the standards is effective for reporting periods beginning after september 30, 2008. earlier',
17547:'implementation is encouraged. the provisions of this statement need not be applied to immaterial items. page 16 sffas 29 fasab',
17548:'handbook, version 20 06/21 sffas 29 appendixa: basis for conclusions this appendix discusses factors considered significant by board members in',
17549:'reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave',
17550:'greater weight to some factors than to others. the standards enunciated in this statementnot the material in this appendixshould govern',
17551:'the accounting for specific transactions, events or conditions. this statement may be affected by later statements. the fasab handbook is',
17552:'updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text',
17553:'of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future',
17554:'changes. the reader can review the basis for conclusions of the amending statement for the rationale for each amendment. introduction',
17555:'45. in sffas 8, supplementary stewardship reporting, the board described stewardship information and required the reporting of that information. when',
17556:'the board established the rssi category, it believed that the new category was needed to highlight the unique nature of',
17557:'the reported items, to accommodate nonfinancial data, and to allow for reporting experimental information, such as condition. the board believed',
17558:'that as agencies gained experience in reporting stewardship information that the reporting would evolve to a level where there was',
17559:'consistency within categories and at the governmentwide consolidated reporting level. the board has found that this evolution is, in fact,',
17560:'happening. 46. consequently, theboardalso hasconsideredentities’ improvedaccountingandreporting methodsin decidinghowto categorizethestewardshipelements.theboardhasfoundthat, inmanycases, entitieshave adoptedthestewardshipstandardswithasenseofresponsible creativity. there are many instances where entities have',
17561:'developed imaginative, informative, and meaningful displays of stewardship information. the board commends the efforts of these entities and supports their',
17562:'continued efforts to report on the nation’s stewardship resources and responsibilities in a responsible and informative manner. 47. the board',
17563:'believes that avoiding the use of the rssi category will eliminate some potential confusion and ambiguity. in particular, it should',
17564:'clarify the board’s expectation that significant information essential to fair presentation will be subject to audit. 48. theboardeliminatedtheuseofrssitoreportinformationaboutweaponssystemswhenit issued sffas',
17565:'23, eliminating the category “national defense property, plant, and equipment.” additionally, sffas 25, reclassification of stewardship responsibilities and eliminating the',
17566:'current services assessment, eliminated the use of rssi for reporting stewardship responsibilities. classification of other items of information currently designated',
17567:'rssi stewardship investments may be dealt with in one or more future standards. page 17 sffas 29 fasab handbook, version',
17568:'20 06/21 sffas 29 49. this standard eliminates the use of rssi for reporting stewardship pp&e. stewardship pp&e consists of',
17569:'items whose physical properties resemble those of general pp&e traditionally capitalized in basic financial statements. however, the nature of federal',
17570:'physical assets classified as stewardship pp&e e.g., museum collections, monuments, assets acquired in the formation of the nation, etc. differ',
17571:'from general pp&e. stewardship pp&e includes heritage assets e.g., federal monuments and memorials and historically or culturally significant property and',
17572:'stewardship land i.e., land not acquired for or in connection with general property, plant, and equipment.26 amendments to standards 50.',
17573:'this standard amends several existing standards. the amendments rescind certain standardsorpartsofcertainstandardsduetotheclassificationchange, aswellasservesas a means to incorporate all standards specific to',
17574:'heritage assets and stewardship land into one standard. 51. this standard amends sffas 8 by rescinding chapters 2 and 4',
17575:'of that standard. this change eliminates the use of the rssi category to report information about heritage assets and stewardship',
17576:'land. this standard also incorporates the revised multiuse heritage asset standards of sffas 16, amendments to accounting for property, plant,',
17577:'and equipment: measurement and reporting for multiuse heritage assets.27 accordingly, sffas 16 is rescinded in its entirety. additionally, par. 57',
17578:'through 76 of sffas 6, accounting for property, plant and equipment also is rescinded because they relate to heritage assets',
17579:'and stewardship land. 52. sffas 14, amendments to deferred maintenance reporting, also amended certain paragraphs within chapters 2 and 4',
17580:'of sffas 8 that related to deferred maintenance and condition reporting. this standard also incorporates those revisions. accordingly, the portion',
17581:'of sffas 14 entitled ‘amendments to sffas 8’ sffas 14 par. 10 and 11 is rescinded.28 53. as a result,',
17582:'this standard incorporates all standards for heritage assets and stewardship land into one document. the board believes by fully incorporating',
17583:'all requirements for heritage assets including multiuse heritage assets and stewardship land, readers will 26 sffas 8, par. 11 27',
17584:'sffas 16 has been incorporated into the current standard for ease in understanding because sffas 16 amended chapter 2 heritageassets',
17585:'of sffas 8 and portions of sffas 6. 28 sffas 14 didamendthe status of deferredmaintenanceby classifying it as rsi, however,',
17586:'sffas 6, accounting for property, plant and equipment, provides for the information to be reported. see sffas 6, chapter 3,',
17587:'deferred maintenance par. 7784 for information regarding definition, measurement and disclosures specific to deferred maintenance. page 18 sffas 29 fasab',
17588:'handbook, version 20 06/21 sffas 29 betterunderstandallexistingreportingrequirements. however,themainissuesdeliberated by the board were the reclassification and presentation of heritage assets and',
17589:'stewardship land information. the board has not reconsidered the definition, recognition and measurement provisions of the current standards at this',
17590:'time. these provisions have been broughtforwardfrom previous standards that werebasedonprior boards’ conclusions. in the future, the board may reconsider the',
17591:'recognition and measurement issues for heritage assets and stewardship land. basic vs. rsi 54. the board believes that information on',
17592:'heritage assets and stewardship land except for condition should be basic information for the following reasons: a. information on these',
17593:'assets is essential to fair presentation and may be crucial to understanding the entirety of an entity’s financial condition. b.',
17594:'accountabilityforheritageassetsandstewardshiplandrequiresmoreauditscrutinythan would be afforded if they were considered rsi.29 c. this classification is consistent with existing standards issued by the',
17595:'governmental accounting standards board gasb that is specific to reporting on art and historical treasures; and the financialaccounting standards board',
17596:'fasb that is specific to collections, and other works of art and historical treasures. there is also existing audit guidance',
17597:'available in this area.30 55. it should be noted that during board discussions and deliberations related to sffas 25, reclassification',
17598:'of stewardship responsibilities and eliminating the current services assessment, and the reclassification of the stewardship responsibilities, the board developed a',
17599:'detailed list of practical and conceptual factorsfor consideration in determining rsi versus basic information classification. this structure was also considered',
17600:'in the decisions relating to the appropriate classification of heritage assets and stewardship land information and will be invoked in',
17601:'any future classification decisions by the board.31 29 see sffas 8, par. 114 which details the fact the board believed',
17602:'“that certain stewardship information, should receive more audit scrutiny than it would if it were rsi…” 30 for additional information',
17603:'on these existing standards and guidance see statement of financialaccounting standards116,accountingforcontributions receivedandcontributions made, gasb 34par. 2729reporting works of art and',
17604:'historical treasures, andaicpaaudit andaccounting guide, notforprofit organizations. 31 see sffas 25,appendixaparagraphs 3450for detailon the factors. to help readers understandthe board’s',
17605:'deliberations, those paragraphs provide more details about some practical and conceptual factors that affected the board’s decision whether to designate',
17606:'an item as rsi or as an integral part of the basic financial statements. page 19 sffas 29 fasab handbook,',
17607:'version 20 06/21 sffas 29 56. specifically, the board agreed that heritage assets and stewardship land information was essential and',
17608:'relevant to fair presentation. additionally, the board believed that it was important that this be clearly communicated to the readers',
17609:'of the financial statements and auditor reports. the board also noted the importance and relevance of the information in light',
17610:'of the objectives of federal financial reporting.32 57. conditionreportingforheritageassetsandstewardshiplandshouldbereportedasrequired supplementary information because this information is experimental in nature and there',
17611:'is inconsistency in the manner of assessing and reporting this information. u.s. governmentwide financial statement 58. in determining the required',
17612:'disclosures for the u.s. governmentwide financial statement, the board considered sffac 4, intended audience and qualitative characteristics for the consolidated',
17613:'financial report of the united states government, which designated the intended or primary audience of the u.s. governmentwide financial statement',
17614:'and qualitative characteristics for the u.s. governmentwide financial statement that would be most useful for that audience.33 59. par. 6',
17615:'of sffac 4 explains that the u.s. governmentwide financial statement “is a general purpose report that is aggregated from agency',
17616:'reports and tells users where to find informationinother formats, both aggregated anddisaggregated, suchasindividualagency reports, agency websites, and the president’s budget.”',
17617:'60. the board considered the nature and the variety of the data that would be aggregated from thevariousentitiesin preparing theheritageassetsandstewardshipland',
17618:'disclosuresforthe u.s. governmentwide financial statement. the board determined that the standards for the u.s. governmentwide financial statement should provide for',
17619:'a general discussion and direct users to the applicable entities’ financial statements for more detailed information on heritage assets and',
17620:'stewardship land. 32 see stewardship objective 3 as described in sffac 1, objectives of federal financial reporting. 33 see sffac4,',
17621:'intended audience and qualitative characteristics for the consolidated financial report of the united states government par. 5 page 20 sffas',
17622:'29 fasab handbook, version 20 06/21 sffas 29 exposure draft 61. fasab published the exposure draft ed heritage assets and',
17623:'stewardship land: reclassification from required supplementary stewardship information onaugust 20, 2003. uponreleaseoftheed,noticesand/orpressreleaseswereprovidedto: thefederal register; the fasab news, the journal of',
17624:'accountancy, aga today, the cpa journal, government executive, the cpa letter, government accounting and auditing update, and jfmip news; the',
17625:'cfo council, the presidents council on integrity and efficiency, the financial statementaudit network, the federal financial managers council; and committees',
17626:'of professional associations generally commenting on exposure drafts in the past. 62. twelve letters were received from the following sources:',
17627:'federal nonfederal internal external users, academics, others 1 3 auditors 1 1 preparers and financial managers 6 63. apublichearingwasheldonmarch4,2004. individualsfromthelibraryofcongress,u.s.',
17628:'department ofagriculture, department of interior including representatives from the cfo, oig and ipacurrently performing the doi audit, and a representative',
17629:'from the institute for truthinaccountingtestifiedatthepublic hearing. theparticipantsreiteratedissues included in the comment letters to the ed. responses to the ed 64.',
17630:'amajorityoftherespondentsdidnot agreewithheritage assets and stewardshipland information being reported as basic. key issues raised by respondents included the following: a. aneedfor',
17631:'morespecificguidanceon categorizationandunitizationfor reporting heritage assets and stewardship land information; b. the audit implications of the standard, including the additional audit',
17632:'costs by classifying the information as basic; and c. less useful information being presented by agencies with the reclassification. page',
17633:'21 sffas 29 fasab handbook, version 20 06/21 sffas 29 65. most respondents that did not agree with heritage assets',
17634:'and stewardship land information being reported as basic, recommended that it be classified as rsi or remain as rssi. 66.',
17635:'mostrespondentsagreedwiththeboard’snewdisclosurerequirementsanddidnotforesee any problems with the new disclosure requirements 67. most respondents did not agree with the proposed effective date for',
17636:'periods beginning after september 30, 2004 in the ed. key reasons cited for the delay of the effective date included',
17637:'the need for additional time to address implementation issues and time for including funding in their budgets to cover the',
17638:'additional costs for implementation and audit. board consideration of comments 68. considering that the majority of respondents did not agree',
17639:'with the ed, the board directed staff to research various issues that would assist the board in addressing the comments',
17640:'raised by respondents. for example, the board considered the current fasb and gasb standards in this area. the board also',
17641:'considered results of a review of private museum reporting practices. 69. the board also considered several recent governmentwide initiatives that',
17642:'promote accountability and stewardship over real property assets and heritage assets such as the federal real propertyasset management initiative, executive',
17643:'order 13327 federal real propertyassetmanagement, andexecutiveorder 13287preserveamerica. theboard believes these initiatives provide further support for the decision to classify the',
17644:'heritage assets and stewardship land as basic information and the importance of accountability for these types of assets. 70. the',
17645:'board also considered the issue of unitization and categorization further by reviewing draft guidance prepared by the heritageassets categorization project',
17646:'team and the accountingandauditingpolicycommitteeaapcstewardshipguidanceworkgroup. the board believes that the draft products from these workgroups are excellent starting points for developing',
17647:'comprehensive guidance on many of the issues raised by respondents. 71. in response to the audit concerns, fasab held a',
17648:'roundtable meeting with representatives fromthe officeofinspector generaloig and cpafirmsresponsibleforfinancialstatement audits to solicit their views on specific issues raised by respondents',
17649:'as well as potential audit costs involved with implementing the standard. 72. as a result of the comments received and',
17650:'testimony provided at the public hearing, as well as the above actions, the board did make certain revisions, which are',
17651:'detailed in the page 22 sffas 29 fasab handbook, version 20 06/21 sffas 29 following paragraphs. additionally, reasons for not',
17652:'making revisions on specific issues are detailed below. importance to mission 73. the ed contained the new disclosure that required',
17653:'a statement explaining how heritage assets and stewardship land are “important to the overall mission of the entity.” a respondent',
17654:'explained that agencies may have significant stewardship assets as a result of their compliance with cultural resource protection laws and',
17655:'regulations or because congress has determined that certain classes of assets to be nationally significant, regardless of the agency mission.',
17656:'the respondent believed that showing the link between the agency mission and the assets may result in less disclosure by',
17657:'agencies that lack a direct link to their mission. 74. the board understands that some agencies may have heritage assets',
17658:'because of the facts described by the respondent and it is possible that the assets may not be important to',
17659:'the overall mission of the agency. however, the board considered the new requirement to be explanatory in nature by offering',
17660:'more information about the assets. the board did not envision the importance to the mission to be considered in determining',
17661:'which heritage assets and stewardship land should be included. 75. theboardrevisedthelanguageofthenew requirementtoread “aconcisestatement explaining how they relate to the mission',
17662:'of the entity.” the board believes with this language, the requirement is flexible enough that if the assets are not',
17663:'related to the mission of the entity, the entity may state that and provide additional explanation, if they so choose.',
17664:'limiting information presented 76. several respondents commented that agencies would present less information in their annual reports because the heritage',
17665:'assets information and stewardship land information would be subject to audit since it is classified as basic information. the classification',
17666:'of heritage assets and stewardship land information as basic should not limit the information entities choose to present or prevent',
17667:'the continuation of informative and meaningful displays of information. 77. this standard does not eliminate any information that was previously',
17668:'required for heritage assets and stewardship land. in drafting the standard, the board envisioned the required disclosures to be presented',
17669:'in a concise format similar to the format that most entities present for general property, plant and equipment. page 23',
17670:'sffas 29 fasab handbook, version 20 06/21 sffas 29 78. the board notes that preparers continue to have the option',
17671:'of voluntarily presenting information beyond the minimum reporting requirements as other accompanying information. categorization and unitization 79. the standard does',
17672:'not define asset categories or physical units for reporting. the board recognizes that there may be difficulties for agencies in',
17673:'determining the appropriate level of aggregation for reporting categories of heritage assets. however, the board believes that theagenciesareinthebest positiontodeterminethemostmeaningfullevelofpresentation. the',
17674:'board believes that ultimately the presentation depends upon the specifics of the entity—its mission, the types of heritage assets, how',
17675:'it manages, and materiality considerations. it would be difficult for the standard to define such specific reporting requirements, as they',
17676:'may be unique to each entity. 80. the board also has avoided detailed illustrations and limited specific examples in the',
17677:'standard because preparers and auditors may attempt to strictly adhere to the illustrations. 81. the standard emphasizes reporting on asset',
17678:'categories, rather than individual assets. basedoncommentstotheed,itappearedthatthismaynothavebeencleartothereaders. therefore, additionallanguagewasaddedto thefinalstandardtoclarifythat theappropriate level of categorization of stewardship assets and the associated physical',
17679:'units should be determined bythe preparer based on the entity’smission, typesof use, and howit manages the assets. 82. entities should',
17680:'designate asset reporting categories that allow inclusion and aggregation of their heritage assets and stewardship land. entities should determine the',
17681:'appropriate level of detail for their categorization. it is helpful if entities designate asset categories that are meaningful and reflect',
17682:'how the entity views the assets for management purposes. it would also be helpful for entities to document the reasoning',
17683:'for the categorization. 83. the board recognizes that the information that is appropriate for reporting heritage assets and stewardship land',
17684:'can vary from one entity to another. the amount and level of detail of theinformationpresenteddepends, inpart, on themissionofthe entityandthematerialityof the',
17685:'assets in question. for example, categories reported by an agency that has a stewardship mission, might be more disaggregated than',
17686:'is appropriate for one that does not. 84. defining physical units as individual items to be counted is neither required',
17687:'nor prohibited. particularly for collectiontype heritage assets, it may be more appropriate to define the page 24 sffas 29 fasab',
17688:'handbook, version 20 06/21 sffas 29 physical unit as a collection, or a group of assets located at one facility,',
17689:'and then count the number of collections or facilities. the level of detail may differ by entity. 85. it is',
17690:'the intent of the board to provide entities with considerable latitude and flexibility in designating categories, determining a meaningful level',
17691:'of aggregation for reporting, and selecting physical units aligned with those categories. for example, should a library report that it',
17692:'has a collection of papers or that it has 10,000 pieces of paper in that collection? further, should a museum',
17693:'report that has 10 dinosaur skeletons or 10,000 dinosaur bones, or a single collection of skeletons in one facility? ultimately,',
17694:'the answer is influenced by how the entity manages as well as materiality considerations. agencies may be required to count',
17695:'the number of individual items for control purposes. but due to materiality considerations, entities may choose to report a higher',
17696:'level of aggregation such as the number of collections or facilities in which individual items are located. although individual item',
17697:'counts may not be necessary to support the reporting requirements in the standard, thisdoesnotmeanthatitemcountsformanagementcontroland safeguardingpurposesare not necessary to fulfill mandates',
17698:'required by other public laws and regulations. supporting documentation 86. the board has recognized in previous standards that historical records',
17699:'for items acquired longagomaynothavebeenretained.34 basedonresponsestotheed,testimonyprovided at thepublichearing, anddiscussionswiththeauditorsatthe roundtablemeeting,theboard believes this may be an issue in implementing this standard. 87.',
17700:'the board understands that with the heritage assets and stewardship land information being classified as basic, auditors may require certain',
17701:'supporting documentation to fulfill audit assertions. there may be instances where the historical documents are not available for items acquired',
17702:'many years ago, prior to the effective date of this standard, in an environment in which the historical records were',
17703:'not required to be retained and may therefore be inadequate. 88. therefore, the board encourages preparers, program offices, and auditors',
17704:'to develop other reasonable approaches and methods for satisfying the specific audit assertions that would rely on historical documents as',
17705:'evidence and support. in addition, the board plans to 34sffas 23 eliminating the category national defense pp&e, par. 11 provided',
17706:'implementation guidance as follows: “this standard recognizes that determining initial historical cost may not be practical for items acquired many',
17707:'years prior to the effective date of this standard in an environment in which the historical records were not required',
17708:'to be retained and may therefore be inadequate.” page 25 sffas 29 fasab handbook, version 20 06/21 sffas 29 suggest',
17709:'that this issue be addressed further in the forthcomingaapc guidance discussed below. additional guidance 89. theboardnotesthattherehasbeenworkbycertaingovernmentwidetaskforcessuchas theaapc stewardship guidance work',
17710:'group and the heritageassets categorization team to address issues identified such as standardized categories, definitions of units of measurements,andotherareaswhereprescriptiveguidancehasbeenrequested. thetask',
17711:'forces contained representatives from pertinent agencies and experts in the field, which most likely provided for a comprehensive assessment. 90.',
17712:'considering the extensive research performed by the task forces, their draft proposals or guides which address areas such as categories',
17713:'and subcategories and related physical units should be a good starting point for additional guidance that could be included in',
17714:'a technical release from theaapc. 91. theboardwillrequestthattheaapc revitalize theefforts ofthestewardshipguidance work group and work towards finalization of their draft guidance,',
17715:'which may ultimately be published as a technical release. the guidance will be expanded where necessary to cover the issues',
17716:'identified by respondents in the comment letters. for example, the board will suggest that theaapc review case studies where supporting',
17717:'documentation may not be available and determine other reasonable approaches, methods, and best practices for satisfying specific assertions that would',
17718:'rely on historical documents as evidence and support. 92. theboardwillsuggestthattheaapc also consider the workdone bytheheritageassets categorization team. fasab staff will',
17719:'work closely with the task force with the goal of finalizing the guide within one year of the issuance of',
17720:'this standard. effective date/phasedin implementation 93. most respondents to the ed and participants at the public hearing did not agree',
17721:'with the proposed effective date in the ed for periods beginning after september 30, 2004. key reasonscited for the delay',
17722:'of the effective date were the need for additional time to address issues noted in their arguments against classifying the',
17723:'information as basic and time for including funding in their budgets for the additional work and audit costs to be',
17724:'incurred. 94. the board believed the reasons provided for the delay of the effective date were valid and justifiedsomedelay. therefore,theboardbelievedaphasedimplementationwouldprovide',
17725:'page 26 sffas 29 fasab handbook, version 20 06/21 sffas 29 time for entities to address some of the issues',
17726:'identified and for consideration of the strained resources facing most agencies. 95. the board also believed that the effective date',
17727:'for certain disclosures to be classified as basic should be delayed to allow time for the issuance of the additional',
17728:'guidance by the aapc. therefore, the standard was revised to allow for a phasein of required reporting disclosures as basic.',
17729:'96. the standards are effective for reporting periods beginning after september 30, 2005, with the exception of the section c',
17730:'category descriptions and section d1 physical units by major category for the end of the reporting period in par. 25',
17731:'and 40 that are effective for reporting periods beginning after september 30, 2007; and section d2 physical units by major',
17732:'category that were acquired and withdrawn during the reporting period and section d3 major methods of acquisition and withdrawal during',
17733:'the reporting period in par. 25 and 40 that are effective for reporting periods beginning after september 30, 2008. 97.',
17734:'theseexceptionsprovideforaphaseinofdisclosurerequirementsbeingreportedasbasic information such that the standard will be fully implemented for reporting periods beginning after september 30, 2008. information that',
17735:'is provided an exception see par. above to being reportedasbasicinformationduringthe phaseinperiodisstillrequired, butshouldbe reported as rsi until the exceptions expire. it',
17736:'may be appropriate for entities to include a reference to the information reported as rsi during the phasein period. 98.',
17737:'the phasedin implementation offers additional time for agencies to determine the proper level of aggregation for major categories, as well',
17738:'as determining the appropriate physical unit of measure and documenting their reasoning for such. this additional time will also allow',
17739:'for theaapctoissue itsguidance intimefor considerationbeforeimplementation. it isanticipatedthat theaapcwillfinalize theguidepriortotheimplementation of the required reporting by major categories. materiality 99. in the',
17740:'ed, the disclosure requirements language read “entities with significant heritage assets/stewardship land should reference a note…” the board used the',
17741:'term “significant” to emphasize that some entities may not be subject to the disclosure requirements due to certain entities having',
17742:'only immaterial amounts of heritage assets and stewardship land covered by this standard. 100. although most respondents to the ed',
17743:'agreed that the preparer should have flexibility in determining appropriate categoriesfor aggregation and that the preparer should be allowed to',
17744:'exercise professional judgment in determining which assets are significant, there was page 27 sffas 29 fasab handbook, version 20 06/21',
17745:'sffas 29 someconcernraisedbyrespondentsthatthesejudgmentsmaybedifficulttomake. certain respondents noted that “significant” is difficult to apply in the case of heritage assets and stewardship',
17746:'land because there are no financial dollar amounts required to be reported. 101. the term “significant” wasremoved from the language',
17747:'establishing disclosure requirements in the final standard because the board has stated within this standard “the provisions of this statement',
17748:'need not be applied to immaterial items.” therefore, entities may omit heritage asset and stewardship land information if they are',
17749:'immaterial. 102. in sffas 3, accounting for inventory and related property, the introduction included a discussion on materiality.35 it explained',
17750:'that materiality has not been strictly defined in the accounting community; rather, it has been a matter of judgment on',
17751:'the part of preparers of financial statements and the auditors who attest to them. it further explained that the determination',
17752:'of whether an item is immaterial requires the exercise of considerable judgment, based on consideration of specific facts and circumstances.',
17753:'103. in its discussion in sffas 3, the board relied on the fasb’sconcept as modified bycertain concepts expressed in governmental',
17754:'auditing standards.36 par. 9 of sffas 3 discussed fasbs statement of financialaccounting concepts no. 2, qualitative characteristics of accounting information,',
17755:'that provides for materiality as the magnitude of an omission or misstatement of accounting information that, in the light of',
17756:'surrounding circumstances, makesit probablethat thejudgmentofareasonablepersonrelyingontheinformation would have been changed or influenced by the omission or misstatement. 104. par. 9 of',
17757:'sffas 3 also explains that this concept includes both qualitative and quantitative considerations. an item that is not considered material',
17758:'from a quantitative standpoint may be considered qualitatively material if it would influence or change the judgment of the financial',
17759:'statement user. the board believes that preparers should consider both quantitative and qualitative characteristics when applying materiality to this standard.',
17760:'boardapproval 105. this statement was approved for issuance by all members of the board. 35see sffas 3, accounting for inventory',
17761:'and related property, par. 715. 36par. 12 of sffas 3 explains that the governmentauditing standards provide in government audits the',
17762:'materiality level and/or threshold of acceptable risk may be lower than in similartype audits in the privatesector because of the',
17763:'public accountability of the entity, the various legal and regulatory requirements, and the visibility and sensitivity of government programs, activities,',
17764:'and functions. page 28 sffas 29 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards30: interentity cost implementation:amending sffas 4, managerial costaccounting standards',
17765:'and concepts rescinded status issued august 15, 2005 effective date for reporting periods beginning after september 30, 2008. affects sffas',
17766:'4 affected by sffas 55 rescinded sffas 30 in its entirety. related guidance interpretation 6, accounting for imputed intradepartmental costs;',
17767:'tr 8, clarification of standards relating to inter entity costs summary sffas 55, amending interentity cost provisions, rescinds sffas 30',
17768:'in its entirety. page 1 sffas 30 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards31: accounting for fiduciaryactivities status issued october 24,',
17769:'2006 effective date for periods beginning after september 30, 2008 affects sffas 1, par. 26, 29, 31, 37, 38 sffas',
17770:'7, par. 8387 rescinded, 142, 276, 370 rescinded interpretation 1 rescinded sffac 2, par. 84, 102 affected by sig 31.1',
17771:'summary this statement defines “fiduciary activities” as those federal government activities that relate to the collection or receipt, and the',
17772:'subsequent management, protection, accounting, investment and disposition of cash or other assets in which nonfederal individuals or entities“nonfederal parties” have',
17773:'an ownership interest that the federal government must uphold. the fiduciary relationship must be based on statutory or other legal',
17774:'authority and the fiduciary activity must be in furtherance of that relationship. this statement requires federal entities to distinguish the',
17775:'information relating to fiduciary activities of the federal entity from all other activities of that federal entity. fiduciary assets will',
17776:'not be recognized on the balance sheet of any federal entity. the federal entity is required to include in its',
17777:'own audited financial statements a note disclosure providing the following information about its fiduciary activities: an explanation of the nature',
17778:'of the fiduciary relationship, ascheduleoffiduciary net assets, and ascheduleoffiduciary activity. this requirement applies even if the federal entity issues standalone',
17779:'audited financial statements for the fiduciary activity. for entities managing several distinct fiduciary activities, disaggregated information is required by activity.',
17780:'the financial report of the united states government fr will include a note disclosure describing the nature of the fiduciary',
17781:'activities of the federal government. the fr note disclosure will provide a list of component entities responsible for fiduciary activitiesand',
17782:'the total amount of fiduciary net assets for each responsible component entity. the fr note disclosure will refer the reader',
17783:'to the component entity financial statements for additional information about each component’s fiduciary activity. page 1 sffas 31 fasab handbook,',
17784:'version 20 06/21 sffas 31 thisstatementiseffectiveforperiodsbeginningafterseptember30,2008. earlyadoptionisnot permitted. in the year this statement becomes effective, entities should not restate the',
17785:'prior period amounts presented in the basic financial statements and notes. page 2 sffas 31 fasab handbook, version 20 06/21',
17786:'sffas 31 table of contents summary 1 introduction 4 accounting standard 6 definitionandcharacteristics offiduciaryactivities 6 basis ofaccounting 8 accountingandreportingfor fiduciaryactivities',
17787:'for componententities 9 financial report of the united states government 11 effect on current standards 12 effective date 15 appendixa:basis',
17788:'for conclusions 16 appendix b: glossary 26 appendix c: examples of fiduciary note disclosure 27 1. example of fiduciary note',
17789:'disclosure for federal component entity 27 2. example of note disclosure for the governmentwide financial report 29 appendix d: pro',
17790:'forma transactions 30 appendix e: list ofabbreviations 40 page 3 sffas 31 fasab handbook, version 20 06/21 sffas 31 introduction',
17791:'1. this statement defines fiduciary activity1 and provides accounting and reporting guidance for fiduciary activities. fiduciary activities should be distinguished',
17792:'from federal programs designated as “trust funds” in the budget and in reporting to the office of management and budget',
17793:'omb and to the treasury financial management service fms. “trust funds” included in the federal budget are often established to',
17794:'carry out federal programs, and their activity differs from the common understanding of trust fund activity outside of government. most',
17795:'of the revenue received by federal “trust funds”represents governmentowned collections “earmarked” or dedicated to finance or help to finance specific',
17796:'federal programs rather than being held for the exclusive benefit of nonfederal parties. nonfiduciary “trust funds” are addressed by statement',
17797:'of federal financial accounting standards 27, identifying and reporting earmarked funds. this standard addresses activities that are fiduciary in nature.',
17798:'2. fiduciaryactivitiesinvolve ownership interests described inthisstatement see paragraph 10. thefederalemployees’thriftsavingsfundandtheindiantribalandindividualindian trust funds are examples of fiduciary activities. 3. in order',
17799:'to clarify financial reporting in general purpose federal financial reports, this standard defines fiduciary activity and provides financial reporting guidance',
17800:'for fiduciary activity and for fiduciary assets and liabilities. 4. this standard requires that the terms “fiduciary,” “fiduciary assets,” “fiduciary',
17801:'fund,” and “fiduciary activity” be used in general purpose federal financial reports to characterize only fiduciary activity as defined in',
17802:'this standard. nonfiduciary “trust fund” assets and activity related thereto should not be characterized as “fiduciary” or “trust” activity in',
17803:'general purpose financial reports of federal entities. such reporting would obscure an essential fact: that the federal government uses the',
17804:'nonfiduciary assets in support of its programs. 5. thisstandardrequiresthatfederalentitiesdisclosefiduciaryassets,liabilitiesandflowsina note disclosure. fiduciary assets and liabilities should not be recognized on',
17805:'the balance sheet of the federal entity. 6. thisstandardalsoclarifiesthedefinitionandreportingforfiduciarycashthatisondepositin the u.s. treasury. fiduciary cash depositsare referred to as fiduciary fund',
17806:'balance with treasury fiduciary fbwt. this deposit activity is not fully addressed in statement of federal financialaccounting standards 1, accounting',
17807:'for selected assets and liabilities. 1 words first appearing in boldface are defined inappendix b: glossary page 4 sffas 31',
17808:'fasab handbook, version 20 06/21 sffas 31 sffas 1 explains that “in some circumstances, the entity deposits cash in its',
17809:'accounts in a fiduciary capacity for the u.s. treasury or other entities.”2 however, some unique aspects of fiduciary fbwt are',
17810:'not included in sffas 1. for example, sffas 1 defines fbwt as “the aggregate amount of funds in the entity’s',
17811:'accounts with treasury for which the entity is authorized to make expenditures and pay liabilities.” sffas 1 further explains that',
17812:'“fund balance with treasury is an intragovernmental item.” however, fiduciary fbwt is not an intragovernmentalitem;theowneroffiduciaryfbwtisanonfederalparty. thisstandard amends sffas 1 to',
17813:'distinguish fiduciary fbwt from federal component entities’ fbwt. 7. numerous “fund groups3” are used in reporting to the treasury fms',
17814:'and the omb. for example, “deposit funds” may be used for monies that do not belong to the federal government.',
17815:'regardlessofhowafundgroupmaybeclassifiedinreportingtothetreasury fms or to the omb, only those activities that meet the definition of fiduciary activity promulgated in this standard',
17816:'are subject to the reporting requirements of this standard. activities that do not meet the definition of fiduciary activities promulgated',
17817:'in this standard are not subject to the reporting requirements of this standard. deposit funds that do not meet thedefinition',
17818:'of fiduciaryactivities, and thereforearenot disclosed in thefiduciarynote disclosure, should be recognized in the principal financial statements. scope 8. this statement',
17819:'provides financial reporting standards for fiduciary activities in the general purpose financial statements for federal entities. the standard does not',
17820:'affect reporting in the budget of the united states or specialpurpose reports. effective date 9. thisstandardiseffectiveforperiodsbeginningafter september 30,2008. intheinitialyear of',
17821:'implementation, comparative information should not be restated. earlier adoption is prohibited. 2sffas 1, paragraph 29. 3 for a description of',
17822:'“fund groups” used in reporting to the treasury fms and the omb, see the treasury financial manual, part 2, chapter',
17823:'1500. page 5 sffas 31 fasab handbook, version 20 06/21 sffas 31 accounting standard definition and characteristics of fiduciaryactivities definition',
17824:'10. in a fiduciary activity a federal entity collects or receives and subsequently manages, protects, accounts for, invests, and/or disposes',
17825:'of cash or other assets in which non federal individuals or entities or “nonfederal parties” have an ownership interest that',
17826:'the federal government must uphold. nonfederal parties must have an ownership interest in cash or other assets held by the',
17827:'federal entity under provision of law, regulation, or other fiduciary arrangement. the ownership interest must be enforceable against the federal',
17828:'government. judicial remedies must be available for the breach of the fiduciary obligation. characteristics 11. fiduciaryactivitiesareinitiatedby fiduciary collections. fiduciarycollections are',
17829:'an inflow to a federalentityoritsnonfederaldesignee such asa commercialbank of cash orother assets that are and remain the property of nonfederal',
17830:'parties. fiduciary collections may be preceded by the recognition of fiduciary accounts receivable. 12. fiduciary activities may involve a variety',
17831:'of fiduciary assets, liabilities and transactions. examples include but are not limited to: cash: fiduciary cash may be held in',
17832:'a variety of ways. cash may be represented by balances on deposit with the u.s. treasury4 or commercial banks. 4theu.s.treasuryisinthetreasurydepartment,',
17833:'whichistheprimaryfiscal agentfor thefederalgovernment. the treasury department collects money due to the united states, makes payments, manages borrowings, performs central accounting',
17834:'functions, and produces coins and currency sufficient to meet demand. the treasury department manages the government’s daily cash position and',
17835:'borrowing as well as the investment of funds in its custody. the treasurydepartmentprovides centralaccountingsystemcas services tofederal agencies. cas transactions involve',
17836:'appropriation credits, transfersin and out, collections, disbursements and related adjustments. such transactions increase or decrease federal entities’ fund balance with',
17837:'treasury fbwt maintained with the treasury department. page 6 sffas 31 fasab handbook, version 20 06/21 sffas 31 investments: fiduciary',
17838:'assets may include investments in treasury securities or in nontreasury securities. otherassets: fiduciary assets may include assets other than cash,',
17839:'e.g., real or personal property held temporarily pending disposition, or held longterm in a fiduciary capacity. liabilities: afiduciary activity may',
17840:'include expenses that will be paid with fiduciary assets. this may result in fiduciary liabilities that will be settled with',
17841:'fiduciary assets. inflows: afiduciary activity may include collections of cash or other assets that represent contributions from or for beneficiaries',
17842:'or revenue derived from fiduciary assets. outflows: afiduciary activity may include expenses that will be paid with fiduciary assets and',
17843:'distributions of assets to the beneficiaries. exclusions 13. the following are excluded from the reporting requirements for fiduciary activities, and',
17844:'should be recognized in the principal financial statements of the federal component entity and not in the fiduciary note disclosure:',
17845:'amounts related to unpaid5 payroll withholdings and garnishments6 are excluded from the reporting requirements of this standard. liabilities for unpaid',
17846:'payroll withholdings and garnishments should be recognized as accounts payable in 5“unpaid” means that amounts withheld or garnished have not',
17847:'been paid to the designated recipient of the amounts withheld or garnished. 6 examples of garnishments include amounts withheld from',
17848:'an individual’s salary or tax refund for payments of child support or to another third party in compliance with a',
17849:'statute or court order. page 7 sffas 31 fasab handbook, version 20 06/21 sffas 31 accordance with existing standards.7 unearned',
17850:'revenue should not be reported as fiduciary activity and should be recognized as a liability in accordance with existing standards.8',
17851:'assets collected or received by a federal entity that represent prepayments or advance payments for which the federal component entity',
17852:'is expected to provide goods or services should not be classified as fiduciary activity. this exclusion applies broadly and applies',
17853:'to amounts a customer advances for orders that may be placed in the future or deposits made as part of',
17854:'a bid or settlement process, even if these amounts are not specifically classified as “unearned revenue” by the entity due',
17855:'to uncertainty about the ultimate realization of the revenue. 14. amounts related to operating revenues and expenses in ways that',
17856:'are consistent with the above exclusions also may be excluded. 15. seized property, including seized monetary instruments, is not subject',
17857:'to the reporting requirements for fiduciary activities because it does not meet the definition of a fiduciary activity. seized assets,',
17858:'including seized monetary instruments, should continue to be reported in accordance with existing standards.9 basis ofaccounting 16. fiduciary activities reported',
17859:'in the federal entity’s notes to the financial statements, as required in paragraphs 1724, should be disclosed in the required',
17860:'schedules and measured using the standards provided in generally accepted accounting principles.10 7 see sffas 1, accounting for selected assets',
17861:'and liabilities, paragraphs 7486. 8 see sffas 1, paragraph 85 and sffas 7, accounting for revenue and other financing sources,',
17862:'paragraph 37. 9 see sffas 3, inventory and related property, paragraphs 61 and 69. 10 for the definition of generally',
17863:'accepted accounting principles see theamerican institute of certified public accountants professional standards, u.s.auditing standards au section 411, ”the meaning of',
17864:'present fairly in conformity with generallyacceptedaccounting principles.” page 8 sffas 31 fasab handbook, version 20 06/21 sffas 31 accounting and',
17865:'reporting for fiduciaryactivities for component entities reporting of fiduciary activities 17. reporting on fiduciary activities is required in two notes',
17866:'to the financial statements. the note disclosing significant accounting policies11 should include, at a minimum, a statement that: “fiduciary assets',
17867:'are not assets of the [federal component entity] and are not recognizedonthebalancesheet. seenote xx,fiduciaryactivities.” 18. aseparatenotetothefinancial statements shouldincludethefollowinginformationfor individual fiduciary',
17868:'activities: a. adescriptionofthefiduciary relationship, e.g.,theapplicable legal authority, the objectivesofthefiduciaryactivity, andageneraldescription ofthebeneficialownersorclass of owners. b. ascheduleoffiduciaryactivitydisplaying, for allperiodspresented: the beginning balance',
17869:'of net assets, theinflowsfromthefiduciaryactivitiesbycategorye.g.,contributions,investment earningsandoutflowsbycategorye.g.,benefitpayments, refunds,administrative expenses, the change in net assets, and the ending balance of net assets. c.',
17870:'aschedule offiduciarynetassetsdisplayingthecurrentandpriorperiod ending balances of cash and any other assets by category e.g., receivables, investments, and liabilities by category e.g.,',
17871:'accounts payable, refunds payable, and a variance analysis addressing significant changes from the prior period. the disclosure for nonmonetary fiduciaryassetsshould',
17872:'include adescription of thecomposition of theassets, themethods of valuation, and changes if any from prior period accounting methods. d. component',
17873:'entities also may have nonvalued fiduciary assets. nonvalued fiduciary assets are fiduciary assets for which required disclosure does not include',
17874:'dollar values. nonvaluedfiduciaryassetsmayincludelandheldintrust. componententitiesholdingnonvalued fiduciary assets should disclose them in a schedule of changes in nonvalued 11 anotedisclosing “significantaccountingpolicies” is',
17875:'a requirement of theofficeofmanagementandbudgetomb. this disclosure is currently listed as note 1 in “form and content of the performance andaccountability',
17876:'report” issued as partaof omb circulara136. page 9 sffas 31 fasab handbook, version 20 06/21 sffas 31 fiduciaryassets, which should',
17877:'include a description of nonvalued fiduciary assets, beginning quantity, quantity received, quantity disposed of, net increase/decrease in non valued fiduciary',
17878:'assets, and ending total quantity. e. if separate audited financial statements are issued for an individual fiduciary activity, additional disclosures',
17879:'listed in paragraph 22 should be provided. if the separate audited financial statements for an individual fiduciary activity are prepared',
17880:'with a fiscal yearend otherthanseptember 30,the informationrequiredinthis paragraphmay beprovidedforthe fiduciary activity’s most recent fiscal year, provided that the information is',
17881:'clearly labeled. 19. most fiduciary activities are disclosed by the federal component entity responsible for administering the fiduciary activity on',
17882:'behalf of the beneficiaries. if more than one federal component entity is responsible for administering a fiduciary activity, and the',
17883:'separate portions of the activity can be clearly identified with a responsible component entity, then each component entity should disclose',
17884:'its portion in accordance with the requirements of this standard. in such cases, each component entity should identify the other',
17885:'component entities that are involved in managing the activity. if separate portions cannot be identified, the component entitywith program management',
17886:'responsibility should disclose the fiduciary activity.12 20. for component entities with several distinct fiduciary activities, summary financial information required in',
17887:'paragraph 18 should be provided for each fiduciary activity presented individually. information for fiduciary activities not presented individually see paragraph',
17888:'21 may be aggregated. 21. selecting fiduciary activities to be presented individually requires judgment. the preparer should consider both quantitative',
17889:'and qualitative criteria. acceptable criteria include but are not limited to: quantitative factors such as the percentage of the reporting',
17890:'entity’s fiduciary net assets or inflows; and qualitative factors such as whether a fiduciary activity is of immediate concern to',
17891:'beneficiaries, whether it is politically sensitive or controversial, whether it is accumulating large balances, or whether the information provided in',
17892:'the fiduciary note disclosure would be the primary source of financial information for the public. 22. if separate audited financial',
17893:'statements are issued for an individual fiduciary activity that is presented individually in accordance with the criteria described in the',
17894:'preceding paragraph, 12 to determine program management responsibility, federal component entities should consider the legislation authorizing the activity; the memorandum',
17895:'of understanding that establishes responsibilities; and the provisions of sffac 2, entity and display. page 10 sffas 31 fasab handbook,',
17896:'version 20 06/21 sffas 31 a. the fiduciary note should disclose the basis of accounting used and auditor’s opinion on',
17897:'the current or most recent financial statements. if the auditor’s opinion was not unqualified, the fiduciary note also should disclose',
17898:'the reasons stated by the auditors and refer the reader to the audit opinion for further information. b. the note',
17899:'disclosure should provide information on how the reader can obtain a copy of the financial statements and the audit opinion',
17900:'thereon. 23. in the initial year of implementation, prior year information should not be displayed. in the reportingperiodsfollowing theinitialyear of',
17901:'implementation, priorperiod amountsshould be displayed. 24. notes to the financial statements are an integral part of the basic financial statements,',
17902:'essential for complete and fair presentation in conformity with generally accepted accounting principles for the federal government. financial report of',
17903:'the united states government 25. reporting on fiduciary activities is required in two notes to the financial statements. the note',
17904:'disclosing significant accounting policies13 should include, at a minimum, a statement that: “fiduciaryassetsare not assetsof the federal government and are',
17905:'not recognized on thebalancesheet oftheu.s. government. seenote xx,fiduciaryactivities.” 26. in the consolidation process, a distinction must be made between federal',
17906:'component entities’ fund balance with treasury fbwt recognized on the balance sheet at the component entity level and the fbwt',
17907:'attributable to fiduciary activities fiduciary fbwt reported by federal component entities in a note disclosure. the liability for fiduciary cash',
17908:'held as fbwt should be recognized as a liability on the governmentwide balance sheet. the liability for fiduciary investments in',
17909:'treasury securities should be recognized on the governmentwide balance sheet as debt held by the public. 27. the fiduciary note',
17910:'disclosure should include a definition of fiduciary activities, a description of the nature of the federal government’s fiduciary activities, a',
17911:'list of component entities responsible for fiduciary assets, and the total amount of fiduciary net assets for each responsible component',
17912:'entity. aggregation of component entities with immaterial amounts of fiduciary net assets is permitted. 13 anotedisclosing “significantaccountingpolicies” is arequirement of',
17913:'theofficeofmanagementandbudgetomb. this disclosureis currently listed as note1 in “form and content of the performance andaccountability report issued as partaof omb',
17914:'circulara136. page 11 sffas 31 fasab handbook, version 20 06/21 sffas 31 28. in the initial year of implementation, prior',
17915:'year information should not be displayed. in the reportingperiodsfollowing theinitialyear of implementation, priorperiod amountsshould be displayed. 29. the note disclosure',
17916:'should refer the reader to component entity financial statements for additional information. 30. notes to the financial statements are an',
17917:'integral part of the basic financial statements, essential for complete and fair presentation in conformity with generally accepted accounting principles',
17918:'for the federal government. effect on current standards 31. this standard affects current standards for reporting nonentity assets. paragraphs 26',
17919:'and 29 of sffas 1, accounting for selected assets and liabilities, are amended as follows: [26] both entity assets and',
17920:'nonentity assets under an entity’s custody or management should be reported in the entity’s financial statements, except for nonentity assets',
17921:'meeting the definition of fiduciary assets, which should not be recognized on the balance sheet, but should be disclosed in',
17922:'accordance with the provisions of sffas 31, accounting for fiduciary activities. nonentity assets reported in recognized on an entity’s financial',
17923:'statementsbalance sheet should be segregated from entity assets. an amount equal to nonentity assets recognized on the balance sheet should',
17924:'be recognized as a liability due to treasury or other entities in the entity’s financial statements. [29] nonentity cash. nonentity',
17925:'cash is cash that a federal entity collects and holds on behalf of the u.s. government or other entities. in',
17926:'some circumstances, the entity deposits cash in its accounts in a fiduciary custodial capacity for the u.s. treasury or other',
17927:'federal component entities, or in a fiduciary capacity for nonfederal parties. a nonentity cash recognized on the balance sheet should',
17928:'be reported separately from entity cash. b nonentity cash meeting the definition of a fiduciary asset should not be recognized',
17929:'on thebalance sheet, butshould be disclosed in accordancewith the provisions of sffas 31, accounting for fiduciary activities. 32. thisstandardaffectscurrentstandardsthatdefinefundbalancewithtreasury. paragraph',
17930:'31 of sffas 1 is amended as follows: page 12 sffas 31 fasab handbook, version 20 06/21 sffas 31 [31]afederal',
17931:'entity’s fund balance with the treasury fbwt is the aggregate amount of funds in the entity’s accounts with treasury for',
17932:'which the entity is authorized to make expendituresandpayliabilities. fundbalancewithtreasury fbwt isanintragovernmental item, except for fiduciary or other nonfederal nonentity fbwt.',
17933:'from the reporting entity’s perspective, the reporting entity’s a fund balance with treasury fbwt is an asset because it represents',
17934:'the entity’s claim to the federal government’s resources. however, from the perspective of the federal government as a whole, it',
17935:'is not an asset; and while it represents a commitment to make resources available to federal departments, agencies, programs and',
17936:'other entities, it is not a liability. in contrast, fiduciary and other non federal nonentity fbwt is not intragovernmental, and',
17937:'it represents a liability of the appropriate treasury component and of the federal government as a whole to the nonfederal',
17938:'beneficiaries. 33. paragraphs37and38ofsffas1areamended,andanewparagraphisadded,asfollows: [37] disclosure should be made to distinguish two three categories of funds within the entity’s fund balance',
17939:'with treasury fbwt reported on the entity’s balance sheet: the obligated balance not yet disbursed, and the unobligated balance, and',
17940:'nonbudgetary fbwt. the obligated balance not yet disbursed is the amount of funds against which budgetary obligations have been incurred,',
17941:'but disbursements have not been made. [38] the unobligated balance is the amount of funds available to an entity against',
17942:'which no claimshavebeenrecorded. unobligatedbalancesaregenerallyavailabletoafederalentity for specific purposes stipulated by law. unobligated balances may also include balances in expired/canceled accounts that',
17943:'are available only for approved adjustments to prior obligations. certain unobligated balances may be restricted to future use and are',
17944:'not apportioned for current use. disclosure should be provided on such restrictions. non budgetary fbwt includes unavailable receipt accounts, clearing',
17945:'accounts and other accounts that do not represent budget authority, as well as nonentity fbwt that is recognized on the',
17946:'balance sheet. [new paragraph] in addition to entity and nonentity fbwt that is recognized on the balance sheet, a federal',
17947:'entity may also administer fiduciary fbwt on behalf of non federal entities or individuals. fiduciary fbwt is not recognized on',
17948:'the balance sheet, but is subject to separate disclosure requirements. for disclosure requirements for fiduciary fbwt, see sffas 31, accounting',
17949:'for fiduciary activities. 34. this standard affects current standards dealing with fiduciary activity and fiduciary relationships in sffas 7, accounting',
17950:'for revenue and other financing sources. paragraphs8387and370ofsffas7arerescinded. inaddition,paragraphs142and276 of sffas 7 are amended as follows: page 13 sffas 31 fasab',
17951:'handbook, version 20 06/21 sffas 31 [142] mmscollectsthisrevenue acting asan agentfor and distributesitto therecipients designated by law: the treasury, certain',
17952:'entities within the government to which amounts areearmarked,thestates,andindiantribesandallottees. therefore, mmsshouldaccount for the exchange revenue it collects as an agent for',
17953:'the u.s. treasury or other federal componententities as acustodialactivity, whichis anamount collected or to becollected for others federal entities, in',
17954:'the same way as the internal revenue service accounts for the nonexchange revenue that it collects. mms collection activity for',
17955:'nonfederal entities may meet the definition of fiduciary activity and, if so, should be accounted for in accordance with the',
17956:'requirements of sffas 31, accounting for fiduciary activities. because the revenue collected by mms is exchange revenue, it should be',
17957:'recognized and measuredundertheexchange revenuestandardswhenthe rents, royalties, and bonuses are due pursuant to the contractual agreements. [276] mms should instead account',
17958:'for the exchange revenue as a custodial activity. mms collects rents, royalties, and bonuses acting as an agent on behalf',
17959:'of and distributes the collections to the recipients designated by law: the general fund, certain entities within the government to',
17960:'which amounts are earmarked, the states, and indian tribes and allottees. mms collection activity for nonfederal entities may meet the',
17961:'definition of fiduciary activity and, if so, should be accounted for in accordance with the requirements of sffas 31, accounting',
17962:'for fiduciary activities. the amounts of revenue should be recognized and measured under the exchange revenue standards when they are',
17963:'due pursuant to the contractual agreement. 35. this standard also amends paragraphs 84 and 102 of sffac 2, entity and',
17964:'display, as follows: [84] the elements most likely to be presented in the balance sheet of a federal suborganization/organization, program,',
17965:'or the entire government would be as follows: fund balancewithtreasury. thisrepresentstheamountintheentity’saccounts with the u.s. treasury that is available only for',
17966:'the purpose for which the funds were appropriated. it would may also include balances held by the entity in the',
17967:'capacity of a banker or agentfor others. however, fund balance with treasury fbwt meeting the definition of fiduciary fbwt should',
17968:'not be recognized on the balance sheet, but should be disclosed in accordance with the provisions of sffas 31, accounting',
17969:'for fiduciary activities. this classification would not be included in the financial statements of the u.s. government. [102] custodial collections',
17970:'do not include deposit funds, i.e., amounts held temporarily by the government e.g., bidders’ earnest money or guarantees for performance',
17971:'or amounts held by the government as an agent for others, e.g., state income taxes withheld from page 14 sffas',
17972:'31 fasab handbook, version 20 06/21 sffas 31 federal employees’ salaries that are to be transferred to the states.. both',
17973:'of tthese types of collections can be considered assetsand liabilitiesuntiltheyare returned to the depositor or forwarded to the organization entitled',
17974:'to the funds should be reported in accordance with the provisions of sffas 31, accounting for fiduciary activities. 36. interpretation',
17975:'no. 1, reporting on indian trust funds in general purpose financial reports of the department of the interior and in',
17976:'the consolidated financial statements of the united states government: an interpretation of sffas 7, is rescinded. effective date 37. thisstandardiseffectiveforperiodsbeginningafter',
17977:'september 30,2008. intheinitialyear of implementation, comparative information should not be restated. earlier adoption is prohibited. the provisions ofthis statement need',
17978:'not be applied to immaterial items. page 15 sffas 31 fasab handbook, version 20 06/21 sffas 31 appendixa: basis for',
17979:'conclusions this appendix discusses some factors considered significant by the board in reaching the conclusions in this standard. it includes',
17980:'the reasons for accepting certain approaches and rejecting others. some factors were given greater weight than other factors. the guidance',
17981:'enunciated in the standards not the material in this or other appendices should govern the accounting for specific transactions, events',
17982:'or conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status',
17983:'section directing the reader to any subsequent statements that amend this statement. within the text of the statements, the authoritative',
17984:'sections are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review',
17985:'the basis for conclusions of the amending statement for the rationale for each amendment. outreach activities 38. fasab published the',
17986:'revised14 exposure draft ed, accounting for fiduciary activities, on june27,2005. uponreleaseoftheed,noticesand/orpressreleaseswereprovidedto:the federal register; the fasab news, the journal ofaccountancy,agatoday, the',
17987:'cpa journal, government executive, the cpaletter, governmentaccounting andauditing update, the cfo council, the financial statementaudit network, the federal financial managers',
17988:'council, and committees of professional associations generally commenting on exposure drafts in the past. copies of the ed and letters',
17989:'requesting comments were also sent to individualswho spoke at the october2003 publichearing for the original ed, aswell as to the',
17990:'federal retirement thrift investment board. 39. during the comment period, fasab staff also gave informational presentations at the 15th annual',
17991:'government financial management conference sponsored bytreasuryagency services, and at july 2005 meetings of the financial statementaudit network, the omb 14',
17992:'the first exposure draft was issued on april 23, 2003. issues raised by respondents to that exposure draft caused the',
17993:'board to revise its proposal. page 16 sffas 31 fasab handbook, version 20 06/21 sffas 31 form and content work',
17994:'group, the greater washington society of cpas, and the u.s. standardgeneralledgerboard’sissuesresolutioncommittee. apublichearingwasalso held onaugust 17, 2005. comments received 40. theboarddidnotrelyonthenumberinfavoroforopposedtoagivenposition.',
17995:'information about the respondents’ majority view is provided only as a means of summarizing the comments. the board considered the',
17996:'arguments in each response and weighed the merits of the points raised. the respondents’ comments are summarized below. 41. fourteen',
17997:'written responses were received from the following sources: comment letters and/or oral testimony federal nonfederal provided by: internal external users,',
17998:'academics, others 3 auditors 3 preparers and financial managers 8 42. note: the response from one federal agency’s office of',
17999:'the inspector general listed above under “auditors,” noted that the response represented the consensus expressed by the agency’s office of',
18000:'the chief financial officer as well as the agency’s auditors. 43. also, one federal agency wrote that it had no',
18001:'comments because the agency’s funds are primarily earmarked funds rather than fiduciary. 44. atthepublichearingheldonaugust17, 2005,representatives from twofederal agencies provided oral',
18002:'statements and answered questions from the board. summary of comments 45. the majority of respondents agreed with the definition of',
18003:'fiduciary activities, the proposed reporting requirements, and the exclusions from the reporting requirements. other issues raised by respondents included how',
18004:'to report on fiduciary activities that issue separate audited financial statements; the ownership interests for seized assets; the appropriate basis',
18005:'of accounting for fiduciary activities and the effective date of the standard. definition 46. the board believes that the substance',
18006:'of a transaction, rather than its form, should be the determining factor in how it is reported. accordingly, this standard',
18007:'provides a definition and page 17 sffas 31 fasab handbook, version 20 06/21 sffas 31 characteristics for fiduciary activity and',
18008:'does not provide lists of specific funds or fund groups. some respondents have noted that often fiduciary activities are managed',
18009:'through the establishment of a deposit fund. therefore, the following section is intended to assist federal financial managers in understanding',
18010:'the role of deposit funds. the role of deposit funds 47. federal component entities report budgetary and proprietary transactions to',
18011:'the omb and the treasury fms using “fund account symbols,” which are subcomponents of federal reporting entities. fund account symbols',
18012:'are assigned by the treasury fms in collaboration with the omb. based upon certain characteristics, fund account symbols are classified',
18013:'into “fund groups.” for example, “deposit funds” are a fund group for monies that do not belong to the federal',
18014:'government.15 the omb classifies deposit funds as non budgetary activities and excludes deposit funds from the federal budget.16 within the',
18015:'“deposit fund” group established by the treasury fms, there are three distinct types: a monies withheld from government payments for',
18016:'goods and services received, including payroll withholdings and garnishments; b monies the government is holding awaiting distribution based on a',
18017:'legal determination or investigation; and c deposits received from outside sources for which the government is acting solely as a',
18018:'banker, fiscal agent or custodian.17 although some fiduciary activities may be recorded and reported in deposit funds, the use of',
18019:'a deposit fund for an activity does not automatically indicate that the activity meets the definition of fiduciary in this',
18020:'standard. the activity in each deposit fund should be reviewed to determine whether it meets the definition and characteristics of',
18021:'a fiduciary activity in this standard. also, if an activity is not reported in a deposit fund, that fact does',
18022:'not necessarily mean that the activity does not meet the definition of fiduciary in this standard. each activity must be',
18023:'evaluated based upon whether or not it meets the definition of a fiduciary activity in this standard. exclusions 48. payroll',
18024:'withholdings and garnishments appear to meet the definition of fiduciary activities. when an employer withholds an amount from an employee’s',
18025:'wages, the employer has a responsibility to forward those amounts to the required recipient. however, this standard excludes payroll withholdings',
18026:'and garnishments from the reporting requirements for 15 treasury financial manual tfm volume 1, part 2, section 1535, available on',
18027:'the internet at http://www.fms.treas.gov/tfm/vol1/index.html 16 see fy 2006 u.s. budget, analytical perspectives, pp. 372, 377 and 378379. 17 tfm, section',
18028:'1535. page 18 sffas 31 fasab handbook, version 20 06/21 sffas 31 fiduciary activities because payroll withholdings and garnishments are',
18029:'similar to other unpaid costs of operations and do not warrant special reporting. because of the routine operational nature and',
18030:'short duration of the activity, the board does not believe that fiduciary reporting of payroll withholdings and garnishments would produce',
18031:'useful information. 49. similarly,federalcomponententitiesmayholdadvancesreceivedfromcustomersforfuture sales of goods or services. such advances represent unearned revenue. one federal agency, in its written',
18032:'response and oral testimony, noted that certain advances received appeartomeetthedefinitionoffiduciaryactivity. however,thisstandardexcludesunearned revenue from the fiduciary reporting requirements because unearned revenue',
18033:'is a routine operational activity and the board believes that fiduciary reporting of unearned revenue is not warranted. 50. the',
18034:'standard clarifies the fact that seized property is not subject to the fiduciary reporting requirements because seized assets do not',
18035:'meet the definition of fiduciary activities. in seizureforforfeiture the government is asserting its right to the property, and is taking',
18036:'action to eliminate, rather than to uphold, the ownership interest of the nonfederal party. reporting standards 51. the board discussed',
18037:'the implications of recognizing fiduciary assets on the balance sheet or on a separate principal statement. the board considered whether',
18038:'recognizing fiduciary assets on the balance sheet might imply not only managerial control over the assets, but also that the',
18039:'benefit of the assets accrue to the federal component entity. the board decided that fiduciary assets should not be recognized',
18040:'on the balance sheet of the federal component entity because they are not assets of either the federal component entity',
18041:'or the federalgovernmentasawhole. theboardconsideredwhetherfiduciaryactivityshouldbe recognized in a separate principal financial statement, but decided that a note disclosure would be preferable,',
18042:'provided that the note disclosure contains adequate information regarding fiduciary assets and activities. basis ofaccounting 52. some members of the',
18043:'board have dissented to the standard and their reasons are presented at paragraph 63. these members oppose requiring the disclosures',
18044:'to be measured in accordance with generally accepted accounting principles. two reasons are offered in the written dissent. 53. some',
18045:'of the members dissenting stated that the board should not impose requirements on reporting information related to “nonfederal entities.” however,',
18046:'a majority of the board believe that fiduciary activities as defined in this standard are federal program activities, page 19',
18047:'sffas 31 fasab handbook, version 20 06/21 sffas 31 carried out byfederalemployeesoftenwithfederalfundingofadministrativeexpenses. the amount and sources of financing fiduciary activities',
18048:'are determined by congress. the assenting board ;members believe that although the assets in fiduciary funds are non federal assets,',
18049:'the responsibility for managing the assets is a federal responsibility and the funds holding the assets are federal accounting entities',
18050:'established to carry out that responsibility. 54. amajor objectiveofgeneralpurposefinancial reportinginaccordancewithgenerally accepted accounting principles is to meet the needs of users',
18051:'who have limited access to internal documentsor statements and lack the abilityto demand that desired information be provided. most citizens',
18052:'and beneficiaries of fiduciary funds lack such ability. 55. some of the members dissenting stated that the costbenefit of the',
18053:'requirement to disclose information in conformity with generally accepted accounting principles has not been demonstrated. however,amajorityoftheboardbelievesthattheneedforaccountabilityby public officials is sufficient',
18054:'in its own right to justify the requirement to conform to generally accepted accounting principles. further, the board notes that:',
18055:'a. current standards sffas 7, paragraphs 8387 already require accrual accounting for fiduciary activities; therefore, this standard is merely carrying',
18056:'forward existing requirements and is not introducing new costs. b. this standard requires the same basis of accounting that is',
18057:'required for federal assets, liabilities and flows. accounting systems on that basis are routinely in operation throughout the government and',
18058:'pose no unusual costs for fiduciary activities. c. the board is permitting generally accepted accounting principles for any domain fasab,',
18059:'governmentalaccounting standards board, or financialaccounting standards board to be used. this should mitigate any costs for fiduciary activities currently reporting',
18060:'with a different source of generally accepted accounting principles. d. the board is permitting the use of information based on',
18061:'a fiscal yearend other than the fiscal yearend used by the federal government. this will mitigate the cost for fiduciary',
18062:'activities currently producing audited financial statements on a different fiscal year. custodialactivity differs from fiduciary activity 56. thestatement ofcustodialactivityisnot amendedbythis',
18063:'standard. thestatement of custodialactivity is appropriate for custodial collections, which are amounts collected by one federal component entity on behalf',
18064:'of another federal component entity and associated with that other entity in the federal budget. for example, the internal revenue',
18065:'service irs and the bureau of customs and border protection customs make page 20 sffas 31 fasab handbook, version 20',
18066:'06/21 sffas 31 collections of income taxes and customs duties, respectively, and they are deposited into designated accounts of the',
18067:'treasury, which are unavailable to either for use in their operations.18 the irs and customs would report such collections on',
18068:'a statement of custodialactivity and the responsible program entity would recognize revenue and the relatedassets. thus,the statementofcustodialactivityisappropriatefor those federal component',
18069:'entities whose primary mission is collecting taxes or other federal revenues, particularly sovereign revenues that are intended to finance the',
18070:'entire governments operation, or at least the programs of other federal component entities, rather than their ownactivities.19 guidancewithrespecttothe statement ofcustodialactivityisprovidedin',
18071:'statement of federal financialaccounting concepts sffac 2 and sffas 7. 57. reporting requirements for fiduciary activities are different from reporting',
18072:'requirements for custodial activities. although the inflows and assets reported on the statement of custodial activity are not inflows or',
18073:'assets of the federal component entity, they are inflows and assets of the federal government as a whole. in contrast,',
18074:'fiduciary inflows and assets are not inflows of net assets to the federal government. accordingly, fiduciary activities are disclosed in',
18075:'a note and are not recognized on the statement of custodialactivity or any other principal financial statement. 58. because fiduciary',
18076:'assets are not recognized on the balance sheet of the reporting entity, there is no offsetting liability, as there is',
18077:'for custodial assets. the fiduciary note discloses the beneficiaries’ equity as “fiduciary net assets.” effective date 59. thisstandardrequiresthatfiduciaryassetsandliabilitiesbedisclosedinanote,andshould not be',
18078:'recognized on the face of the balance sheet. in order to facilitate the preparation of the financial report of the',
18079:'u.s. government, a uniform implementation date for all federal component entities is necessary. accordingly, early implementation of this standard is',
18080:'prohibited, and federalcomponent entitiesshould not restate prior periodsinthe initialyear of implementation. the effective date is intended to allow federal agencies',
18081:'adequate time to comply with the reporting requirements. 18 implementation guide to statement offinancingin statement offederalfinancialaccountingstandards 7, accounting for revenue',
18082:'and other financing sources: detailed information on the statement of financing, par. 25. 19 sffac 2, par. 101. page 21',
18083:'sffas 31 fasab handbook, version 20 06/21 sffas 31 effect on existing standards 60. the board promulgates standards for activities',
18084:'that are defined by specific characteristics, and not by how an activity may be labeled in the budget or reported',
18085:'to the treasury financial management service. paragraph 370 of sffas 7 addressed the group of funds designated as “deposit funds”',
18086:'as follows: [370] deposit funds are accounts outside the budget that record amounts that the government a holds temporarily until',
18087:'ownership is determined or b holds as an agentforothers. thestandardsandguidanceinthisstatementdonotapplytodeposit funds except insofar as a particular deposit fund may be',
18088:'classified as part of a federal reporting entity or a disclosure may be required due to a fiduciary relationship on',
18089:'the part of a federal reporting entity toward a deposit fund. 61. the board decided that this paragraph was not',
18090:'sufficiently clear that all deposit funds that are not disclosed in the fiduciary note should be recognized in the principal',
18091:'financial statements of the federal component entity. accordingly, paragraph 370 of sffas 7 is rescinded by this standard and an',
18092:'explanatory sentence was added to paragraph 7 in the introduction section of this standard. all deposit funds that do not',
18093:'meet the definition of fiduciary activities and therefore are not disclosed in the fiduciary note must be recognized on the',
18094:'face of the financial statements. boardapproval 62. this statement was approved by the board with a vote of six members',
18095:'in favor of its issuance and four members, messrs. dacey, patton, reid and zavada, opposing its issuance. dissents 63. messrs.',
18096:'dacey, patton, reid and zavada dissented to this standard. their dissent is presented below. some members who voted to issue',
18097:'the standard agree with certain of the arguments posed by the dissenters but believe that, on balance, the standard is',
18098:'an improvement in federal financial reporting. dissent of messrs. dacey, patton, reid and zavada 63a. paragraph 16 of the proposed',
18099:'standard requires that information disclosed about fiduciary activities be presented on the basis of generally accepted accounting principles. board members',
18100:'robert dacey, james patton, robert reid, and david zavada support disclosure of information on fiduciary activities, but disagree with this',
18101:'requirement. these members believe that, at a minimum, the words “and measured using the standards provided in page 22 sffas',
18102:'31 fasab handbook, version 20 06/21 sffas 31 generally accepted accounting principles” should be deleted from paragraph 16 and replaced',
18103:'with words such as “and measured on the basis of accounting used to maintain or report the information.” while these',
18104:'members do not disagree that generally accepted accounting principles gaap financial reporting enhances the quality of reported financial information, they',
18105:'nonetheless disagree that the board should require information related to fiduciary activities to be presented on a gaap basis. the',
18106:'reasons for these views and the members supporting each of these reasons are as follows: the board should not impose',
18107:'requirements on reporting information related to non federal entities 64. board members james patton and robert reid believe that the',
18108:'board should not impose requirements on reporting information related to nonfederal entities, including the basis of accounting to be used',
18109:'in disclosures related to such nonfederal entities. fiduciary activities, as defined in the proposed standard, represent activities of nonfederal entities.',
18110:'all entities are obligated to choose the basis of accounting that will be used to prepare financial information and whether',
18111:'such information will be audited, consistent with any legal and regulatory requirements. in some known instances and likely in others,',
18112:'information related to these nonfederal entities is not maintained or reported on a gaap basis and/or are not audited. 65.',
18113:'other organizations are positioned to require the basis of accounting to be used by the non federal entities that represent',
18114:'fiduciary activities to the federal government, as well as require the information to be audited. the beneficiaries/owners that have an',
18115:'interest in the nonfederal entities’ activities and oversight bodies that represent them and the respective federal entities are best positioned',
18116:'to determine the basis of accounting and reporting and audit assurance that best meets their needs. for example, the beneficiaries/owners',
18117:'of the nonfederal entities may have agreements in place covering the basis of accounting used or the audit assurance to',
18118:'be provided. in addition, the basis of reporting and audit assurance can be determined by the courts, by statute or',
18119:'by policy. 66. in summary, the board should not mandate disclosure of financial information on a basis of accounting that',
18120:'is different from the basis used to maintain or report information related to these nonfederal entities nor require that such',
18121:'information be audited on an individual fiduciary activity basis. however, as part of the current federal entity project, the board',
18122:'can reconsider whether certain or all entities representing fiduciary activities should be considered to be federal entities, and therefore be',
18123:'required to follow federal gaapand be audited. page 23 sffas 31 fasab handbook, version 20 06/21 sffas 31 the costbenefit',
18124:'of the requirement has not been demonstrated 67. board members robert dacey, robert reid, and david zavada do not believe',
18125:'that it has been demonstrated that the requirement to disclose information in conformity with gaap is costbeneficial i.e., benefits clearly',
18126:'exceed the additional costs that would be incurred.as noted above, in some known instances and likely in others, information related',
18127:'to non federal entities that represent fiduciary activities to the federal government is not maintained or reported on a gaap',
18128:'basis and/or are not audited. 68. in their response to the exposure draft, the department of the interior indicated that',
18129:'they were maintaining the indian trust fund information on a basis of accounting that was consistent with trust activity of',
18130:'commercial banks and institutions and they questioned the benefit of converting the information to a federal gaap basis of accounting.',
18131:'69. requiringthefederalentitiestoreportfinancialinformationonthesenonfederalentitiesin their footnotes on a gaap basis will incur additional costs, which could be substantial. furthermore, requiring such disclosure',
18132:'will not require the nonfederal entity to maintain or report financial information on a gaap basis of accounting. financial information',
18133:'disclosed in the federal entity financial statements that is different from information provided to fiduciary owners/beneficiaries and oversight bodies could',
18134:'result in confusion. such confusion further decreases the benefit of the requirement to report fiduciary activities on a gaap basis.',
18135:'70. thedisclosureoffiduciaryactivitiesinfederalfinancialstatementsisnotdesignedtobethe primary source of information to owners/beneficiaries of these nonfederal entities. rather, such beneficiaries should receive information directly from',
18136:'the nonfederal entity or related federal entity. in the case of the larger fiduciary activities, such information is provided or',
18137:'available, both at an aggregate and individual account holder level. 71. aprimarypurposeofdisclosingfiduciary activities inafederal entity’s financial statements is to demonstrate',
18138:'the nature and extent of the federal government’s fiduciary responsibilities and whether the federal entity is adequately carrying out its',
18139:'fiduciary responsibilities. therefore, disclosure of 1 information prepared onthebasis of accounting used to maintain or report the financial information to',
18140:'beneficiaries/oversight bodies, 2 the basis of accounting used including whether or not it was prepared on a federal gaap basis,',
18141:'3 whether the information wasaudited, and 4 the type of opinion issued, provides sufficient information that users and oversight bodies',
18142:'e.g., congress, omb may use to determinetheadequacyoffederalactionstodischargetheirfiduciaryresponsibilities. ithas not been demonstrated that incurring additional costs to develop disclosures beyond these',
18143:'would provide significant benefits relative to the additional costs. page 24 sffas 31 fasab handbook, version 20 06/21 sffas 31',
18144:'72. the nature and extent of all fiduciary activities have not been identified nor have the related costs to meet',
18145:'the requirements of the proposed standard. in addition to the major fiduciary activities discussed by the board, there may be',
18146:'many other fiduciary activities for which federalgaapbased information isnot maintained orreported and/orare not audited.also, the cost of developing accrualbased information,',
18147:'if available, is unknown. in addition, an interior official indicated that certain accruals, such as for royalties on the thousands',
18148:'of oil and gas leases held and for timber sales on behalf of the indian trust funds are not readily',
18149:'determinable, and if estimated, would not be reliable. therefore the relative magnitude of the ultimate cost of adopting this requirement',
18150:'is not known. 73. while a precise estimate of costs and a formal cost benefit analysis is not expected, the',
18151:'board shouldconsidertherelative magnitudeofcostsbeforedecidingwhetherastandardis cost beneficial. as part of this consideration, the board should also consider the expected utility of the',
18152:'requirement a disclosure in this instance, and alternatives for achieving the related objectives. in this instance, it has not been',
18153:'clearly demonstrated that the increased benefits exceed the related costs. page 25 sffas 31 fasab handbook, version 20 06/21 sffas',
18154:'31 appendix b: glossary [see consolidated glossary inappendix e of this document.] page 26 sffas 31 fasab handbook, version 20',
18155:'06/21 sffas 31 appendix c: examples of fiduciary note disclosure 1. example of fiduciary note disclosure for federal component entity',
18156:'the following illustrates the summary financial information required in paragraph 18. fiduciaryactivities fiduciary activities are the collection or receipt, and',
18157:'the management, protection, accounting, investment and disposition by the federal government of cash or other assets in which non federal',
18158:'individuals or entities have an ownership interest that the federal government must uphold. fiduciary cash and other assets are not',
18159:'assets of the federal government and accordingly are not recognized on the balance sheet. [fiduciary fund a] wasauthorized by the',
18160:'[legislation], which authorized [the component entity] to collect [type of collections] on behalf of [beneficiaries]. other fiduciary activities by [the',
18161:'component entity] include but are not limited to [examples of fiduciary activities included in “other.”] page 27 sffas 31 fasab',
18162:'handbook, version 20 06/21 sffas 31 department xyz schedule of fiduciaryactivity as of september 30, 2010 and 2009 2010 2010',
18163:'2010 2009 2009 2009 fiduciary other total fiduciary other total funda fiduciary fiduciary funda fiduciary fiduciary funds funds funds funds',
18164:'contributions $ 233,450 $ 116,550 $ 350,000 $ 200,000 $ 125,000 $ 325,000 investment earnings 116,725 58,275 175,000 100,000 65,000',
18165:'165,000 gain loss on disposition of investments, net 6,670 3,330 10,000 4,000 1,000 5,000 disbursements to beneficiaries increases in fiduciary',
18166:'300,150 149,850 450,000 200,000 150,000 350,000 fund balances 56,695 28,305 85,000 104,000 41,000 145,000 fiduciary net assets, beginning of year',
18167:'1,674,000 1,041,000 2,715,000 1,570,000 1,000,000 2,570,000 fiduciarynetassets,end ofyear $1,730,695 $1,069,305$2,800,000 $1,674,000 $1,041,000$2,715,000 fiduciary netassets as of september 30, 2010 and',
18168:'2009 2010 2010 2010 2009 2009 2009 fiduciary other total fiduciary other total funda fiduciary fiduciary funda fiduciary fiduciary funds',
18169:'funds funds funds fiduciary assets cash and cash equivalents $ 429,895 $ 391,559 $ 821,454 $ 250,000 $ 275,000 $',
18170:'525,000 investments 1,300,000 677,746 1,977,746 1,424,000 766,000 2,190,000 other assets 1,000 1,000 less:accounts payable 200 200 page 28 sffas 31',
18171:'fasab handbook, version 20 06/21 sffas 31 total fiduciary net assets $1,730,695$1,069,305 $2,800,000$1,674,000 $1,041,000 $2,715,000 2. example of note disclosure',
18172:'for the governmentwide financial report the following illustrates the summary information required in paragraph 27. fiduciaryactivities fiduciary activities are the',
18173:'collection or receipt, and the management, protection, accounting, investment and disposition by the federal government of cash or other assets',
18174:'in which non federal individuals or entities have an ownership interest that the federal government must uphold. fiduciary cash and',
18175:'other assets are not assets of the federal government and accordingly are not recognized on the balance sheet. examples of',
18176:'the federal government’s fiduciary activities include the indian tribal and individual indian trust funds, which are administered by the department',
18177:'of the interior, and the thrift savings fund, which is administered by the federal retirement thrift investment board. the following',
18178:'federal component entities were responsible for fiduciarynet assetsat september 30, 2010 and 2009. detailed information is available in the financial',
18179:'statements of the federal component entities. the federal component entity websites are listed on page of this document. schedule of',
18180:'fiduciary netassets fy 2010 fy 2009 department a $ xxxxx $ xxxxx department b xxx xx department c xxxxx xxxxx',
18181:'department d xxxxxxx xxxxxxx all other x x total $ xxxxxxxxxxxxx $ xxxxxxxxxxxxx page 29 sffas 31 fasab handbook, version',
18182:'20 06/21 sffas 31 appendix d: pro forma transactions note: thefollowingproformatransactionsillustratehowtheinformation forthe fiduciarynotedisclosurecanberecorded ina component federal entity’sfinancialsystemutilizingthe u.s. government standardgeneral',
18183:'ledger.20 the approach illustrated utilizes several general ledger accounts that are linked to a note disclosure and not to line',
18184:'items in the principal financial statements. component entities are also permitted to utilize a separate financial system for fiduciary activities.',
18185:'transactions and balances that crosswalk to the fiduciary note disclosure are shaded. table of illustrations illustration 1 – federal component',
18186:'entity receives and holds nonfederal party’s cash as fund balance with treasury fbwt. illustration 2 – federal component entity invests',
18187:'nonfederal party’s fbwt in treasury securities. 2a – federal entity’s purchase of treasury securities on behalf of nonfederal party 2b',
18188:'– receipt of appropriation by bureau of public debt to pay interest on nonfederal party’streasury securities 2c – treasury bureau',
18189:'of public debt pays interest on treasury securities illustration 3 – federal component entity invests nonfederal party’s cash in non',
18190:'treasury securities. 3a – federal entity purchases nontreasury securities on behalf of nonfederal party 3b – receipt of interest earned',
18191:'on nonfederal party’s nontreasury securities 20 section803aofthe federalfinancialmanagementimprovementact of1996p.l. 104208,divisiona,section 101f, title viii requires federal agencies to implement the u.s.',
18192:'government standard general ledger ussgl at thetransactionlevel. informationaboutthe ussglcanbefoundonthewebsite ofthe treasuryfinancial management service at www.fms.treas.gov/ussgl. page 30 sffas 31 fasab',
18193:'handbook, version 20 06/21 sffas 31 illustration 4 – federal component entity disburses interest earned to nonfederal party. illustration 5',
18194:'– closing entries illustration 6 – effect of pro forma transactions on the federal component entity’s financial statements. illustration 7',
18195:'– effect of pro forma transactions on the consolidation worksheet for the u.s. governmentwide financial report. page 31 sffas 31',
18196:'fasab handbook, version 20 06/21 sffas 31 illustration 1 – federal component entity receives and holds nonfederal party’s cash. dr',
18197:'cr federal component entity fiduciary fund balance with treasury fbwt 1,500 fiduciary collections received from beneficiaries 1,500 to record fiduciary',
18198:'cash collected. treasury general fund entity treasury’s governmentwide cash account 1,500 treasury general fund liability for fiduciary fbwt 1,500 to',
18199:'record cash received and held by component entity as fiduciary fbwt. illustration 2 – federal component entity invests fiduciary fbwt',
18200:'in treasury securities. 2a federal component entity invests fbwt in treasury securities federal component entity fiduciaryinvestmentsin treasurysecurities1,000fiduciaryfbwt1,000torecordfiduciarytreasurysecuritiespurchased. treasury general fund',
18201:'entity treasury general fund liability for fiduciary fbwt/component entity 1,000 treasury general fund’s liability for fbwt/treasury bureau of 1,000 public',
18202:'debt to record purchase of treasury securities. fbwt treasury bureau of public debt entity 1,000 liability for fiduciary treasury securities',
18203:'1,000 to record sale of treasury securities. page 32 sffas 31 fasab handbook, version 20 06/21 sffas 31 2b treasury',
18204:'bureau of public debt receives an appropriation to fund interest expense treasury general fund entity treasury’sgovernmentwidecashaccount 50 transferin from federal',
18205:'reserve 50 treasury general fund receives transfer of federal reserve earnings appropriation warrants issued 50 treasury’s liability for fbwt/bureau of',
18206:'public debt 50 treasury issues appropriation warrant to the bureau of public debt treasury bureau of public debt entity fbwt',
18207:'50 appropriations receiveda 50 to record appropriation received. 2c treasury bureau of public debt pays interest on treasury securities. treasury',
18208:'bureau of public debt entity interest expense 50 fbwt 50 unexpendedappropriationsused 50 expendedappropriations 50 to record appropriation received and interest',
18209:'expense paid. federal component entity fiduciary fbwt 50 interest revenue/fiduciary 50 to record interest received on fiduciary investments. treasury general',
18210:'fund entity treasury general fund liability for fbwt/treasury bureau of public debt 50 liability for fiduciary fbwt/component entity 50 to',
18211:'record payment of interest by treasury bureau of public debt a note: accountingforappropriationsrequiresadditionalbudgetaryentriesthatarenotdisplayedhere. foradditional information, refer to the treasury financial',
18212:'manual standard general ledger supplement at www.fms.treas.gov/ussgl. page 33 sffas 31 fasab handbook, version 20 06/21 sffas 31 illustration 3',
18213:'– federal component entity invests nonfederal party’s assets in nontreasury securities. 3a federal component entity purchases nontreasury securities on behalf',
18214:'of non federal party federalcomponententityfiduciaryinvestmentsin nontreasurysecurities500fiduciaryfund balancewith treasury500torecordsecuritiespurchasedonbehalfofnonfederalparties. treasury general fund entity treasurys liability for fiduciary fbwt/component entity treasurys governmentwide',
18215:'cash account to record cash withdrawal. 500 500 3b interest is received on nontreasury securities and held as fbwt federal',
18216:'component entity fiduciary fbwt interest revenue/fiduciary to record interest received on fiduciary investments held outside of the u.s. treasury. 10',
18217:'10 treasury general fund entity treasury governmentwide cash account treasury general fund liability for fiduciary fbwt/component entity to record cash',
18218:'received and deposited as fiduciary fbwt. 10 10 page 34 sffas 31 fasab handbook, version 20 06/21 sffas 31 illustration',
18219:'4 – federal entity disburses interest earned to nonfederal beneficiaries 4. disbursement to beneficiaries of interest earned. federal component entity',
18220:'fiduciary disbursements to beneficiaries fiduciary fbwt payment made to beneficiaries. 50 50 treasury general fund entity treasury general fund liability',
18221:'for fiduciary fbwt/component entity treasurys governmentwide cash account to record cash withdrawal. 50 50 page 35 sffas 31 fasab handbook,',
18222:'version 20 06/21 sffas 31 illustration 5 – closing entries for pro forma transactions illustrated preclosing trial balances after pro',
18223:'forma transactions: assets fiduciary fbwt fbwt nonfiduciary governmentwide cash fiduciary investments in treasury securities fiduciary investments in nontreasury securities liabilities',
18224:'liability for fiduciary fbwt liability for fbwt liability for fiduciary investments in treasury securities net position fiduciary netassets unexpendedappropriationsappropriations received',
18225:'unexpendedappropriationsused revenues and other financing sources fiduciary collectionscontributions from beneficiaries interest revenue/fiduciary transferin from federal reserve expendedappropriations expenses and miscellaneous',
18226:'items interest expense fiduciary disbursements to beneficiaries appropriation warrants issued totals component entity treasury gf treasury bpd 10 1,000 1,010',
18227:'1,000 500 10 1,000 1,000 50 50 1,500 60 50 50 50 50 50 0 0 0 page 36 sffas',
18228:'31 fasab handbook, version 20 06/21 sffas 31 closing entries: federal component entity fiduciarycollectionscontributionsfrombeneficiaries1,500interestrevenue/fiduciary60fiduciarydisbursementstobeneficiaries50fiduciarynetassets1,510 treasury bureau of public debt entity',
18229:'cumulative results of operations 50 interest expense 50 unexpendedappropriationsreceived 50 unexpendedappropriationscumulative 50 unexpendedappropriationscumulative 50 unexpendedappropriationsused 50 expendedappropriations 50 cumulative results',
18230:'of operations 50 treasury general fund entity cumulative results of operations 50 appropriation warrants issued 50 transferin of federal reserve',
18231:'revenue 50 cumulative results of operations 50 postclosing trial balances after pro forma transactions: assets fiduciary fbwtfbwt nonfiduciary governmentwide cash',
18232:'fiduciary investments in treasury securities fiduciary investments in nontreasury securities liabilities liability for fiduciary fbwt liability for fbwt liability for',
18233:'fiduciary investments in treasury securities net position fiduciary netassetstotals component entity treasury gf treasury bpd 10 1,000 1,010 1,000 500',
18234:'10 1000 1,000 1510 0 0 0 page 37 sffas 31 fasab handbook, version 20 06/21 sffas 31 illustration 6',
18235:'– illustration of federal component entity note disclosure of pro forma transactions federal component entityscheduleof fiduciaryactivityfortheperiodendedseptember30,20xxfy20x2fy20x1contributionsfrombeneficiaries1,500 intereston investments60 disbursementsto beneficiaries50',
18236:'increasein fiduciaryassets1,510 fiduciarynetassets,beginning ofyear increasein fiduciaryassets1,510 fiduciarynetassets,end ofyear1,510 fiduciarynet assetsasof september30,20xxfy20x2fy20x1cash and cash equivalents$10$ investmentsin treasurysecurities1,000 otherinvestments500 totalnetassets$1,510 note: the',
18237:'illustration above displays only the impact of the pro forma transactions upon the fiduciarynotedisclosure. seeappendix cfor amoredetailedillustration ofthefiduciary note disclosure.',
18238:'page 38 sffas 31 fasab handbook, version 20 06/21 sffas 31 illustration 7 – effect of pro forma transactions upon',
18239:'elimination worksheet for governmentwide reporting impact on governmentwide elimination worksheet assets fiduciary fund balance with treasury fund balance with treasury',
18240:'fiduciary investments in treasury securities fiduciary investments in nontreasury securities treasurys government wide cash account total assets liabilities treasurys liability',
18241:'for fiduciary fbwt treasurys liability for fbwt treasury bpd liability for fiduciary investments net position fiduciary net assets total liabilities',
18242:'and net position federal componententity notedisclosure treasurybureau of public debt treasurygeneral fund eliminations government wide balance sheet government wide note',
18243:'disclosure $ 1,000 $ 1,010 $ 1,000 $ 1,010 $ 10 $ 10 1,000 1,000 500 500 $ 1,510 $',
18244:'1,000 $ 1,000 $ $ 1,010 $ 10 1,000 $ 1,000 $ 1,000 $ 1,010 $ 10 1,000 $ 1,510',
18245:'$ $ $ 1,510 1,510 $ 1,510 $ 1,000$ 1,010 $ 1,000 $ 1,010 $ 1,510 note: the federal component',
18246:'entity’s fiduciary assets, liabilities and net assets shaded and in italics in the above table are reported in the fiduciary',
18247:'note disclosure only, and not recognized on the face of the component entity’s balance sheet or on the governmentwide balance',
18248:'sheet. treasury general fund liability for fiduciary fbwt is not eliminated. treasury bpd liability for fiduciary securities is not eliminated.',
18249:'note disclosure of fiduciary funds is required at the fr level. the illustration above displays only the impact of the',
18250:'pro forma transactions upon the eliminations for governmentwide reporting. seeappendix c for an illustration of the fiduciary note disclosure. page',
18251:'39 sffas 31 fasab handbook, version 20 06/21 sffas 31 appendix e: list ofabbreviations fasab federalaccountingstandardsadvisoryboard fbwt fund balance with',
18252:'treasury fr financial report of the u.s. government fy fiscal year gaap generallyacceptedaccountingprinciples gao governmentaccountabilityoffice omb office of management and',
18253:'budget sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards treasury bpd treasury bureau of public debt treasury fms treasury financial management service u.s. united',
18254:'states ussgl u.s. government standard general ledger page 40 sffas 31 fasab handbook, version 20 06/21 statement of federal financialaccounting',
18255:'standards 32: consolidated financial report of the united states government requirements: implementing statement of federal financial accounting concepts 4 “intendedaudience',
18256:'and qualitative characteristics for the consolidated financial reportofthe united states government” status issued september 28, 2006 effective date for periods',
18257:'beginning after september 30, 2005 affects sffas 1, par. 86 sffas 2, par. 56 sffas 3, par. 28, 30, 35,',
18258:'50, 55, 56, 66, 71, 78, 91, and 109. sffas 5, par. 117 and 121 sffas 6, par. 45, 83,',
18259:'84, 107 through 111 sffas 7, par. 43, 46, 65.1, and 65.3 sffas 10, par. 35 sffas 18, par, 10',
18260:'and 11 sffas 59 transitionally amends paragraphs 23 and adds a new paragraph 23a. affected by sffas 42 affects paragraphs',
18261:'12 and 24. summary thisstandardamendsstandardsissued priortojanuary2003 to specifydisclosurerequirements appropriate for the financial report of the united states government cfr based',
18262:'on the guidance containedin statement of federalfinancialaccounting conceptssffac4, intended audience and qualitative characteristics for the consolidated financial report of the',
18263:'united states government. page 1 sffas 32 fasab handbook, version 20 06/21 sffas 32 table of contents summary 1 introduction',
18264:'3 accounting standard 4 amendments to existing standards 4 disclosurerequirementsapplicable tothe u. s. governmentwide financialstatements 6 references to component entity',
18265:'reports 11 requirednote 1onsignificantaccountingpolicies disclosures 11 appendixa:basis for conclusions 12 appendix b: relationshipofamendments tonew requirements 17 appendix c:list ofabbreviations 30',
18266:'page 2 sffas 32 fasab handbook, version 20 06/21 sffas 32 introduction 1. statementoffederalfinancialaccountingstandards 24, selected standards for the consolidated',
18267:'financial report of the united states government, issued in january 2003 clarified that all existing and future standards apply to',
18268:'all federal entities unless a standard specifically provides otherwise. 2. this standard amends standards issued prior to january 2003 to',
18269:'specify disclosure requirements appropriate for the financial report of the united states government cfr based on the guidance contained in',
18270:'statement of federal financialaccounting concepts sffac 4, intended audience and qualitative characteristics for the consolidated financial report of the united',
18271:'states government. 3. some disclosure requirements contained in previously issued standards have been modified to allow aggregation and reduce detail',
18272:'for governmentwide reporting while other disclosure requirements have been eliminated because of excessive detailed information required that is inappropriate for',
18273:'a governmentwide report consistent with the guidance contained in sffac 4. 4. appendix b provides a nonauthoritative summary of the',
18274:'effect of these changes on disclosure requirements. it presents amended text of existing standards and related new requirements in a',
18275:'table format. 5. this standardalsocontains cfrdisclosurerequirementsfor note1significantaccounting policies. scope 6. this statement provides financial accounting standards for the cfr. it',
18276:'does not change financial accounting standards for component entity reports. effective date 7. this standard is effective for periods beginning',
18277:'after september 30, 2005. page 3 sffas 32 fasab handbook, version 20 06/21 sffas 32 accounting standard amendments to existing',
18278:'standards 8. statementoffederalfinancialaccountingstandards sffas1, accounting for selected assets and liabilities, is amended by inserting in par. 86 the following final',
18279:'sentence – “the u. s. governmentwide financial statements need not include this disclosure.” 9. sffas 2, accounting for direct loans',
18280:'and loan guarantees, par. 56 is amended by inserting the following final sentence – “the u. s. governmentwide financial statements',
18281:'need not include this disclosure.” 10. sffas 3, accounting for inventory and related property, is amended as follows: a. the',
18282:'text “the above listed disclosure requirements are not applicable to the u. s. governmentwide financial statements. sffas 32 provides for',
18283:'disclosures applicable to the u.s. governmentwide financial statements for these activities.” is added following the existing text of these paragraphs:',
18284:'par. 28, 35, 50, 56, 66, 78, 91, and 109. b. the text “the u.s. governmentwide financial statements need not',
18285:'separately report or disclose the difference between the carrying amount of the inventory and its expected net realizable value.” is',
18286:'added to par. 30 as the final sentence. c. the text “the u.s. governmentwide financial statements need not separately report',
18287:'or disclose any difference between the carrying amount of the stockpile materials held for sale and their estimated selling price.”',
18288:'is added to par. 55 as the final sentence. d. the text “the u.s. governmentwide financial statements are not subject',
18289:'to the disclosure requirements for forfeited property that cannot be sold due to legal restrictions.” is added to par. 71',
18290:'as the final sentence. 11. sffas 5, accounting for liabilities of the federal government, is amended as follows: a. the',
18291:'text “the u.s governmentwide financial statements need not follow the required disclosures described below.” is added to par. 117 as',
18292:'the final sentence. b. the text “the u.s. governmentwide financial statements need not separately report or disclose all components of',
18293:'the liability for future policy benefits with a description of each amount and an explanation of its projected use and',
18294:'any other potential uses.” is added to par. 121 as the final sentence. page 4 sffas 32 fasab handbook, version',
18295:'20 06/21 sffas 32 12. sffas 6, accounting for property, plant, and equipment, is amended as follows: a. the text',
18296:'“the above listed disclosure requirements are not applicable to the u.s. governmentwide financial statements. sffas 32 provides for disclosures applicable',
18297:'to the u.s. governmentwide financial statements for these activities.” is added following the existing text for par. 45. b. [rescinded',
18298:'by sffas 42.] c. [rescinded by sffas 42.] d. the text “the u.s. governmentwide financial statements need not disclose the',
18299:'sources of cleanup requirements.” is added to par. 107 as the final sentence. e. the text “the u.s. governmentwide financial',
18300:'statements need not disclose the method for assigning estimated cleanup costs to current operating periods.” is added to par. 108',
18301:'as the final sentence. f. the text “sffas 32 provides for disclosure requirements for the u.s. governmentwide financial statements regarding',
18302:'the unrecognized portion of estimated total cleanup cost associated with general pp&e.” is added to par. 109 as the final',
18303:'sentence. g. the text “the u.s. governmentwide financial statements need not disclose material changes in total estimated cleanup costs due',
18304:'to changes in laws, technology, plans, or the portion of the changein estimatethat relatestopriorperiodoperations.” is added topar. 110 as the',
18305:'final sentence. h. thetext “theu.s. governmentwidefinancialstatementsneednotdisclosethenatureof estimatesandinformationregardingpossiblechangesduetoinflation,deflation, technology, or applicable laws and regulations.” is added to par. 111 as the',
18306:'final sentence. 13. sffas 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting,',
18307:'is amended as follows: a. thetext ”theu.s. governmentwidefinancialstatementsneednotbreakoutgrosscosts of providing goods, services, benefit payments, or grants that did not earn',
18308:'exchange revenue, separately from those programs that earned exchange revenue.” is added to par. 43 as the final sentence. b.',
18309:'the text “the above listed disclosure requirements are not applicable to the u.s. governmentwide financial statements.” is added following the',
18310:'existing text for par. 46. page 5 sffas 32 fasab handbook, version 20 06/21 sffas 32 c. the text “the',
18311:'u.s. governmentwide financial statements need not disclose factors affecting collectibility and timing of categories of accounts receivable and the amounts',
18312:'involved.” is added to par. 65.1 as the final sentence. d. the text “the u.s. governmentwide financial statements need not',
18313:'disclose cumulative cash collections and refunds by tax year and type of tax for the reporting period and for sufficient',
18314:'priorperiodsto illustrate1thehistoricaltimingoftaxcollectionsand refunds,and 2 any material trends in collection and refund patterns. sffas 32 providesfor disclosures applicable to the u.s.',
18315:'governmentwide financial statements.” is added to par. 65.3 as the final sentences. 14. sffas 10, accounting for internal use software,',
18316:'par. 35 is amended by inserting the text “the above listed disclosure requirements are not applicable to the u.s. governmentwide',
18317:'financial statements. sffas 32 provides for disclosures applicable to the u.s. government wide financial statements for these activities.” is added',
18318:'following the existing text for par. 35. 15. sffas18, amendments to accounting standards for direct loans and loan guarantees,is amended',
18319:'as follows: a. the text “the u.s. governmentwide financial statements need not disclose a reconciliation between the beginning and ending',
18320:'balancesof the subsidy cost allowance for the outstanding direct loans and the liability for outstanding loan guarantees reported in the',
18321:'u.s. governmentwide financial statements.” is added to par. 10 as the final sentence. b. the text “the above listed disclosure',
18322:'requirements are not applicable to the u.s. governmentwide financial statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide',
18323:'financial statements for these activities.” is added following the existing text for par. 11. disclosure requirementsapplicable to the u. s.',
18324:'governmentwide financial statements inventory 16. the u.s. governmentwide financial statements should include the following disclosures1: 1 disclosure is “reporting information',
18325:'in notes or narrative regarded as an integral part of the basic financial statement.” page 6 sffas 32 fasab handbook,',
18326:'version 20 06/21 sffas 32 a. broad descriptions of inventory categories, b. a general reference to component entity2 reports, and',
18327:'c. balances for each of the following categories of inventory: 1. inventory held for current sale, 2. inventory held in',
18328:'reserve for future sale, 3. excess, obsolete, and unserviceable inventory; and 4. inventory held for repair. operating materials and supplies',
18329:'17. the u.s. governmentwide financial statements should include the following disclosures: a. broad descriptions of operating materials and supplies categories,',
18330:'b. a general reference to component entity reports, and c. balances for each of the following categories of operating materials',
18331:'and supplies: 1. operating materials and supplies held for use, 2. operating materials and supplies held in reserve for future',
18332:'use, and 3. excess, obsolete, and unserviceable operating materials and supplies. stockpile materials 18. the u.s. governmentwide financial statements should',
18333:'include the following disclosures: a. broad descriptions of stockpile material categories, 2the term “component entity” is used to distinguish between',
18334:'the u.s. federal government and its components. the u.s. federal government is composed of organizations that manage resources and are',
18335:'responsible for operations, i.e., delivering services. these include major departments andindependent agencies, which are generally divided into sub organizations, i.e.,',
18336:'smaller organizational units with a wide variety of titles, including bureaus, administrations, agencies, and corporations. sffac no. 2, entity and',
18337:'display, paragraphs 1112 page 7 sffas 32 fasab handbook, version 20 06/21 sffas 32 b. a general reference to component',
18338:'entity reports, and c. balances for each of the following categories of stockpile materials: 1. stockpile materials, and 2. stockpile',
18339:'materials held for sale. seized property 19. the u.s. governmentwide financial statements should include the following disclosures: a. a broad',
18340:'description of seized property, and b. a general reference to component entity reports. forfeited property 20. the u.s. governmentwide financial',
18341:'statements should include the following disclosures: a. a broad description of forfeited property, and b. a general reference to component',
18342:'entity reports. foreclosed property 21. the u.s. governmentwide financial statements should include the following disclosures: a. a broad description of',
18343:'foreclosed property, and b. a general reference to component entity reports. commodities 22. the u.s governmentwide financial statements should include',
18344:'the following disclosures: a. a broad description of commodities, and b. a general reference to component entity reports. page 8',
18345:'sffas 32 fasab handbook, version 20 06/21 sffas 32 property, plant, and equipment 23. the u.s. governmentwide financial statements should',
18346:'include the following [rsi information: fy 20222025] [disclosures: fy 2026]: a. abroaddescriptionofpp&e b. for general pp&e land i. anoteonthebalance sheetthat',
18347:'[presents rsi: fy 20222025] [discloses: fy 2026] information about general pp&e land and permanent land rights which includes: 1. aconcise',
18348:'statementincluding ageneraldescriptionofthe federal governments land explaining how its federal land relates to the mission of the federal government. 2. [rsi',
18349:'information: fy 20222025] [a disclosure: fy 2026] of estimated acres by predominant use subcategories and estimated acres of land held',
18350:'for disposal or exchange by the federal government. c. the cost excluding land and permanent land rights, associated accumulated depreciation,',
18351:'and book value by major class. d. ageneral referencetoagency reportsfor additionalinformationaboutgeneralpp&e and general pp&e land. 23a. the balance sheet should',
18352:'reference a note that [presents rsi: fy 20222025] [discloses the: fy 2026] information2.1 about general pp&e land and permanent land',
18353:'rights required by paragraph 23, but no asset dollar amounts should be shown. existing display and disclosures2.2 should continue during',
18354:'the transition period through fiscal year 2025 and cease in fiscal year 2026 when superseded by the transition of the',
18355:'rsi information to note disclosures. if general pp&e land and information to note disclosures. if general pp&e land and stewardship',
18356:'land are presented in separate notes to the financial statements, include cross references between the notes. 2.1 additionally, such information',
18357:'may include a description of the different uses of land managed by the entity, its predominant activities, condition information, and',
18358:'policy initiatives in effect during the reporting period. 2.2 existing disclosures at paragraph 23 are those which are in effect',
18359:'for governmentwide reporting prior to the amendments contained at paragraph 23. page 9 sffas 32 fasab handbook, version 20 06/21',
18360:'sffas 32 deferred maintenance 24. [rescinded by sffas 42.] cleanup cost 25. the u.s. governmentwide financial statements should include the',
18361:'following disclosures: a. a broad description of cleanup cost, b. theunrecognizedportionofestimatedtotalcleanupcostsassociatedwithgeneralpp&e, and c. a general reference to component entity reports.',
18362:'taxes 26. the u.s. governmentwide financial statements should disclose the cumulative cash collections and refunds by tax year and type',
18363:'of tax for the reporting periods. direct loans and loan guarantees 27. the u.s. governmentwide financial statements should include the',
18364:'following disclosures: a. a broad description of direct loan and loan guarantee programs, b. the face value of loans outstanding',
18365:'for direct loan and loan guarantee programs, c. the long term cost3 of loans and guarantees outstanding for direct loan',
18366:'and loan guarantee programs, d. net loans receivable for direct loan programs, e. the amount guaranteed by the government for',
18367:'guaranteed loan programs, f. the subsidy expense for the reporting year for direct loan and loan guarantee programs, and 3“longterm',
18368:'cost of direct loans and loan guarantees” is the sum of 1 the subsidy cost allowance for post1991 direct loans,',
18369:'2 the liability for post1991 and pre1992 loan guarantees, and 3 allowance for uncollectible amounts for post1991 direct loans and',
18370:'loan guarantees. page 10 sffas 32 fasab handbook, version 20 06/21 sffas 32 g. a general reference to component entity',
18371:'reports. references to component entity reports 28. for each “general reference to component entity reports” required in par. 16 through',
18372:'27 above, it is required that the preparer indicate, in the relevant note, agencies that are disclosing significant detailed information',
18373:'about the item. selecting individual agencies to refer readers to requires judgment. the preparer should consider both quantitative and qualitative',
18374:'criteria in selecting such agencies. required note 1 on significantaccounting policies disclosures 29. describe the reporting entity and identify its',
18375:'major components. summarize the accounting principles and methods of applying those principles that management has concluded are appropriate for presenting',
18376:'fairly the entity’s assets, liabilities, net cost of operations, and changes in net position. disclosure of accounting policies should identify',
18377:'and describe the accounting principles followed by the reporting entity and the methods of applying those principles. in general, the',
18378:'disclosure should encompass important judgments as to the valuation, recognition, and allocation of assets, liabilities, expenses, revenues and other financing',
18379:'sources. disclosuresof accounting policiesshould not duplicate details presented elsewhere as part of the notes to the financial statements. 30. in',
18380:'addition, the summary of significant accounting policies should disclose any significant changes in the composition of the reporting entity or',
18381:'significant changes in the manner in which the reporting entity aggregates information for financial reporting purposes. these changes, in effect,',
18382:'result in a new reporting entity, and their impact should be reported by restating the financial statements for all prior',
18383:'periods presented in order to show the new reporting entity for all periods presented. the provisions of this statement need',
18384:'not be applied to immaterial items. page 11 sffas 32 fasab handbook, version 20 06/21 sffas 32 appendixa: basis for',
18385:'conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in this standard. it includes',
18386:'the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others.',
18387:'the standards enunciated in this statementnot the material in this appendixshould govern the accounting for specific transactions, events or conditions.',
18388:'this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section directing',
18389:'the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are updated',
18390:'for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for',
18391:'conclusions of the amending statement for the rationale for each amendment. background 31. thefiscalyear 2003cfrwas discussedbytheboardmembers attheapril2004fasab meeting. during the',
18392:'discussion of the fy 2003 cfr, several board members indicated a desire for the cfr to be more accessible to',
18393:'the intended audience identified in sffac 4: citizens and citizen intermediaries. the members believed this would require a concise presentation.',
18394:'the member representing the department of the treasury treasury agreed and explained that the current cfr omitted certain required disclosures',
18395:'for a variety of reasons. hadthesedisclosurerequirementsbeenincludedthefy2003cfritwouldhave been much less accessible. the member noted that earlier fasab standards made no distinction',
18396:'between component entity disclosure requirements and cfr disclosure requirementsand to fullycomply with all disclosure requirementswould furtherlengthen the cfr. 32. membersagreedthatitwouldbeappropriatetoreviewdisclosurerequirementsestablished',
18397:'priorto theissuance of sffac 4andtailor cfrdisclosure requirementstomeet thecurrent concepts. this approach has been adopted for standards developed since sffac 4',
18398:'was issued and the board indicated a willingness to review past standards if resources were not diverted from ongoing projects.',
18399:'chairman david mosso asked treasury to prepare a list of items it does not consider appropriate to the cfr in',
18400:'light of sffac 4. 33. at the october 2004 fasab meeting, the board considered a proposal prepared by treasury’s financial',
18401:'management service fms. the project proposal included a table of items identified for amendment. based on treasury’s offer to staff',
18402:'the project, the board agreed to go forward with the project. page 12 sffas 32 fasab handbook, version 20 06/21',
18403:'sffas 32 objectives of the standard 34. at the may 45, 2005 fasab meeting, board members held a general discussion',
18404:'of the issues associated with the project. sffac 4 notes that the cfr has grown in size and complexity and',
18405:'some have questioned whether the cfr is trying to satisfy too many audiences with different needs in one format. sffac',
18406:'4 provides that citizens and citizen intermediaries should be the audience to whom the cfr is primarily directed and it',
18407:'is particularly fundamental that the cfr be timely and understandable to the primary audience. 35. fasab has been diligent in',
18408:'ensuring that its requirements are consistent with the guidance contained in sffac 4 since the january 2003 issuance of sffas',
18409:'24. sffas 24 clarified that sffas’s apply to all federal entities unless a current or subsequent standard specifically provides otherwise.',
18410:'many earlier sffas’s were issued without considering the need for less detailed disclosures for the cfr. 36. this sffas revisits',
18411:'standards issued before january 2003 and amends many of those standards to specify substitute disclosure requirements for the cfr or',
18412:'eliminate certain requirements. in its deliberations the board assumed that the disclosures being amended were material disclosures but understood that',
18413:'sffac 4 was issued to provide guidance in addressing material items since immaterial items are not required to be reported',
18414:'or disclosed by fasab standards. 37. the basis for the board’s actions with respect to this sffas emanates entirely from',
18415:'the need to implement sffac 4 and do retroactively what the board has done prospectively since january 2003. however, the',
18416:'board has indicated that disclosure requirements eliminated or modified for the cfr should not result in allowing the preparer to',
18417:'exclude significant unusual items needed to explain changes in balances between years. 38. this standard eliminates or modifies disclosure requirements',
18418:'that are useful for assessing operating performance for a particular program within an agency. for example, disclosures of restrictions on',
18419:'the use of foreclosed property and average holding period for foreclosed property have been eliminated. also, disclosures of the gross',
18420:'cost associated with exchange revenue and certain pricing policies have been eliminated. if information relevant to assessing operating performance for',
18421:'individual programs were included in the cfr it would not be concise.aconcise cfr will be more appealing and therefore more',
18422:'accessible to citizens and citizen intermediaries. the board believes that including references to other sources of information appropriately balances the',
18423:'appeal of a concise cfr with the disaggregated information necessary to assess operating performance. 39. ingeneral,thespecificchangesreducethelevelofdetailprovidedregardingspecificassets and liabilities. such disaggregated',
18424:'information is inconsistent with sffac 4. for readers page 13 sffas 32 fasab handbook, version 20 06/21 sffas 32 seeking',
18425:'additionaldetail forparticular items, theboard proposesto substitute a referenceto component entity reports disclosing significant detailed information about the item. 40. significant',
18426:'accounting policies disclosures are required by this statement to ensure that the preparer of the cfr informs readers about management’s',
18427:'conclusions regarding fair presentationandthebasisofsuchconclusions. thisisintendedtoaddressconcernsabout thesufficiencyofdisclosuresin viewoftheelimination ormodificationof disclosuresthat are required for agency level reporting. exposure draft 41. fasab published',
18428:'the exposure draft ed consolidated financial report of the united states government requirements: implementing sffac 4 “intended audience and qualitative',
18429:'characteristics for the consolidated financial report of the united states government”, on october 27, 2005. upon release of the ed,',
18430:'notices and/or press releases were provided to: the federal register, the fasab news, the journal of accountancy, aga today, the',
18431:'cpa journal, government executive, the cpa letter, government accounting and auditing update, jfmip news, the financial statementaudit network, the federal',
18432:'financial managers council, and committees of professional associations commenting on past exposure drafts. 42. twelve letters were received from the',
18433:'following sources: federal nonfederal internal external users, academics, others 0 6 auditors 2 1 preparers and financial managers 3 0',
18434:'responses to the ed 43. the majority of the respondents agreed with the proposed changes to the disclosure requirements for',
18435:'the cfr. additionally, a majority of respondents felt disclosure requirements for component entity reports should be the same as those',
18436:'required in the cfr. 44. many respondents believed it would be useful to a provide a summary report designed for',
18437:'citizen users, b develop a central link to agency reports on the website, and c study the page 14 sffas',
18438:'32 fasab handbook, version 20 06/21 sffas 32 needsof citizenusers. the boardagrees that these are useful ideas and willconsider these',
18439:'suggestions as it prioritizes future work. 45. specific concerns raised by respondents related to the omission of disclosures of liabilities',
18440:'not covered by budgetary resources, forfeited property not available for sale due to legal restrictions, details regarding modifications to loans',
18441:'and loan guarantees, and the process used by the financial management service to prepare the cfr. the board did not',
18442:'believe that the concerns outweighed the benefits derived from reducing the disclosures required for the cfr. boardapproval and dissent 46.',
18443:'this statement was approved for issuance by nine members of the board. mr. dacey dissented. 47. mr. dacey believes differences',
18444:'in reporting between the cfr and other federal entities should be limited to unique or unusual reporting issues present in',
18445:'the federal reporting environment. 48. mr. dacey noted that other accounting standard setters do not differentiate reporting requirementsbetween consolidatedandcomponent entities.',
18446:'however, basedonmateriality, theinformation presented inconsolidatedfinancialstatementstypicallyisaggregated andin less detail than in component entity financial statements. mr. dacey also noted that fasab',
18447:'standards reinforce that the standards need not be applied to immaterial items. 49. mr. dacey believes that certain information that',
18448:'is 1 required in component entity reports, 2 generally consistent with requirements of other accounting standard setters, and 3 material',
18449:'to the cfr, should be required to be presented in the cfr. such information, some of which is currently reported',
18450:'in the cfr, relates to disclosure of: a. the general composition of and the basis for determining values for inventory,',
18451:'operating materials and supplies, and stockpile materials, b. estimated useful lives and depreciation methods for each major class of property,',
18452:'plant, and equipment, and related capitalization thresholds, and c. certain credit reform information for material programs, currently reported in the',
18453:'cfr. 50. basedonthegovernmentaccountabilityoffice’s analysis, mr. daceybelievesthatthe incrementalinformationnecessarytoreporttheaboveinformationandconformwithexisting page 15 sffas 32 fasab handbook, version 20 06/21 sffas 32 fasab standards',
18454:'would likely be nominal in relation to the current cfr i.e., less than one page. 51. mr. dacey notes the',
18455:'“basis for conclusions” indicates that if the currently required information was included in the cfr, the cfr would be less',
18456:'accessible to users. in other words, it would lengthen the cfr and make it less appealing to users. however, mr.',
18457:'dacey does not believe that the length would be significantly affected. also, requiring users to locate and read individual entity',
18458:'financial statements to obtain such information would increase theburden on usersof thecfrand likelyresult in theinformation being lesseasily accessible to users.',
18459:'while mr. dacey strongly supports the notion that financial information about the federal government as a whole should be presented',
18460:'in a manner that appeals to the broadest range of potential users, he feels there are other means to meet',
18461:'this objective. for example, mr. dacey noted that several agencies publish brief summary annual reports, in addition to their financial',
18462:'statements, that are intended for broader distribution and are written to be more understandable to a nonfinancial user. page 16',
18463:'sffas 32 fasab handbook, version 20 06/21 sffas 32 appendix b: relationship ofamendments to new requirements thedisclosureitemsaddressedbythisstatement haveeitherbeenmodifiedto allowaggregation or',
18464:'rescinded to reduce detail for governmentwide reporting consistent with guidance contained in statement of federal financialaccounting concepts 4 “intendedaudience and',
18465:'qualitative characteristicsfor the consolidated financial report of the unitedstates government.” sffac 4 for purposes of understanding the impacts of the',
18466:'provisions of this statement, this appendix presents the text of amendments to existing standards along with the text of the',
18467:'new requirements applicable to the cfr. relationship of amendments to new requirements see par. text of amendment to existing standards',
18468:'see par. summary of changes 8 the reporting entity should disclose the amount of current liabilities not covered by budgetary',
18469:'resources. the u. s. governmentwide financial statements need not includethis disclosure. sffas 1.86 no cfr disclosure would be required. 9',
18470:'disclosure is made in notes to financial statements to explain the nature of the modification of direct loans or loan',
18471:'guarantees, the discount rate used in calculating the modification expense, and the basis for recognizing a gain or loss related',
18472:'to the modification. the u. s. government wide financial statements need not include this disclosure. sffas 2.56 27 and 28',
18473:'no cfr disclosure would be required regarding modifications of direct loans or loan guarantees. a general reference to agency reports',
18474:'would be provided. page 17 sffas 32 fasab handbook, version 20 06/21 sffas 32 10 the criteria considered by management',
18475:'in identifying inventory held in reserve for future sale shall be disclosed. examples of factors to be considered in developing',
18476:'the criteria are 1 all relevant costs associated with holding these items including the storage and handling costs, 2 the',
18477:'expected replacement cost when needed, 3 the time required to replenish inventory, 4 the potential for deterioration or pilferage; and,',
18478:'5 the likelihood that a supply of items will be available in the future. the above listed disclosurerequirements arenotapplicabletotheu.s. governmentwide',
18479:'financial statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. sffas 3.28 the',
18480:'difference between the carrying amount of the inventory before identification as excess, obsolete, or unserviceable and its net realizable value',
18481:'shall be recognized as a loss or gain and either separately reported or disclosed. the u.s. governmentwide financial statements need',
18482:'not separately report or disclose the difference between the carrying amount of the inventory and its expected net realizable value.',
18483:'sffas 3.30 disclosures of 1 general composition of inventory; 2 basis for determining inventory values including the valuation method and',
18484:'any cost flow assumptions; 3 changes from prior year’s accounting methods if any; 4 balances for each of the following',
18485:'categories of inventory – inventory held for current sale, inventory held in reserve for future sale, excess, obsolete and unserviceable',
18486:'inventory, and inventory held for repair unless otherwise presented on the financial statements; 5 restrictions on the sale of material;',
18487:'6 the decision criteria for identifying the category to which inventory is assigned; and, 7 changes in the criteria for',
18488:'identifying the category to which inventory is assigned.the above listed disclosure requirements are not applicable to the u.s. governmentwide financial',
18489:'statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. sffas 3.35 16, 28,',
18490:'29 and 30 the cfr should provide: 1 broad descriptions of inventory categories; 2 a general reference to agency reports',
18491:'that disclose significant detailed information about inventory; and, 3 balances for each of the following categories of inventory – inventory',
18492:'held for current sale, inventory held in reserve for future sale, excess, obsolete and unserviceable inventory, and inventory held for',
18493:'repair. in addition, the cfr should disclose significant accounting principles used and the methods of applying those principles. page 18',
18494:'sffas 32 fasab handbook, version 20 06/21 sffas 32 10 disclosures of: 1 general composition of operating materials and supplies;',
18495:'2 basis for determining operating materials and supplies values including valuation method and any cost flow assumptions; 3 changes from',
18496:'prior year’s accounting methods, if any; 4 balances for operating materials and supplies held for use, operating materials and supplies',
18497:'held in reserve for future use, and excess, obsolete and unserviceable operating materials and supplies; 5 restrictions on the use',
18498:'of material; 6 decision criteria for identifying the category to which operating materials and supplies are assigned; and, 7 changes',
18499:'in the criteria for identifying the category to which operating materials and supplies are assigned. the above listed disclosurerequirements arenotapplicabletotheu.s.',
18500:'governmentwide financial statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. sffas 3.50',
18501:'17, 28, 29 and 30 the cfr should provide: 1 broad descriptions of operating materials and supplies categories; 2 a',
18502:'general reference to agency reports that disclose significant detailed information about operating materials and supplies; and,3 balances for each of',
18503:'the following categories of operating materials and supplies – operating materials and supplies held for use, operating materials and supplies',
18504:'heldinreserve for future use, and excess, obsolete and unserviceable operating materials and supplies. in addition, the cfr should disclose significant',
18505:'accounting principles used and the methods of applying those principles. page 19 sffas 32 fasab handbook, version 20 06/21 sffas',
18506:'32 10 for stockpile materials held for sale, any difference between the carrying amount and their estimated selling price shall',
18507:'be disclosed. the u.s. governmentwide financial statements need not separately report or disclose any differencebetween thecarrying amount of thestockpile materials',
18508:'held for sale and their estimated selling price. sffas 3.55 disclosures of: 1 general composition of stockpile materials; 2 basis',
18509:'for valuing stockpile materials including valuation method and any cost flow assumptions; 3 changes from prior year’s accounting methods if',
18510:'any; 4 restrictions on the use of materials; 5 balances for stockpile materials and stockpile materials held for sale; 6',
18511:'decision criteria for categorizing stockpile materials as held for sale; and, 7 changes in criteria for categorizing stockpile materials as',
18512:'held for sale. the above listed disclosure requirements are not applicable to the u.s. governmentwide financial statements. sffas 32 provides',
18513:'for disclosures applicable to the u.s governmentwide financial statements for these activities. sffas 3.56 18, 28, 29 and 30 the',
18514:'cfr should provide: 1 broad descriptions of stockpile material categories; 2 a general reference to agency reports that disclose significant',
18515:'detailed informationabout stockpile materials; and, 3 balances for each of the following categories of stockpile materials – stockpile materials and',
18516:'stockpile materials held for sale. in addition, the cfr should disclose significant accounting principles used and the methods of applying',
18517:'those principles. 10 disclosures about seized property: 1 explanation of what constitutes a seizure and a general description of the',
18518:'composition of seized property; 2 methods of valuing seizures; 3 changes from prior year’s accountingmethods if any; 4 analysis of',
18519:'change in seized property including the dollar value and number of seized properties that are a on hand at the',
18520:'beginning of the year, b seized during the year, c disposed of during the year, and d on hand at',
18521:'the end of the year as well as known liens or other claims against the property. this information should be',
18522:'presented by type of seized property and method of disposition where material. the above listed disclosure requirements are not applicable',
18523:'to the u.s. governmentwide financial statements. sffas 32 provides for disclosures applicable to the u.s governmentwide financial statements for these',
18524:'activities. sffas 3.66 19, 28, 29 and 30 the cfr should provide a broaddescription of seized property and a general',
18525:'reference to agency reports that disclose significant detailed information about seized property. page 20 sffas 32 fasab handbook, version 20',
18526:'06/21 sffas 32 10 forfeited property that cannot be sold due to legal restrictions but which may be either donated',
18527:'or destroyed shall be subject to the disclosure requirements described below see paragraph 78. however, no financial value shall be',
18528:'recognized for these items. the u.s. government wide financial statements are not subject to the disclosure requirements for forfeited property',
18529:'that cannot be sold due to legal restrictions. sffas 3.71 disclosures for forfeited property: 1 composition of forfeited property; 2',
18530:'methods of valuing forfeited property; 3 restrictions on use or disposition of forfeited property; 4 changes from prior year’s accounting',
18531:'method if any; 5 analysis of change in forfeited property providing the dollar value and number of forfeitures that a',
18532:'are on hand at the beginning of the year, b are made during the year, c are disposed of during',
18533:'the year and the method of disposition, and d are on hand at the end of the year this informationwould',
18534:'bepresented by type of property forfeited where material. ; 6 if available an estimate of the value of property or',
18535:'funds to be distributed to federal state and local agencies in future reporting periods. the above listed disclosure requirements are',
18536:'not applicable to the u.s. governmentwide financial statements. sffas 32 provides for disclosures applicable to the u.s governmentwide financial statements',
18537:'for these activities. sffas 3.78 20, 28, 29 and 30 the cfr should provide a broad description of forfeited property',
18538:'and a general reference to agency reports that disclose significant detailed information about forfeited property. 10 disclosures when the government',
18539:'acquires foreclosed assets in full or partial settlement of a direct or guaranteed loan: 1 valuation basis used for foreclosed',
18540:'property, 2 changes from prior years accounting methods, if any, 3 restrictions on the use/disposal of the property, 4 balances',
18541:'in the categories described above i.e., pre1992 foreclosed property and post1991 foreclosed property, 5 number of properties held and average',
18542:'holding period by type or category, 6 number of properties for which foreclosure proceedings are in process at the end',
18543:'of the period. the above listed disclosure requirements are not applicable to the u.s. governmentwide financial statements. sffas 32 provides',
18544:'for disclosures applicable to the u.s governmentwide financial statements for these activities. sffas 3.91 21, 28, 29 and 30 the',
18545:'cfr should provide a broad description of foreclosed property and a general reference to agency reports that disclose significant detailed',
18546:'information about foreclosed property. page 21 sffas 32 fasab handbook, version 20 06/21 sffas 32 10 disclosures for goods held',
18547:'under price support and stabilization programs commodities: 1 basis for valuing commodities including the valuation method and any cost flow',
18548:'assumptions; 2 changes from prior year’s accounting method if any; 3 restrictions on the use, disposal, or sale of commodities;',
18549:'4 an analysis of change in the dollar value and volume of commodities, including those a on hand at the',
18550:'beginning of the year, b acquired during the year, c disposed of during the year by method of disposition, d',
18551:'on hand at the end of the year, e on hand at year’s end and estimated to be donated or',
18552:'transferred during the coming period, and f that may be received as a result of surrender of collateral related to',
18553:'nonrecourse loans outstanding.the analysis should also show thedollar value and volume of purchase agreement commitments. the above listed disclosure requirements',
18554:'are not applicable to the u.s. governmentwide financial statements. sffas 32 provides for disclosures applicable to the u.s governmentwide financial',
18555:'statements for these activities. sffas 3.109 22, 28, 29 and 30 the cfr should provide a broad description of commoditiesandageneral',
18556:'reference to agency reports that disclose significant detailed information about commodities. 11 the u.s. governmentwide financial statements need not follow',
18557:'the required disclosures described below. disclosures required by applicable private sector standards: fasb sfas 60 accounting and reporting by insurance',
18558:'enterprises, fasb sfas 97accounting and reporting by insurance enterprises for certain long duration contracts and for realized gains and losses',
18559:'from the sale of investments, and fasb sfas 120 accounting and reporting by mutual life insurance enterprises and by insurance',
18560:'enterprises for certain long duration participating contracts andaicpa statement of position sop 951 accounting for certain insurance activities of mutual',
18561:'life insurance enterprises. sffas 5.117 no cfr disclosure would be required. page 22 sffas 32 fasab handbook, version 20 06/21',
18562:'sffas 32 11 additional whole life insurance disclosure required by fasab: all components of the liability for future policy benefits',
18563:'i.e., the net level premium reserve for death and endowment policy and the liability for terminal dividends should be separately',
18564:'disclosed in a footnote with a description of each amount and an explanation of its projected use and any other',
18565:'potential uses e.g., reducing premiums, determining and declaring dividends available, and/or reducing federal support in the form of appropriations related',
18566:'to administrative cost or subsidies. the u.s. governmentwide financial statements need not separately report or disclose all components of the',
18567:'liability for future policy benefits with a description of each amount and an explanation of its projected use and any',
18568:'other potential uses. sffas 5.121 no cfr disclosure would be required. 12 the following are minimum general pp&e disclosure requirements:',
18569:'1 the cost, associated accumulated depreciation, and book value by major class; 2 the estimated useful lives for each major',
18570:'class; 3 the methods of depreciation for each major class; 4 capitalization thresholds including any changes in thresholds during the',
18571:'period; and, 5 restrictions on the use or convertibility of general pp&e. the above listed disclosure requirements are not applicable',
18572:'to the u.s. governmentwide financial statements. sffas 32 provides for disclosures applicable to the u.s governmentwide financial statements for these',
18573:'activities. sffas 6.45 23, 28, 29 and 30 the cfr should provide: 1 a broad description of pp&e; 2 the',
18574:'cost, associated accumulated depreciation, and book value by major class; and, 3 a general reference to agency reports that disclose',
18575:'significant detailed information about pp&e. in addition, the cfr should disclose significant accounting principles used and the methods of applying',
18576:'those principles. page 23 sffas 32 fasab handbook, version 20 06/21 sffas 32 12 at a minimum, the following required',
18577:'supplementary information shall be presented for all pp&e: identification of each major class of asset for which maintenance has been',
18578:'deferred and the method of measuring deferred maintenance for each major class of pp&e. if the condition assessment survey method',
18579:'of measuring deferred maintenance is used, the following should be presented for each major class of pp&e: 1 description of',
18580:'requirements or standards for acceptable operating condition; 2 any changes in the condition requirements or standards; and, 3 asset condition',
18581:'and a range estimate of the dollar amount of maintenanceneeded to return it to its acceptable operating condition. if the',
18582:'total lifecycle cost method is used, the following should be presented for each major class of pp&e: 1 the original',
18583:'date of maintenance forecast and explanation for any changes to the forecast; 2 prior year balance of cumulative deferred maintenance',
18584:'amount; 3 the dollar amount of maintenance that was defined by professionals who designed, built, or manage sic the pp&e',
18585:'as required maintenance for the period; 4 the dollar amount of maintenance actually performed during the period; 5 the difference',
18586:'between forecast and actual maintenance; 6 any adjustments to scheduled amounts deemed necessary by pp&e managers; and, 7 the ending',
18587:'cumulative balance for the period for each major class of asset experiencing deferred maintenance. the above listed required supplementary information',
18588:'is not applicable to the u.s. governmentwide financial statements. sffas 32 provides for requiredsupplementary informationapplicable totheu.s governmentwidefinancial statements for these',
18589:'activities. sffas 6.83 optional rsi reporting – stratification between critical and noncritical amounts of maintenance needed to return each major',
18590:'class of asset category to its acceptable operating condition. if management elects to report critical and noncritical amounts, the report',
18591:'shall include management’s definition of these categories. the u.s. governmentwide financial statements need not separately report stratification between critical and',
18592:'noncritical amounts of maintenance needed to return each major class of asset to its acceptable operating condition as wellas management’s',
18593:'definition of these categories. sffas 32 provides for optional information applicable to the u.s. government wide financial statements for these',
18594:'activities. sffas 6.84 24, 28, 29 and 30 the cfr should provide: 1 a broad description of deferred maintenance; 2',
18595:'amounts for each major asset category i.e., general property, plant, and equipment, heritage assets, and stewardship land for which maintenance',
18596:'has been deferred; 3 a general reference to agency reports that report significant detailed information about deferred maintenance; and, 4',
18597:'optional reporting of the stratification between critical and noncritical amounts of maintenance needed to return each major asset category to',
18598:'its acceptable operating condition. in addition, the cfr should disclose significant accounting principles used and the methods of applying those',
18599:'principles. page 24 sffas 32 fasab handbook, version 20 06/21 sffas 32 12 disclosures of: the sources applicable laws and',
18600:'regulations of cleanup requirements. the u.s. governmentwide financial statements need not disclose the sources of cleanup requirements. sffas 6.107 the',
18601:'method for assigning estimated cleanup cost to current operating periods e.g., physical capacity versus passage of time. the u.s. governmentwide',
18602:'financial statements need not disclose the method for assigning estimated cleanup costs to current operating periods. sffas 6.108 for cleanup',
18603:'costs associated with general pp&e, the unrecognized portion of estimated total cleanup costs e.g., the estimated total cleanup costs less',
18604:'the cumulative amounts charged to expense at the balance sheet date. sffas 32 provides for disclosure requirements for the u.s.',
18605:'governmentwide financial statements regarding the unrecognized portion of estimated total cleanup cost associated with general pp&e. sffas 6.109 material changes',
18606:'in total estimated cleanup costs due to changes in laws, technology, or plans and the portion of the change relating',
18607:'to prior periods.the u.s. governmentwide financial statements need not disclose material changes in total estimated cleanup costs due to changes',
18608:'in laws, technology, plans, or the portion of the change in estimate that relates to prior period operations. sffas 6.110',
18609:'the nature of estimates and information regarding possible changes due to inflation, deflation, technology, or applicable laws and regulations.theu.s.governmentwide financial',
18610:'statements need not disclose the nature of estimates and information regarding possible changes due to inflation, deflation, technology, or applicable',
18611:'laws and regulations. sffas 6.111 25, 28, 29 and 30 the cfr should provide: 1 a broad description of cleanup',
18612:'cost; 2 the unrecognized portion of estimated total cleanup costs associated with general pp&e; and, 3 a general reference to',
18613:'agency reports that disclose significant detailed information about cleanup cost. in addition, the cfr should disclose significant accounting principles used',
18614:'and the methods of applying those principles. page 25 sffas 32 fasab handbook, version 20 06/21 sffas 32 13 exchange',
18615:'revenueshouldberecognizedin determining the net cost of operations of the reporting entity during the period. the exchange revenue should be recognized',
18616:'regardless of whether the entity retains the revenue for its own use or transfers it to other entities. gross and',
18617:'net cost should be calculated as appropriate to determine the cost of outputs and the total net cost of operations',
18618:'of the reporting entity. the components of the net cost calculation should separately include the gross cost of providing goods',
18619:'or services that earned exchange revenue, less the exchange revenue earned, and the resulting difference. the components of net cost',
18620:'should also include separately the gross cost of providing goods, services, benefit payments, or grants that did not earn exchange',
18621:'revenue. the u.s. governmentwide financial statements need not breakout gross costs of providing goods, services, benefit payments, or grants that',
18622:'did not earn exchange revenue, separately from those programs that earned exchange revenue. sffas 7.43 no cfr reporting would be',
18623:'required. 13 each reporting entity that provides goods or services to the public or another government entity should disclose the',
18624:'following: 1 differences in pricing policy from the full cost or marketing pricing guidance for exchange transactions with the public',
18625:'as set forth in omb circular no. a25, user charges july 8, 1993 or in subsequent amendments in circulars that',
18626:'set forth pricing guidance; 2 exchange transactions with the public in whichprices are set by law or executive order and',
18627:'are not based on full cost or on market price; 3 the nature of intragovernmental exchange transactions in which the',
18628:'entity provides goods or services at a price less than the full cost or does not charge a price at',
18629:'all, for disparities between the billing if any and full cost; and, 4 the full amount of the expected loss',
18630:'when specific goods are made to order under a contract, or specific services are produced to order under a contract',
18631:'and a loss on the contract is probable more likely than not and measurable reasonably estimable. the above listed disclosure',
18632:'requirements are not applicable to the u.s. governmentwide financial statements. sffas 7.46 no cfr disclosure would be required. 13 disclosure',
18633:'of factors affecting collectibility and timing of categories of accounts taxes receivable and amounts involved. the u.s. governmentwide financial statements',
18634:'need not disclose factors affecting collectibility and timing of categories of accounts receivable and the amounts involved. sffas 7.65.1 no',
18635:'cfr disclosure would be required. page 26 sffas 32 fasab handbook, version 20 06/21 sffas 32 disclosure of cumulative cash',
18636:'collections and refunds by tax year and type of tax. cash collections and refunds by tax year and type of',
18637:'tax should include cash collections and cash refunds for the reporting period and for sufficient prior periods to illustrate 1',
18638:'the historical timingof tax collections and refunds, and 2 any material trends in collection and refund patterns. sufficient prior periods',
18639:'for each type of tax are the periods which end when the statutory period for collection ends. collecting entities may',
18640:'shorten these periods if evidence for prior tax years indicates that a shorter period would reflect at least 99 percent',
18641:'of the collectible taxes. the u.s. governmentwide financial statements need not disclose cumulative cash collections and refunds by tax year',
18642:'and type of tax for the reporting period and for sufficient prior periods to illustrate 1 the historical timing of',
18643:'tax collections and refunds, and 2 any material trends in collection and refund patterns. sffas 32 provides for disclosures applicable',
18644:'to the u.s. government wide financial statements. sffas 7.65.3 26 the cfr should disclose cumulative cash collections and refunds by',
18645:'tax year and type of tax for the reporting periods. 14 the disclosures required by sffas no. 6, paragraph 45,',
18646:'for general pp&e are applicable to general pp&e software. thus, for material amounts, the following should be disclosed in the',
18647:'financial statements regarding the software: 1 the cost, associated amortization, and book value; 2 the estimated useful life for each',
18648:'major class of software; and 3 the methods of amortization. the above listed disclosurerequirements arenotapplicabletotheu.s. governmentwide financial statements. sffas 32',
18649:'provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. sffas 10.35 23, 28, 29 and 30',
18650:'the cfr should provide: 1 the cost, associated accumulated depreciation, and book value; and, 2 a general reference to agency',
18651:'reports that disclose significant detailed information about pp&e. in addition, the cfr should disclose significant accounting principles used and the',
18652:'methods of applying those principles. page 27 sffas 32 fasab handbook, version 20 06/21 sffas 32 15a in a note',
18653:'to the financial statements, reporting entities should display a reconciliation between the beginning and ending balances of the subsidy cost',
18654:'allowance for outstanding direct loans and the liability for outstanding loan guarantees reported in the entities’balance sheet.the reconciliation is accomplished',
18655:'by adding to or subtracting from the beginning balance the dollar amounts of the following items: a the subsidy expense',
18656:'recognized in the four components as defined in paragraphs 25 through 29 interest subsidy cost, the default cost, the present',
18657:'value of fees and other collections, and other subsidy costs for direct or guaranteed loans disbursed during the reporting year,',
18658:'b the two types of subsidy reestimates as defined in paragraph 32 i.e., the subsidy cost allowance for direct loans',
18659:'and the liability for loan guarantees, and c other adjustments. for direct loans, the other adjustments include loan modifications, fees',
18660:'received, loans written off, foreclosed property or other recoveries acquired, and subsidy allowance amortization. for loan guarantees, the other adjustments',
18661:'include loan guarantee modifications, fees received, interest supplements paid, claim payments made to lenders, foreclosed property or other recoveries acquired,',
18662:'and interest accumulated on the loan guarantee liability. the requirement to display reconciliation applies to direct loans and loan guarantees',
18663:'obligated or committed on or after october 1, 1991, the effective date of the federal credit reform act of 1990.',
18664:'reporting entities are encouraged but not required to display reconciliations for direct loans and loan guarantees obligated or committed prior',
18665:'to october 1, 1991, in schedules separate from the direct loans and loan guarantees obligated or committed after september 30,',
18666:'1991. the u.s. governmentwide financial statements need not disclose a reconciliation between the beginning and ending balances of the subsidy',
18667:'cost allowance for the outstanding direct loans and the liability for outstanding loan guarantees reported in the u.s. governmentwide financial',
18668:'statements. sffas 18.10 28 no reconciliation is required in the cfr. a general reference to agency reports would be provided.',
18669:'page 28 sffas 32 fasab handbook, version 20 06/21 sffas 32 15b disclosure and discussion requirements: a reporting entities should',
18670:'provide a description of the characteristics of programs and disclose for each program: a the total amount of direct or',
18671:'guaranteed loans disbursed for the current reporting year and the preceding reporting year, b the subsidy expense by components recognized',
18672:'for the direct or guaranteedloans disbursedinthose years, and c the subsidy reestimates by components for those years. b reporting entities',
18673:'should also disclose at the program level the subsidy rates for the total subsidy cost and its components for the',
18674:'interest subsidy costs, default costs net of recoveries, fees and other collections, and other costs, estimated for direct loans and',
18675:'loan guarantees in the current year’s budget for the current year’s cohorts. each subsidy rate is the dollar amount of',
18676:'the total subsidy or a subsidy component as a percentage of the direct or guaranteed loans obligated in the cohort.',
18677:'entities may use trend data to display significant fluctuations in subsidy rates. such trend data, if used, should be accompanied',
18678:'with analysis to explain the underlying causes for the fluctuations. c reporting entities should disclose, discuss, and explain events and',
18679:'changes in economic conditions, other risk factors, legislation, credit policies, and subsidy estimation methodologies and assumptions, that have had a',
18680:'significant and measurable effect on subsidy rates, subsidy expense, and subsidy reestimates. the disclosure and discussion should also include events',
18681:'and changes that have occurred and are more likely than not to have a significant impact but the effects of',
18682:'which are not measurable at the reporting date. changes in legislation or credit policies include, for example, changes in borrowers’',
18683:'eligibility, the levels of fees or interest rates charged to borrowers, the maturity terms of loans, and the percentage of',
18684:'a private loan that is guaranteed. d the above listed disclosure requirements are not applicable to the u.s. governmentwide financial',
18685:'statements. sffas 32 provides for disclosures applicable to the u.s. governmentwide financial statements for these activities. sffas 18.11 27, 28,',
18686:'29 and 30 the cfr should provide: 1 a broad description of direct loan and loan guarantee programs; 2 the',
18687:'face value of loans outstanding for direct loan and loan guarantee programs; 3 the long term cost of loans e.g,',
18688:'the subsidy cost allowance for post1991 direct loans and the allowance for uncollectible amounts for pre1992 direct loans and guarantees',
18689:'e.g, the liability for loan guarantees outstanding for direct loan and loan guarantee programs; 4 net loans receivable for direct',
18690:'loan programs; 5 amount guaranteed by the government for guaranteedloanprograms; 6thesubsidy expensefor the reportingyear for direct loan and loan guarantee',
18691:'programs; and, 7 a general reference to agency reports indicating agencies that are disclosing significant detailed information about direct loan',
18692:'and loan guarantee programs. in addition, the cfr should disclose significant accounting principles used and the methods of applying those',
18693:'principles. page 29 sffas 32 fasab handbook, version 20 06/21 sffas 32 appendix c: list ofabbreviations cfr consolidated financial report',
18694:'of the united states government fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board fms financial management service treasury fy fiscal year omb office',
18695:'of management and budget pp&e property, plant, and equipment sfas statementoffinancialaccountingstandards sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards u.s. united states page 30',
18696:'sffas 32 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 33: pensions, other retirement benefits, and other postemployment',
18697:'benefits: reporting the gains and losses from changes inassumptions and selecting discount rates and valuation dates status issued october 14,',
18698:'2008 effective date for fiscal years beginning after september 30, 2009 affects sffas 5. pars. 65, 66, 83, 95, and',
18699:'157. sffas 7, par. 67.1 and 67.2. sffas 17, pars. 25, 272, and 274. interpretation 3 was rescinded by par.',
18700:'36. affected by none. summary during itsconsideration of longterm obligations, the board discussed the need to highlight gains andlossesfromchangesin assumptionsinfederalfinancialreports.',
18701:'some of themostsignificant changes in amounts on the statement of net cost for the consolidated financial report of the united',
18702:'states government cfr and for certain component entities can result from gains and losses from changes in assumptions. this statement',
18703:'addresses that need. thisstatement appliestofederalentitiesthatreport liabilitiesandexpensesforfederalemployee pensions, other retirement benefits orb, and other postemployment benefits opeb in general purpose financial',
18704:'reports prepared pursuant to federalaccounting standardadvisory board standards. this statement requires gains and losses from changes in longterm assumptions used',
18705:'to estimate federal employee pension, orb, and opeb liabilities to be displayed on the statement of net cost separately from',
18706:'other costs. separate display will provide more transparent information regarding the underlying costs associated with these liabilities. this statement also',
18707:'requires disclosure of the components of the expense associated with federal employee pension, orb, and opeb liabilities in notes to',
18708:'the financial statements. such disclosure will provide useful information for analysis. the information will be comparable across agencies and between',
18709:'postemployment and retirement programs. this statement also provides a standard for selecting the discount rate assumption for present value estimates',
18710:'of federal employee pension, orb, and opeb liabilities. there is currently uncertainty in practice in this regard. page 1 sffas',
18711:'33 fasab handbook, version 20 06/21 sffas 33 this statement also provides a standard for selecting the valuation date for',
18712:'estimates of federal employee pension, orb, and opeb liabilities, which will establish a consistent method for such measurements. page 2',
18713:'sffas 33 fasab handbook, version 20 06/21 sffas 33 table of contents summary 1 introduction 4 purpose 4 background 4',
18714:'accounting standard 7 scope 7 display 8 selecting discount rates 10 selecting valuation date 11 reasonable estimates 11 effect on',
18715:'prior standards 11 appendixa:basis for conclusions 17 appendix b: pro forma statement of net cost displaying separate line item for',
18716:'37 gains and losses due to changes inassumptions appendix c: pro forma note disclosure of opeb liabilities and expense 38',
18717:'appendix d: note 11 from fy 2006 financial report of the united states 39 appendix e: glossary 43 appendix f:list',
18718:'ofabbreviations 44 page 3 sffas 33 fasab handbook, version 20 06/21 sffas 33 introduction purpose 1. this statement requires the',
18719:'following: a. gains and losses from changes in longterm assumptions1 used to estimate federal employee pension, other retirement benefit orb,',
18720:'and other postemployment benefit opeb liabilities should be displayed on the statement of net cost separately from other costs. this',
18721:'display will provide more transparent information regarding the underlying costs associated with certain liabilities. b. components of the expense associated',
18722:'with federal employee pension, orb, and opeb liabilities should be disclosed in notes to the financial statements. such disclosure will',
18723:'provide information useful for analysis. the information will be comparable across agencies and between postemployment and retirement programs. 2. this',
18724:'statement also provides standards for selecting: a. the discount rate assumption for pension, orb, and opeb liabilities. there is currently',
18725:'uncertainty in practice regarding the selection of discount rates in some situations. b. the valuation date for measuring pension, orb,',
18726:'and opeb liabilities, which will establish a consistent method for such measurements. background reporting gains and losses from changes in',
18727:'assumptions 3. during its discussions of longterm obligations the board addressed the need to highlight certain gains and losses from',
18728:'changes in assumptions in federal financial reports. some of the most significant changes in amounts on the statement of net',
18729:'cost for the consolidated financial report of the united states government cfr2 and for certain component entities can result from',
18730:'gains and losses from changes in assumptions. the board is now 1 terms in the glossary are shown in boldface',
18731:'the first time they appear in this document. 2seeappendix d containing note 11, “federal employee and veterans benefits payable,” from',
18732:'the fy 2006 cfr. page 4 sffas 33 fasab handbook, version 20 06/21 sffas 33 requiring that such gains and',
18733:'losses be reported as a discrete line item on the statement of net cost. selecting the discount rates 4. sffas',
18734:'5 provides standards for several types of liabilities, some of which require present value valuations. federal accounting standards requiring present',
18735:'valuations usually specify u. s. treasuryborrowing ratesas the discount rates, although the terminology useddiffers. 5. with respect to the selection',
18736:'of assumptions for pension, orb, and opeb liabilities, including the discount rate assumption, sffas 5 emphasizes expected longterm future trends',
18737:'rather than recent past experience. for the discount rate, sffas 5 required either the entitys longterm investment yield on assets,',
18738:'if the benefit plan isbeing funded, or other longterm assumptions such astreasury borrowing rates for securities of similar maturity to',
18739:'the period over which the payments are to be made.3 6. some entities interpreted the sffas 5 standard with respect',
18740:'to other postemployment benefits opeb to require the use of singleday treasury rates for the discount rates. singleday rates render',
18741:'liability projections susceptible to more volatility than, for example, rates based on longterm expectations or historical experience. 7. liabilitiesforpostemploymentandretirementbenefitscanbeverylarge.thecombinationof the',
18742:'magnitude of these liabilities and volatility of the projections has resulted in large variationsin annualcost fromyear to yearthat reducesthe usefulnessof',
18743:'reported operating results. 8. fasab standards that require the use of treasury borrowing rates for discounting do not specify a',
18744:'precise method for selecting such rates. there were a number of options for the discountrate. however,thediscountrategenerallyrequiredinfasabstandardsistherate on marketable treasury securities',
18745:'of similar maturity to the cash flows of the obligation in question. 9. this statement provides a standard for selecting',
18746:'discount rates for present value measurements of federal employee pension, orb, and opeb liabilities. 3sffas 5, pars. 66, 83, and',
18747:'95. page 5 sffas 33 fasab handbook, version 20 06/21 sffas 33 selecting the valuation date 10. this statement provides',
18748:'a standard regarding selecting valuation dates for present valuations of federal employee pension, orb, and opeb liabilities. few fasab standards',
18749:'currently address the valuation date per se. 11. in interpretation 3, measurement date for pension and retirement health care liabilities',
18750:'august 1997, the board addressed the valuation date issue with respect to measuring federal civilian and military employee pension and',
18751:'retirement health care liabilities in general purpose financial reports prepared pursuant to sffas 5. interpretation 3 requires that pensionandretirement health',
18752:'careliabilitiesingeneralpurposefederalfinancialreports prepared pursuant to sffas 5 be measured asof the end of the reporting period. however, a full actuarial valuation',
18753:'as of the end of the reporting period is not required. the interpretation allows the measurement to be based on',
18754:'an actuarial valuation performed as of an earlier date during the fiscal year, including the beginningofyear, adjusted or rolled forward',
18755:'for the effects of changes during the year in major factors such as pay raises and cost of living adjustments.',
18756:'12. in this statement the board is extending the interpretation 3 approach to expense and liability measurement for opeb liabilities.',
18757:'13. this statement is effective for fiscal years beginning after september 30, 2009. page 6 sffas 33 fasab handbook, version',
18758:'20 06/21 sffas 33 accounting standard scope 14. this statement applies exclusively to entities that report liabilities for federal employee',
18759:'pensions, other retirement benefits orb, and other postemployment benefits opeb, including veterans compensation,4 in general purpose financial reports prepared pursuant',
18760:'to federalaccounting standardadvisory board fasab standards. this statement does not apply to the federal employees compensationact feca program. 15. this',
18761:'statement requires the display of gains and losses from changes in longterm assumptions used to estimate liabilities for federal employee',
18762:'pensions, orb, and opeb, including a discount rate assumption. for the purpose of this statement, assumptions are considered longterm if',
18763:'the underlying event about which the assumption is made will not occur for fiveyears or more. if the event is',
18764:'one of a seriesof events, theentire series should be considered the event and, thus, projected payments may commence within one',
18765:'year but would be required to extend at least five years. otherwise, assumptions would be considered shortterm. 16. this statement',
18766:'does not preclude entities from displaying or disclosing any information about the effect of changes in any assumptions with regard',
18767:'to other types of activities. 17. in addition, except for the change in terminology to characterize the preparers best estimate',
18768:'as reasonable estimate, this statement does not apply to social insurance programs for which the fasab has specifically provided standards',
18769:'in sffas 17, accounting for social insurance. the preparation and display of the expense and liability, related disclosures, and the',
18770:'statement of social insurance follows the standards promulgated in sffass 17, 25,5 and 26.6 4 the pension program for veterans',
18771:'of the department of veterans’ affairs dva is not accounted for as a “federal employee pension plan” under sffas 5',
18772:'and the obligation therefore is not recorded as a liability due to differences between its eligibility conditions and those of',
18773:'federal employee pensions. the veterans’ pension obligation is currently measured internally by the dvain a manner consistent with the dva’s',
18774:'compensation program. 5reclassification of stewardship responsibilities and eliminating the current services assessments, july 17, 2003. 6presentation of significant assumptions for',
18775:'the statement of social insurance: amending sffas 25, november 1, 2004. page 7 sffas 33 fasab handbook, version 20 06/21',
18776:'sffas 33 18. this statement applies to information provided in general purpose federal financial reports. it does not affect statutory',
18777:'or other specialpurpose reports, such as pension or orb reports. display component entities 19. component entities should display gains and',
18778:'losses from changes in longterm assumptions used to measure liabilities for federal civilian and military employee pensions, orb, and opeb,',
18779:'including veterans compensation, as a separate line item or line items on thestatement of netcosts. seethe pro formaillustrationinappendixb. 20. selecting',
18780:'the gains and losses to display from changes in individual pension, orb, and opeb liability assumptions to be displayed on',
18781:'the statement of net cost requires judgment. the preparer should consider quantitative and qualitative criteria. acceptable criteria include but are',
18782:'not limited to quantitative factors such as the percentage of the reporting entitys cost that resulted from the gain or',
18783:'loss and the size of the gain or loss relative to the liability; and qualitative factors including whether the gain',
18784:'or loss would be of interest to decisionmakers and other users. nothing in this standard should be construed to preclude',
18785:'an entity from displaying gains or losses from changes in shortterm assumptions. 21. pursuant to sffas 5, some component entities',
18786:'report the liability and expense for pensions, orb, or opeb, while other component entities report only normal or service cost.7',
18787:'the office of personal management is an example of the former with respect to the federal employees retirement system fers,',
18788:'and federal component entities with employees participating in fers are examples of the latter. component entities that report pension, orb,',
18789:'or opeb liabilities should display a discrete line item for gains and losses fromchangesin assumptionsonitsstatement of netcostwhentheconditionsinparagraphs 1920 above are',
18790:'met. component entities reporting only the normal or service cost should not display such gains and losses. 7the terms “employer',
18791:'entity” and “administrative entity” are used in sffas 5 to distinguish between entities that employ federal workers and thereby incur',
18792:'the employee costs, including pension cost, and those that are responsible formanagingand/oraccountingfor thepensionortheother employee plan. for example, entities that receive',
18793:'“salaries and expense” appropriations are employer entities, while the office of personnel management opm is an administrative entity because it',
18794:'administers the civilian retirement benefit plans. see especially sffas 5, pars. 712 and 88. an entity may be both an',
18795:'employer entity and an administrative entity, for example, when it, rather than opm, administers a pension plan for its employees.',
18796:'in such instances, that entity would be responsible for reporting gains and losses from changes in assumptions if the conditions',
18797:'in paragraph 1920 are satisfied. page 8 sffas 33 fasab handbook, version 20 06/21 sffas 33 22. component entities should',
18798:'disclose in notes to the financial statements the following reconciliation of beginning and ending pension, orb, and opeb liability balances:',
18799:'beginning liability balance $x,xxx expense: normal costa xx interest on the liability balance xx actuarial gain/loss: from experience from assumption',
18800:'changes xx xx prior service costs x other x total expense xxx less amounts paid xx ending liability balance $x,xxx',
18801:'a see the glossary for this standard’s definition of “normal cost.” 23. this reconciliation must provide all material components of',
18802:'pension, orb, or opeb expense consistent with the components identified in the table immediately above, if applicable.additional subcomponentsmay be presented.',
18803:'the line item for actuarialgains and losses should be broken out into the subcomponents from experience and from assumptions changes.',
18804:'significant pension, orb, and opeb programs should be presented individually in a separate column along with an all other column,',
18805:'if applicable, and a total column for each line item. 24. component entities that report pension, orb, or opeb liabilities',
18806:'should disclose the information required in paragraph 22. component entities reporting only the normal or service cost should not disclose',
18807:'the information required in paragraph 22. 25. component entities holding nontreasury securities as assets to fund their pension, orb, or',
18808:'opeb programs should disclose the rates of return, specific maturities, and allocation by type stocks, bonds, etc. of such assets.',
18809:'governmentwide entity 26. the governmentwide entity should display gains and losses from changes in assumptions as a separate line item',
18810:'or line itemson the statement of net cost after a subtotal for all other costsandbeforetotal cost. seetheproformaillustrationinappendix b. page 9',
18811:'sffas 33 fasab handbook, version 20 06/21 sffas 33 27. the governmentwide entity should disclose in the notes to the',
18812:'financial statements a reconciliation consistent with information required in paragraph 22 above for pension, orb, and opeb liabilities. at a',
18813:'minimum, reconciliations for liabilities classified as civilian, military, and veterans compensation must be presented. seeappendix c for an example. selecting',
18814:'discount rates 28. discount rates as of the reporting date for present value measurements of pension, orb, and opeb liabilities',
18815:'should be based on interest rates on marketable treasury securities with maturities consistent with the cash flows being discounted. the',
18816:'discount rates should bematchedwiththeexpectedtiming of theassociated expectedcashflow. thus,cashflows projected in each period should have a discount rate associated with them.',
18817:'however, one discount rate may be used for all projected future cash flows if the resulting present value is not',
18818:'materially different than the resulting present value using multiple rates. achange to or from multiple rates from or to a',
18819:'single rate should be disclosed. 29. the discount rates as of the reporting date should reflect average historical rates on',
18820:'marketabletreasury securities rather than giving undue weight to the current or very recent past experience of such rates. historical experience',
18821:'should be the basis for expectations about future trends in marketable treasury securities. the discount rate, the underlying inflation rate,',
18822:'and the other economic assumptions should be consistent with one another. 30. in developing average historical treasury rates, a minimum',
18823:'of five historical rates as of the reporting date e.g., at the current and four prior fiscal year ends should',
18824:'be used for each maturity. the historical rates used to calculate the average should be sequential e.g., 20032007. for example,',
18825:'for an average historical treasury rate to be used as the discount rate as of the end of fiscal year',
18826:'2007 for a payment due in 10 years i.e., in fiscal 2017, a minimum of the five most recent fiscal',
18827:'yearend historical rates on 10year treasury securities should be used. thus, the rate on 10year treasury securities as of the',
18828:'end of fiscal year 2007 would be one of the five historical ratesused in the average, the rate on 10year',
18829:'treasury securities as of the end of fiscal year 2006 would be another rate, etc., until, at a minimum, the',
18830:'rates on 10year treasury securities as of the end of fiscal years 2003 through 2007 would be included in the',
18831:'average. 31. the number of historical rates used in the calculation of the average as explained in paragraph 30, e.g.,',
18832:'five fiscal yearend rates, should be consistent from period to period. the entitys accounting policy disclosures should include its policy',
18833:'regarding consistency from one reporting period to the next. 32. inthedeterminationofthehistoricaltreasuryratesused,forcashflowsthatareprojectedto occur in future years for which treasury securities are',
18834:'or were not available or that are page 10 sffas 33 fasab handbook, version 20 06/21 sffas 33 expected beyond',
18835:'the maturities at which treasury securities are available, e.g., beyond the 30year security, the preparer should incorporate into the determination',
18836:'of the discount rate interest rates interpolated or extrapolated from historical treasury rates. selecting valuation date 33. estimates of pension,',
18837:'orb, and opeb liability and expense in general purpose federal financial reports should be measured as of the end of',
18838:'the fiscal year or other reporting period if applicable. measurements based on an actuarial valuation may be performed as of',
18839:'anearlierdate during the fiscalyear, includingthebeginning of the year, with adjustments for the effects of changes during the year in major',
18840:'factors such as the pay raise and cost of living adjustment. afull actuarial valuation as of the end of the',
18841:'reporting period is not required. measurementsshouldreflecttheentitysassumptionsaboutthemajorfactorsthat would be reflected in a full actuarial valuation, such as the actual pay raise,',
18842:'the actual cost of living adjustment, and material known changes in the number of participants covered enrollment that cause a',
18843:'change in the liability. 34. the valuation date in the full actuarial valuation utilized by the entity should be consistently',
18844:'followed from year to year. reasonable estimates 35. the entitys estimates should reflect its judgment about the outcome of events',
18845:'based on past experience and expectations about the future. estimates should reflect what is reasonable to assume under the circumstances.',
18846:'the entitys own assumptions about future cash flows may be used. however, the entity should review assumptions used generally in',
18847:'the federal government as evidenced by sources independent of the reporting entity, for example, those used by the bureau of',
18848:'economicanalysis for the national income and productaccounts and, if its assumptions do not reflect such data, explain why it is',
18849:'inappropriate to do so. effect on prior standards 36. this statement provides additional requirements for display, disclosure, discount rates, and',
18850:'valuation dates for federal civilian and military employee pensions, orb, and opeb in sffas 5. interpretation 3 is rescinded. in',
18851:'addition, this statement replaces best estimate with reasonable estimate in sffas 5, sffas 7, and sffas 17. page 11 sffas',
18852:'33 fasab handbook, version 20 06/21 sffas 33 sffas 5 37. this statement also affects current standards for selecting discount',
18853:'rates. sffas 5, accounting for federal liabilities, is amended as follows: 65. assumptions—for financial reports prepared for the three primary',
18854:'federal plans csrs, fers, and mrs, the best available actuarial estimates of assumptions should be used to calculate the pension',
18855:'expense and liability. the selection of all actuarial assumptions should be guided by actuarial standards of practice no. 4, measuring',
18856:'pension obligations, as revised from time to time by the actuarial standards board. accordingly, actuarial assumptions should be on the',
18857:'basis of the actual experience of the covered group, to the extent that credible experience data are available, but should',
18858:'emphasize expected long term future trends rather than give undue weight to recent past experience. although emphasis should be given',
18859:'to the combined effect of all assumptions, the reasonableness of each actuarial assumption should be considered independently on the basis',
18860:'of its own merits and its consistency with each other assumption. [footnote omitted] page 12 sffas 33 fasab handbook, version',
18861:'20 06/21 sffas 33 66. in addition to complying with the guidance in the preceding paragraph, the discount rate assumption',
18862:'for present value measurements of pension liabilities should be the interest rate on marketable treasury securities of similar maturities to',
18863:'the cash flows of the payments for which the estimate is being made. the discount rates should be matched with',
18864:'the expected timing of the associated expected cash outflow. thus, each year for which cash flows are projected should have',
18865:'a separate discount rate associated with it. however, a single average discount rate may be used for all projected future',
18866:'payments if the resulting present value is not materially different than the resulting present value using multiplerates. the interest rate',
18867:'assumption should be based on an estimated longterm investment yield for the plan, giving consideration to the nature and the',
18868:'mix of current and expected plan investments and the basis used to determine the actuarial value of assets; or if',
18869:'the plan is not being funded, other longterm assumptions for example, the longterm federal government borrowing rate. the underlying inflation',
18870:'rate and the other economic assumptions should be consistent. the rate used to discount the pension obligation should be equal',
18871:'to the longterm expected return on plan assets. the discount rates should reflect average historical rates on marketable treasury securities',
18872:'rather than give undue weight to recent past experience with such rates. historical experience should be the basis for expectations',
18873:'about future trends in marketable treasury securities. in developing the average historical treasury rates, a minimum of five historical rates',
18874:'as of the appropriate reporting dates should be used for each maturity. the historical rates used to calculate the average',
18875:'should be sequential e.g. 20032007. for example, for an average historical treasury rate to be used as the discount rate',
18876:'as of the end of the fiscal year 2007 for a payment due in 10 years, i.e., in 2017, a',
18877:'minimum of five 10year treasury rates should be used. thus, the rate on 10year treasury securities as of the end',
18878:'of fiscal year 2007 would be one rate, the rate on 10year treasury securities as of the end of fiscal',
18879:'year 2006 would be another rate, etc., until, at a minimum, the rates on 10year treasury securities for the years',
18880:'2003 through 2007 were included in the average. the number of historical rates used for the average, e.g., five yearly',
18881:'rates, should be consistent from period to period. the entity should explain that its accounting policy is to be consistent',
18882:'in this regard from period to period. for cash flows that are projected to occur in future years for which',
18883:'treasury securities are not available or that extend beyond the maturities for which treasury securities are available, e.g., beyond the',
18884:'30year security, the preparer should incorporate in the assumed discount rate expected refinancing rates extrapolated from historical treasury borrowing rates.',
18885:'page 13 sffas 33 fasab handbook, version 20 06/21 sffas 33 83. assumptions—amounts calculated for financial reports prepared for orb',
18886:'plans should reflect 1 general actuarial and economic assumptions that are consistent with those used for federal employee pensions and',
18887:'2 a longterm health care cost trend assumption that is consistent with medicare projections or other authoritative sources appropriate for',
18888:'the population covered by the plan. the discount rate assumption for present value measurements of orb liabilities should be developed',
18889:'in accordance with paragraph 66 of this standard. be equal to the longterm expected return on plan assets if the',
18890:'plan is being funded or on other longterm assumptions for example, the longterm federal government borrowing rate for unfunded plans.',
18891:'the administrative entity should disclose the assumptions used. 95. the employer entity should recognize an expense and a liability for',
18892:'opeb when a future outflow or other sacrifice of resources is probable and measurable on the basis of events occurring',
18893:'on or before the reporting date. for example, a reduction in force may require an employer entity to make severance',
18894:'payments, unemployment reimbursements, or other payments in future periods. similarly, an injury on the job may require the employer entity',
18895:'to make shortor longterm reimbursements to the federal workers’ compensation program. a longterm opeb liability should be measured at the',
18896:'present value of future payments. this will require the employer entities to estimate the amount and timing of future payments,',
18897:'and to discount the future outflow using the interest rate on marketable treasury borrowing rate for securities of similar maturities',
18898:'to the period over which the payments are to be made. the discount rate assumption for present value measurements of',
18899:'opeb liabilities should be developed in accordance with paragraph 66 of this standard. 157. second, assumptions ought to be consistent',
18900:'across federal employee pension, other retirement benefit, and other postemployment benefit systems. assumptions need not be identical because the conditions',
18901:'facing each plan may objectively differ, but they should be rationally related thus, the standard calls for financial reports to',
18902:'be prepared on the basis of the best available reasonable estimates for actuarial assumptions. also, the standard allows the smaller',
18903:'plans to use the assumptions provided by any of the three primary plans or to use their own assumptions if',
18904:'they explain how and why they are different from one of the major plans. page 14 sffas 33 fasab handbook,',
18905:'version 20 06/21 sffas 33 sffas 7 38. this statement also affects current standards that use the term “best estimate.”',
18906:'sffas 7, accounting for revenue and other financing sources …, is amended as follows: 67.1 entities that collect taxes and',
18907:'duties should provide the following supplementary information relating to their potential revenue and custodial responsibilities: 67.1 the estimated realizable value,',
18908:'as of the end of the reporting period, of compliance assessments and, if reasonably estimable, preassessment work in process. the',
18909:'amounts furnished should represent management’s best estimate of additional revenues reasonably expected likely to be collected from compliance assessments and',
18910:'from preassessment work in process, appropriately qualified as to their reliability. a range of amounts may be provided for preassessment',
18911:'work in process if estimable. the change in the totals of compliance assessments and of preassessment work in process during',
18912:'the reporting period also should be provided. 67.2 if reasonably estimable, other claims for refunds that are not yet accrued',
18913:'but are likely to be paid when administrative actions are completed. if estimated, unasserted claims for refunds should be provided',
18914:'separately from claims filed and may be expressed as a range of amounts. the amounts furnished should represent management’s best',
18915:'reasonable estimates, appropriately qualified as to their reliability. the change in the total of these amounts during the reporting period',
18916:'also should be provided. sffas 17 39. paragraphs2427and3233ofsffas17providethestandardforrequiredsupplementary information subparagraph 273 and 323 were reclassified as basic information by page',
18917:'15 sffas 33 fasab handbook, version 20 06/21 sffas 33 sffas 26, presentation of significant assumptions for the statement of',
18918:'social insurance: amending sffas 25. paragraph 25 of sffas 17 is changed as follows: 25. the projections and estimates used',
18919:'should be based on the entity’s best reasonable estimates of demographic and economic assumptions, taking each factor individually and incorporating',
18920:'future changes mandated by current law. significant assumptions should be disclosed. 40. paragraph 272 of sffas 17 requires the ratio',
18921:'of contributors to beneficiaries as supplementary information. paragraph 272 is changed as follows: 272 ratio of contributors to beneficiaries with',
18922:'respect to the oasdi and hi programs, the ratio of the number of contributors to the number of beneficiaries commonly',
18923:'called the “dependency ratio” during the same projection period as for cashflow projections e.g., 75 years, using the program managers’',
18924:'best estimate. at a minimum, the ratio should be reported for the beginning and end of the projection period. [footnote',
18925:'omitted] 41. paragraph 274 a of sffas 17 requires sensitivity analysis as supplementary information. the phrase “best estimate cost” before',
18926:'the word “assumptions” is changed as follows: 274 a for all programs except ui illustrate the sensitivity of the projections',
18927:'and present values required by paragraphs 271 and 273 to changes in the most significant individual assumptions. for example, using',
18928:'the entity’s “best estimate” reasonable cost assumptions as a baseline, show the effect of varying several significant assumptions …. effective',
18929:'date 42. this statement is effective for fiscal years beginning after september 30, 2009. the provisions of this statement need',
18930:'not be applied to immaterial items. page 16 sffas 33 fasab handbook, version 20 06/21 sffas 33 appendixa: basis for',
18931:'conclusions this appendix discusses factors considered significant by board members in reaching the conclusions in this statement. it includes the',
18932:'reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others. the',
18933:'standards enunciated in this statementnot the material in this appendixshould govern the accounting for specific transactions, events or conditions. this',
18934:'statement may be affected by later statements. the fasab handbook is updated annually and includes a status section directing the',
18935:'reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are updated for',
18936:'changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for conclusions',
18937:'of the amending statement for the rationale for each amendment. comments received a1. the board did not rely on the',
18938:'number in favor or opposed to a given position. information about the respondents’ majority view is provided only as a',
18939:'means of summarizing the comments. the board considered the arguments in each response and weighed the merits of the points',
18940:'raised. the respondents’ comments are summarized below. a2. eight written responses were received from the following sources: federal internal nonfederal',
18941:'external users, academics, others 2 auditors 1 preparers and financial managers 5 summary of comments display what the exposure draft',
18942:'proposed regarding display a3. during its consideration of longterm obligations the board discussed how financial statement display might be modified',
18943:'to show the fluctuations in cost caused by changes in assumptions. some of the most significant changes in amounts on',
18944:'the operating statement forthefinancialreport of the united statesgovernmentcfrand on the statement of net cost for some component entities often result',
18945:'from gains and losses from changes in assumptions. note118tothe fy2006cfrdisclosedthattheexpenseformilitaryemployee 8 seeappendix d for note 11. page 17 sffas 33',
18946:'fasab handbook, version 20 06/21 sffas 33 pension benefits was $112.2 billion. of this amount $20.1 billion was for changes',
18947:'in assumptions, and $6.1 billion was from differences between actual experience and what was assumed. and even more dramatically, note',
18948:'11 in the cfr for fy 2005 disclosed that of the $123 billion expense for postretirement healthcare benefit for military',
18949:'personnel, $53 billion was attributed to changes in assumptions and $5 billion was from differences between actual experience and what',
18950:'was assumed. a4. the issue of volatility in reported annual expense was first brought to the board’s attention with respect',
18951:'to yeartoyear volatility in veterans’ compensation expense amounts reported by department of veteran’saffairs dva. large percentage changes in net cost',
18952:'resulted from dva’s need to estimate future outflow for veteran’s compensation benefits based on complex assumptions and cost models. other',
18953:'agencies need to make similar estimates. small changes in the discount rate assumption, for example, produce large fluctuations. a5. theboarddecidedtoproposeageneralstandardratherthanfocussolelyondvaandother',
18954:'employee compensation liabilitiesbecause manyprogramsare affected by changes in longterm assumptions. although pension, orb, and opeb programs employ longrange assumptions to',
18955:'estimate liabilities and periodic expense, other programs also involve longterm assumptions for liability and cost estimates the dollar amounts of',
18956:'which are very large relative to other financial statement items. for example, environmental liabilities require the use of longterm assumptions.',
18957:'a6. the exposure draft proposed that gains or losses from changes in assumptions, if any, should be presentedasdiscrete line itemsnot',
18958:'assignedtoprogramsonthestatement ofnet cost snc. the board believed that this disaggregation would enhance the usefulness of theinformationprovidedonthestatement of netcost. separatedisplayhighlightstheeffects of',
18959:'changesinassumptions,whichcanbe significant. expensesassignedtoprogramswould be distinguished from the gains and losses from changes in assumptions. the user would be better able',
18960:'to understand the operating performance of the entity as well as the role of gains and losses from changes in',
18961:'assumptions. a7. theboardbelievedthatthediscretedisplayofsuchgainsandlosseswouldenhanceusers’ understanding of liabilities and periodic expense. users, including entity managers, would understand more about how liabilities and',
18962:'expense are measured; about the uncertainty of the measurement of individual liabilities; and about what causes changes in liabilities. managers',
18963:'would benefit from having information about the volatility of assumptions in their programs. extreme volatility might indicate the assumptions chosen',
18964:'and/or the assumption selection processneedsreevaluation. volatilitymayaffect the entity’sfunding requestsand longterm planning. it will at least raise a flag for further',
18965:'investigation. a8. the proposed statement provided certain exceptions to the display requirement. assumptions used to estimate receivables, payables, inventory and',
18966:'related property and page 18 sffas 33 fasab handbook, version 20 06/21 sffas 33 other shortterm assumptions were excepted because',
18967:'they will be proved or disproved within a relatively short period of time. also, those assumptions used for direct loans',
18968:'and loan guarantees were excepted because the fasab has already provided accounting procedures. respondents’ comments regarding display a9. most respondents',
18969:'agreed that the separate display of gains and losses from changes in assumptions on the snc would be informative and',
18970:'useful. one respondent recommended displaying more detail about assumption changes on the face of the snc, for example, the nature',
18971:'of the assumption change, within a category of assumptions i.e., economic, demographic, etc. and the amount of change. a10.most of',
18972:'the respondents who commented on the question about the criteria for short – and longterm assumptions found the 5year criteria',
18973:'useful. one respondent commented that thereissomeambiguityinthe wordingand suggestedthe following threeimprovements: 1 explicitlyallowdisplayof gains/lossesfrom assumption changesinvolving estimatesforless than five years, 2',
18974:'include the size of the gain/loss relative to the actuarial liabilityaspart of the guidance in the proposed standard ed paragraph',
18975:'21 as another criterion for deciding what to display, and 3 include a discussion of the need to distinguish between',
18976:'benefit changes and assumption changes in the basis for conclusions. another respondent commented that the glossary should be clearer regarding',
18977:'what is meant by longterm assumptions. a11.one respondent did not believe the 5year division is appropriate “to define liabilities.” in',
18978:'addition, this respondent thought there would be situations where changes in shortterm assumptions could result in material gains and losses.',
18979:'a12.another respondent commented that the proposed standard did not provide satisfactory guidance based on their belief that it 1 would',
18980:'apply to a very limited federal audience, 2 uses highlevel generalities, and 3 should be directed to the administrative entities',
18981:'for the primary federal employee benefit programs. a13.several respondents commented that the proposed standard is not clear with respect to',
18982:'how it applies to nonactuarially prepared liability estimates. for example, one respondent thought that it may not be feasible to',
18983:'identify separate components of an annual change in nonactuarial liabilities. another respondent asked for more guidance with respect to paragraph21inthe',
18984:'exposuredraft,which directedthepreparertousejudgmentinselecting the longterm assumptions for which gains and losses from changes are to be displayed individually on the statement',
18985:'of net cost. page 19 sffas 33 fasab handbook, version 20 06/21 sffas 33 the board’s conclusions regarding display a14.the',
18986:'board decided to limit the standard to federal employee pension, orb, and opeb liabilities. this decision is based on the',
18987:'board’s desire to address more immediately its primary concern, which is to display the effect of assumption changes on employee',
18988:'compensation liabilities. the board considered the requests from some respondents for more guidance regarding how the standard would apply to',
18989:'other than pension, orb, and opeb activities. although in principle a broader application is desirable, the board believes that developing',
18990:'additional guidance would significantly delay implementation of a broad standard. therefore, the board concluded that limiting the scope to pension,',
18991:'orb, and opeb liabilities would address the specific issue presented at this time. in addition, the need for information about',
18992:'the effect of assumption changes is more acute for pension, orb, and opeb liabilities than for other liabilities where the',
18993:'combination of factors that the preparerwouldhavetoconsiderismore complex. legalcontingencies, forexample, involve an array of considerations that are not as clearcut as',
18994:'for employee benefits. a15.this decision effectively renders moot several of the respondents’ concerns. first, it addressestheconcernofsomerespondentsthatthe guidancewasnotspecificenough with respect towhichassumptionsare',
18995:'subject tothe standard. second, it addressesthe concern that the disclosure requirement of ed paragraphs 2223 were too pensionoriented and preparers',
18996:'may be confused regarding how to classify annual changes in, for example, environmental cleanup liabilities or contingent liabilities. a16.narrowing the',
18997:'scope of the standard also meant that the examples of liabilities to which the standard does not apply were not',
18998:'necessary. paragraph 14 now explicitly states that the standard applies exclusively to pensions, orb, and opeb. the board decided that',
18999:'the ed paragraphs containing examples of other liabilities to which the standard would not apply e.g., liabilities that employ longterm',
19000:'assumptions where the fasab has specifically provided standards such as loans and loan guarantees, or to assumptions that are short',
19001:'term in nature, including estimates or receivables, payables inventory, and claims incurred but not reported were redundant and potentially confusing,',
19002:'and they have been removed. a17.with respect to concern that the proposed standard did not provide satisfactory guidance regarding how',
19003:'it applies to administrative and employer entities as defined in sffas 5, specific guidance has been added. the standard now',
19004:'states that, in cases where an entity does not report the pension, orb, or opeb liability, that entity is not',
19005:'responsible for reporting gainsand losses from changesin assumptions. for example, most civilian federal employees participate in either the civil service',
19006:'retirement system csrs or the federal employee retirement system fers pension plans, which are administered by the office of personal',
19007:'management opm. federal reporting entities whose employees participate in csrs and fers other than opm itself report only a portion',
19008:'of the annual cost of the employee benefits. this portion is called the “normal cost” or, “service cost’. the opm',
19009:'page 20 sffas 33 fasab handbook, version 20 06/21 sffas 33 reports the liability and all costs components, as described',
19010:'in sffas 5. thus, the opm, which iscalledthe “administrativeagency” insffas5,isresponsibleforreportingthe gains and losses from changes in assumptions as a discrete',
19011:'line item on its snc. a18.an entity may function both as an employer and an administrator entity. for example, it',
19012:'may administer a pension benefit for its employees rather than participate in csrs or fers. in such instances, that entity',
19013:'would report the liability and all costs. thus, that entity would report gains and losses from changes in assumptions, if',
19014:'the conditions in paragraphs 1920 are satisfied. the board believes that the display of the effect of changes in assumptions',
19015:'will be meaningful for all entities that report a pension, orb, or opeb liability. a19.the board considered the applicability of',
19016:'this standard to the federal employees compensationact program. the board concluded that it was not appropriate or necessary for the',
19017:'department of labor to provide the information concerning gains and losses from changes in assumptions to the employer agencies, nor',
19018:'for the employer agencies to separately report or disclose such information. under the particular circumstances of feca accounting and reporting,',
19019:'the board decided that the value of the fecainformation provided pursuant to this standard would not offset the burden and',
19020:'cost of providing it. a20.regarding the distinction between “shortterm assumptions” and “longterm assumptions,” the board believes the standard provides sufficient',
19021:'guidance. assumptions are considered longterm if the underlying event about which the assumption is made will not occur for five',
19022:'years or more. if the event is one of a series of events, the entire series should be considered the',
19023:'event and, thus, projected payments may commence within one year but would be required to extend at least five years.',
19024:'otherwise, assumptions would be considered shortterm. the board believes that limiting the scope of the standard to federal employee pensions,',
19025:'orb, and opeb will reduce the potential for misunderstanding. a21.regarding the comment thatinformation aboutchangesinshorttermassumptionsmight be informative, the board agrees that',
19026:'there might be instances where the display of gains and losses from changes in assumptions that are by definition “shortterm”',
19027:'in nature might be informative. although it does not require such display, the final standard does not preclude displaying the',
19028:'effect of changes in shortterm assumptions see paragraph 16. a22.regarding thecomment about theproprietyofthe5yearcriteriafordistinguishinglongterm liabilities, the proposed standard did not define',
19029:'“longterm liabilities.” it used that term generally to describe the types of liabilities for which components of expense should be',
19030:'disclosed and for which estimates are undertaken using “longterm assumptions.” the proposed standard defined longterm assumptions as those where the',
19031:'underlying event about which the assumption is made will not occur for five years or more. the board understands the',
19032:'respondent’s comment to involve a question about the sufficiency of the general usage of “longterm liability” in the standard. the',
19033:'board believes that the usage of page 21 sffas 33 fasab handbook, version 20 06/21 sffas 33 “longterm liability”, along',
19034:'with the specificfocusonassumptionsinvolvingevents of 5 years or more, is sufficient. however, in order to make the standard as clear as',
19035:'possible, in the final standard the board uses the word “longterm” primarily to modify the word “assumption” and does not',
19036:'apply it to the word “liability.” rather, the standard refers to liabilities and/or estimated liabilities that involve longterm assumptions. note',
19037:'disclosures what the exposure draft proposed regarding disclosure a23.the proposed standard required certain note disclosures. first, the componentsof expense associated',
19038:'with liabilities involving longterm assumptions were to be disclosed. the treasury department and other users advocated a disclosure that will',
19039:'allow increased comparabilitybetweenfederalcivilianandmilitaryemployeeandveteranbenefitsprograms. the board believed that disclosing the components of expense will provide information about the government’s annual accrued',
19040:'costs and about increases and decreases in the associated liability that will be useful for decisionmaking. the treasury department prepares',
19041:'the cfr and must explain any wide swings in certain liabilities. for some time treasury has sought to improve the',
19042:'disclosure for federal employee and veteran benefits payable and currently discloses the information shown inappendix d. the desire for more',
19043:'transparency in this regard is not only the goal of the treasury department but also apparent in comments from other',
19044:'cfr users, most notably the federal reserve. most of the information required in this statement is already presented in the',
19045:'cfr but some data is missing. the proposed standard was intended to fill these gaps. a24.in addition tothe componentsof expense,',
19046:'theexposure draft proposed disclosure of market rates for treasury securities with 10, 20, and 30year maturities. the board believed that',
19047:'market rates would be a useful benchmark for comparison with the discount rates the entity is using. the discount rate',
19048:'affects expense and liability amounts and a comparison with market rates would provide useful context. the board considered but decided',
19049:'not to require the note disclosure to include the entity’s analysis of the effect on expense and liability amounts of',
19050:'using current market rates. the burden of such a requirement on some preparers was deemed to outweigh the benefits of',
19051:'the information provided. however, the proposed note disclosure would allow interested parties to begin such an analysis. respondents comments regarding',
19052:'disclosure a25.most respondents commented that the note disclosure would be informative. one respondent recommended more detailed information about gains and',
19053:'losses from assumption changes. for example, display the type of assumption within a category of assumptions i.e., categories are economic,',
19054:'demographic, discount rates, etc. and the amount of each change. another respondent recommended disclosure of 1 the assumed page 22',
19055:'sffas 33 fasab handbook, version 20 06/21 sffas 33 rate of return on the plan assets, if the reporting entity',
19056:'has such assets – that is, not just the return on treasury securities, 2 the specific maturities for the treasury',
19057:'securities, and 3 the allocation of the fund’s assets by asset general category. another respondent recommended requiring the reporting entityto',
19058:'determine itsfinancial position using both the discount rate ontreasury securitiesand the discount rate on the actualassetsof thefund, if any, to',
19059:'show the actual impact of these different rates. a26.another respondent commented that the disclosure would be neither meaningful nor informative.',
19060:'they found the standard too vague to determine whether longterm construction contacts or procurements would be included. they cited issues',
19061:'involving their standard general ledger accounts and accounting system. a27.one respondent commented that the disclosure of market rates would be',
19062:'informative and provide transparency. however, another respondent found the benchmark comparisons unnecessary andpotentially confusing. thisrespondent favored merelystating the basisfor selecting',
19063:'assumptions in the notes; for example, that a board of experts decided the rates are appropriate. a28.one respondent commented that',
19064:'the proposed standard appeared to eliminate the requirement in sffas 5, par. 88, for disclosure of gains and losses due',
19065:'to changes in the medical trend assumptions as a separate item because it could be included in disclosure of all',
19066:'other such gains and losses. the board notes that this is not the case; the requirement in par. 88 is',
19067:'not affected by this standard. the board’s conclusions regarding disclosure a29.with respect to the suggestion that more detail be disclosed,',
19068:'the proposal in the exposure draft did not require as much detail on the face of the financial statement or',
19069:'as much disclosure as recommended by some respondents. the board’s decision to limit the scope of the final standard to',
19070:'pensions, orb, and opeb reduces the need for additional detail.at the same time the board added a requirement for disclosure',
19071:'of information about non treasury assets, if any. as noted above, the exposure draft did not and the standard does',
19072:'not preclude display or disclosure of shortterm gains and losses or other material components. a30.regarding the comments about disclosing current',
19073:'market rates for certain treasury securities, the board decided to eliminate this requirement. some believe that this disclosure would be',
19074:'a useful benchmark for comparison with the discount rate used by the entity. they note that current market rates are',
19075:'used in many other contexts. moreover, others believe that the current market rate for treasury securities is the best indicator',
19076:'of the government’sborrowing cost. however, others question the usefulness of the disclosure for several reasons. first, they note that the',
19077:'exposure draft did not require the entity to provide page 23 sffas 33 fasab handbook, version 20 06/21 sffas 33',
19078:'an analysis of the effect of using current market rates on the entity’s liability and periodic cost, because the board',
19079:'concluded that the benefit of such an analysis was outweighed by the burden of producing it. second, the entity was',
19080:'not required to disclose the average historical treasury rates it was using for discounting and therefore a direct comparison would',
19081:'not be possible. finally, some believe that the disclosure is not a good benchmark because the board is requiring another',
19082:'discount rate; and, if a benchmark were to be disclosed, it should be closer to what the board is requiring.',
19083:'the board decided that, given the lack of unanimity on its information value, the disclosure should not be required. a31.similarly,',
19084:'a respondent recommended using both the discount rate on treasury securities and the discount rate on the actual assets of',
19085:'the fund, if any, to show the impact of these different rates. the board believes this disclosure would be informative',
19086:'but concluded that its informational value did not clearly overcome the burden that preparing two calculations would have imposed on',
19087:'the preparer, and therefore reporting such information should be optional. a32.regarding the request for more guidance about administrative and employer',
19088:'entities, the standard now explains that, as indicated in paragraphsa17a18 above, the entity that reportsthepension, orb, or opeb liabilityshould displaythegainsor',
19089:'lossesfrom changes in assumptions and disclose the relevant liability components. selecting discount rates what the exposure draft proposed regarding discount',
19090:'rates a33.the board became aware of an issue affecting preparers with respect to the selection of discount rates for present',
19091:'value measurements of expense and liability amounts. a preparer noted that, with respect to opeb accounting, sffas 5 requires that',
19092:'the liability be estimated using as the discount rate the u. s. treasury borrowing rate for securities of similar maturityto',
19093:'the period over which the paymentsare to be made.9the preparer asked whether the discount rates should be based on a',
19094:'single day’s interest rates, or were other alternatives acceptable, such as an average of interest rates over a period of',
19095:'time. the preparercurrentlyuses onedaytreasury “spot” ratesconsistent withtheexpectedtimingof future cash flows relating to the program, believing that that is what the',
19096:'board intended by the standard in sffas 5, paragraph 95. as a result, its liabilities have been susceptible to extreme',
19097:'volatility. a34.several current fasab standardsrequire present valuationsand discounting. for example, federal civilian and militaryemployee pensions, orb, opeb, including veterans’ compensation,',
19098:'require discounting. federal activities that incur such liabilities typically involve similar types of demographic and economic assumptions. 9sffas 5, par.',
19099:'95. page 24 sffas 33 fasab handbook, version 20 06/21 sffas 33 a35.the fasab standard for federal civilian and military',
19100:'employee pensions and orb includes general guidance with respect to assumptions.10 these standards state that federal pension plans should be',
19101:'guided byactuarial standards of practice asop, e.g.,asop 4, measuring pension obligations, andasop 27, selection of assumptions for measuring pension obligations,',
19102:'as revised from time to time by theactuarial standards board asb. theasb is a board associated with theamericanacademy ofactuaries that',
19103:'sets professional standardsof actuarialpractice in the united states. the board referencedasb standards because it considers them accepted actuarial practice. a36.consistent',
19104:'withasops,sffas5,paragraph 65requiresactuarialassumptionstobebased ontheactualexperienceofthe coveredgroupandtoemphasizeexpectedlongrangefuture trends rather than give undue weight to recent past experience.although emphasis should be given to the',
19105:'combined effect of all assumptions, the standard requires that the reasonableness of each actuarial assumption should be considered independently on',
19106:'the basis of its own merits and its consistency with each other assumption. a37.with respect to discount rates for pension',
19107:'and orb accounting, sffas 5 requires the interest rate used for discounting to be based on an estimated longterm investment',
19108:'yield for the plan, giving consideration to the nature and the mixof current and expected plan investments and the basisused',
19109:'to determine the actuarial value of assets; or if the plan is not being funded, other longterm assumptions for example,',
19110:'the longterm federal government borrowing rate. …11 a38.thefasab standardfor opebdifferssomewhatfrom thatfor pensions andorb. for opeb, sffas 5 requires employer entities',
19111:'to estimate the amount and timing of future payments and to discount the future cash flows using the treasury borrowing',
19112:'rate for securities of similar maturity to the period over which the payments are to be made.12 this difference is',
19113:'attributable to the fact that, unlike most federal civilian and military employee pension and orb plans, the federal employee opeb',
19114:'generally are not funded and thus the longterm yield on investments was not thought to be relevant. for plans that',
19115:'are not funded the standards have been essentially the same: the objective is an expected longterm rate that reflects the',
19116:'government’s expected borrowing costs. a39.the board concluded in sffas 5 that the discount rate for pensions and orb, which are',
19117:'funded, should reflect the longterm expected return on plan assets. the board explained 10 see sffas 5, pars. 65 and',
19118:'83, respectively, for pensions and orb. 11sffas 5, par. 66. 12sffas 5, par, 95. page 25 sffas 33 fasab handbook,',
19119:'version 20 06/21 sffas 33 that the expected longterm rate reduces volatility, reflects the actual experience and expectationsoftheprimaryfederalplans,and isconsistentwiththe assumptionsusedinthe',
19120:'budget.13 a40.as previously stated, current fasab standards provide two approaches for selecting discount rates. the first approach is the expected',
19121:'longterm return on plan assets. the second approach involves unfunded plans where an expected longterm return on plan assets is',
19122:'not available and a treasury borrowing rate is required. the proposed standard employed one approach for all instances not otherwise',
19123:'expressly provided in fasab standards: discount rates for present value measurements of estimated liabilities that involvelongtermassumptionsshould betheinterest rate onmarketabletreasurysecurities of',
19124:'similar maturities to the cash flows of the benefit payment for which the estimate is being made. a41.the board believed',
19125:'that discount rates for present value measurements of expense and liability amounts should be average historical rates for marketable treasury',
19126:'securities because they reflect the government’s borrowing cost with the public. also, expected longterm rates reduce volatility, reflect the actual',
19127:'experience and expectations of the primary federal plans, and are consistent with the assumptions used in the budget. a42.the proposed',
19128:'standard eliminated the plan’s investment yield as an option for discount rates for present value measurements of expense and liability',
19129:'amounts. the discount rate assumption for liabilities is used most significantly to calculate the present value of the obligation and',
19130:'the annual cost increments of net periodic cost, for example, the normal cost component of pension expense. both of those',
19131:'uses are conceptually independent of a plans assets, if any. if two employers have made the same benefit promise, the',
19132:'fasab believes the annual cost increments and the present value of the obligation should be the same even if one',
19133:'expected to earn an annual return of 6 percent on its plan assets and the other had an unfunded plan.',
19134:'a43.the board noted that the pension protectionact of 200614 requires fund managers to focus on longterm interest rates instead of',
19135:'their particular asset holdings. theact requires them to calculate pension liabilities based on current bond rates rather than the expected',
19136:'rate or return from an asset portfolio. thus, high expected gains from stock holdings will no longer be able to',
19137:'help diminish benefit liabilities since they will no longer be part of the calculation. 13 sffas 5, par. 159. 14',
19138:'plno. 109280. page 26 sffas 33 fasab handbook, version 20 06/21 sffas 33 a44.the fasab believes that the objective of',
19139:'discount rates is to reflect the time value of money. the time value of money should reflect the single amount',
19140:'that, if invested at the measurement date in riskfree investments with maturities like those of the future benefit payments being',
19141:'measured, would generate the necessary cash flows to pay the benefits when due. marketable u.s. treasury securities are deemed risk',
19142:'free because they pose neither uncertainty in timing nor risk of default to the holder. this single amount is the',
19143:'gross liability. it would equal, conceptually, the current market value of a portfolio of treasury zero coupon bonds whose maturity',
19144:'dates and amounts would be the same as the timing and amount of the expected future benefit payments. in the',
19145:'absence of a portfolio of such zero coupon treasury securities, however, the federal preparer should incorporate in assumed discount rates',
19146:'the refinancing rates expected to be available on marketable treasury securities in the future, which should be extrapolated from historical',
19147:'experience. a45.with respect to treasury rates the board considered average historical rates as well as currentmarket rates asof thereportingdate. some',
19148:'prefer current market rates, arguingthat interest rates can move significantly from year to year and the use of interest rates',
19149:'from a prior year or smoothing this year’s rates with those from prior years can therefore result in significant misstatements',
19150:'about the current value of future cash flows. they argue further that changing interest rate assumptions annually would result in',
19151:'more accurate but also more volatile estimates of liabilities and changes in net cost than the current actuarial practice in',
19152:'the federal government of revisiting interest rate assumptions every3 to 5 years. they argue that the proposed display standard is',
19153:'the best way to deal with volatility, i.e., by reporting on a separate line changes in net cost due to',
19154:'changes in actuarial assumptions. a46.the fasab decided to propose average historical rates rather than singleday or market rates on the',
19155:'reporting date. the board believed that singleday rates would not reflect the longterm orientation of most federal programs. a47.the proposed',
19156:'standard was not intended to change the board’s preference, expressed in sffas 5 and elsewhere, for expected future trends rather',
19157:'than giving undue weight to recent past experience. with respect to assumptions in general, fasab standards have emphasized expected future',
19158:'trends. a48.regarding the method of discounting cash flow in future years, the fasab believed that discount rates used to measure',
19159:'the present value of the annual cost increments of expense should be selected that are applicable to the various benefit',
19160:'periods in question. the board believed that annual cost increments will be more representationally faithful if individual discount rates applicable',
19161:'to various benefit deferral periods are selected. for future years extending beyond the last for which treasury rates are available,',
19162:'e.g., beyond 30year maturities, the proposed standard required the preparer to incorporate in the assumed discount rate expected refinancing rates',
19163:'extrapolated from historical treasury borrowing rates. however, the proposed standard allowed that a single average discount rate may be page',
19164:'27 sffas 33 fasab handbook, version 20 06/21 sffas 33 usedfor allprojected future payments if the resulting present value isnot',
19165:'materiallydifferent than the resulting present value using multiplerates, or for cases in which discount rates have limited influence on current',
19166:'liability estimates. a49.the proposed standard provided for the discount rates to be reviewed at each annual reporting date and changed',
19167:'if materially different from the existing rate. however, the board preferred a stable discount rate that would result from applying',
19168:'historical averages, rather than current market rates. the board stated that current market rates produce a degree of volatility that',
19169:'is not a faithful representation of the time value of money in longterm federal programs. the board also stated that',
19170:'implicit in the notion of stable rates is the fact that the discount rate normally would not change every year.',
19171:'the preparer would change the rate based on a significant change in the historical average treasury rate, as determined by',
19172:'the preparer, which would reflect longterm expectations rather than the current market rate. thus, the proposed standardneither required norprecluded annual',
19173:'changesin the discount rate. current office of personnel management practice is to maintain a constant discount rate for civilian pensions',
19174:'and other retirement benefits for five years. the board does not anticipate that the proposed standard would necessarily affect that',
19175:'practice because treasury borrowing rates normally change very slowly. a50.the discount rate standard in the proposed statement did not apply',
19176:'to instances where the fasab has required or permitted a discount rate to capture risk, i.e., to be other than',
19177:'the riskfree treasury borrowing rate. however, the proposed standard did apply to all instances where riskfree treasury borrowing rates are',
19178:'appropriate. respondents comments regarding discount rates a51.the majority of respondents commented that longterm treasury rates are appropriate for discounting liabilities',
19179:'the estimates for which involve longterm assumptions. one respondent favored current market rates over average historical treasury rates, believing them',
19180:'to be abetterreflection of the cost of issuingtreasurysecuritiesto extinguish liabilities at the financial statement date. in addition, this respondent believes',
19181:'current market rates would provide more comparability and would be consistent with fair value accounting; but if average historical rates',
19182:'are used, this respondent believes the time period allowed for average historicaltreasury rates should be limited to 5 years, which',
19183:'would better reflect the current market than longer horizons. a52.one respondent commented that it uses statutory rates and that such',
19184:'rates supersede sffass. a53.one respondent found the requirement ed paragraphs 27 anda33 to use yearspecific discount rate “fundamentally” inconsistent with',
19185:'theaggregate entryage normal aean cost method required by sffas 5. the current fasab pension and orb standards for page 28',
19186:'sffas 33 fasab handbook, version 20 06/21 sffas 33 selecting cost attribution methods paragraphs 63 and 82, sffas 5, respectively',
19187:'direct the preparer to useaean or other actuarial cost methods if the results are not materially different. theaeanmethodis one of',
19188:'several cost attributionmethods available. the private sector pension standard, sfas 87, used another approach called “projected unit credit” puc. the',
19189:'primary reason given in sffas 5 for directing the use ofaean was that the major federal pension plans at opm',
19190:'and dod were using it, and the board was advised by actuaries that the results would not be substantially different',
19191:'than the unit benefit approach required by sfas 87 see sffas 5, par. 153. a54.in addition, the respondent did not',
19192:'believe that allowing a single rate if the “result” is not materiallydifferent, aswasdonein the ed paragraph27, would sufficientlyaddressthe cost attribution',
19193:'method issue. this respondent did not believe that yearspecific discount rates should be required, even if the board wants to',
19194:'allow them. a55.this respondent also commented that the perspective of the government’s borrowing cost with the public is not necessarilyrelevant',
19195:'from the point of view of the employer entity in the case of a funded plan. although this respondent’s plan',
19196:'is a federal plan holding federal securities, from this respondent’s perspective, the plan is funded. therefore, this respondent believes the',
19197:'investment yield perspective for the discount rate has relevance. from the employers’ perspective, this respondent did not believe the statement',
19198:'in paragrapha25 of the exposure draft about the equivalence of two plans with the same benefit provisions one funded and',
19199:'one not, is necessarily correct. a56.this respondent stated that, from the overall federal government perspective, it is not clear what',
19200:'constitutes the best basis for the discount rate assumption. this respondent believes the statement in paragrapha24 of the exposure draft',
19201:'that the rationale for using marketable treasury securities for the discount rate is that they reflect the government’s borrowing cost',
19202:'with the public is questionable. this respondent asserted that a private company would not value a given future obligation at',
19203:'its own borrowing cost. a57.this respondent acknowledged that, in the sense that treasury securities represent risk free investments as described',
19204:'in paragrapha27, of the exposure draft arguments can be made for their use as the discount rate basis. however, this',
19205:'respondent asserted that two circumstances make an investment yield approach preferable. first, when the entity employs an independent actuarial board,',
19206:'the respondent believes that board’s assumptions for the financial statement valuations make the most sense, especially when congress has created',
19207:'the independent expert for setting the assumptions. second, an investment yield approach is preferable when the funding in a trust',
19208:'fund is comprised entirely of investments that mirror marketable us treasury securities. this respondent states that arguments that the discount',
19209:'rate should not be impacted by the particular portfolio of securities in a trust fund at a given time are',
19210:'not valid in the context of an alternative involving “a vague, undefined ‘historical’ average.” page 29 sffas 33 fasab handbook,',
19211:'version 20 06/21 sffas 33 a58.another respondent commented that the phrase “average historical treasury rates” is unclearbut consistent with ed',
19212:'paragraph 28 with respect tothe need for the reporting entity to use judgment, and with the notion of congressionallyestablished expert',
19213:'boards for trust funds restricted to investing in securities that mirror marketable us treasury securities. a59.other respondents prefer more guidance',
19214:'regarding the timeperiod for and meaning of average historical rates. several respondents recommended limiting the timeperiod to 5 years, if',
19215:'average historical rates are used, feeling it would better reflect the current market than longer horizon and that that would',
19216:'be a sufficiently long period. a60.one respondent asked for more explanation and guidance with respect to the phrase “extrapolated from',
19217:'historical treasury borrowing rates.” it is possible for projected cash flows to extend beyond the maturities for which treasury securities',
19218:'are available, e.g., beyond the 30year security. the proposed standard required the preparer to incorporate in the assumeddiscount rate expected',
19219:'refinancingratesextrapolatedfromhistoricaltreasury borrowing rates, that is, use the historical rates as indicative of what future rates will be. the board’s conclusions',
19220:'regarding discount rates a61.the board decided to retain the average historical treasury rate approach proposed in the exposure draft. thus,',
19221:'the entity should employ treasury borrowing rates associated with each future year involving relevant cash flow. this is sometimes called',
19222:'the “yield curve” approach. a62.with respect to the attribution methods, the board does not believe the standard is inconsistent with',
19223:'theaggregate entryage normal aean attribution method required in sffas 5. thechange inthe discount rate appliedtoa particularfuturecashflowwouldbea function of 1 the',
19224:'passage of time and 2 the market rate for each maturity, as evidenced by historical rates. it would not represent',
19225:'a change in assumption per se. in other words, the discount rate does not necessarily change, the period changes. there',
19226:'would be a oneyearrate, a twoyearrate, a5yearrate, etc.,that wouldnot necessarilychangeeach year. the average historical rate would change only when the',
19227:'data dictated. the mere fact that a payment that was due in 5 years is now due in 4 years',
19228:'would not constitute an assumption change. the board does not believe that the requirement is conceptually inconsistent with theaean or',
19229:'other provisions of sffas 5, paragraphs 63 and 82. a63.regarding whether to use the entity’s investment return for determining a',
19230:'discount rate, the board continues to believe that discount rates for present value measurements of federal pension, orb, and opeb',
19231:'liabilities should be average historical rates for marketable treasury securities because it reflects the government’s borrowing cost with the public',
19232:'and therefore the time value of money for the government. the board also believes that there should be consistency among',
19233:'federal entities. the discount rate is used to calculate the page 30 sffas 33 fasab handbook, version 20 06/21 sffas',
19234:'33 present value of the obligation and annual cost increments and should be the same, everything else being equal, between',
19235:'funded and unfunded pension, orb, and opeb programs. moreover, overly optimisticassumptions about investment returns have provided inaccurate financial information about',
19236:'public and private sector pensions. a64.the board believes that the average historical treasury rate standard is clear and well defined.',
19237:'the objective isaprinciplebased requirement where thereporting entitywoulduse its judgment when developing the rate. a65.the board considered the request for more',
19238:'guidance regarding the number of instances to include in an average historical rate. the board decided to establish a minimum',
19239:'number of five historicaltreasuryrates to include for the average. the exposure draft did not specify a minimum or maximum number',
19240:'of historical treasury rates for developing an average. the board believes that setting a minimum number of historical rates to',
19241:'include in the average would ensure that the discount rate captures richer experience and avoids undue focus on the current',
19242:'market rate. in addition, a standard requiring aminimum of five periodic ratesfor the average would not encourage the use of',
19243:'so many historical rates as to render the average rate antiquated. a66.the board was concerned regarding the possibility that the',
19244:'entity would frequently change the number of treasury rates included in the average rate. the board’s believes that the reporting',
19245:'entity should be consistent from period to period with respect to the number of rates included in the average. sffac',
19246:'1, objectives of federal financial reporting, and sffac 2, entity and display, states that consistency is one of the qualitative',
19247:'characteristic of accounting information.15 the board concluded that the standard should require the entity’saccountingpolicydisclosureto includethepolicyof consistencyin thisregard, which is the',
19248:'intent of paragraph 31. a67.the board notes that a respondent criticized as vague the exception provided in the exposure draft',
19249:'allowing entities to use a single rate for discounting if the resulting present value is “not materially different” than the',
19250:'resulting present value using the approach in the standard. the respondent commented that the single rate would need to be',
19251:'compared to the various components of expense to not materially differ. nonetheless, the boardbelieves that this exception may be useful',
19252:'to preparers. if the result of applying a single composite discount rate to the cash flows vs. individual rates is',
19253:'not materially different, then the preparermayuse the single rate. thisexceptionisa continuation of one currentlyin fasab pension and orb standards and',
19254:'has been in effect since october 1996. however, the standard now specifies that the resulting present value of the entity’s',
19255:'single rate should not be materially different than the resulting present value using the approach in the standard. 15 see',
19256:'sffac 1, par. 163, and sffac 2, par. 109. page 31 sffas 33 fasab handbook, version 20 06/21 sffas 33',
19257:'a68.withrespect to arespondent’scomment about the use of expert actuarialboards, the board notes that such boards provide assumptions for funding and',
19258:'other purposes and presumably also would provide assumptions for generalpurpose financial statements. however, for the latter, under the standard, they',
19259:'would look at the broader historical market for treasury securities for context.actuaries work with requirements appropriate to specific objectives. the',
19260:'board concludes that the general requirement for average historical rates should be retained. a69.with respect to the request for additional',
19261:'guidance regarding the phrase “extrapolate from historical treasury borrowing rates” where projected cash flows extend beyond the maturities for which',
19262:'treasury securities are available, e.g., beyond the 30year maturity, the board notes that there are several methods that can be',
19263:'applied to extend a yield curve for terms beyond the last available rate in the market. the internationalactuarialassociation’s risk margin',
19264:'working group’s rmwg recent exposure draft16 on measuring liabilities for insurance contractsmentionsthat the simplest approach is to use the last',
19265:'available rate for example the 20yearrate for a 30year cash flow, and that a more advanced method would be to',
19266:'extrapolate the yield curve with a constant slope assuming that the forward rate observed between the last two market rates',
19267:'stays constant. in addition, the rmwg ed states that a model can be applied to extend the yield curve and',
19268:'cites several examples. the board believes these approaches are reasonable.17 selecting valuation date what the exposure draft proposed regarding valuation',
19269:'dates a70.the fasab has addressed the issue of valuation dates for present valuations in various ways. the sections of sffas',
19270:'5 dealing with pensions, orb, and opeb do not mention valuation dates, but the board did address it in interpretation',
19271:'3, measurement date for pension and retirement health care liabilities august 1997. in interpretation 3 the board decided that pension',
19272:'and retirement health care liabilities should be measured for general purpose federal financial reports as of the end of the',
19273:'reporting period, and that such measurement should be based on an actuarial valuation within a year of the end of',
19274:'the reporting period. a71.in interpretation 3 the board had been asked to endorse use of an actuarial valuation date as',
19275:'of the beginning of the fiscal year, which had been the practice in some of special 16risk margin working group,',
19276:'measurement of liabilities for insurance contracts: current estimate and risk margins, march 24, 2008 “rmwg ed”. 17 rmwg ed, page',
19277:'31. page 32 sffas 33 fasab handbook, version 20 06/21 sffas 33 purpose financialreports on pension plansprepared pursuant to statutoryprovisions.',
19278:'some actuaries were concerned that differences between actuarial measurements used in different reports would cause problemsand confusion. some people who',
19279:'supported using a beginningofyear valuation also were concerned about the potential for disagreements between auditors and preparers if projections or',
19280:'estimates were used instead of a full actuarial valuation. however, other people believed that liability measurements in financial statements prepared',
19281:'pursuant to sffas 5 should be as of the end of the reporting period, and that a measurement based on',
19282:'a projection or roll forward of a full actuarial valuation would be appropriate if it were not feasible to perform',
19283:'a full actuarial valuation as of year end. a72.sffas 17, accounting for social insurance, does address the valuation date, specifying',
19284:'that it should be as of any time within a year of the reporting date. a73.although it does not explicitly',
19285:'discuss the valuation date, sffas 5 implicitly calls for measurement at the reporting date for pension, orb, and opeb liabilities,',
19286:'which are reported as of the balance sheet date. a74.fasb’s statements 87 and 106 allowed preparers to use a valuation',
19287:'date for measuring pension and other postretirement liabilities up to three months earlier than the reporting date. however, fas 158',
19288:'published under phase i of fasb’s pension project requires the measurement of plan assets and benefit obligations to be as',
19289:'of the date of the sponsoring employer’s statement of financial position. the fasb concluded that this will more accurately reflect',
19290:'the economic status of defined benefit plans and further improve the understandability of the financial statements.18 a75.in statement 27 and',
19291:'statement 45, the gasb did not require the valuation date to be the employers balance sheet date. statement 27 requires',
19292:'the expense/expenditure amount to be based on the results of an actuarial valuation performed in accordance with the parameters as',
19293:'of a date not more than 24 months before the beginning of the employers fiscal year. statement 45 requires that',
19294:'the actuarial valuation date generally should be the same date each year or other applicable interval. however, in both instances',
19295:'a new valuation would be required if, since the previous valuation, significant changes occurred that affectthe resultsof thevaluation,includingsignificantchangesinbenefitprovisions,the size or',
19296:'composition of the population covered by the plan, or other factors that impact longterm assumptions. a76.the board believes that the',
19297:'approach in interpretation 3 is preferable. pension, orb, and opeb liabilities should be measured as of the end of the',
19298:'reporting period based on a full 18 fas 158, par. b16. page 33 sffas 33 fasab handbook, version 20 06/21',
19299:'sffas 33 actuarial valuation within a year of the end of the reporting period. thus, “full actuarial valuations,” as that',
19300:'term is used by actuaries, can be performed as of an earlier date during the fiscal year than year end,',
19301:'including a beginningofyear date, with suitable adjustments for the effects of changes during the year in major factors such as',
19302:'the pay raise and cost of livingadjustment. suchadjustmentsare sometimesreferredto asameasurementbased on a projection or rollforward. respondents comments regarding the valuation',
19303:'date a77.most of the respondents who commented on the proposed valuation date standard commented that it was appropriate. one respondent',
19304:'asserted that its valuation dates are based on statutory requirements. the board’s conclusions regarding valuation date a78.the board continues to',
19305:'believe that pension, orb, and opeb liabilities should be measured as of the end of the reporting period based on',
19306:'a full actuarial valuation within a year of the end of the reporting period. reasonable estimates what the exposure draft',
19307:'proposed regarding reasonable estimates a79.the proposed statement also addressed an issue with respect to the meaning of “best estimate.” theproposedstatementprovidedthat',
19308:'estimatesshouldbereasonableunderthe circumstances see paragraph 31. the notion of “best estimate” has been used in several fasab standards, for example, in',
19309:'sffas 5, paragraph 65, sffas 7, accounting for revenue and other financing sources …, paragraph 67.1, and in various instances',
19310:'in sffas 17. however, preparers and auditors have reported disagreements regarding the meaning of the word “best,” which is sometimes',
19311:'defined as “excelling all others.” thus, the board proposed to replace the term “best estimate” in fasab standards with “reasonable',
19312:'estimate.” a80.actuarial standards of practice asop provide guidance regarding the meaning of “best estimate” inasop 10, methods and assumptions for',
19313:'use in life insurance financial statements prepared in accordance with gaap, andasop 27, selection of economic assumptions for measuring pension',
19314:'obligations. asop 27 instructs actuaries to select a specific economic assumption from within his or her “best estimate range” with',
19315:'respect to that assumption, which it defines as “the narrowest range within which the actuary reasonably anticipates that the actual',
19316:'results … are more likely than not to fall”19 [emphasis added]. asop 27 provides, generally, that 19 asop 27, section',
19317:'2.1. page 34 sffas 33 fasab handbook, version 20 06/21 sffas 33 “[b]ecause no one knows what the future holds',
19318:'with respect to economic and other contingencies, the best an actuary can do is to use professional judgment to estimate',
19319:'possible future economicoutcomes basedon past experience and futureexpectations, and to select assumptions based upon that application of professional judgment. therefore,',
19320:'an actuary’s bestestimate assumption is generally represented by a range rather than one specific assumption. the actuary should determine the',
19321:'bestestimate range foreach economicassumption, andselectaspecificpoint fromwithinthatrange. in some instances, the actuary may present alternative results by selecting different points within',
19322:'the bestestimate range” [emphasis added].20 a81.the board concluded thatasop 10 and 27 apply a standard of reasonableness regarding “best estimate,”',
19323:'and that that is an appropriate approach. therefore, paragraph 31 of the exposure draft called for the preparer’s estimate to',
19324:'reflect what is reasonable to assume under the circumstances, rather that the preparer’s “best estimate.” respondents comments regarding reasonable estimates',
19325:'a82.one respondent objected to the proposed requirement that the preparer compare assumptions used for the liability estimate with assumptions generally',
19326:'used in the federal government as evidenced by independent sources, unless their actuarial board is considered an “independent source.” anotherrespondent',
19327:'was concerned that the proposed standard may prove inconsistent with the historical rates used in setting discount rates, because it',
19328:'permits the use of the entity’sown assumptionsaslong asthey can be justified if they deviate from independent sources. they suggest this',
19329:'possible inconsistency be discussedin theguidance.anotherrespondent commentedthattherequirement isnot clear regarding whether it applies to pension and actuarial valuations or other estimated',
19330:'liabilities that employ longterm assumptions such as environmental liabilities and, if so, as to what independent source should be used.',
19331:'the board’s conclusions regarding reasonable estimates a83.paragraph 35 of the standard requires the preparer to compare its assumptions with assumptions',
19332:'used generally in the federal government as evidenced by sources independent of the reporting entity and, if its assumptions do',
19333:'not reflect such data, explain why it is inappropriate to do so. arespondent suggested that the board consider specifying a',
19334:'set of federal assumptions for this purpose. some assumptions will involve general economic parameters while others will be particular to',
19335:'the entity. 20 asop 27, section 3.1. page 35 sffas 33 fasab handbook, version 20 06/21 sffas 33 a84.the board’s',
19336:'objective in this regard is for the entity to inform the reader about the reasonableness of the assumptions used in',
19337:'the preparation of its financial reports. with respect to sources for assumptionsgenerallyin use in the federalgovernment, the standard offers the',
19338:'example of bureau of economicanalysis’ assumptions but does not require the use of these or other particular sets of federal',
19339:'assumptions. the board decided not to change the standard in this regard. the board believes a comparison with a benchmark',
19340:'is likelyto bemeaningfultousers. thepreparershould useitsjudgmenttoselect assumptions used generally in the federal government that are relevant to its activities and estimates.',
19341:'in addition, the narrowing of the scope of the standard to pensions, orb, and opeb will narrow the comparison as',
19342:'well. board approval a85.this statement was approved for issuance by all members of the board. page 36 sffas 33 fasab',
19343:'handbook, version 20 06/21 sffas 33 appendix b: pro forma statement of net cost displaying separate line item for gains',
19344:'and losses due to changes in assumptions component entity: pro forma statement of net cost for the year ended september',
19345:'30, 2007 2007 billions abc program abc expenses less: exchange revenue net expense before gain/loss fromchangesin assumptions gain/loss on assumption',
19346:'changes: discount rate assumption other assumptions net gain/loss on assumption changes $ 223 24 199 200 50 150 net cost',
19347:'$349 governmentwide entity: pro forma statements of net cost for the year ended september 30, 2007 gross cost earned net',
19348:'revenue cost billions abc agency………… ………………………. opm……………………………………………. dva…………………………………………… xyz…………………………………………… other agencies……………………………… cost before gains/losses from changes in assumptions: less: loss',
19349:'plus gain from changes in assumptions: abc………………………………………… opm……………………………………… dva……………………………………… $ 199 146 3,060 150 100 110 $ 24 $ 223',
19350:'92 54 226 2,834 0 150 0 100 0 110 total cost ……………………………………. $3,420 226 $ 3,194 page 37 sffas',
19351:'33 fasab handbook, version 20 06/21 sffas 33 appendix c: pro forma note disclosure of opeb liabilities and expense post',
19352:'employmentactuarial liabilities in billions balance civilian military veterans sheettotal beginning balance 1,496.3 1,563.0 924.8 4,062.1 expense normal cost 41.5 33.4',
19353:'xxx interest on the liability balance 92.4 96.9 xxx assumption changes 0.2 58.5 xxx plan amendments prior service cost 25.8',
19354:'xxx actuarial gain/loss 1.9 4.6 xxx other 0.2 xxx total expense 135.8 219.2 xxx less benefits paid 67.6 52.9 xxx',
19355:'subtotal of pension and health 1,564.5 1,729.3 xxx ending balance, other benefits 48.5 26.9 total post employment actuarial liabilities 1,613.0',
19356:'1,756.2 1,122.6 4,491.8 page 38 sffas 33 fasab handbook, version 20 06/21 sffas 33 appendix d: note 11 from fy',
19357:'2006 financial report of the united states page 39 sffas 33 fasab handbook, version 20 06/21 sffas 33 page 40',
19358:'sffas 33 fasab handbook, version 20 06/21 sffas 33 page 41 sffas 33 fasab handbook, version 20 06/21 sffas 33',
19359:'page 42 sffas 33 fasab handbook, version 20 06/21 sffas 33 appendix e: glossary see the consolidated glossary appendix e',
19360:'in this volume. page 43 sffas 33 fasab handbook, version 20 06/21 sffas 33 appendix f: list ofabbreviations anpv actuarial',
19361:'net present value cfs consolidated financial statements cpi consumer price index ed exposure draft fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board gao',
19362:'governmentaccountabilityoffice gasb governmentalaccountingstandards board omb office of management and budget opeb other postemployment benefits orb other retirement benefits pv preliminary',
19363:'views rsi required supplementary information sfas statements offinancialaccountingstandards sffac statements offederalfinancialaccountingconcepts sffas statements offederalfinancialaccountingstandard page 44 sffas 33 fasab handbook,',
19364:'version 20 06/21 statement of federal financialaccounting standards 34: the hierarchy of generallyacceptedaccountingprinciples, including theapplication of standards issued by the',
19365:'financialaccounting standards board status issued effective date affects affected by july 28, 2009 upon issuance. none. none. summary the federalaccounting',
19366:'standardsadvisory board fasab is the body designated by the american institute of certified publicaccountants aicpa as the source of generally',
19367:'accepted accounting principles gaap for federal reporting entities.1 as such, the fasab is responsible for identifying the gaaphierarchy for federal',
19368:'reporting entities. the gaap hierarchy consists of the sources of accounting principles and the framework for selecting the principles used',
19369:'in the preparationofgeneralpurpose financialreports2of federalreportingentities thatarepresentedin conformity with generally accepted accounting principles. however, the hierarchy for selecting the principles used',
19370:'in the preparation of general purpose financial reports by federal reporting entities was set forth in theaicpastatement onauditing standards sas',
19371:'no. 91, federal gaap hierarchy, rather than in the authoritative literature of the fasab. this statement incorporates the hierarchy into',
19372:'the fasab’s authoritative literature. incorporating the gaap hierarchy into the authoritative literature of the fasab isnot intended to cause a',
19373:'sudden and dramatic change in practice for federal entities. this statement permits those federal entities currently applying financial accounting and',
19374:'reporting standards issued by thefinancialaccountingstandards boardfasbtocontinuetodoso. inaddition, giventhat the fasab is the source of gaap for federal entities, the statement',
19375:'clarifies that a federal entity that is preparing gaapbased general purpose financial reports for the first time is required to',
19376:'implement fasab standards unless, in consultation with its auditors and bodies with oversight authority, the entity clearly demonstrates that the',
19377:'needs of its primary users would be best met through the application of fasb standards. 1statementoffederalfinancialaccountingconceptssffac2, entity and display,discussesthecriteria fordefining',
19378:'federal reporting entities. also, the terms federal reporting entity and federal entity are used interchangeably throughout this statement. 2 the',
19379:'term general purpose financial report is used throughout this statement as a generic term to refer to the report that',
19380:'contains the entity’s financial statements that are prepared pursuant to generally accepted accounting principles. in the federal government, the report',
19381:'is known as the performance andaccountability report or theagency financial report. page 1 sffas 34 fasab handbook, version 20 06/21',
19382:'sffas 34 table of contents summary 1 introduction 3 purpose 3 materiality 3 effective date 3 accounting standards 4 scope',
19383:'4 the hierarchy ofgenerallyacceptedaccountingprinciples 4 otheraccountingliterature 5 applicationofstandards issuedbythefinancialaccountingstandards board 6 effective date 7 appendixa: basis for conclusions 8 appendix',
19384:'b:abbreviations 14 page 2 sffas 34 fasab handbook, version 20 06/21 sffas 34 introduction purpose 1. the objective of this',
19385:'statement is to identify the sources of accounting principles and the framework for selecting the principles used in the preparation',
19386:'of general purpose financial reportsoffederalreportingentities3that are presentedin conformitywithgenerallyaccepted accounting principles the gaap hierarchy. a. this statement responds to a request',
19387:'from the american institute of certified public accountants aicpa that fasab incorporate the gaap hierarchy, which currently resides in the',
19388:'professional auditing literature, into the accounting literature. b. this statement also addresses 1 whether federal entities currently applying standards issued',
19389:'by the financialaccounting standards board fasb may continue that practice, and 2 whether federal entities that are preparing gaapbased general',
19390:'purpose financial reports for the first time may also apply fasb standards. materiality 2. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an item',
19391:'is material depends on the degree to which omitting or misstating information about the item makes it probable that the',
19392:'judgment of a reasonable person relying on the information would have been changed or influenced by the omission or the',
19393:'misstatement. effective date 3. the requirements in this standard are effective upon its issuance. 3statement of federal financialaccounting concepts 2,',
19394:'entity and display, provides criteria for identifying federal reporting entities. in addition, the board is currently developing standards defining the',
19395:'federal reporting entity. page 3 sffas 34 fasab handbook, version 20 06/21 sffas 34 accounting standards scope 4. this statement',
19396:'applies to the general purpose financial reports of all federal reporting entities that are presented in conformity with generally accepted',
19397:'accounting principles gaap.4 the hierarchy of generallyacceptedaccounting principles 5. the hierarchy of generally accepted accounting principles, hereafter referred to as',
19398:'the gaap hierarchy, governs what constitutes gaap for federal reporting entities. it lists the priority sequence of pronouncements that a',
19399:'federal reporting entity should look to for accounting and financial reporting authoritative guidance. the sources of accounting principles that are',
19400:'generally accepted are categorized in descending order of authority as follows: a. officially established accounting principles consist of fasab statements',
19401:'of federal financialaccounting standards standards and interpretations. fasab standards and interpretations will be periodically incorporated in a publication by the',
19402:'fasab. b. fasab technical bulletins and, if specifically made applicable to federal reporting entities by theaicpa and cleared5 by the',
19403:'fasab,aicpaindustryaudit and accounting guides.6 c. technical releases of the accounting andauditing policy committee of the fasab. d. implementation guides published',
19404:'by the fasab staff, as well as practices that are widely recognized and prevalent in the federal government. 4theaicpahas designated',
19405:'the fasab as the source of gaapfor federal reporting entities. therefore, fasab gaap would be the appropriate accounting standards for',
19406:'federal reporting entities in the executive, legislative, and judicial branches. 5 for purposes of interpreting category b, the word cleared',
19407:'means that the fasab does not object to the pronouncement’s issuance. 6such pronouncements specifically made applicable to federal reporting entities',
19408:'are presumed to have been cleared by the fasab, unless the pronouncement indicates otherwise. page 4 sffas 34 fasab handbook,',
19409:'version 20 06/21 sffas 34 6. iftheaccountingtreatmentforatransactionoreventisnotspecifiedbyapronouncementin category a, a federal reporting entity should consider whether the accounting treatment is',
19410:'specified by an accounting principle from a source in another category. in such cases, if categories b–d contain accounting principles',
19411:'that specify accounting treatments for a transaction or event, the federal reporting entity should follow the accounting treatment specified by',
19412:'the accounting principle from the source in the highest category—for example, follow category b treatment over category c treatment. 7.',
19413:'iftheaccountingtreatmentforatransactionoreventisnotspecifiedbyapronouncementor established in practice as described in categories a–d, a federal reporting entity should then consider accounting principles for similar',
19414:'transactions or events within categories a– dbeforeconsideringotheraccountingliteraturediscussedinparagraph8. forexample, it might be appropriate to report the event or transaction by applying,',
19415:'in a similar manner, an accounting principle established within categories ad for an analogous transaction or event on the basis',
19416:'of its substance.7afederal reporting entity should not follow the accounting treatment specified in accounting principles for similar transactions or events',
19417:'in cases in which those accounting principles either a specifically prohibit the application of the accounting treatment to the particular',
19418:'transaction or event or b indicate that the accounting treatment should not be applied to other transactions or events by',
19419:'analogy. otheraccounting literature 8. otheraccountingliteratureincludes,for example, fasabconceptsstatements;the pronouncements referred to in category b of paragraph 5 when not specifically made',
19420:'applicable to federal reporting entities by the fasab; pronouncements of other accounting and financial reporting standardssetting bodies, such as the',
19421:'fasb, governmental accounting standards board, internationalaccounting standards board, and international public sectoraccounting standards board; professional associations or regulatory agencies; and',
19422:'accounting textbooks, handbooks, and articles. the appropriateness of other accounting literature depends on its relevance to particular circumstances, the specificity',
19423:'of the guidance, and the general recognition of the issuer or author as an authority. for example, fasab concepts statements',
19424:'would normally be more influential than other sources in this category. 7generally accepted accounting principles recognize the importance of reporting',
19425:'transactions and events in accordance with their substance. consideration should be given to whether the substance of transactions or events',
19426:'differs materially from their form. page 5 sffas 34 fasab handbook, version 20 06/21 sffas 34 application of standards issued',
19427:'by the financialaccounting standards board 9. some federal entities, including government corporations listed in the government corporation controlact and certain',
19428:'others, such as the united states postal service, continue to publish financial reports pursuant to the accounting and reporting standards',
19429:'issuedbythefasb. someentitiesalsomayberequiredtopreparestatementspursuantto standards set by a regulatory agency e.g., the federal energy regulatory commission ferc. general purpose financial reports prepared',
19430:'in conformity with accounting standards issued by the fasb also may be regarded as in conformity with gaap for those',
19431:'entities that have in the past issued such reports.8 10. except as provided in paragraph 11, a federal entity that',
19432:'is preparing gaapbased general purpose financial reports for the first time should implement fasab standards as fasab is the preferred',
19433:'method of reporting for federal entities. 11. in rare instances, a federal entity that is preparing gaapbased general purpose financial',
19434:'reports for the first time may, in consultation with its auditors and bodies with oversight authority, elect to apply standards',
19435:'issued by the fasb if the entity clearly demonstrates that theneedsof itsprimaryuserswouldbe best metthroughthe applicationoffasbstandards. unique user needs can arise',
19436:'from various sources that include, but are not limited to, investors,secrequirements,bondholders,andcustomers. entitiesmaydeterminethatthe application of standards issued by the fasb more',
19437:'appropriately meets these unique user needs. thisdeterminationshouldinvolveanumberofconsiderations. examplesoffactors to consider include but are not limited to: a. the entity’s primary',
19438:'funding is derived from a source other than through annual federal appropriations. b. the entity has been delegated the financial',
19439:'and operational authority to carry on its activities in a manner similar to private business enterprises. c. the entity sells',
19440:'goods and/or services to individuals outside of the government reporting entity as its principal activity. 8the fasab has an existing',
19441:'project underway that will assist the board in determining whether certain federal entities should be permittedto continue applyingfasb gaapand, if',
19442:'so, whether additional reportingshould be required. this project will also consider whether federal entities should be permitted to convert from',
19443:'fasb standards to international financial reporting standards published by the internationalaccounting standards board. page 6 sffas 34 fasab handbook, version',
19444:'20 06/21 sffas 34 d. the entity is intended to, in the normal course of its operations, maintain its operations',
19445:'and meet its liabilities from revenues received from sources outside of the federal government reporting entity. e. it is desirable',
19446:'to compare general purpose financial reports of the federal entity that is preparing gaapbased general purpose financial reports for the',
19447:'first time with an existing entity that is already following fasb gaap. 12. while the application of standards issued by',
19448:'the fasb may be acceptable for a limited numberoffederalentitiesasnoted above, entitiesthathavealreadyimplementedstandards issued by the fasab should continue to apply the',
19449:'federal standards, as fasab is the preferred method of reporting for federal entities. effective date 13. the requirements in this',
19450:'standard are effective upon its issuance. the provisions of this statement need not be applied to immaterial items. page 7',
19451:'sffas 34 fasab handbook, version 20 06/21 sffas 34 appendixa: basis for conclusions this appendix discusses some factors considered significant',
19452:'by board members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting',
19453:'others. individual members gave greater weight to some factors than to others. the standards enunciated in this statement–not the material',
19454:'in this appendix–should govern the accounting and reporting for specific transactions, events, or conditions. this statement may be affected by',
19455:'later statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that',
19456:'amend this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will',
19457:'not be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for',
19458:'the rationale for each amendment. project history a1. representativesoftheamericaninstituteofcertifiedpublicaccountants aicpa requestedthattheu.s. accountingstandardssettersconsideradoptingcertainguidancefor accounting and financial reporting issues that now reside',
19459:'in the professional auditing literature. injuly2008,thefasabjoinedthegovernmentalaccountingstandardsboardin responding to this request. a2. in october 1999,theaicpadesignatedthefasabasthestandardssettingbodyfor federalentities. assuch,thefasabisresponsibleforidentifyingthesourcesofaccounting principles and providing federal',
19460:'entitieswith a framework for selecting the principles used in the preparation of general purpose financial reports that are presented in',
19461:'conformity with gaapgaaphierarchy. theboardbelievesthatincorporationofthegaaphierarchyinto the fasab’s authoritative literature would more clearly convey that financial statement preparers are responsible for selecting',
19462:'the sources of the principles to be used in the preparationofgeneralpurposefinancialreportsthatarepresentedinconformitywithgaap. the structure presented in this statement generally carries forward',
19463:'the hierarchy as set forth in sas 91 and the office of management and budget omb circulara136, financial reporting requirements.',
19464:'page 8 sffas 34 fasab handbook, version 20 06/21 sffas 34 application of standards issued by the financialaccounting standards board',
19465:'a3. although the fasab’s standards have been recognized as gaap for federal entities fasab gaap since october 1999, some federal',
19466:'entities follow gaap for nongovernmentalentitiespromulgatedbytheprivatesectorfinancialaccounting standards board fasb gaap. for example, federal government corporations, the u.s. postal service, certain component',
19467:'entities of the u.s. department of the treasury, and some smaller entities in the executive and legislative branches have historically',
19468:'applied fasb gaap and continue to do so. a4. in early 2000, the fasab recognized this practice as acceptable for',
19469:'those entities that had been following fasb gaap to avoid an immediate and unanticipated requirement that these federal entities follow',
19470:'federal gaap after the fasab was recognized as the rule 203 standardssetting body for the federal government. this guidance was',
19471:'published in the january – march 2000 issue of fasab news9and wasintended asa temporarymeasure in lightoftheunanticipatedconsequencesofrule203recognition. theexistenceoftheissue has also been',
19472:'acknowledged in statement of federal financialaccounting concepts sffac 2, entity and display paragraph 78; statement of federal financialaccounting standards sffas',
19473:'5, accounting for liabilities of the federal government inside front cover andappendixa, paragraph 142; sffas 8, supplementary stewardship reporting introduction',
19474:'paragraph 40; and, sffas 24, selected standards for the consolidated financial report of the united states government appendixa, paragraph 20.',
19475:'a5. providing interim guidance on the application of standards issued by the fasb serves to proactively address entity concerns that',
19476:'moving the hierarchy of generally accepted accounting principles into the accounting literature without addressing the use of fasb gaap would',
19477:'require a sudden and dramatic change in practice. application to legislative and judicial branches a6. thefasab’ssponsorsdonotprescribeaccountingstandardsforthelegislativeandjudicial branches. the legislative and',
19478:'judicial branches, and most entities within those branches, are not currently required to prepare general purpose financial reports and those',
19479:'that do prepare statements are not subject to any requirements by the fasab’s sponsors to follow fasab gaap or prepare',
19480:'a reconciliation between fasab gaap and fasb gaap. however, as the source of gaap for federal reporting entities, fasab gaap',
19481:'would be the 9 fasab news, jan.march 2000, p. 2. page 9 sffas 34 fasab handbook, version 20 06/21 sffas',
19482:'34 appropriate accounting standards for these entities to adopt if they prepare gaapbased general purpose financial reports. exposure draft a7.',
19483:'the board published the exposure draft ed, the hierarchy of generally accepted accounting principles for federal entities, including the application',
19484:'of standards issued by the financial accounting standards board, on december 2, 2008, with comments requested by february 3, 2009.',
19485:'upon release of the ed, notices and press releases were provided to: the federal register, fasab news, the journal of',
19486:'accountancy, aga today, the cpa journal, government executive, the cpa letter, and government accounting and auditing update, the cfo council,',
19487:'the presidents council on integrity and efficiency, financial statementaudit network, and the federal financial managers council, and committees of professional',
19488:'associations generally commenting on eds in the past. a8. this broad announcement was followed by direct mailings of the ed',
19489:'to the subcommittee on federal financial management, government information, and international security, committee on homeland security and governmentalaffairs, united states',
19490:'senate; and the subcommittee on government management, organization, and procurement, committee on oversight and government reform, house of representatives. a9.',
19491:'the board received 31 response letters from the following sources: federal internal nonfederal external users, academics, others 3 auditors 5',
19492:'1 preparers and financial managers 22 totals 27 4 a10.theboarddidnotrelyonthenumberinfavoroforopposedtoagivenposition. information about the respondents’ majority view is provided only as',
19493:'a means of summarizing the comments. the board considered the arguments in each response and weighed the merits of the',
19494:'points raised. the respondents’ comments are summarized below. a11.respondents generally agreed that the hierarchy of gaap that currently resides in',
19495:'the professional auditing literature should be incorporated into the fasab’s authoritative literature. also, respondents generally agreed that: 1 general purpose',
19496:'financial reports prepared in conformity with accounting standards issued by the fasb should be regarded as being in conformity withgaapfor',
19497:'those federal entitiesthat have in the past issued such page 10 sffas 34 fasab handbook, version 20 06/21 sffas 34',
19498:'reports, and 2 a federal reporting entity that is preparing gaapbased general purpose financial reports for the first time should',
19499:'implement fasab standards unless the entity clearly demonstrates that the needs of its primary users would be best met through',
19500:'the application of fasb standards. a12.however, some respondents believed it would be useful to clarify certain aspects of the statement.',
19501:'some respondents believed it would be useful to clarify where administrative directives e.g. omb, governmentaccountability office, and department of the',
19502:'treasury guidance would be considered in the hierarchy. some respondents questioned if “other accounting literature” was a part of or',
19503:'separate from the hierarchy. a13.in addition, some respondentsbelieved that thosefederal entitiesfollowingfasb standards could be required to reconsider their practices. for',
19504:'example, if they receive federal appropriations, they should follow fasab standards. clarifying the gaap hierarchy and otheraccounting literature a14.paragraph 5',
19505:'of the statement presents the gaap hierarchy for federal entities, and the boardexpectspracticetobegovernedbythishierarchy. thehierarchypresentedintheed referred toaicpastatements of position sop and',
19506:'practice bulletins specifically made applicable to federal reporting entities and cleared by the fasab. however, the fasb is codifying its',
19507:'accounting standards and sops and practice bulletins will generally be incorporated into the codification and have no continued authority. because',
19508:'of this matter and because no sops and practice bulletins have been specifically made applicable to federal reporting entities and',
19509:'cleared by the fasab, these sources were removed from the hierarchy. a15.in addition, while some respondents believed that it would',
19510:'be useful to discuss the location of administrative directives within the hierarchy, the fasab believes that incorporating the gaap hierarchy',
19511:'in the accounting standards should be accomplished expeditiously due to theaicpa’s planned removal of the hierarchy from the auditing standards.',
19512:'since fasab is unaware of any practice problems arising due to the absence of explicit guidance placing eachtype of administrativedirective',
19513:'within thehierarchy, immediate actionon thisrequest is not warranted.10 fasab also notes that there are multiple sources of administrative directives, many',
19514:'types of directives, and varying processes for developing directives. resolving placement for all administrative directives may require significant study. 10',
19515:'this request will be considered when the board reviews its technical agenda to select new projects. page 11 sffas 34',
19516:'fasab handbook, version 20 06/21 sffas 34 therefore, the board is acting to adopt the gaap hierarchy essentially as it',
19517:'currently exists in theaicpaaudit literature and does not intend to change current practices. a16.paragraphs 6 and 7 of the statement',
19518:'provide guidance to assist readers in understanding howthe hierarchyshouldbeconsideredwhenpreparinggeneralpurposefinancialreportsin conformity with gaap. a17.paragraph 7 also discusses when to consider literature',
19519:'not discussed in the gaap hierarchy otheraccounting literature. the phrase “otheraccounting literature” is capitalizedinthestatement andincludedunderaseparateheading to indicateitsdistinction from thegaapliterature. otheraccountingliteratureis',
19520:'presentedseparatelyfrom the hierarchy because the items in this category do not establish gaap and cannot amend existing fasab standards, interpretations,',
19521:'technical bulletins or releases, or staff implementationguidance. otheraccountingliteraturemayonlyberelieduponbyfinancial statement preparers and auditors to resolve specific accounting issues in the absence',
19522:'of literature in paragraph 5 of the statement. a18.the board also recognizes that other standardssetting bodies are currently considering codifying',
19523:'their pronouncements. as a result, listing the titles of specific pronouncements in otheraccounting literature may cause difficulty in referencing those',
19524:'documents in the future. thus, paragraph 8 of the statement refers to pronouncements of other standards setting bodies rather than',
19525:'listing specific pronouncements. entities following fasb gaap a19.as noted above, the board primarily intended to incorporate the gaap hierarchy into',
19526:'the fasab’s accounting literature and did not intend to change existing practices at this time. the board is continuing a',
19527:'separate project on reporting by federal entities that primarily apply standards issued by the fasb. the project intends to determine',
19528:'whether certain federal entities should be permitted to continue following fasb gaap and what additional reporting, if any, is needed',
19529:'for standalone financial reports of federal entities that are permitted to continue applying fasb accounting standards. a20.paragraph 9 of the',
19530:'statement states that those federal entities preparing general purpose financial reports in conformity with fasb accounting and reporting standards are',
19531:'permitted to continue current practices. the statement does not preclude those entities from reconsidering those practices. page 12 sffas 34',
19532:'fasab handbook, version 20 06/21 sffas 34 boardapproval a21.thisstatementwasapprovedforissuancebyallmembersoftheboard. thewrittenballots are available for public inspection at the fasabs offices. page',
19533:'13 sffas 34 fasab handbook, version 20 06/21 sffas 34 appendix b:abbreviations aicpa americaninstituteofcertifiedpublicaccountants fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandardsboard gaap generallyacceptedaccountingprinciples',
19534:'gao governmentaccountabilityoffice gasb governmentalaccountingstandards board iasb internationalaccountingstandards board ipsasb internationalpublicsectoraccountingstandardsboard omb office of management and budget sas statement onauditingstandards sffac',
19535:'statement offederalfinancialaccountingconcepts page 14 sffas 34 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 35: estimating the historical',
19536:'cost of general property, plant, and equipment:amending statements of federalfinancialaccounting standards 6 and 23 rescinded status issued october 14, 2009',
19537:'effective date upon issuance affects sffas 6, paragraphs 40 and 45. sffas 23, paragraphs 10 – 18. affected by sffas',
19538:'50 rescinded sffas 35 in its entirety. related guidance tr 13, implementation guide for estimating the historical cost of general',
19539:'property, plant, and equipment summary sffas 50, establishing opening balances for general property, plant and equipment rescinded sffas 35 in',
19540:'its entirety. page 1 sffas 35 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 36: comprehensive longterm projections',
19541:'for the u.s. government status issued september 28, 2009 effective date the following phasein of reporting requirements as basic information',
19542:'provides for full implementation for reporting periods beginning after september 30, 2013. affects none. affected by sffas 45 amends paragraph',
19543:'45. summary this standard requires: abasic financial statementintheconsolidatedfinancial report oftheu.s. government cfr presenting for all the activities of the federal',
19544:'government: the present value of projected receipts and noninterest spending under current policy without change, the relationship of these amounts',
19545:'to projected gross domestic product gdp, and changes in the present value of projected receipts and noninterest spending from the',
19546:'prior year. required supplementary information rsi that explains and illustrates the projected trends in: the relationship between receipts and spending,',
19547:'deficits or surpluses, treasury debt held by the public as a share of gdp, possible results using alternative scenarios, and',
19548:'the likely impact of delaying corrective action when a fiscal gap exists. page 1 sffas 36 fasab handbook, version 20',
19549:'06/21 sffas 36 disclosures that explain and illustrate: the assumptions underlying the projections, factors influencing trends, and significant changes in',
19550:'the projections from period to period. these requirements will be implemented following a threeyear transition period beginning in fiscal year',
19551:'fy 2010 during which all information may be presented as rsi. beginning in fy 2013, the required information will be',
19552:'presented as a basic financial statement, disclosures and rsi as designated within the standards. the required information will help readers',
19553:'of the cfr assess “whether future budgetary resources will likely be sufficient to sustain public services and to meet obligations',
19554:'as they come due.” [statement of federal financialaccounting concepts sffac 1, paragraphs 135 and 139.] such an assessment is an',
19555:'important objective of federal financial reporting requiring prospective information about receiptsand spending, the resulting debt, and how these amounts relate',
19556:'to the economy. page 2 sffas 36 fasab handbook, version 20 06/21 sffas 36 table of contents summary 1 introduction',
19557:'4 purpose 4 materiality 6 effective date 6 accounting standards 7 scope 7 definitions 7 policy,economic, anddemographicassumptions 8 valuation date',
19558:'11 projection periods 12 basic financial statement 12 disclosures 13 required supplementary information 14 supportingdataotheraccompanyinginformation 16 effective date 16 appendixa:basis',
19559:'for conclusions 17 appendix b: example formats and illustrations 35 basic financial statement 35 examples of selected narrative and graphics',
19560:'37 appendix c:frequentlyaskedquestions faqs 49 appendix d:list ofabbreviations 53 appendix e:fiscalsustainabilityreportingtaskforce 54 page 3 sffas 36 fasab handbook, version 20',
19561:'06/21 sffas 36 introduction purpose 1. in statementoffederalfinancialaccountingconcepts sffac1,the boardestablished four objectives of federal financial reporting. these objectives provide a',
19562:'framework for assessing the existing accountability and financial reporting systems of the federal government and for considering new accounting standards.1',
19563:'the objectives address 1 budgetary integrity, 2 operating performance, 3 stewardship, and 4 systems and controls. 2. objective 3, stewardship,',
19564:'is the primary focus for this statement. objective 3 states that: federal financial reporting should assist report users in assessing',
19565:'the impact on the country of the governments operations and investments for the period and how, as a result, the',
19566:'governments and the nations financial condition has changed and may change in the future.2 3. subobjective 3b states that: federal',
19567:'financial reporting should provide information that helps the reader to determine whether future budgetary resources will likely be sufficient to',
19568:'sustain public services3 and to meet obligations as they come due.4 4. while federal financial reporting is not expected by',
19569:'itself to accomplish the stewardship reportingobjective,itcancontributetomeetingtheobjective.5 thisstatement’scontribution relates primarily to the federal government’s operations and financial condition; it does not',
19570:'extend to an assessment of the nation’s financial condition. 1sffac 1, par. 109. 2sffac 1, par. 134. 3 in this',
19571:'standard, “public services” refers to all goods, benefits and services provided by the government. federal public services include but are',
19572:'not limited to the provision of goods, transfer payments such as social security benefits or other financial benefits such as',
19573:'loan guarantees, as well as national defense, transportation safety and national parks. 4 sffac 1, par. 139. 5 sffac 1,',
19574:'par. 235. page 4 sffas 36 fasab handbook, version 20 06/21 sffas 36 5. the board believes that comprehensive longterm',
19575:'fiscal projections6 make an essential contribution to meeting the stewardship objective and especially subobjective 3b because it is concerned with',
19576:'the future and the resources needed in the future. 6. longterm fiscal projections serve as the basis for key measures',
19577:'presented in the basic financial statement as well as narrative and illustrations required in the consolidated financial report of the',
19578:'u.s. government cfr. the more detailed objectives presented below were developed as one means of guiding the board in developing',
19579:'the basic financial statement and in identifying the most important areas to be addressed through narrative, tables and/or graphics. objectives',
19580:'of basic financial statement comprehensive longterm fiscal projections for the u.s. government andaccompanying disclosures and required supplementary information 7. in',
19581:'this statement, “fiscal sustainability reporting” isthe short termforthe basicfinancial statement, disclosures, and required supplementary information rsi required in the cfr.',
19582:'fiscal sustainability reporting should provide information to assist readers of the cfr in assessing whether future budgetary resources of the',
19583:'u.s. government will likely be sufficient to sustain public services and to meet obligations as they come due,7 assuming that',
19584:'current policy for federal government public services and taxation is continued without change hereafter referred to as “current policy without',
19585:'change”.8 8. such an assessment is important not only because of its financial implications but also because it has social',
19586:'and political implications. for example, users of financial reports should be provided with information that is helpful in assessing the',
19587:'likelihood that the government will continue to provide public services to constituent groups and to assess whether financial burdens without',
19588:'related benefits were passed on by currentyear taxpayerstofutureyeartaxpayers.9 fiscalsustainabilityreportingshouldassistthereader in understanding these financial, social and political implications. 6 terms defined',
19589:'in the glossary are shown in boldface the first time they appear. 7 sffac 1, par. 139. 8 notethat fiscal',
19590:'sustainability reporting does notextend to supporting a detailed assessment ofwhether current policy without change regarding federal public services and taxation',
19591:'is optimal; rather, it addresses the fiscal outlook if current policy is continued without change. 9the latter notion is sometimes',
19592:'referred to as “interperiod equity.” page 5 sffas 36 fasab handbook, version 20 06/21 sffas 36 9. fiscalsustainabilityreportingshouldbeunderstandabletotheintendedusersofthecfr. the primary',
19593:'intended users of this report are citizens and citizen intermediaries for example, the media, public interest and advocacy groups, and',
19594:'others. the cfr should be easily understandable to the “average citizen” who has a reasonable understanding of federal government activities',
19595:'and is willing to study the information with reasonable diligence. materiality 10. the provisions of this statement need not be',
19596:'applied to immaterial items. the determination of whether an item is material depends on the degree to which omitting or',
19597:'misstating information about the item makes it probable that the judgment of a reasonable person relying on the information would',
19598:'have been changed or influenced by the omission or the misstatement. effective date 11. this statement provides for a phasedin',
19599:'implementation, but earlier implementation is encouraged. all information will be reported as rsi for the first three years of implementation',
19600:'fiscal years 2010, 2011, and 2012. beginning in fiscal year 2013, the required information will be presented as a basic',
19601:'financial statement, disclosures, and rsi as designated within the standard. page 6 sffas 36 fasab handbook, version 20 06/21 sffas',
19602:'36 accounting standards scope 12. thereportingrequirementsinthisstatementapplytotheconsolidatedfinancialreportofthe u.s. government cfr. they do not apply to financial statements prepared at the component',
19603:'entity level. they also do not affect the reporting in the budget of the u.s. government or any other special',
19604:'purpose report. definitions 13. fiscal gap the fiscal gap is the change in noninterest spending and/or receipts that would be',
19605:'necessary to maintain public debt at or below a target percentage of gross domestic product gdp.10 more specifically, the fiscal',
19606:'gap is the net present value of projected spending11 minus projected receipts, adjusted by the decrease or increase in public',
19607:'debt required to maintain public debt at or below the target percentage of gdp for the stated projection period. the',
19608:'fiscal gap may be expressed as: a. a summary amount in present value dollars, b. a share of the present',
19609:'value of the gdp for the projection period, and/or c. a share of the present value of projected receipts or',
19610:'projected noninterest spending. 14. policyassumptions policy assumptions address the factors under the direct control of the federal government concerning the',
19611:'taxes and other receipts to be received by the federal government and the public services to be provided by the',
19612:'federal government. policy assumptions address 10 gdp is the total market value of all final goods and services produced domestically',
19613:'during a given period of time. the components of gdp are: private sector consumption and investment, government consumption and investment,',
19614:'and net exports exportsimports. 11 since interest is factored into the present value calculation, the fiscal gap as a share',
19615:'of spending is expressed as a share of spending excluding interest “noninterest spending”. page 7 sffas 36 fasab handbook, version',
19616:'20 06/21 sffas 36 projected spending rules for both mandatory and discretionary spending12 as well as the framework for assessing',
19617:'taxes and fees. 15. current policy without change in thisstandard, “currentpolicywithout change” referstothe continuationof policiesin place as of the valuation',
19618:'date in other words, no policy change. 16. economicassumptions economic assumptions address the economic factors that are not under the',
19619:'direct legislative control of the federal government for example, inflation and growth in gdp. 17. demographicassumptions demographic assumptions address projected',
19620:'population trends for example, birth rates, mortality rates, and net immigration. 18. public services in federal financial reporting, “public services”',
19621:'refers to all goods, benefits and services provided by the government. federal public services include but are not limited to',
19622:'the provision of goods, cash such as social security benefits or other financial benefits such as loan guarantees, or services',
19623:'such as national defense, transportation safety, and the operation of national parks. policy, economic, and demographicassumptions 19. fiscal sustainability reporting',
19624:'for the u.s. government should provide information that helps the reader to determine whether current policy without change is likely',
19625:'to produce future budgetary resources sufficient to sustain public services and to meet obligations as they come due. longterm projections',
19626:'should help the reader to understand the fiscal implications of continuing current policy without change regarding public services and taxation',
19627:'along with other factors such as projected economic and demographic trends. 20. projections of deficits, surpluses, and debt are a',
19628:'central feature of fiscal sustainability reporting. projections are not forecasts or predictions; they are designed to depict result 12in the',
19629:'federal budget process, “discretionary spending” refers to outlays from budget authority that is controlled by annual appropriation acts. annual appropriation',
19630:'acts are required to fund the continuing operation of all federal programs that are not “mandatory.” “mandatory spending” includes entitlement',
19631:'authority such as social security and medicareandpaymentofinterestonthenationaldebt. congresscontrolsmandatoryspendingbycontrollingeligibility and setting benefit and payment rules, rather than by annual appropriation acts.',
19632:'for additional information, see a glossary of terms used in the federal budget process, gao05734sp. available at: http://gaoweb.gao.gov accessed may',
19633:'7, 2009 page 8 sffas 36 fasab handbook, version 20 06/21 sffas 36 that may occur under various conditions–for example,',
19634:'what if current policy without change regarding federal government public services and taxation are continued in the future? projections are',
19635:'useful to display alternative future scenarios, but it is important to clearly explain the nature of the information being presented.',
19636:'21. longterm projections are derived from models that rely heavily on assumptions. there is an expectation that such models will',
19637:'evolve over time. therefore, this statement provides guiding principles for selecting assumptions. the guiding principles address three types of assumptions:',
19638:'policy, economic, and demographic. 22. policy assumptions address the factors under the direct control of the federal government concerning the',
19639:'taxes and other receipts to be received by the federal government and the public services to be provided by the',
19640:'federal government. 23. economic assumptions address the economic factors that are not under the direct legislative control of the federal',
19641:'government for example, inflation and growth in gdp. 24. demographic assumptions address projected population trends for example, birth rates, mortality',
19642:'rates, and net immigration. 25. when combined, policy, economic, and demographic assumptions determine the future projected receipts and spending. 26.',
19643:'to illustrate the distinction between policy, economic and demographic assumptions: consider the application of policy, economic and demographic assumptions to',
19644:'the social security program. assumptions relating to future social security eligibility and benefit formulasrepresentpolicyassumptions. assumptionsaboutproductivitygrowthandinflation represent economic assumptions. assumptions about',
19645:'the future population represent demographic assumptions. 27. policy assumptions should reflect reasonable assumptions about the future course of receipts and',
19646:'spending assuming the continuation of current policy without change. the guiding principle for selecting policy assumptions is to base selections',
19647:'on assumptions consistent with the continuation of policies in place as of the valuation date. 28. current law is the',
19648:'best place to start when identifying “current policy without change.” however, a simple projection of “current law” would not always',
19649:'reflect current policy without change. a. cases where a departure from current law may be appropriate include but are not',
19650:'limited to those in which current law page 9 sffas 36 fasab handbook, version 20 06/21 sffas 36 1 expires',
19651:'almost immediately, 2 contains provisions that are internally inconsistent, or 3 has been changed in a consistent direction over time',
19652:'i.e., there is a recurring history of change. b. the following examples demonstrate how a simple projection of current law',
19653:'may be inconsistent with the guiding principle: 1 legislation providing for discretionary spending provides funding that extends at mosta fewyearsintothefuture.',
19654:'acurrentlawpolicyassumptionwouldshow discretionary spending falling to zero within a few years. in this situation a simple projection of “current law” would',
19655:'not reflect the implicit “current policy without change.” 2 current law may contain inconsistent provisions in certain situations. for example,',
19656:'current law may contain provisions for scheduled social insurance benefit payments as well as provisions that restrict spending on certain',
19657:'social insurance programs, for example, social security and part aof medicare, to the amounts available in the social security or',
19658:'medicare trust fund accounts, respectively, plus inflows of earmarked revenues. acurrentlaw policy assumption would not be feasible in this case',
19659:'since both requirements can not be metsimultaneously. thus,aninterpretationof “currentpolicywithoutchange” will be necessary. 3 current law may include provisions that have',
19660:'been changed in a consistent direction over a period of time. for example, the statutory limit on federal debt has',
19661:'been consistentlyraised. acurrentlawpolicyassumptionwouldbethat treasury borrowing will never increase beyond the dollar amount of the current statutory limit. in such situations',
19662:'a simple projection of current law would not reflect the implicit “current policy without change.” 29. assumption of a uniform',
19663:'growth rate for all types of receipts and spending is not required. assumptions may be based on, but are not',
19664:'limited to, the notion that noninterest spending or receipts are likely to: page 10 sffas 36 fasab handbook, version 20',
19665:'06/21 sffas 36 a. maintain a constant share of gdp, b. grow with inflation,13 or c. maintain a constant real14',
19666:'per capita level.15 30. judgment should be applied in selecting assumptions. policy assumptions representing the worst case scenario are not',
19667:'required. the preparer’s objective should be to produce unbiased projections. 31. the same economic and demographic assumptions generally should be',
19668:'used for the basic financial statement for fiscal sustainability reporting and for social security and/or medicare in the statement of',
19669:'social insurance sosi although exceptions may be necessary when considering all projected receipts and spending. for example, an appropriateunified discount',
19670:'rate forallprojectedreceiptsandspendinginthe basicfinancial statement may differ from either the social security or medicare discount rate. see paragraph 40c 32. the',
19671:'projection of current policy without change is intended to show the longterm results of current policy without change. the projection',
19672:'of current policy without change is not a forecast or prediction. this distinction must be clearly explained in the narrative',
19673:'accompanying the principal financial statement, the disclosures and the rsi. valuation date 33. all projections and estimates required in this',
19674:'statement should be made as of a date the valuation date as close to the end of the fiscal year',
19675:'being reported on “current year” as possible and no more than one year prior to the end of the current',
19676:'year. this valuation date should be consistently followed from year to year. 34. if, after the valuation date, but prior',
19677:'to the end of the fiscal year, policy changes are enacted that could materially affect the basic statement, the projections',
19678:'should be adjusted, if feasible,16 as if the policy changes took place as of the valuation date. if not feasible,',
19679:'the entity should disclose an estimate of the magnitude of the effect of the policy change on the projection or,',
19680:'if not possible, disclose that it was not possible to reasonably estimate the effect. in any case, the nature of',
19681:'the policy change should be disclosed. if policy changes 13 inflation is growth in a general measure of prices, usually',
19682:'expressed as an annual rate of change. 14 in economic terms, “real” means adjusted to remove the effects of inflation.',
19683:'15 as applicable, the characteristics of the population should be considered for expenditures that benefit identifiable subgroups. 16 factors affecting',
19684:'feasibility include but are not limited to the timing of the enactment of legislation and the ability of thepreparers torevise',
19685:'thefinancial statements and/or the ability of the auditors to audit the revised information prior to the issuance of the financial',
19686:'statements and/or the audit opinion. page 11 sffas 36 fasab handbook, version 20 06/21 sffas 36 are enacted after the',
19687:'end of the fiscal year, but prior to the issuance of the financial statements, the financial statements should disclose the',
19688:'nature of the policy change and, if known, the estimated effect on the projections. projection periods 35. projections in the',
19689:'basic financial statement should be for a finite projection period sufficient to illustrate longterm sustainability. if the projection period in',
19690:'the basic financial statement is not consistent with the projection period used for social security and medicare in the sosi,',
19691:'the disclosures should display the subtotal and total line items of the basic financial statement calculated for the projection period',
19692:'that was used for social security and medicare in the sosi.17 basic financial statement 36. the basic financial statement, longterm',
19693:'fiscal projections for the u.s. government, should state the projection period and display the following projected amounts as both present',
19694:'value dollars and as a percentage of the present value of gdp for the projection period indicated: a. receipts, disaggregated',
19695:'by major programs such as medicare, social security, and all other receipts, and total receipts;18 b. noninterest spending, disaggregated by',
19696:'major programs such as medicare, medicaid, social security, and all other noninterest spending, total noninterest spending; and c. the difference',
19697:'between projected receipts and projected noninterest spending. 37. after the initial year of implementation, the basic financial statement should also',
19698:'present comparative amounts for the current year and prior year, and the net change for each line item from the',
19699:'prior year as both present value dollars and as a percentage of the present value of gdp for the projection',
19700:'period indicated. 17 thesosi projection period is required to be “sufficient to illustrate longterm sustainability for example, traditionally the “social',
19701:'security” or oasdi, program has used a projection period of 75 years for longterm projections.” see sffas 17, paragraph 27.',
19702:'18 full payment of amounts due to social security and medicare hi trust funds must be included as receipts for',
19703:'medicare and social security, and outlays for “rest of government.” page 12 sffas 36 fasab handbook, version 20 06/21 sffas',
19704:'36 38. fiscal gap information should be provided, either on the face of the financial statement or in the disclosures.',
19705:'disclosures 39. disclosures should include an explanation of the following limitations: a. forwardlooking projections require assumptions and estimates relating to',
19706:'future events, conditions, and trends; actual results may differ materially from those that are projected. b. forwardlooking projections focus on',
19707:'future cash flows, and do not reflect either the accrual or modifiedcash basis of accounting. c. projections are not forecasts',
19708:'or predictions; they are designed to answer the question “what if?” – for example, what would be the impact on',
19709:'federal borrowing if current policies without change were continued for a long period of time? d. forwardlooking projections may also',
19710:'encompass hypothetical future trends or events that are not necessarily deemed probable for example, the assumed abilityto continue issuing new',
19711:'public debt indefinitely. e. fiscal sustainability reporting is limited to the activity of the federal government, and does not include',
19712:'activities of state and local governments or the activities of the private sector. f. the summary measures cover a finite',
19713:'period and consideration should be given to trends following the end of the projection period. disclosures should refer the readers',
19714:'to the rsi for a further discussion of this limitation.19 40. disclosures should also include: a. a “plain english” explanation',
19715:'of present value and interest rates used to calculate present value. b. significant policy assumptions used in making the projections.',
19716:'19 see paragraph 42. page 13 sffas 36 fasab handbook, version 20 06/21 sffas 36 c. anysignificantdifferencesineconomicanddemographicassumptionsfromthoseused for social security',
19717:'and/or medicare in the preparation of the sosi and a reference to the note presenting assumptions used in the sosi.',
19718:'d. an explanation of the most significant departures from current law–for example, allowing for exceeding the statutory limit on federal',
19719:'debt. e. thesignificantreasonsforthechangeswhenyearbyyearcomparisonsaredisplayed. for example, significant changes may be attributable to the following broad causes: 1 valuation period for example,',
19720:'the beginning of the projection period is one year later; 2 changes in policies legislation; and 3 changes in assumptions',
19721:'or estimates. f. the net excess of noninterest spending over receipts disaggregated between 1 programs funded by the government’s general',
19722:'revenues which would currently20 include federal supplementary medical insurance medicare parts b and d, as well as other programs, and',
19723:'2 major programs that are funded by payroll and self employment taxes and that are not financed in any material',
19724:'respect by the government’s general revenues which would currently consist of social security old age, survivors and disability insurance oasdi',
19725:'and medicare parta, accompanied by a discussion of the different funding mechanisms for the two types of programs. required supplementary',
19726:'information 41. rsi should explain and illustrate: a. trends in: 1 historical and projected treasury debt held by the public',
19727:'as a share of gdp, 2 historical and projected receipts and spending, and 20 “currently” means as of the date',
19728:'of board approval of this sffas in june 2009. page 14 sffas 36 fasab handbook, version 20 06/21 sffas 36',
19729:'3 historical and projected deficits and surpluses for a progression of years beginning at least 20 years before the current',
19730:'year and, at a minimum, extending to the end of the projection period used in the basic financial statement. these',
19731:'amounts should be presented at regular time intervals for example, every five years or ten years. b. themajorfactorsthatareexpectedtohaveasignificantimpactuponprojectedreceipts and spending,',
19732:'and how such factors are expected to change over time. for example, twosuchfactorsmaybe 1 therising cost of health care and',
19733:'2 demographictrends. information about how such factors have changed and are expected to change over time is necessary to assist',
19734:'the reader in understanding the factors that influence fiscal projections. c. if an excess of projected noninterest spending over projected',
19735:'receipts is indicated by the projections, the likely impact of delaying action. for example, graphics could illustrate the progressive increase',
19736:'in the change that would be needed to close the fiscal gap by 1 reducing noninterest spending, or 2 increasing',
19737:'receipts. d. the results of alternative scenarios that are consistent with current policy without change. alternative scenarios are projections in',
19738:'which one or more significant assumptions is varied from the assumptions used in the projections presented in the basic financial',
19739:'statement. the choice of alternative scenarios presented should consider both those that result in larger as well as those that',
19740:'result in smaller net differencesbetweenthepresentvalueofprojectedreceiptsandnoninterest spending. projections for alternative scenarios may be displayed in a table format. the major causesof',
19741:'thedifferencesbetweentheresultsof thealternativescenariosand thebasic financial statement should be explained. 42. rsi should also include an explanation of the significance of the',
19742:'data presented or other information that puts the data into context. options for context may include but are not limited',
19743:'to: a. comparison of the data/trend with past u.s. trends and trends in other developed nations, b. where to find',
19744:'information about outside organizations that use similar data to assess the longterm implications for an entity or sovereign government, for',
19745:'example, the role of rating organizations and/or european union rules for member nations, and/or c. information that may be helpful',
19746:'to readers in assessing whether financial burdens without related benefits were passed on by currentyear taxpayers to futureyear taxpayers. 43.',
19747:'rsi should discuss the implications of the trends in receipts and spending for periods following the end of the projection',
19748:'period. this requirement may be met by providing projections for an infinite horizon or a narrative discussion. page 15 sffas',
19749:'36 fasab handbook, version 20 06/21 sffas 36 supporting data otheraccompanying information 44. the quantitative data supporting the basic financial',
19750:'statement, disclosures and rsi may be provided in or referenced as other accompanying information.21 effective date 45. the following phasein',
19751:'of reporting requirements as basic information provides for full implementation for reporting periods beginning after september 30, 2013. a. these',
19752:'standards are effective for periods beginning after september 30, 2009. b. information should be reported as rsi for the first',
19753:'three years of implementation fiscal years 2010, 2011, 2012, and 2013. c. beginning in fiscal year 2014, the required information',
19754:'should be presented as specified in paragraphs 12 42. d. earlier implementation is encouraged. the provisions of this statement need',
19755:'not be applied to immaterial items. 21 for example, a link to a more detailed report such as the president’s',
19756:'budget, a congressional budget office report, or thetrustees report status of the social security and medicare program may be provided.',
19757:'note that the trustees report is available at: http://www.ssa.gov/oact/tr/ accessed may 7, 2009. page 16 sffas 36 fasab handbook, version',
19758:'20 06/21 sffas 36 appendixa: basis for conclusions this appendix discusses some factors considered significant by board members in reaching',
19759:'the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater',
19760:'weight to some factors than to others. the standards enunciated in this statement–not the material in this appendix–should govern the',
19761:'accounting for specific transactions, events, or conditions. this statement may be affected by later statements. the fasab handbook is updated',
19762:'annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text of',
19763:'the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes.',
19764:'the reader can review the basis for conclusions of the amending statement for the rationale for each amendment. project history',
19765:'a1. this project was initiated to address the board’s reporting objective 3, in particular sub objective 3b, below: objective 3:',
19766:'stewardship federalfinancial reporting should assist report usersin assessing theimpact on the country of the government’s operations and investments for the',
19767:'period and how, as a result, the government’s and the nation’s financial condition has changed and may change in the',
19768:'future. federal financial reporting should provide information that helps the reader to determine whether a. the government’s financial position improved',
19769:'or deteriorated over the period, b. future budgetary resources will likely be sufficient to sustain public services and to meet',
19770:'obligations as they come due, and c. government operations have contributed to the nation’s current and future wellbeing.22 a2. thefasabconsideredwhatinformationwouldmostlikelyhelpreadersoftheconsolidated',
19771:'financial report of the u.s. government cfr assess whether future budgetary resources will likely be sufficient to sustain public services',
19772:'and meet obligations as they come due. 22statement of federal financialaccounting concepts sffac 1, pars. 134145, available at http://www.fasab.gov/codifica.html accessed',
19773:'may 7, 2009. page 17 sffas 36 fasab handbook, version 20 06/21 sffas 36 a3. discussion of such longterm fiscal',
19774:'issues has been described in terms such as “fiscal sustainability.” in the exposure draft ed, the board’s working definition of',
19775:'“fiscal sustainability” was the federal government’s ability to continue, both now and in the future, current policywithout change regarding public',
19776:'servicesand taxation without causing debt to rise continuously as a share of gdp.23 a4. throughoutthisproject,theboardconsideredexpertcommentsfromafiscalsustainability reportingtaskforce“taskforce”whoseparticipantshave technicalknowledgerelevantto the issues and/or',
19777:'communication expertise relevant to the challenge of how to effectively communicate complex information on longterm fiscal issues. a5. thetaskforce participantsincluded',
19778:'representativesfromtheamericanenterpriseinstitute, the cato institute, the brookings institution, and the urban institute; the chiefactuaries for social securityand medicare; technicalexpertsfromthetreasurydepartment, theofficeof management',
19779:'and budget omb, the governmentaccountability office gao, and the congressional budget office cbo; members of congress; and academics in the',
19780:'areas of public policy and communication. a6. fasab staff also researched existing reporting on comprehensive governmentwide longterm projections published in',
19781:'english by other countries for example, the united kingdom, australia, new zealand, and canada and studies by the european commission,',
19782:'and conferred with staff of the international public sectoraccounting standards board ipsasb. a7. the ed, reporting comprehensive longterm fiscal projections',
19783:'for the u.s. government, was issued on september 5, 2008 with comments requested by january 5, 2009. the ed proposed',
19784:'standards for reporting comprehensive longterm fiscal projections for the u.s. government via a basic financial statement and disclosures. the ed',
19785:'proposed that the reporting requirements would be subject to a phased implementation as required supplementary information rsi for fiscal years',
19786:'2010, 2011 and 2012, and as a basic financial statement and related disclosures beginning in fiscal year 2013. based upon',
19787:'public commentsand board deliberations, the final statement provides for all information to be reported as rsi for the first three',
19788:'years fy 2010, 2011, and 2012. beginning in fiscal year 2013, the required information will be presented as a basic',
19789:'financial statement, disclosures and rsi as designated within the accounting standards paragraphs 12 42.24 23 determining how much a government',
19790:'can depart–in magnitude and/or duration–from this general notion of fiscal sustainability is beyond the scope of the board’s efforts. 24',
19791:'see paragrapha38 for a discussion of the effective date for basic information. page 18 sffas 36 fasab handbook, version 20',
19792:'06/21 sffas 36 a8. upon release of the ed, notices and press releases were provided to: a. the federal register;',
19793:'b. fasab news; c. the journal of accountancy, aga today, the cpa journal, government executive, the cpa letter, and government',
19794:'accounting and auditing update; d. the cfo council, the presidents council on integrity and efficiency, financial statementaudit network, and the',
19795:'federal financial managers council; and e. committees of professional associations generally commenting on exposure drafts in the past. a9. thisbroadannouncementwasfollowedbydirectmailingsoftheedtomajorityandminority',
19796:'staffdirectorsof relevantcongressionalcommittees,over300thinktanksandpublicinterest groups, and past respondents on similar issues, such as the fasab’s preliminary views: accounting for social insurance issued',
19797:'in october 2006. a10. there were 22 responses from the following sources: federal internal nonfederal external users, academics, others 14',
19798:'auditors 3 preparers and financial managers 5 a11.the board did not rely on the number in favor of or opposed',
19799:'to a given position. information about the respondents’ majority view is provided only as a means of summarizing the comments.',
19800:'the board considered the arguments in each response and weighed the merits of the points raised. the respondents’ comments are',
19801:'summarized for each major issue addressed below. a12.inaddition,apublichearingwasheldonfebruary25,2009. thepublichearingaddressed two eds: this ed and another ed, accounting for social insurance,',
19802:'revised. seven speakers addressed this ed: federal internal nonfederal external users, academics, others 5 auditors 1 preparers and financial managers',
19803:'1 page 19 sffas 36 fasab handbook, version 20 06/21 sffas 36 assumptions: limitations of “current law” assumptions a13.projections are',
19804:'the central feature of fiscal sustainability reporting and require that assumptions be made. the board believes that the most useful',
19805:'projections will reflect current policy without change regarding federal public services and taxation. a14.although current law isa reasonable starting point',
19806:'in selecting policyassumptions, a simple projection of “current law” would not always reflect current policy without change regarding public services',
19807:'or taxation. the board’s proposal includes a guiding principle for selecting policy assumptions but acknowledges the role of judgment in',
19808:'filling voids in current law for example, when current law expires almost immediately or departing from current law provisions. a15.major',
19809:'provisions of current law often do not extend far enough into the future to be used as a basis for',
19810:'a longrange projection. discretionary spending is primarily based upon annual appropriation acts,andeven somemandatoryspendingprogramsaresubjecttoauthorizing legislation that expires in the near future.',
19811:'for example, the legislation authorizing several mandatory programs such as food stamps, student assistance for higher education, and agriculturalpricesupportsexpiresand legislativeactionwould',
19812:'berequiredforthe programs to continue past the expiration date. a16.current law may contain provisionsfor scheduled socialinsurance benefit paymentsas well as provisions',
19813:'that restrict spending on certain social insurance programs, for example, social security and part aof medicare, to the amounts available',
19814:'in the social security or medicaretrust fund accounts, respectively, plusinflows of earmarked receipts.acurrent law policyassumption wouldnot be feasible inthiscasesincebothrequirementscannot be',
19815:'met simultaneously. thus,aninterpretationof “currentpolicywithoutchange” willbenecessary. a17.current law also may include tax provisions that expire within several years, along with a',
19816:'historical trend of extending those tax provisions before they expire—but only for a short period, such as one year. in',
19817:'such situations, current law would indicate that the tax provisions will expire on schedule, while a projection based upon current',
19818:'policy without change for taxation together with reasonable expectations based on recent historical trends may indicate that the tax provisions',
19819:'will be extended. fiscal sustainability task force input regarding policyassumptions a18.amajority of the task force technical experts agreed that policy',
19820:'assumptions for the basic financialstatement that areconsistent withcurrent policywithout change25 regarding federal public services and taxation would be useful for',
19821:'readers of the cfr in assessing whether 25 “current policy without change” as defined in this statement is not equivalent',
19822:'to constant dollar amounts. current policy without change is to be considered with respect to the service or benefit being',
19823:'provided or scheduled to be provided and the general relationship of taxation to the economy for example, taxable income, gdp,',
19824:'or some other base. page 20 sffas 36 fasab handbook, version 20 06/21 sffas 36 future budgetary resources will likely',
19825:'be sufficient to sustain public services and to meet obligations as they come due. a19.amajority of the task force technical',
19826:'experts believe that for mandatory spending on social insurance programs, a modified version of current lawignoring the exhaustion of the',
19827:'social securityandmedicarehospitalinsurancetrust fund accounts —see paragrapha16,which might also be termed “current services,” represents the most useful assumption for projecting spending',
19828:'for social insurance programs. however, a minority believe that any deviation from current law requires a subjective judgment that can',
19829:'be biased. a20.the technical experts also acknowledged that projections for discretionary spending are more uncertain than projections for mandatory spending,',
19830:'since current law often only addresses the next one or two years. however, there was some agreement among the group',
19831:'that projecting discretionary spending growth at the same rate as assumed gdp per capita would be an example of a',
19832:'reasonable option for some programs. a21.areport issued by the gao26 illustrates the tension between choosing current law versus current policy',
19833:'without change regarding federal public services and taxes. the report’s primary display contains two different projections in a single graphic',
19834:'presentation: the 10year cbo baseline, which is then projected into the future called “baseline extended” and a different projection called',
19835:'an “alternative simulation”, which includes modifications that aredescribedinthenarrative. the “baselineextended” projectionisbasedonassumptions that focus on current law. those assumptions are changed',
19836:'in the gao’s “alternative simulation” to reflect historical trends and recent policy preferences. a22.the gao’s approach of showing two different',
19837:'sets of numbers provides a more complete picturethanselectingoneortheother. however,thisapproachdoesnotachieveoneofthe mostimportantcharacteristicsofeffectivecommunication. allofthecommunicationexperts and many of the technical experts on the task',
19838:'force strongly emphasized the importance of simplicity of presentation. the board noted that one of the greatest challenges inherent in',
19839:'fiscal sustainability reporting is the tension between technical rigor and simplicity of presentation. policyassumptions a23.the board believes that the most',
19840:'useful reporting on fiscal sustainability would illustrate the longterm effects of current policy without change regarding public services and taxation.',
19841:'however, there are numerouswaysof projecting current policy into the future. forexample, it could be assumed that discretionary spending will continue',
19842:'as a constant share of gdp. 26the nation’s longterm fiscal outlook, august 2007 update gao071261r. page 21 sffas 36 fasab',
19843:'handbook, version 20 06/21 sffas 36 another alternative would be to assume constant realspending per capita which could give adifferentresultfromassuminggrowthataconstantshareofgdp.',
19844:'yetanotheralternative would be to assume constant growth at the rate of inflation, which may be different than the growth of',
19845:'gdp.27 historically, nondefense discretionary spending has grown roughly with gdp while defense discretionary spending has grown slightly faster than inflation',
19846:'but less than gdp, often in a nonlinear pattern. a24.the board believes that the details of the assumptions for projecting',
19847:'current policy without change should be left to the judgment of the preparer, subject to review by the auditor. regardlessofwhichassumptionsare',
19848:'used forthe basicfinancial statement,the disclosures should include an explanationoftheassumptionsused and alternativescenarios, aswellas the reasons for and the effect of changes',
19849:'in assumptions that result in significant changes from amounts reported in the prior period financial statement. readers will have access',
19850:'to important explanatory material. a25.currentlawmaycontaininconsistent provisionsin certainsituationsfor example,regarding the impact on benefit payments upon the exhaustion of the balances in',
19851:'the medicare hospital insurance trust fund account. as noted previously, although current law limits spendingto theamountsavailablein thetrustfundaccountand current earmarked revenue,',
19852:'current law provides for benefits that would exceed such a limit. thus, current law contains inconsistent provisions and does not',
19853:'provide an answer. a26.when current law contains inconsistent provisions, the board believes that in selecting assumptions, the projections should reflect',
19854:'current policy regarding federal government public services and taxation, and should answer the question “what if current policy without change',
19855:'were continued over time?” the resulting projection should be accompanied by a narrative that explains what would happen if an',
19856:'alternative event occurs in the example in paragraph a25, the narrative could explain what percentage of medicare reimbursements could not',
19857:'be paid if legislation does not provide for maintaining current reimbursement rates. a27.in drafting the final statement, the board also',
19858:'improved the clarity of the requirements for policy assumptions by reordering the content of this section. the guiding principles for',
19859:'when a departure from current law may be appropriate are stated first, followed by specific examples. 27 forexample,thecboprojectsthattherateofinflationwillbelowerthantherateofgdpgrowthfor20072017. see page',
19860:'xi, the budget and economic outlook: fiscal years 2008 to 2017 january 2007. available at: http://www.cbo.gov accessed may 7, 2009.',
19861:'page 22 sffas 36 fasab handbook, version 20 06/21 sffas 36 economic and demographicassumptions a28.economic and demographic assumptions are different',
19862:'in scope from policy assumptions. economic and demographic assumptions include such factors as economic growth, inflation, birth rates, net immigration,',
19863:'and longevity. the elements of economic and demographic assumptions are generally influenced more by a variety of external factors than',
19864:'by direct legislative impact. a29.the ed proposed that the reporting requirements for fiscal sustainability reporting should not dictate specific economic',
19865:'and demographic assumptions, but should require that the primary displays for fiscal sustainability reporting should use economic and demographic assumptionsthatareconsistent',
19866:'withtheeconomicanddemographicassumptionsforsocial security and medicare in the sosi. a30.although a majority of respondents concurred with the ed’s proposed broad and general',
19867:'guidance on economic and demographic assumptions, the gao noted that in some cases, the assumptions, particularly the economic assumptions, may',
19868:'need to differ. for example, an appropriate unified discount rate for all projected receipts and noninterest spending in the basic',
19869:'financial statement maydiffer from either the social securityor medicare discount rates. increasing the flexibility in the requirement would allow the',
19870:'use of the most appropriate discount rate and permit changes to other assumptions as appropriate. the gao noted that such',
19871:'differences in assumptions used in the basic financial statement and those in the sosi for social security and medicare should',
19872:'be appropriately disclosed. a31.the board decided to allow the flexibility recommended by the gao and to require disclosure for significant',
19873:'differences. see paragraphs 31 and 40c. basic financial statement a32. the basic financial statement will report amounts in a present',
19874:'value dollars and b as a percentage of the present value of gdp for the projection period. the basic financial',
19875:'statement will be presented as rsi for a period of three years and will then become a basic financial statement.',
19876:'a33.elements considered for inclusion as mandatory requirements for the basic financial statement were: a. total projected noninterest spending and receipts,',
19877:'disaggregated by major programs such as medicare and social security b. the net total of all projected receipts and noninterest',
19878:'spending page 23 sffas 36 fasab handbook, version 20 06/21 sffas 36 c. amounts displayed as both present value dollars',
19879:'and percent of gdp d. yeartoyear for example, sidebyside comparison with prior year e. net change from yeartoyear as a',
19880:'separate column f. alternative scenario information a34.amajority of the members decided that a through e above should be included as',
19881:'minimum requirements for the basic financial statement, with the format of the elements left to thediscretion ofthepreparer. anillustrativestatementisincludedinappendix b. in',
19882:'addition, the board concluded that the concept of fiscal gap should be explained and reported, either on the face of',
19883:'the financial statement or in the disclosures. an illustrative example is shown inappendix b on the face of the illustrative',
19884:'basic financial statement. a35.the board concluded that disaggregation of specific major programs would be left to the discretion of the',
19885:'preparer. a36.amajority of respondents agreed with the general guidance proposed in the ed: that major programs should be shown separately.',
19886:'however, respondents’ suggestions that named specific examples of major programs indicated that many respondents interpreted the illustrative financial statement inappendix',
19887:'b as authoritative and inferred that social insurance programs are the federal government’s only “major programs.” a37.the board decided to',
19888:'edit the illustrative basic financial statement inappendix b by adding two additional lines, “major programa” and “major program b” to',
19889:'clarify the fact that social insurance programs are not the only major programs of the federal government. effective date for',
19890:'basic information a38.the ed proposed that the financial statement and disclosures be designated as basic information rather than continue as',
19891:'rsi beginning in fiscal year 2013. for three years prior to fiscalyear2013,theinformationin thebasicfinancialstatement and disclosureswouldbe presentedasrsi. amajority of respondentsaddressingthis issue,includingthegao,',
19892:'which willhave the responsibilityof auditing the basicinformation, agreed that the proposed implementation schedule is reasonable and appropriate. the gao did',
19893:'identify several requirements that should remain rsi permanently, and the board incorporated that recommendation into the requirements of the final',
19894:'statement. a39.given the potential for flexibility within and between years of policy assumptions underlying the projections, one member believes that',
19895:'significant disagreements between preparer and auditor are likely when the information becomes basic in fiscal year 2013. for page 24',
19896:'sffas 36 fasab handbook, version 20 06/21 sffas 36 example,paragraph28b3providesanexampleof asituationwheredeparturefromcurrent law may be appropriate if historically consistent changes have',
19897:'been made. that member notes that it remains to be seen how historically consistent the changes must be to qualify',
19898:'and how departures from previously consistent patterns in policy will be addressed. in addition, based on its “but not limited',
19899:'to” language, paragraph 28 allows for an openended set of exceptions which have yet to be specified and defended. he',
19900:'believes, therefore, that the projection information should remain rsi until such time as preparation and audit procedures concerning exceptions to',
19901:'the “current law” approach to “current policy without change” can be developed and agreed upon. a40.the majority board member view',
19902:'is that the preparer and auditor will resolve such disagreements by reference to the guiding principle – current policy without',
19903:'change. the board is aware that significant judgment will be required. if any irreconcilable issues arise during the threeyear transition',
19904:'period, the board would be called upon to 1 offer implementation guidance or 2 defer the transition from rsi to',
19905:'basic information. summary measures a41.the fiscal sustainability task force technical experts did not agree on the usefulness of summary measures',
19906:'such as the present value amounts intended to be presented on the basic financial statement. although some of the technical',
19907:'experts believe that summary measuresconveyimportant information, othersbelieve that duetotheinherent weaknessof summary measures, they should be deemphasized. a42.the inherent weaknesses of',
19908:'summary measures that were identified by the fiscal sustainabilitytask force and considered by the board include but are not limited',
19909:'to the following: a. a specific time horizon must be used in order to calculate any summary measure. there are',
19910:'no potential time horizons that do not have inherent weaknesses. those weaknesses are discussed in paragraphsa50 a57 below. b. summary',
19911:'measures for longterm fiscal projections for the u.s. government are likely to produce very large numbers that readers find difficult',
19912:'to relate to. one potential remedyfor this would be to report the numbers on a per capita basis, but that',
19913:'approach has weaknesses. those weaknesses are discussed in paragraphs a46 a49 below. c. potential “bottomline” summary measures include fiscal imbalance',
19914:'and fiscal gap, both of which have inherent weaknesses. those weaknesses are discussed in paragraphs a58 a61 below. page 25',
19915:'sffas 36 fasab handbook, version 20 06/21 sffas 36 a43.in spite of the inherent weaknesses of summary measures, many of',
19916:'the technical experts and all of the communication experts recommended that summary measures, including a “bottom line” summary measure, are',
19917:'important and should be required. among other reasons, summarymeasuresare valuable forevaluating proposals and also for comparison of the prior reporting',
19918:'year to the current reporting year. for example, one technical expert said that highlighting changes resulting from such actions as',
19919:'the passage of new entitlement programs should be the “acid test” for any proposed reporting on fiscal sustainability. such reporting',
19920:'on whether a projected shortfall increased or decreased during the reporting period can best be accomplished through the use of',
19921:'summary measures. furthermore, a study by the organisation for economic cooperation and development oecd found that 10 of 12 nations',
19922:'producing fiscal sustainability analyses included summary measures.28 a44.in order to address the difficulty that some readers may have with summary',
19923:'amounts that are expressed as verylarge presentvalue dollar amounts, the board decided that each line iteminthebasicfinancialstatement that isdisplayedinpresentvaluedollaramountsshould also be',
19924:'displayed as a percentage of the present value of gdp for the projection period. a45.amajority of respondents agreed that the',
19925:'board’s proposed basic financial statement, which requires summary measures, would be understandable and meaningful to readers. however, some respondents expressed',
19926:'the view that trend information is more understandable than summary measures. the board decided to retain the basic financial statement',
19927:'as proposed in the exposure draft.29 while users’ preferences among individual items in the fiscal sustainability reporting package will vary,',
19928:'the board believes that each requirement in the statement is meaningful and necessary. per capita measures a46.theboardconsideredwhethertoincludepercapitameasuresinthesummarydisplay. the technical experts',
19929:'serving on the fiscalsustainabilitytask force did not come to agreement regarding the display of summary numbers on a per capita,',
19930:'per worker, and/or per household basis. a47.amajority of the technical experts on the task force recommended against per capita measures,',
19931:'for the following reasons: 28 oecd draft report, fiscal futures, institutional budget reforms, and their effects: what can be learned?,',
19932:'to be published in oecd journal on budgeting in 2009. 29 see additional discussion of the basic financial statement in',
19933:'paragraphsa32 througha37. page 26 sffas 36 fasab handbook, version 20 06/21 sffas 36 a. several technical experts strongly objected to',
19934:'the use of per capita summary numbers using currentyear population for the denominator. they said that such measures would imply',
19935:'that the currentyear population is solely responsible for funding program shortfalls into the distant future. they believe that any changes',
19936:'needed to address the shortfalls projected through, for example, the next 75 years, should be spread across the population throughout',
19937:'that 75year period. b. other technical experts noted that per capita measures may be useful in conveying the magnitude of',
19938:'projected fiscal imbalances and could be displayed if summary amounts are divided by the population that parallels the horizon indicated',
19939:'and a narrative is included that explains present value and the nature of the numerator and denominator. c. per capita',
19940:'measures for infinitehorizon projection periods present special problems. it is uncertain how a reasonable per capita denominator for an infinite',
19941:'horizon ratio would be selected and explained, especially if the denominator includes an estimate of all individuals that enter the',
19942:'population during the projection period. d. two technical experts believe that even present value per capita amounts can be misinterpreted,',
19943:'because the reader will compare the amount with current salary levels and not understand the role of potential future productivity',
19944:'increases. e. one technical expert objects to per capita amounts because they represent amounts distributed equally among individuals with widely',
19945:'different abilities to pay. a48.after a discussion of the above issues, the board decided not to include per capita measures',
19946:'in the proposed reporting requirements. several of the respondents to the ed indicated strong support for per capita amounts. three',
19947:'respondents recommended per capita amounts on the face of the financial statement. one respondent specifically recommended a detailed per capita',
19948:'format titled “u.s. taxpayer personal credit card statement.” a49.the board decided that the technical arguments described in paragrapha47 were compelling',
19949:'and that the standard should not require per capita information. time horizon for projections a50.there wasstrongdisagreement among the taskforce participantsregarding',
19950:'the selectionof a time horizon for projections, in particular a finite horizon for example, 75year versus an infinite horizon. one',
19951:'task force participant believes that only infinitehorizon projections shouldbedisplayedbutothersbelievethatinfinitehorizonprojectionsshouldnotbeshown. some participants suggested that information using both finite and infinitehorizon projections',
19952:'be included. page 27 sffas 36 fasab handbook, version 20 06/21 sffas 36 a51.amajority of the communication experts believe that',
19953:'information for both finite and infinite horizon projections should be provided to readers, but not necessarily both within a primary',
19954:'display. a52.arguments in favor of a finite horizon: a. a finite period would be sufficient to cover essentially all of',
19955:'the working and retirement years for current participants. b. a finite period is subject to less uncertainty than an infinite',
19956:'horizon. c. a finite period is meaningful to readers. for example, readers can relate to a time period that will',
19957:'include the retirement of the youngest members of the current workforce. an infinite horizon is less meaningful to readers. readers',
19958:'are less likely to relate to or be concerned about the u.s. government’s fiscal condition in 200, 500, or 1,000',
19959:'years in the future. d. infinitehorizon projections are no more informative to policymakers than 75year projections, in part because projections',
19960:'beyond the 75year horizon are subject to significant uncertainty. amore detailed version of this argument is made in an article',
19961:'in the national tax journal: …many people already believe that the 75–year horizon is too distant to be meaningful, and',
19962:'that detailed projections over longer horizons suggest a false precision. asimpler projection assumption is that after 75 years or some',
19963:'other interval, t, the system will have settled into a steady state in which rates of growth of costs and',
19964:'tax revenues are thereafter constant, although not necessarily equal.30 a53.arguments in favor of an infinite horizon: a. unlesstrendsareleveltowardstheendoftheperiod,projectionsmaybesubjecttothe “moving window”',
19965:'effect, where shortfalls or surpluses increase significantly from one reporting year to the next due to the change in the',
19966:'projection period. for example, if a projection period is 75 years, the activity in “year76” isoutsidetheprojection period for that year,',
19967:'but will be included in the projection period for the following year. an infinite horizon would avoid the “moving window”',
19968:'effect that occurs when there are significant 30 sustainable social securitywhat would it cost?nationaltaxjournal,vol. lvi,no. 1,part1,march2003, page34. available at http://ntj.tax.org',
19969:'/wwtax/ntjrec.nsf/5dc000487120304885256d8e0054c858/$file/lee.pdf accessed may 7, 2009. page 28 sffas 36 fasab handbook, version 20 06/21 sffas 36 changes to an estimate',
19970:'from one year to the next that are caused by the passage of time. b. some have argued that a',
19971:'finite projection period essentially assumes zero for years beyond the projection period. infinitehorizon projections would not assume zero for years',
19972:'beyond the cutoff point for projections. a54.the board believed that the advantages of both finite and infinite horizons were sufficiently',
19973:'compelling to propose in the ed that both finite and infinitehorizon information should be provided, although only one projection period',
19974:'should be used for the basic financial statement. the ed proposed that whichever type of projection period is selected for',
19975:'the primary display, the other type of projection period would have been presented with the disclosures. a55.the board also believed',
19976:'that one of the projection periods used in either the basic financial statement or the narrative section should be consistent',
19977:'with that used for the sosi. this would ensure consistency between major line items in the sosi for example, projected',
19978:'earmarked receipts and spending for social security and medicare and corresponding line items in the basic financial statement or the',
19979:'disclosures. a56.amajorityof respondentsdisagreed with theboard’sproposal to require reportingprojected data for both finite and infinite time horizons. respondents said that requiring',
19980:'projected data for an infinite time horizon would be: too much information, irrelevant, and unacceptably uncertain due to many major',
19981:'events that are very difficult or impossible to predict, suchas depressions,naturaldisasters, andwars. amajority of respondents disagreed with the board’s proposal',
19982:'not to specify a time horizon for projected data. several respondents recommended a specific time horizon of 75 years. a57.the',
19983:'board decided not to require reporting on the infinite horizon and to explicitly require a finite horizon for the basic',
19984:'financial statement. the board addressed the issue of trends beyond the end of the projection horizon by adding a requirement',
19985:'that the rsi should discuss the implications of the sustainability information, particularly the information in the basic financial statement, after',
19986:'the end of the projection period. this requirement may be met by providing projections for an infinite horizon. see paragraph',
19987:'42. the concepts of fiscal gap and fiscal imbalance a58.the board considered two potential summary measures for presentation below the',
19988:'other required elements on the basic financial statement or separate disclosure: fiscal gap and fiscal imbalance. page 29 sffas 36',
19989:'fasab handbook, version 20 06/21 sffas 36 a. the fiscal gap is the change in noninterest spending or receipts that',
19990:'would be necessary to maintain public debt at or below a target percentage of gdp. b. the fiscal imbalance is',
19991:'the net present value of existing federal debt plus projected noninterest spending,31 minus projected receipts. in other words, it is',
19992:'the fiscal gap when the target level of federal debt at the end of the projection period is zero. the',
19993:'fiscal imbalance illustrates the amount that would be necessary to balance projected receipts, projected noninterest spending, and repayment of debt',
19994:'for a stated projection period. a59.several of the task force technical experts indicated that the fiscal imbalance, as defined above,',
19995:'overstates the size of the problem over any finite time period such as 75 years. the fiscal imbalance is defined',
19996:'as the existing federal debt plus projected noninterest spending less projected receipts. if projected receipts are large enough to set',
19997:'the fiscal imbalance to zero after 75 years or any other fixed time period, this would imply the debt was',
19998:'paid off at the end of the period. many of the technical experts argued that this is not necessary for',
19999:'continued solvency provided the economy is expected to last longer than 75 years. a positive level of debt is viewed',
20000:'bymany to be fiscally acceptable at the end of the projection period, provided it is not too large or growing',
20001:'too fast. a60.the fiscal gap measure does not require a target debt level of zero; instead, it allows for a',
20002:'positive level of debt at the end of the forecast horizon. in order to report the fiscal gap as a',
20003:'single amount in present value dollars or as a percentage of gdp, projected receipts or projected noninterest spending, a target',
20004:'debt level relative to gdp must be selected. such a measure would show the magnitude of increases in receipts or',
20005:'cuts in noninterest spending that would be needed to achieve that target. however, any specific limit selected may be considered',
20006:'arbitrary. in the united states, there is currently no legislated goal for debt as a share of gdp or a',
20007:'legislated limit on borrowing other than the statutory debt limit, which has been frequently raised. a61.since the board has no',
20008:'objective basis for selecting a debttogdp limit or goal, the requirements for information about the fiscal gap do not include',
20009:'a specific debttogdplimit or goal. fiscal gap should be explained and reported, either on the face of the financial statement',
20010:'or in the disclosures. 31 since interest is factored into the present value calculation, the fiscal gap as a share',
20011:'of spending is expressed as a share of spending excluding interest. page 30 sffas 36 fasab handbook, version 20 06/21',
20012:'sffas 36 foreign holdings of u.s. treasury debt a62.asignificant minority of members supported a proposal that the proportion of u.s.',
20013:'treasury debt held by foreign investors is also important information and should be reported as rsi. theypoint out that while',
20014:'it isimportant to reportthelargeand growing gapbetweenreceipts and spending, the extent to which deficits are being financed by foreign lenders is',
20015:'also significant information, particularly in light of the large and growing increase in that proportion. a63.the memberssupporting thisadditional requirement pointed',
20016:'out that foreign lenderscannot be counted on to be always willing to finance the government’s deficits; that the magnitude of',
20017:'this indebtedness to foreign lenders has national security implications, including threatening our international standing and influence and limiting our foreign',
20018:'policy options; and it results in the interest payments on the debt going abroad instead of providing income to u.',
20019:'s. residents and feeding into our economy. a64.the members supporting this additional requirement therefore proposed that rsi should include an',
20020:'illustration and/or explanation of the trend in foreign holdings of u.s. treasury debt for a minimum of 15 years through',
20021:'the most recent date for which data are available. a65.amajority of members believed that there should not be a requirement',
20022:'to report foreign holdings of u.s. treasury debt, for reasons that included the following: a. it is unclear how the',
20023:'information relates to the fiscal sustainability of current policy without change. b. information on foreign holdings of u.s. treasury debt',
20024:'is based upon unaudited, unverifiable surveys rather than transaction records and is not available on a timely basis. c. a',
20025:'reporting requirement for existing foreign holdings would repeat information readily available in other places. a66.amajority of respondents agreed with the',
20026:'minority proposal to require reporting of foreign holdings of u.s. treasury debt. among the reasons given were: a. this information',
20027:'would show the reader the impact foreign countries could have on the u.s. economy. b. trends in the proportion of',
20028:'u.s. treasury debt held by foreign investors are a fundamental user consideration. page 31 sffas 36 fasab handbook, version 20',
20029:'06/21 sffas 36 c. this is a very important financial issue that can have significant economic, fiscal, foreign relations and',
20030:'even national security implications over time. d. graphic information like the pie chart in 10, appendix b of the ed',
20031:'regarding trends in the proportion of u.s. treasury debt held by foreign investors especially foreign countries should be made part',
20032:'of rsi and be subjectto the phasedin implementation. the respondent feels strongly about this because of our increasing reliance on',
20033:'foreign countries to fund our operating deficits at a time when the global economy is under great strain and these',
20034:'funds may not be available to us in the future as countries like china, japan, and germany are forced to',
20035:'shore up their own economies, especially with further global economic deterioration. a67.the board decided not to include a requirement to',
20036:'report on foreign holdings of u.s. treasury debt for reasons described in paragraph a65. alternative policy proposals a68.aminorityof members supported',
20037:'a proposal for additionalrsi not subject to the phasedin implementation in paragraph 45 that they believed would increase the likelihood',
20038:'that the financial statement and disclosures will result in important and necessary decisions. these members proposed that if the comprehensive',
20039:'longterm fiscal projections for the u.s. government indicate a significant imbalance, the basic financial statement should be accompanied by an',
20040:'identification of one or more policy alternatives that would close the fiscal gap. the identification, explanation, and fiscal impact of',
20041:'the policy alternatives would be presented as rsi. a69.amajority of members believed that there should not be a requirement to',
20042:'describe policy alternatives because a statement of accounting standards is not the proper venue for requiring policy proposals. a70.amajority of',
20043:'respondents agreed with the board majority view. interperiod or intergenerational equity a71.the board also considered information that may be helpful',
20044:'to readers in assessing whether financial burdens without related benefits were passed on by current year taxpayers to future year',
20045:'taxpayers sometimes referred to as “intergenerational equity” or “interperiod equity”. a72.in addition to measuring whetherprojected future receipts are sufficient tosupport',
20046:'projected future spending, it is important to understand how the financing of future spending affects current and futureyear taxpayers. for',
20047:'example, even if projected receipts equal projected page 32 sffas 36 fasab handbook, version 20 06/21 sffas 36 spending over',
20048:'the time horizon of the projections, policy may be such that futureyear taxpayers assume a higher burden of taxes or',
20049:'lesser public services than currentyear taxpayers. a73.to present such information, a narrative could explain how measures such as debt to',
20050:'gdp over the time horizon of the projection indicate the extent that current deficits are left to be financed by',
20051:'futureyear taxpayers either through increased taxes or decreased benefits. a74.whileaminorityof theboardbelieved that suchdisclosuresshouldbe required,the majority of the board decided to',
20052:'provide that such information is an optional way to meet the disclosure requirement to provide information that puts the data',
20053:'into context see paragraph 42. a75.amajority of respondents agreed with the board majority view. other comments a76.several respondentsraisedfundamentalquestions regardingtheproject. onerespondent',
20054:'said that unlike private entities, the government is sovereign; it has the power to tax and issue money; accordingly, the',
20055:'federal government is unlikely to lack sufficient budgetary resources to sustain public services and to meet obligations as they come',
20056:'due. however, even that respondent noted that government spending can indeed become excessive. a77.another respondent said that the concept of',
20057:'sustainability should not require assumptions aboutwhattheamericanpeoplewanttodo. for example, if40years from now citizens decide that 30 percent of gdp may be',
20058:'appropriate to address a large elderly and/or disabled population, the board should not assume that this would be impossible or',
20059:'unsustainable. thatrespondentalsosaidthattoshowincometaxesasaflatpercentageof gdp while we show the cost of entitlementsrising with the law isinconsistent and showsan unintended bias. that respondent',
20060:'indicated that even a very small adjustment would put social security into balance. a78.the board decided that the proposed standard',
20061:'may not have made it sufficiently clear that the reporting consists of projections and not predictions and that the final',
20062:'statement of federal financialaccounting standards sffas should explicitly explain the difference between projections and predictions. the following language was added',
20063:'to paragraph 39c: [39] disclosures should include an explanation of the following limitations: [c] projections are not forecasts or predictions;',
20064:'they are designed to answer the question “what if?” – for example, what would be the impact on federal borrowing',
20065:'if current policies without change were continued for a long period of time? page 33 sffas 36 fasab handbook, version',
20066:'20 06/21 sffas 36 boardapproval a79.thisstatementwasapprovedforissuancebyallmembersoftheboard. thewrittenballots are available for public inspection at the fasab office. page 34 sffas 36',
20067:'fasab handbook, version 20 06/21 sffas 36 appendix b: example formats and illustrations the examples in thisappendix are illustrative only;',
20068:'they do not represent authoritative guidance. basic financial statement longterm fiscal projections for the u.s. government amounts projected to 75',
20069:'years as of xxxx xx , as of xxxx xx, 20xx current 20xx prior year year pv % of pv',
20070:'% of dollars the pv dollars the in of in pv of trillions gdp trillions gdp receipts medicare $ xx.x',
20071:'x.x% $ xx.x x.x% social security xx.x x.x% xx.x x.x% all other receipts xx.x x.x% xx.x x.x% total receipts $',
20072:'xxx.x x.x% $ xx.x x.x% noninterest spending medicare $ xx.x x.x% $ xx.x x.x% medicaid xx.x x.x% xx.x x.x% social',
20073:'security xx.x x.x% xx.x x.x% major program a x.x x.x% xx.x x.x% major program b x.x x.x% xx.x x.x% rest',
20074:'of federal government xx.x x.x% xx.x x.x% total noninterest spending $ xxx.x x.x.% $ xx.x x.x% noninterest spending in excess',
20075:'of receipts $ xx.x x.x% $ xx.x x.x% change from prior year pv %of dollars the pv in of trillions',
20076:'gdp $ x.x x.x% x.x x.x% x.x x.x% $ x.x x.x% $ x.x x.x% x.x x.x% x.x x.x% x.x x.x%',
20077:'x.x x.x% x.x x.x% $ x.x x.x% $ x.x x.x% gdp gross domestic product can be roughly defined as all',
20078:'of the nation’s income or everything the country produces. rest of government: the repayment of borrowings by the general fund',
20079:'from the trust fund accounts for social security and medicare are included in receipts for social security and medicare, and',
20080:'noninterest spending for rest of government. page 35 sffas 36 fasab handbook, version 20 06/21 sffas 36 to maintain the',
20081:'current [or date] level of u.s. treasury debt held by the public to gdp, actions would need to be taken',
20082:'to increase receipts or decrease noninterest spending by a net present valueof $xx.x trillion or x% of gdp. to accomplish',
20083:'thisreduction, annualreceipts wouldneedto increase byxx.x% or annualnoninterest spending would have to decrease by xx.x% orsome combination of these two options.',
20084:'note:amounts are estimated based upon guidance for selecting assumptions provided in this statement. receipts and noninterest spending include repayment of',
20085:'borrowings from the trust fund accounts for social security and medicare estimated as 0.x percent of gdp. page 36 sffas',
20086:'36 fasab handbook, version 20 06/21 sffas 36 examples of selected narrative and graphics the following examples display and/or describe',
20087:'narrative and graphics that might supplement the basic financial statement in a manner consistent with the standard. these illustrations are',
20088:'illustrative only and do not represent authoritative guidance. illustrations are not provided for all requirements. examples are provided in this',
20089:'appendix for the following: 1. rising cost of health care 37 2. demographic trends 40 3. relationship of projected receipts',
20090:'and spending 42 4. trends in deficit spending 43 5. trends in treasury debt held by the public 44 6.',
20091:'impact of delayingaction 45 7.alternative scenarios range information 47 8. fiscal gap 47 9. disclosure on funding mechanisms 48 10.',
20092:'other required information 48 1. rising cost of health care paragraph 41b provides that rsi should explain and illustrate major',
20093:'factors that are expected to have a significant impact upon future receipts and spending. for example, if rising federal spending',
20094:'on health care is a major factor in the longterm spending projections, the disclosure might include the following: a. if',
20095:'the growth in health care spending exceeds the growth in gdp, a narrative might explain that the growth in any',
20096:'spending program cannot continue indefinitely to exceed the growth in the economy, because at some point, the spending would exceed',
20097:'the resources that can be extracted from the economy. b. a range encompassing projections for major factors affecting future spending',
20098:'such as the rising cost of health care might be presented in a graphic as a percentage of gdp. the',
20099:'graphic could use the example format in illustration 1a or other formats page 37 sffas 36 fasab handbook, version 20',
20100:'06/21 sffas 36 illustration 1a: major cost drivers for federal spending federal spending for medicare and medicaid as a percentage',
20101:'of gross domestic product under differentassumptions about excess cost growth source: congressional budget office, the longterm outlook for health care',
20102:'spending november 2007 figure 5, page 15. available at: http://www.cbo.gov/ accessed may 7, 2009 “excess cost growth” refers to the',
20103:'number of percentage points by which the growth of annual healthcarespendingperbeneficiaryisassumedtoexceed thegrowth of nominalgrossdomestic product per capita. in addition, a',
20104:'graphic might display the relative contribution of two or more major cost drivers. for example, illustration 1b displaysthe effect of',
20105:'the aging ofthepopulation, excesscostgrowth, and the interaction of those two factors on federal spending on medicare and medicaid. page 38',
20106:'sffas 36 fasab handbook, version 20 06/21 sffas 36 illustration 1b: relative contribution of two major cost drivers allocation of',
20107:'projected growth in federal spending on medicare and medicaid, by source percentage of gross domestic product “excess cost growth” refers',
20108:'to the number of percentage points by which the growth of annual healthcarespendingperbeneficiaryisassumedtoexceed thegrowth of nominalgrossdomestic product per capita. “interaction”',
20109:'is the interaction of the aging of the population combined with projected excess cost growth. in other words, both conditions',
20110:'excess cost growth and aging of the population are necessary for the cost growth labeled “interaction” to occur. “aging” is',
20111:'the projected increase in federal spending on medicare and medicaid that is attributable solely to the aging of the population.',
20112:'source:adapted from figure 1 of accounting for sources of projected growth in federal spendingonmedicareandmedicaid, economicandpolicyissuebrief,may28,2008. available at: http://www.cbo.gov accessed june',
20113:'1, 2009. page 39 sffas 36 fasab handbook, version 20 06/21 sffas 36 2. demographic trends paragraph 41b requires that',
20114:'rsi explain and illustrate the major factors that are expected to have a significant impact upon future receipts and spending',
20115:'of the federal government, one example of which may be demographic trends. the narrative might describe demographic trendsand brieflyexplain themajordriversof',
20116:'change in demographictrends, forexample, trends in longevity and birth rates, and refer the reader to more extensive coverage of the',
20117:'topic in other existing reports, for example, the social security and medicare trustees reports. the narrative could describe the change',
20118:'in the ratio of workers to retirees and how this change relates to longterm fiscal outlook for social insurance programs.',
20119:'alternatively, simple age demographics rather than workforce participation could be used in other words, “over 64” instead of “retired” provided',
20120:'that they are used consistently. asimple graphic to accompany and illustrate the narrative may follow the format of the example',
20121:'shown below. the illustrative sample format below is called an “age/gender pyramid.” the graphic could display two or three age/gender',
20122:'pyramids sidebyside, for example: 1. the current or other baseline year minus 50 years; 2. the current year or other',
20123:'baseline year, for example, 2000; and 3. a projection of the current or other baseline year plus 50 years. page',
20124:'40 sffas 36 fasab handbook, version 20 06/21 sffas 36 illustration 2: agegender pyramid the changing shape of the united',
20125:'states’ population 200076543210123456704591014151920242529303435394044454950545559606465697074757980848589909495+ percent% male% female205076543210123456704591014151920242529303435394044454950545559606465697074757980848589909495+ percent% male% female195076543210123456704591014151920242529303435394044454950545559606465697074757980848589909495+ percent% male% female source: social security administration, area population statistics. the',
20126:'narrative could also discuss the “total dependency” ratio dependent children plus retirees per worker for each “workertoretiree” ratio that is',
20127:'provided in the narrative.32 the narrative also could provide perspective by explaining that similar demographic trends are occurring in other',
20128:'developed countries, and provide examples of developed nations projected to have a greater number of retirees per worker than the',
20129:'united states, and developed nations projected to have fewer retirees per worker. 32 the european commission defines the total dependency',
20130:'ratio as the “population under 15 and over 64 as a percentage of the population aged 1564.” european economy: special',
20131:'report 1/2006, page 313. page 41 sffas 36 fasab handbook, version 20 06/21 sffas 36 paragraph 41a requires that rsi',
20132:'explain and illustrate the historical and projected trends for a progression of years. illustrations 3, 4 and 5 display how',
20133:'this might be accomplished. 3. relationship of projected receipts and spending the rsi section could include a graphic of the',
20134:'relationship between projected receipts and spending for a progression of years, for example beginning 20 years before the current year',
20135:'and extending to all future years projected in the basic financial statements. below is an example. illustration 3: projected u.s.',
20136:'government receipts and spending projected u.s. government receipts and spending as a percent of gdp source: fy 2007 financial report',
20137:'of the u.s. government, chart h, page 18. available at http://fms.treas.gov/fr/index.html accessed may 7, 2009. page 42 sffas 36 fasab',
20138:'handbook, version 20 06/21 sffas 36 4. trends in deficit spending the trends in deficit spending could be graphically displayed',
20139:'as a percentage of gdp for a progression of years, for example beginning at least 20 years before the current',
20140:'year and extending to all future years projected in the basic financial statement. illustration 4: projected deficit/surplus as a percentage',
20141:'of gdp projecteddeficit surplus asapercentage of gdp1001020304050198019902000201020202030204020602080historicalprojected data sources: historical: office of management and budget, table 132, chapter 13, “stewardship,”',
20142:'analytical perspectives, fy 2008 budget projections: governmentaccountability office, longterm fiscal simulation data,alternative scenario. available at: http://www.gao.gov/special.pubs/longterm/data.html accessed may 7, 2009',
20143:'page 43 sffas 36 fasab handbook, version 20 06/21 sffas 36 5. trends in treasury debt held by the public',
20144:'agraphic could display the projected trends in treasury debt held by the public as a percentage of gdp, for a',
20145:'progression of years beginning at least 20 years before the current year and extending to all future years projected in',
20146:'the basic financial statement. this graphic could illustrate the assumption that increased borrowing would occur to finance the difference between',
20147:'projected receipts and spending. illustration 5: increase in federal debt held by the public federaldebt heldby the public as a',
20148:'percentageof gdp0100200300400500600700800198019902000201020202030204020602080historicalprojected data sources: historical: office of management and budget, table 132, chapter 13, “stewardship,” analytical perspectives, fy 2008 budget',
20149:'projections: governmentaccountability office, longterm fiscal simulation data,alternative scenario. available at: http://www.gao.gov/special.pubs/longterm/data.html accessed may 7, 2009. page 44 sffas 36 fasab',
20150:'handbook, version 20 06/21 sffas 36 6. impactofdelaying action paragraph 41c provides that if the projections indicate an excess of',
20151:'projected noninterest spending over projected receipts, rsi should explain and illustrate the likely impact of delaying action. agraphiccoulddisplaytheprogressiveincreaseinthe changethat wouldbeneededto',
20152:'closethefiscalgapbyareducingnoninterestspendingoralternativelybbyincreasingtaxes. illustration 6: impact of delaying action what are the costs of delaying action? how soon action is taken will',
20153:'affect how much the government would have available to spend on various priorities. the measures below show, for each of',
20154:'the years presented, how much the government would have to immediately and permanently either raise receipts or cut noninterest spending',
20155:'– orsome combination of the two – to close the fiscal gap if action beginsin that year. for example, if',
20156:'action does not begin until 2040, noninterest spending would have to be permanentlyreduced by59.7% or receipts increased by 92.9% or',
20157:'some combination of the two relative to 2009 levels of spending and receipts. in this projection, “closing the fiscal gap”',
20158:'means to maintain the government’s debt at the same size in relation to the economy as it was at the',
20159:'beginning of the projection period. page 45 sffas 36 fasab handbook, version 20 06/21 sffas 36 percent increase in revenue',
20160:'needed to close the fiscal gap 120 100 80 60 40 20 0 20 40 60 80 100 120 percent',
20161:'decrease in spending needed to close the fiscal gap 2009begin in 2020, 20302040revenue would need to increase 54.5% or spending',
20162:'would need to decrease 37.4% or some combination of the two 30.946.159.743.669.892.9 to close the gap if changes source: gao’s',
20163:'march 2009 alternative simulation. page 46 sffas 36 fasab handbook, version 20 06/21 sffas 36 7. alternative scenarios range information',
20164:'paragraph 41d provides for the explanation and illustration of alternative scenarios consistent with current policy without change. it indicates that',
20165:'a table may be used to display alternative scenarios. the following illustration is an example of how such a table',
20166:'might be displayed. illustration 7: alternative scenarios statement alternative 1 alternative 2 receipts: medicare social security all other total receipts',
20167:'spending: medicare medicaid social security major programa major program b rest of government total noninterest spending noninterest spending in excess',
20168:'of receipts 8. fiscal gap paragraph 38 requires that information about fiscal gap be included on the face of the',
20169:'basic financial statement or in the disclosures. the fiscal gap is the change in noninterest spending or receiptsthat wouldbenecessarytomaintain publicdebtat',
20170:'or belowa target percentageof gdp. an illustrative narrative disclosure on the face of the basic financial statement for the change',
20171:'in noninterest spending or receipts necessary is shown on page 32. the following is an example of an explanation of',
20172:'the concept of fiscal gap that may be useful in putting the information required by paragraph 38 into context: how',
20173:'much public debt is sustainable? while many experts agree that some level of public debt is reasonable and acceptable, there',
20174:'is no universally agreedupon “sustainable” percentage of debt to gdp. however, all experts agree that a continually page 47 sffas',
20175:'36 fasab handbook, version 20 06/21 sffas 36 increasinglevelofdebttogdpisnotsustainable. thechartinnotex33 displayshow the debt as a percentage of gdp has varied',
20176:'over time. debt was 36.8% of gdp as of september 30, 2007, but has risen as high as 109% of',
20177:'gdp during world war ii. many economists believe that persistent debttogdp levels over 100% are unhealthy. 9. disclosure on funding',
20178:'mechanisms paragraph 40f requiresa discussion of the different fundingmechanismsformajor programsthat are not primarily funded by the government’s general revenues. below',
20179:'is an illustrative disclosure. of the $xx of the net excess of noninterest spending over receipts, $yy relates to programs',
20180:'funded by the government’s general revenues and $zz relates to social security oasdi and medicare partaprograms, which are funded by',
20181:'payroll taxes and which are not funded in any material respects by the government’s general revenues. if payroll and selfemployment',
20182:'taxes and related assets in the federal oldage and survivors and disability insurance oasdi trust funds or federal hospital insurance',
20183:'trust fund medicare parta become insufficient to cover related benefits, as indicated by projections, additional funding for each of these',
20184:'two programs would be necessary or scheduled benefitswouldneedtobereduced. ifthegovernment’sgeneralrevenuesareinsufficientto cover both mandated transfers to medicare parts b and d and',
20185:'spending for other general government programs funded by the government’s general revenues, as indicated by the projections, either the government’s',
20186:'general revenues or medicare parts b and d revenues premiums and state transfers would need to be increased, spending for',
20187:'medicare parts b and d and/or other general government spending would need to be reduced, and/or additional amounts borrowed from',
20188:'the public. 10. other required information the illustrations in the appendix are not allinclusive. additional information is required by paragraphs',
20189:'39 42 but is not explicitly described or illustrated in this appendix. for example, paragraph 39 requires an explanation of',
20190:'the nature and limitations of projections. paragraph 42 requires that the narrative should explain the significance of the data presented',
20191:'and put the information into context. 33see illustration 5: trends in treasury debt held by the public on page 1414.',
20192:'page 48 sffas 36 fasab handbook, version 20 06/21 sffas 36 appendix c: frequentlyasked questions faqs thesefaqswereincludedintheexposuredrafttoaidrespondents. theyarenotrequiredinthe cfr. faq',
20193:'1. what is “fiscal sustainability reporting”? “fiscal sustainability reporting” is the short term for “comprehensive longterm fiscal projections andaccompanying narrative',
20194:'and graphics in the financial report of the u.s. government.” faq 2. what is gdp? anation’s gross domestic product, or',
20195:'gdp, is one of the ways for measuring the size of its economy. the gdp of a nation is defined',
20196:'as the market value of all final goods and services produced within a country in a given period of time.',
20197:'the most common approach to measuring and understanding gdp is the expenditure method: gdp = consumption + investment + government',
20198:'spending + exports imports faq 3. a. what is the debttogdp ratio? b. why does the debttogdp ratio matter? a.',
20199:'the debttogdpratio,forthepurposesoffederalfinancialreporting,is theamount of federal treasury debt held by the public divided by gdp. [an alternative ratio would be the',
20200:'amount of total public debt federal, state, and local divided by gdp.] b. the debttogdpratioprovides an indication of anation’sabilitytorepayits public',
20201:'debtbycomparingthesizeofitsdebttothesizeofitseconomy. forexample,during the formation of the european union eu, one of the conditions for initial membership in the eu, which',
20202:'included eligibility to convert its currency to the euro, was that each nation had to meet certain conditions, including debttogdpratio.',
20203:'generally, higher debttogdp ratios are believed to result in lower economic growth and private investment as well as higher interest',
20204:'costs. many economists believe thatpersistentdebttogdplevels over100%areunhealthy. inaddition,the debtto gdp ratio cannot continue to rise indefinitely, because at some point although',
20205:'the precise point at which this would occur is unknown the world’s financial markets would likely cease lending to the',
20206:'u.s. government. page 49 sffas 36 fasab handbook, version 20 06/21 sffas 36 faq 4. what is present value? present',
20207:'value represents the amount of money that if invested today would grow to a specified amount in the future. present',
20208:'value is an adjusted amount that takes the “time value of money” intoconsideration. the “timevalueofmoney” isillustratedbyaquestionsuchas: “attenpercent interest compounded annually,',
20209:'how much do i need to put into the bank today in order to have $110 one year from today?”',
20210:'the amount you would need today would be $100. therefore, the present value of $110 in this example would be',
20211:'$100. in present value calculations, the further out in the future the needed amount, the smaller the amount you would',
20212:'need today. in the first year, you earn interest on the amount that you deposit the “principal” amount. in the',
20213:'second year, you earn interest on both the original principal amount and the amount of interest that was earned in',
20214:'year one. in year three, you would earn interest on: the original principal amount, plus the interest earned in year',
20215:'one on the principal amount, the interest earned in year two on the principal amount, and the interest earned in',
20216:'year two on year one’s interest earnings. this is colloquially called “the magic of compounding.” if inflation is less than',
20217:'the rate of interest earned in this example, ten percent per year, the “magic of compounding” is an advantage to',
20218:'the party that is earning the interest. faq 5. what are projections? aprojectionisthecalculation of future databased upon theapplicationof trendstopresent data.',
20219:'projections of deficits, or surpluses, and debt are a central feature of fiscal sustainability reporting. projections are not forecasts or',
20220:'predictions; they are designed to depict results that may occur under various conditions–for example, what if current policywithout change regarding',
20221:'federal government public services and taxation are continued in the future? projections are useful in order to display alternative future',
20222:'scenarios, but it is important to clearly explain the nature of the information being presented. faq 6. what factors affect',
20223:'projections? projections are affected by three kinds of assumptions: policy assumptions, economic assumptions, and demographic assumptions. policy assumptions address the',
20224:'factors under the direct control of the federal government concerning the taxes and other receipts to be received by the',
20225:'federal government and the public services to be provided by the federal government. policy assumptions address page 50 sffas 36',
20226:'fasab handbook, version 20 06/21 sffas 36 projected spending rules for both mandatory and discretionary spending as well as the',
20227:'framework for assessing taxes and fees. economic assumptions address the economic factors that are not under the direct legislative control',
20228:'of the federal government for example, inflation and growth in gdp. demographic assumptions address projected population trends for example, birth',
20229:'rates, mortality rates, and net immigration. projectionsarealsoaffectedbyuncertainty. theuncertaintymaybedemonstratedbyproviding alternative scenarios consistent with current policy without change. faq 7. what is',
20230:'the nature of accounts designated as “trust funds” in the budget of the federal government? atrust fund account, as the',
20231:'term is used in the budget of the federal government, is a type of account designated by law as a',
20232:'trust fund, for receipts earmarked for specific purposes and the expenditure of those receipts. hence the meaning of the term',
20233:'differs significantly from its meaning in the private sector. for example, a trust in the private sector necessarily involves a',
20234:'fiduciary relationship. in the federal government, despite the legislative requirement that the funds be earmarked, earmarked funds often titled “trust',
20235:'funds” in the federal budget are distinct from fiduciary activities.34 moreover, in order to reduce confusion between accounts designated as',
20236:'“trust funds” in the budget of the federal government such as the trust fund accounts for social security and medicare',
20237:'and privatesector trust funds, fasab’s statement of federal financialaccounting standardssffas 27, identifying and reporting earmarked funds,prohibitstheuse oftheterm “trust fund” for',
20238:'earmarked funds federal “trust funds” except when referring to the legal title of the fund. sffas 27 also requires the',
20239:'following note disclosure when accounts designated as “trust funds” in the budget of the federal government use their excess funds',
20240:'to buy treasury securities: theu.s. treasurydoes notsetasideassetstopayfutureexpendituresassociatedwith earmarked funds. instead, the cash generated from earmarked funds is used by the',
20241:'u.s. treasury for general government purposes. treasury securities are issued to the earmarked fund as evidence of earmarked receipts and',
20242:'provide the fund with the authority to draw upon the u.s. treasury for future authorized expenditures. for some funds, the',
20243:'drawdown is subject to future appropriation. treasury securities held by an earmarked fund are an asset of the fund and',
20244:'a liability of the u.s. treasury, so they are eliminated in consolidation for the u.s. governmentwide financial statements. 34 fiduciaryactivities',
20245:'are defined in sffas 31, accounting for fiduciary activities. page 51 sffas 36 fasab handbook, version 20 06/21 sffas 36',
20246:'when the earmarked fund’s treasury securities are redeemed to make expenditures, the u.s. treasury will finance those expenditures in the',
20247:'same manner that it finances all other expenditures.35 35see sffas 27, identifying and reporting earmarked funds, paragraphs 16 and 27.',
20248:'page 52 sffas 36 fasab handbook, version 20 06/21 sffas 36 appendix d: list ofabbreviations cbo congressional budget office cfr',
20249:'consolidated financial report of the u.s. government ed exposure draft faq frequentlyaskedquestion fasab federalaccountingstandardsadvisoryboard fy fiscal year gaap generallyacceptedaccountingprinciples gao',
20250:'governmentaccountabilityofficeformerly,general accounting office gdp gross domestic product ipsasb internationalpublic sectoraccountingstandards board oasdi oldage,survivors anddisabilityinsurancesocialsecurity oecd organisation for economic cooperation and',
20251:'development omb office of management and budget rsi required supplementary information sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards sosi statement of social insurance',
20252:'u.s. united states page 53 sffas 36 fasab handbook, version 20 06/21 sffas 36 appendix e: fiscal sustainability reportingtask force',
20253:'the fasab acknowledges with gratitude the invaluable expertise and support of the fiscal sustainability reporting task force participants. the viewsexpressedinthisstandard',
20254:'represent theviewsof thefasab membersand shouldnot be attributed to the task force participants or to their organizations. members of congress the',
20255:'honorable james cooper, dtn the honorable k. michael conaway, rtx federal government participants james duggan, phd, senior economicadvisor for social',
20256:'security, office of economic policy, department of the treasury patrick locke, chief, budgetanalysis branch, office of management and budget robert',
20257:'b. anderson, senior economist, office of management and budget stephen goss, chiefactuary, social securityadministration richard foster, chiefactuary, centers for medicare',
20258:'and medicaid services thomas mccool, phd, director, center for economics, governmentaccountability office benjamin r. page, phd, principalanalyst, macroeconomicanalysis division, congressional',
20259:'budget office nongovernment participants josephantos, phd, wilson h. taylor scholar in health care and retirement policy,american enterprise institute allen schick,',
20260:'phd, visiting fellow in governance studies, brookings institution jagadeesh gokhale, phd, senior fellow, cato institute robert bixby, jd, executive director,',
20261:'concord coalition page 54 sffas 36 fasab handbook, version 20 06/21 sffas 36 paul posner, phd, director, master’s in publicadministration',
20262:'program, george mason university gary kreps, phd, chair, department of communication, george mason university sheila weinberg, ceo and founder, institute',
20263:'for truth inaccounting c. eugene steuerle, phd, senior fellow, urban institute page 55 sffas 36 fasab handbook, version 20 06/21',
20264:'statementoffederalfinancialaccountingstandards37: social insurance:additional requirements for management’s discussion andanalysis and basic financial statements status issued april 5, 2010 effective date for',
20265:'periods beginning after september 30, 2010 affects sffas 17, paragraphs 26, 27, and 32. affected by none. summary for federal',
20266:'financial reporting, social insurance comprises five programs – social security, medicare, railroad retirement, black lung, and unemployment insurance. however, two',
20267:'programs, social security and medicare, are of special significance because of the high rate of participation among citizens, the fiscal',
20268:'challenges related to the programs, and the challenges associated with incorporating estimates of future cash flows of this magnitude in',
20269:'financial statements. therefore, thefederalaccountingstandardsadvisoryboardfasabor “the board” has devoted substantial resources to considering how fundamental questions about social insurance programs should',
20270:'be addressed through federal financial reporting. these questions include whether the government can sustain these programs as currently constructed, whether',
20271:'the government’s financial condition improved or deteriorated as a result of its efforts to provide these and other programs, and',
20272:'how long these programs will be able to provide benefits at current levels. from the outset of this project, members',
20273:'have agreed on the objectives of financial reporting for social insurance programs and yet have had different views about how',
20274:'best to achieve the objectives. for example, all members have agreed that it is extremely important to provide useful financial',
20275:'information about the sustainability of social insurance programs, and that such information should be presented for the government as a',
20276:'whole in the consolidated financial report of the united states government.1 members have agreed that social insurance information should be',
20277:'included in the basic financial statements and should be “transparent” – that is, readily understandable to an interested, non expert',
20278:'reader. members also have agreed that the financial report should highlight any longrange fiscal imbalances anticipated in social insurance programs.',
20279:'all members have supported several innovations, including a new basic financial statement presenting changes in the amounts presented on the',
20280:'statement of social insurance. however, members have had different views about what should be reported on certain financial statements. 1to',
20281:'that end the board recently issued statement of federal financialaccounting standards 36, reporting comprehensive longterm fiscal projections for the u.',
20282:'s. government. page 1 sffas 37 fasab handbook, version 20 06/21 sffas 37 the key difference among members is in',
20283:'regard to the timing of the recognition of expense and liabilityforsocialinsuranceprograms. somemembersbelievethatanexpenseisincurredanda liability arises for social insurance programs during the',
20284:'working lives of participants, and that some portion of the benefits accumulated at the balance sheet date should be recognized',
20285:'as a liability. other members agreewithstatement offederalfinancialaccountingstandards sffas17, accounting for social insurance,thatan expenseisincurred and aliabilityarisesfor social insurance programs when the',
20286:'participants have met all eligibility requirements and the amount is “due and payable.” thisstatementoffederalfinancialaccountingstandardsrepresentsacompromise. itprovides enhanced reporting but does not',
20287:'resolve the two strongly held views regarding when the obligating event occurs for social insurance programs and, thus, when the',
20288:'liability and expense definitionsare met within those programs. therefore, this statement does not change the liability and expense recognition and',
20289:'measurement from that required in sffas 17.2 sffas 17 requires certain information about social insurance programs, and this statement requires',
20290:'the following: critical information about costs, assets and liabilities, social insurance commitments, budget flows, and the longterm fiscal projections together',
20291:'in one section in management’s discussion and analysis md&a.3 atableor other singular presentationofkeymeasures inmd&a. anew summary sectionfor thestatementof socialinsurance. anew',
20292:'basic financial statementtopresentthereasonsfor changesduringthereporting period in the open group measure reported on the statement of social insurance. although opinions continue',
20293:'to differ regarding when the obligating event occurs for social insurance programs, and thus the question of when the liability',
20294:'and expense occur within those programs continues to be discussed, this statement fulfills a desire held by all the members',
20295:'to present other information that will significantly improve readers’ understanding of the status and results of the government’s social insurance',
20296:'programs. 2sffas 17 established a “due and payable” liability standard for social insurance programs. under that standard the expense recognized',
20297:'for the reporting period is the benefits paid during the period plus any increase or less any decrease in the',
20298:'liability from the end of the prior period to the end of the current period. the liability is the social',
20299:'insurance benefits due to be paid to or on behalf of beneficiaries at the end of the reporting period but',
20300:'not disbursed until after the end of the period, including claims incurred but not reported. 3this statement applies only to',
20301:'the governmentwide entity and to component entities that prepare a statement of social insurance. page 2 sffas 37 fasab handbook,',
20302:'version 20 06/21 sffas 37 table of contents summary 1 introduction 4 purpose 4 background 5 materiality 6 effective date',
20303:'6 accounting standard 6 scope 6 definitions 7 management’s discussionandanalysis 8 statement of social insurance 10 statement ofchanges insocialinsuranceamounts 11',
20304:'required supplementary information other than md&a 11 valuation date 11 sensitivityanalysis 12 governmentwide entityaccountingandreporting 13 effect on sffas 17 13',
20305:'effective date 17 appendixa:basis for conclusions 18 appendix b:illustrativetableofkeymeasures 41 appendix c: illustrative statement of social insurance, part i, governmentwide',
20306:'42 sosi appendix d:illustrativestatement ofchanges in socialinsuranceamounts 47 appendix e:list ofabbreviations 49 page 3 sffas 37 fasab handbook, version 20',
20307:'06/21 sffas 37 introduction purpose 1. federal financial reporting should provide accurate and transparent information to citizens so that they',
20308:'can make wellinformed decisions for themselves and their government. in this regard, such reporting must include information on the government’s',
20309:'longterm commitmentsforsocialinsuranceaswellasallothergovernment programs. thisstatement of federal financialaccounting standards sffas or statement supports that objective. 2. thisstatementamendssectionsofsffas17, accounting for social insurance.',
20310:'in addition to the current requirements in sffas 17, the standard requires the governmentwide entity as well as entities that',
20311:'present a statement of social insurance sosi to: a. include in one section of management’s discussion and analysis md&a information4',
20312:'about costs, assets and liabilities, social insurance commitments, budget flows, and longterm fiscal projections;5 b. include inmd&aa tableor other singular',
20313:'presentation ofkeymeasuresdrawn from the basic financial statements; c. add a section within the sosi that summarizes the net present values',
20314:'of cash flows and presents certain subtotals and totals see appendix c: illustrative statement of social insurance, part i, governmentwide',
20315:'sosi; and d. present a statement of changes in social insurance amounts scsia that indicates the reasons for changes in',
20316:'the open group measure from the end of the previous reporting period see appendix d: illustrative statement of changes in',
20317:'social insuranceamounts. 3. thefederalfinancialreportingmodelisunique. themodelincludes,inadditiontoabalance sheet and statements of net cost and changes in net position, unique financial statements designed',
20318:'specifically for the federal government, including a statement of budgetary resources, a sosi, and a statement of longterm fiscal projections',
20319:'for the u.s. government. 4this statement applies only to the governmentwide entity and to component entities that prepare a statement',
20320:'of social insurance. 5terms defined in the glossary are shown in boldface the first time they appear. page 4 sffas',
20321:'37 fasab handbook, version 20 06/21 sffas 37 in addition, md&ais a required component in federal financial reports. this statement',
20322:'provides for additional reporting within this model. background 4. as notedin statement offederalfinancialaccountingconceptssffac1, objectives of federal financial reporting, the federal',
20323:'government is unique when compared with any other entity in the country. in sffac 1, the board established four major',
20324:'reporting objectives for federal accounting standards. the objectives deal with 1budgetary integrity, 2 operating performance, 3 stewardship, and 4 systems',
20325:'and control. 5. although all four of the objectives are equally important, objectives 2 and 3 guided the development of',
20326:'the social insurance standard. objective 2 states that federal financial reporting should assist report users in evaluating the service efforts,',
20327:'costs, and accomplishments of the reporting entity; the manner in which these efforts and accomplishments have been financed; and the',
20328:'management of the entity’s assets and liabilities. 6. objective 3 states that federal financial reporting should assist users in assessing',
20329:'the impact of the government’s operations and investments for the period and how the government’s and the nation’s financial condition',
20330:'has changed and may change in the future. this objective is based on the government’s responsibility for the general welfare',
20331:'of the nation in perpetuity. it focuses not on the provision of specific services, but on the requirement that the',
20332:'government report the broad outcomes of its actions. 7. in light of objective 3, fundamental questions about social insurance programs',
20333:'should be addressed by accounting standards, including whether the government can sustain these programs as currently constructed, whether the government’s',
20334:'financial condition improved or deteriorated as a result of its efforts to provide these and other programs, and how long',
20335:'these programs will be able to provide benefits at current levels. the information that is proposed will help users address',
20336:'these questions. 8. the sosi was a first step in the process of developing information for an assessment of sustainability',
20337:'of specific programs in governmentwide financial reports and in the financial reportsof component entitiesthatadminister socialinsuranceprograms. the sosi isbased on longrangeactuarial',
20338:'estimatesof futurecosts. sffas 17requirescertain supplementary information as well, including presentations of future cash flow as a percentage of taxable payroll',
20339:'and gross domestic product gdp. the sosi and required supplementary informationrsiprovideinformationthathelpsusersanalyzetheeffectofbenefitpayments to different participants under current law, as well as',
20340:'economic and demographic changes e.g., in the cost of health care and in life expectancies. page 5 sffas 37 fasab',
20341:'handbook, version 20 06/21 sffas 37 9. social insurance involves major programs. they are not only a component of federal',
20342:'operations, but an essential part of the national economy. this statement requires information that is not currently provided. specifically, it',
20343:'requires management to discuss and analyze in md&ameasures of social insurance in the context of other measures presented in the',
20344:'basic financial statements. in addition, it requires a table or other singular presentation of measures in md&a; a new summary',
20345:'section for the sosi; and a new statement of changes in social insurance amounts. materiality 10. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether',
20346:'an item is material depends on the degree to which omitting or misstating the item makes it probable that the',
20347:'judgment of a reasonable person relying on the information would have been changed or influenced by the omission or the',
20348:'misstatement. effective date 11. the provisions of this statement will be effective beginning in fiscal year 2011. accounting standard scope',
20349:'12. this statementoffederalfinancialaccountingstandards sffasor statementis applicable to the consolidated financial report of the u.s. government as well as to the',
20350:'financialreportsof component entitiesthat presentastatement of socialinsurancesosi. social insurance standards for these entities are provided in sffas 17. 13. this statement',
20351:'amends sections of sffas 17. it does not affect provisions of sffas 17 that are not explicitly described and illustrated',
20352:'in paragraph 40 of this standard. for the governmentwide entity and entities that present a sosi, the statement supplements sffas',
20353:'15, management’s discussion and analysis; it does not affect the md&a requirements of other entities. 14. the following five programs',
20354:'are the sole programs subject to social insurance amendments adopted through this statement: page 6 sffas 37 fasab handbook, version',
20355:'20 06/21 sffas 37 a oldage, survivors, and disability insurance oasdi or social security; b medicarehospitalinsurancemedicarehipartaandmedicaresupplementary medical insurance medicare smi',
20356:'part b and part d;6 c railroad retirement benefits rrb;7 d unemployment insurance for the general public ui;8 and e',
20357:'black lung benefits. definitions 15. closed group population those persons who, as of a valuation date, are participants in a',
20358:'social insurance program as beneficiaries, covered workers, or payers of earmarked taxes or premiums. 16. closed group measure the closed',
20359:'group measure is the net present value of all expenditures to or on behalf of the closed group population see',
20360:'above participating in a social insurance program and all contributions or other income from or on behalf of those participants',
20361:'over a given projection period. 6 medicare also includes a “part c.” the medicare prescription drug, improvement, and modernization act',
20362:'of 2003 mmacreatedthemedicareadvantagemaprogramthatis sometimes referredtoofficially as partc. maprovides partsa,b, andnowdthroughprivatehealthinsuranceplans. thosewhoareentitledtopartaandenrolledinpartb maychoosetojoinamaplan,ifthereisaplanavailableintheirarea. maplans havetheirownproviders oranetwork ofcontractinghealthcareproviders. allmaplansarecurrentlypaidapercapitapremium,assumefullfinancialriskfor all careprovidedto beneficiaries,',
20363:'andmustprovideallmedicarecovered services. manymaplans offer additional medicareservices suchas prescriptiondrugs andvision and dental benefits to beneficiaries. the federalgovernment’s commitment for components of',
20364:'part c i.e., hospital, physician, drugs wouldbethe same as for partsa, b, andd and would be accounted for accordingly. 7legislation',
20365:'enacted in 1974 restructuredrailroad retirement benefits into two tiers,so asto coordinate themmore fully with social security benefits. the first tier',
20366:'is based on combined railroad retirement and social security credits, using social security benefit formulas. the second tier is based',
20367:'on railroad service only and is comparable to the pensions paid over and above social security benefits in other industries.',
20368:'8 pursuant to sffas 17, astatement of social insurance is not preparedfor the ui program; sffas 17 specifies other reporting',
20369:'for the ui program. thus, for the purposes of this statement, the ui program is not a “component entity that',
20370:'presents a sosi.” page 7 sffas 37 fasab handbook, version 20 06/21 sffas 37 17. closed group unfunded obligation the',
20371:'closed group unfunded obligation is the closed group measure see above minus the value of the assets held by the',
20372:'program at the beginning of the reporting period. 18. current participants all individuals currently participating in a social insurance program,',
20373:'e.g., for social security, those who are 15 years and older and are working or have worked in covered employment',
20374:'and retirees as of the valuation date. an entry age for work in covered employment of 15 years is assumed.',
20375:'19. future participants individuals who are not currently participating in a social insurance program but who are projected to participate',
20376:'in the future over a given projection period as contributors or beneficiariesorboth. forexample,forsocialsecurity,futureworkersandbeneficiarieswho are under age 15, not yet born,',
20377:'or not yet immigrated as of the valuation date. 20. open group population those persons who, as of a valuation',
20378:'date, are or will be during the projection period participants in a social insurance program as beneficiaries, covered workers, or',
20379:'payers of earmarked taxes or premiums. 21 open group measure the open group measure is the net present value of',
20380:'all expenditures to or on behalf of the open group population see above and all contributions or other income from',
20381:'or on behalf of the open group population over a given projection period, e.g., 75 years. 22. open group unfunded',
20382:'obligation the open group measure see above minus the value of assets held by the program at the beginning of',
20383:'the reporting period. management’s discussion andanalysis 23. component entities that present a sosi and the governmentwide entity should discuss critical',
20384:'measures from their basic statements in a separate section of their management’s discussion and analysis md&a. they should explain the',
20385:'significance of key amounts, the page 8 sffas 37 fasab handbook, version 20 06/21 sffas 37 major changes in those',
20386:'amounts during the reporting period, and the causes thereof. in particular, the entity should explain why the changes occurred and',
20387:'what they imply for the program’soperation. theentityshouldexplainhowcostsandcommitmentsincurredduring the period were or will be financed. the entity should describe important existing',
20388:'and currentlyknown demands, risks, uncertainties, events, and conditions—both favorable and unfavorable—that affect the amounts reported in the basic financial statements.',
20389:'the discussion should go beyond a mere description of existing conditions and should encompass the possible future effects of anticipated',
20390:'future events, conditions, and trends regarding social insurance programs. where appropriate, the description of possible future effects of both existing',
20391:'and anticipated factors should include quantitative forecasts or projections. 24. at a minimum, component entities that present a sosi and',
20392:'the governmentwide entity should present and explain, as described in paragraph 23, the following measures except as noted: a. from',
20393:'the statement of net cost and the statement of changes in net position component entities or statement of operations and',
20394:'changes in net position governmentwide entity: i. net costs ii. total financing sources and net change of cumulative results of',
20395:'operations for component entities only and iii. total revenue and net operating costs for the governmentwide entity only b. from',
20396:'the statement of financial position balance sheet: i. total assets ii. total liabilities iii. net position c. from the statement',
20397:'of social insurance and the statement of changes in social insurance amounts scsia: i. the open group measure; the entity',
20398:'should discuss the closed group measure in the narrative and explain how it differs from the open group measure9 and',
20399:'the significance of the difference ii. the change in the open group measure during the reporting periods 9 see the',
20400:'definitions of “closed group” and “open group” in pars. 1522. the black lung benefits program serves a population that is',
20401:'closed to new entrants; therefore, for that program, the open and closed groups would be the same. page 9 sffas',
20402:'37 fasab handbook, version 20 06/21 sffas 37 d. from the reconciliation of net operating cost and unified budget deficit',
20403:'for the governmentwide entity only: total unified budget deficit or surplus e. from the statement of longterm fiscal projections for',
20404:'the governmentwide entity only: the net present value of the excess of spending over receipts. 25. in addition,md&ashouldpresenttheabove measuresinatableor other',
20405:'singular presentation see the illustration for the governmentwide entity at appendix b: illustrative table of key measures. the closed group',
20406:'measure is not required to be presented in the table or other singular presentation. the table inappendix b is for',
20407:'purposes of illustration only. thepreparershoulddeterminethemosteffectiveformatforcommunicatingthecritical financial information and the reasons for changes during the prior period. 26. each critical measure',
20408:'above costs, net position, etc., see paragraph 24 may be disaggregated into submeasures. for example, regarding assets, component entities may',
20409:'separately present treasury securities held, and liabilities may be disaggregated into major items, i.e., into line items for employee pension',
20410:'liabilities and other liabilities. 27. theamounts discussedinmd&afor theopengroup measureshouldbe thesame as the amountinthesummarysectionofthesosi discussedbelowandinappendixc:illustrative statement of social insurance, part i,',
20411:'governmentwide sosi, and the scsiadiscussed below and in appendix d: illustrative statement of changes in social insuranceamounts. statement of social',
20412:'insurance [see appendix c: illustrative statement of social insurance, part i, governmentwide sosi. there are two illustrations, one for the',
20413:'governmentwide entity part i and another for the component entity part ii.] 28. the governmentwide entity and component entities that',
20414:'present a sosi pursuant to sffas 1710 should conclude the sosi with a summary section that presents the closed group',
20415:'measureandopengroupmeasure seeappendixc. the opengroupmeasureline item should be the same as lines on the beginningofyear and endofyear amounts on the scsiasee',
20416:'below andappendix d. 10 currently, these component entities are the social securityadministration, the department of health and human services, the',
20417:'centers for medicare and medicaid services, the railroad retirement board, and the department of labor. page 10 sffas 37 fasab',
20418:'handbook, version 20 06/21 sffas 37 29. the summary section of the component entity sosi should include the assets held',
20419:'by the programs, if any, and totalsfor the open group unfunded obligation seeappendixc, part ii, summary section for component entities.',
20420:'30. this statement should not be construed to preclude presenting subtotals by age cohort. statement of changes in social insuranceamounts',
20421:'[see appendix d: illustrative statement of changes in social insurance amounts.] 31. the governmentwide entity and component entities that present',
20422:'a sosi should present a scsia. the scsiawill reconcile beginning and ending open group measures and present the components of',
20423:'the changes in the open group measure from the end of the previous reporting period. it should present the significant',
20424:'components of the change, e.g., the change due to the change in valuation period; the interest on the obligation due',
20425:'to present valuation; the changes in demographic, economic, and health care assumptions; the changes in law, regulation, and policy; and',
20426:'the amounts associated with each type of change. 32. thescsiashoulddisclose innotes onthe faceofthestatement and/or innotestothe financial statements the reasons for',
20427:'the changes. the reasons should be explained as briefly and simply as possible. the most significant changes should be explained',
20428:'in the entity’s md&aas well as in disclosures associated directly with the scsia. required supplementary information other than md&a 33.',
20429:'this statement does not eliminate or otherwise affect the sffas 17 requirements for supplementaryinformation11 except that actuarial projectionsof annual cashflowin',
20430:'nominal dollars are no longer required for either component entities that present a sosi or the governmentwide entity. valuation date',
20431:'34. all projections and estimates required in this statement should be made as of a date the valuation date as',
20432:'close to the end of the fiscal year being reported on “current year” as 11 sffas 17, paragraph 271 requires',
20433:'certain longrange projections of social insurance cashflow. page 11 sffas 37 fasab handbook, version 20 06/21 sffas 37 possible and',
20434:'no more than one year prior to the end of the current year. this valuation date shouldbeconsistentlyfollowedfromyeartoyear. if,afterthevaluationdate,butpriortothe end of',
20435:'the fiscal year, policy changes are enacted that could materially affect the basic statement, the projections should be adjusted, if',
20436:'feasible, as if the policy reforms had taken place as of the valuation date. if not feasible, the entity should',
20437:'disclose an estimate of the magnitude of the effect of the policy change on the projection or, if not possible,',
20438:'disclose that it was not possible to reasonably estimate the effect. in any case, the nature of the policy change',
20439:'should be disclosed. if policy changes are enacted after the end of the fiscal year, but prior to the issuance',
20440:'of the financial statements, the financial statements should disclose the nature of the policy change and, if known, the estimated',
20441:'effect on the projections. 35. the entity should provide a brief statement explaining that the sosi amounts are estimates based',
20442:'on current conditions, that such conditions may change in the future, and that actual cost may vary, sometimes greatly, from',
20443:'the estimated cost. for example: application of criticalaccounting estimates the financial statements are based on the selection of accounting policies',
20444:'and the application of significant accounting estimates, some of which require management to make significant assumptions. further, the estimates are',
20445:'based on current conditions that may change in the future. actual results could differ materially from the estimated amounts. the',
20446:'financial statements include informationtoassist inunderstandingtheeffectofchangesin assumptionstothe related information. sensitivityanalysis 36. the component entity should provide, as required supplementary information, sensitivity',
20447:'analysis oftheclosedandopengroupmeasuresappropriatefortheircircumstances.12 the objective of sensitivity analysis is to illustrate how an estimate or projection would change if assumptions, data,',
20448:'methodologies or other inputs change. the social security administration ssa, medicare and railroad retirement programs should provide sensitivity analysis of',
20449:'the open group measure in the sosi summary. the entity should state that the amounts of the open and closed',
20450:'group measures depend on the assumptions used and that actual experience is likely to differ from the estimate. 12 seeactuarial',
20451:'standards of practice 32, paragraph 3.5. page 12 sffas 37 fasab handbook, version 20 06/21 sffas 37 37. whenchoosinganapproachforsensitivityanalysis,theentityshouldconsiderfuturetrends, the',
20452:'utility of the information to the users and policymakers, and the relative burden on the component entity resources. providing analysis',
20453:'or disclosure for one or more periods will not imply that such analysis or disclosure is appropriate in the future,',
20454:'although the reasons for discontinuing a particular sensitivity analysis should be addressed in the annual report. 38. the governmentwide entity',
20455:'should provide a summary of the sensitivity analyses required for component entities. governmentwide entityaccounting and reporting 39. the standard for',
20456:'governmentwide accounting and reporting for social insurance programs is the same as that for component entities that present a sosi',
20457:'unless otherwise indicated. however, the level of detail at the governmentwide level should be less than at the component level.',
20458:'effect on sffas 17 40. the statement provides additional requirements for presentation, disclosure, and supplementary reporting for social insurance programs.',
20459:'sffas 17 is amended as follows to conform to the changes in this statement: page 13 sffas 37 fasab handbook,',
20460:'version 20 06/21 sffas 37 26. all projections and estimates required in these standards should be made as of a',
20461:'date the valuation date as close to the end of the fiscal year being reported upon current year as possible',
20462:'and no more than one year prior to the end of the current year. this valuation date should be consistently',
20463:'followed from year to year. all projections and estimates required by this statement should be made as of a date',
20464:'the valuation date as close to the end of the fiscal year being reported on “current year” as possible and',
20465:'no more than one year prior to the end of the current year. this valuation date should be consistently followed',
20466:'from year to year. if, after the valuation date, but prior to the end of the fiscal year, policy changes',
20467:'are enacted that could materially affect the basic statement, the projections should be adjusted, if feasible, as if the policy',
20468:'changes took place as of the valuation date. if not feasible, the entity should disclose an estimate of the magnitude',
20469:'of the effect of the policy change on the projection or, if not possible, disclose that it was not possible',
20470:'to reasonably estimate the effect. in any case, the nature of the policy change should be disclosed. if policy changes',
20471:'are enacted after the end of the fiscal year, but prior to the issuance of the financial statements, the financial',
20472:'statements should disclose the nature of the policy change and, if known, the estimated effect on the projections. 26a. the',
20473:'entity should provide a brief statement explaining that the sosi amounts are estimates based on current conditions, that such conditions',
20474:'may change in the future, and that actual cost may vary, sometimes greatly, from the estimated cost. the entity should',
20475:'state that the amounts of the open and closed group measures depend on the assumptions used and that actual experience',
20476:'is likely to differ from the estimate. for example: page 14 sffas 37 fasab handbook, version 20 06/21 sffas 37',
20477:'application of critical accounting estimates the financial statements are based on the selection of accounting policies and the application of',
20478:'significant accounting estimates, some of which require management to make significant assumptions. further, the estimates are based on current conditions',
20479:'that may change in the future. actual results could differ materially from the estimated amounts. the financial statements include information',
20480:'to assist in understanding the effect of changes in assumptions to the related information. 27 1 cashflow projections – …',
20481:'a actuarial projections of the annual cashflow, in nominal dollars, with amounts reported for at least every fifth year in',
20482:'the projection period. the cashflow information should show i. total cash inflow from: a. b. all sources and excluding net',
20483:'interest on intra governmental borrowing/lending and ii. total cash outflow bthe actuarial estimate provided in 271ai2 and 271aii immediately above',
20484:'as a percentage of itaxable payroll7and ii gross domestic product gdp.8 for the oasdi and hi programs, the actuarial projections',
20485:'of the annual cashflows should be expressed as a percentage of taxable payroll and gross domestic product gdp. for the',
20486:'smi program, the actuarial projections should be expressed as a percentage of gdp. for the rrb program, the actuarial projections',
20487:'should be expressed as a percentage of taxable payroll. for the black lung and ui programs, the actuarial projections should',
20488:'be expressed in constant or inflationadjusted dollars. 7 certain social insurance programs i. e., smi, black lung benefits, and ui',
20489:'are either not financed by earmarked payroll taxes or are financed by statedetermined payroll taxes on employers that can vary',
20490:'by state and by employer; therefore these programs are not required to provide this estimate. 8 this requirement does not',
20491:'apply to the rrb, black lung, and ui programs. … page 15 sffas 37 fasab handbook, version 20 06/21 sffas',
20492:'37 4 sensitivity analysis – a for aall programs except ui, illustrate the sensitivity of the projections and present values',
20493:'required by paragraph 271 and 273 to change in the most significant individual assumptions. for example, using the entity’s “best',
20494:'estimates” cost assumptions as a baseline, show the effect of varying several significant assumptions one at a time to show',
20495:'the effect on the projection. at a minimum, the oasdi and medicare programs should analyze assumptions regarding the birth and',
20496:'death rates, net immigration, the real wage differential, and the real interest rate. the realwage differential is the difference between',
20497:'the annual percentage increase in wages in covered employment and the inflation rate, as measured by the cpi. the medicare',
20498:'program should also analyze the health care cost factors and their trend. should provide sensitivity analysis appropriate for their particular',
20499:'circumstances. the objective of sensitivity analysis is to illustrate how an estimate or projection would change if assumptions, data, methodologies',
20500:'or other inputs change. the oasdi, medicare and railroad retirement programs should provide sensitivity analysis of the open group measure',
20501:'presented in the sosi summary. appropriate considerations include future trends, the utility of the information to the users and policymakers,',
20502:'and the relative burden on the component entity resources. providing analysis or disclosure for one or more periods will not',
20503:'imply that such analysis or disclosure is appropriate in the future, although the reasons for discontinuing a particular sensitivity analysis',
20504:'should be addressed in the annual report. the entity should state that the amounts of the closed and open group',
20505:'measures depend on the assumptions used and that actual experience is likely to differ from the estimate. b for ui,',
20506:'illustrate the sensitivity of the projections required by paragraph 271 to changes in the unemployment rate assumption. the illustrations should',
20507:'reflect the effect of increasing the unemployment rate 1 by approximately one percentage point and 2 to a level sufficient',
20508:'to put stress on the system e.g., to simulate the largest recession occurring within the last 25 years. 32. …',
20509:'4 sensitivity analysis – for all social insurance programs, provide a summary of the sensitivity analysis requiredunder the standard for',
20510:'component entities see par. 274. at a minimum, the summary should present the oasdi, hi, smi, and ui separately. page',
20511:'16 sffas 37 fasab handbook, version 20 06/21 sffas 37 effective date 41. this statement is effective for periods beginning',
20512:'after september 30, 2010. the provisionsofthisstatement need not be applied to immaterial items. page 17 sffas 37 fasab handbook, version',
20513:'20 06/21 sffas 37 appendixa: basis for conclusions thisappendix discusses factors considered significant by board members in reaching the conclusions',
20514:'in this statement of federal financialaccounting standards sffas or “statement”. it includes the reasons for accepting certain approaches and rejecting',
20515:'others. individual members gave greater weight to some factors than to others. the standards enunciated in this statement – not',
20516:'the material in thisappendix – should govern the accounting for specific transactions, events, or conditions. this statement may be affected',
20517:'by later statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements',
20518:'that amend this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix',
20519:'will not be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement',
20520:'for the rationale for each amendment. background a1. expense and liability recognition for social insurance programs as well as potential',
20521:'expense and liability recognition for other nonexchange transactions and government acknowledged events has been a longstanding source of controversy. in',
20522:'its 19 years of operationtheboardhasissuedseveralexposuredrafts,astandard, andapreliminaryviews document related to social insurance reporting as follows: a1995exposuredraftentitled accounting for liabilities of the',
20523:'federal government a1998exposuredraftentitled accounting for social insurance sffas 17, accounting for social insurance, inaugust 1999 a2002exposuredraftentitled reclassification of stewardship responsibilities',
20524:'and eliminating the current services assessment, which resulted, in 2003, in sffas 25 of the same title a2004exposuredraftentitled presentation of',
20525:'significant assumptions for the statement of social insurance: amending sffas 25, which resulted, in 2004, in sffas 26 of the',
20526:'same title a2006preliminary views documententitled accounting for social insurance, revised and a2008exposuredraftentitled accounting for social insurance, revised a2. for sffas',
20527:'17 the board identified five programs as social insurance programs. oldage, survivors, and disability insurance oasdi or social security page',
20528:'18 sffas 37 fasab handbook, version 20 06/21 sffas 37 hospital insurance hi and supplementary medical insurance smi; known collectively',
20529:'as medicare railroad retirement benefits black lung benefits and unemployment insurance ui a3. the issue of social insurance accounting was',
20530:'addressed in sffas 17 through compromise between strongly opposing views. the compromise featured: a. liability recognition at the point when',
20531:'social insurance benefit payments are due and payable and with revenue and expenses on a cashflow basis, plus or minus',
20532:'the change in the due and payable liability during the reporting period; b. a sosi and accompanying disclosures; and c.',
20533:'other narrative and trend information, e.g., graphs of longterm cash flow projections usingnominaldollarsandaspercentagesoftaxablepayrollandgdp,the “dependency ratio,” and sensitivity analysis. a4. through',
20534:'sffas 25 and 26, the board reclassified the sosi from “required supplementary stewardship information” to basic information. the sosi became',
20535:'subject to a full audit in fiscal year 2006 and significant assumptions were required to be disclosed. a5. sffas 17,',
20536:'25, and 26 substantially improved the information presented in generalpurpose external financial reports of the u.s. government and its component',
20537:'entities. however, in 2004 the board decided to reconsider the question of liability and expense recognition. a majority of members',
20538:'serving at that time concluded that the compromise that produced sffas 17 did not recognize the accruing cost of social',
20539:'insurance programs in each reporting period and the accumulated liability for benefits payable at a determinable date under current law.',
20540:'nor did it fully explain the change in the net present value of program related cash flows. hence, in 2004,',
20541:'the board initiated a new social insurance project, and a preliminary views document was issued in october 2006. what the',
20542:'preliminary views document proposed a6. in the preliminary views document,the board presentedtwo views –a primaryviewandan alternativeview –ofproposedchangesinthe informationprovidedabout theeffect of',
20543:'social insurance programs. under the primary view proposal, social insurance expense would havebeenrecognized on the statement of net cost whenparticipants',
20544:'become fully insured and thus substantially meet the eligibility conditions for future benefits and as scheduled benefits increase due to',
20545:'additional work in covered employment by fullyinsured individuals. page 19 sffas 37 fasab handbook, version 20 06/21 sffas 37 a7.',
20546:'in addition to changing the expense and liability recognition points, the primary view would have linked the sosi amounts with',
20547:'amounts reported for social insurance on the balance sheet and statement of net cost. for the primary view members, such',
20548:'linkage or “articulation” would have illustrated how the amounts reported on other basic financial statementsrelatetothe presentvaluesof thecashinflowandoutflowoverthe next 75years reported',
20549:'on the sosi. a8. thealternativeview inthe preliminaryviewsdocumentproposedtomaintainthe recognition and measurement of expense and liability for social security, medicare, and railroad',
20550:'retirement programs currently required in sffas 17. that is, the entity would recognize a liability and a related expense for',
20551:'social insurance benefits when all eligibility criteria are met such that an individual beneficiary is entitled to receive a benefit',
20552:'e.g., a cash payment, goods, or services, which includes the point when benefit payments are “dueandpayable.” thus,under thealternativeview theamountsreportedonthebalance sheet,',
20553:'statement of net cost, and statement of social insurance presentation would not have changed from what is currently reported under',
20554:'sffas 17. a9. thealternativeview inthe preliminary views document would have added a new basic financial statement entitled the “statement of',
20555:'changes in social insurance amounts,” that would show the reasons for all changes during the period in the amounts net',
20556:'benefits less receiptspresentedinthestatementofsocialinsurance. theprimaryviewmembersagreed in principle that such a statement should be required. a10.in addition, thealternative view in the preliminary',
20557:'views proposed to break new ground. it proposed a new statement of “fiscal sustainability”13 for the consolidated financial report of',
20558:'the united states government cfr that would provide sustainability information on the entire government, including information necessary to assess the',
20559:'sustainability of social insurance programs and information on intergenerational equity, as required supplementary information. a11.the members supporting the primary view',
20560:'welcomed and encouraged the development of additionalsupplementarysustainabilityinformation. however,theybelieveditshouldbethe subject of a separate project because it has implications for a wide',
20561:'variety of issues. a12.the fasab subsequently undertook a project on sustainability that resulted in sffas 36, reporting comprehensive longterm fiscal',
20562:'projections for the u. s. government. 13 sffas 36, reporting comprehensive longterm fiscal projections for the u. s. government, paragrapha3,',
20563:'notes that discussionof longtermfiscal issues has beendescribedin terms of “fiscal sustainability,” andthat in the exposure draft on that subject the',
20564:'board’s working definition of fiscal sustainability was “the federal government’s ability to continue, both now and in the future, current',
20565:'policy without change regarding public services and taxation without causing debt to rise continuously as a share of gdp.” page',
20566:'20 sffas 37 fasab handbook, version 20 06/21 sffas 37 different views regarding the obligating event a13.supporters of the primary',
20567:'andalternative views differed as to the event or transaction that would trigger an expense and a liability for social insurance',
20568:'programs. the members supporting the primary view believed that conditions for receiving a future benefit are substantially met whentheparticipantsbecome fullyinsured,',
20569:'and theomission of theeffects of these events results in an incomplete reporting of costs and liabilities. a14.members supporting thealternative view',
20570:'in the preliminary views document saw a fundamental distinction in financial reporting of exchange transactions, which are voluntary market exchanges',
20571:'of goods and services for a price, and nonexchange transactions resulting from decisions made collectively by the congress and the',
20572:'president to levy taxes and to authorize programs. they noted that this distinction is made in fasab concepts, standards, and',
20573:'financial statements, e.g., the statement of net cost, as well as by other standard setters, including the governmentalaccounting standards board',
20574:'gasb and the international public sectoraccounting standards board ipsasb; and that it is also the difference between offsetting collections or',
20575:'offsetting receipts, on the one hand, and governmental receipts on the other hand. a15.members who supported thealternative view in the',
20576:'preliminary views document believed that although the basis for recognition of a liability and cost for social insurance established in',
20577:'sffas 17 e.g., due and payable remainsappropriate, the set of information required by sffas 17 was inadequate. they argued that',
20578:'sffas 17 does not 1 recognize important information concerning the fiscal sustainability of social insurance programs, or 2 fully explain',
20579:'the change in the net present value of program related cash flows. they believed that the fundamental nature of social',
20580:'insurance is more complex than the federal government’s current accounting model could accommodate. a16.it is extremely important to note that',
20581:'both the primary view and thealternative view in the preliminary views document called for sustainability reporting. those members who supportedtheprimaryviewbelievedthattheboardshouldconsideradditionalsustainability',
20582:'reporting in a future project. as noted above, the fasab subsequently undertook a project on the subject that resulted in',
20583:'sffas 36. fiscal sustainability reporting a17.after the public hearing on the preliminary views on social insurance on may 23, 2007',
20584:'and initial discussions in the summer of 2007, the board decided to suspend work on the social insurance standard briefly',
20585:'while it developed fiscal sustainability reporting further. the preliminary views document mentioned the board’s unanimous interest in fiscal page 21',
20586:'sffas 37 fasab handbook, version 20 06/21 sffas 37 sustainability reporting and thealternative view presented examples of what it might',
20587:'look like. a18.the board issued an exposure draft on fiscal sustainability14 inaugust 2008, and subsequentlya final standard, sffas 36, in',
20588:'september 2009.15 sffas36 requires thatthe cfr present information that will help readers assess whether future budgetary resources will likely be',
20589:'sufficient to sustain public services and to meet obligations as they come due, including social insurance. the board concluded that',
20590:'this requires presenting current and projected levels of all federal spending, federal receipts, and federal debt in relation to the',
20591:'economy. a19.the fiscal sustainability standard is comprehensive. it requires: a. a statement of longterm fiscal projections for the u.s. government,',
20592:'a basic financial statement, in the cfr presenting the present value of projected receipts and non interest spending under current',
20593:'policy without change for all activities of the federal government, including social insurance; how those amounts relate to projected gdp;',
20594:'and changes in the present value of projected receipts and noninterest spending from the prior year. b. supplementary information explaining',
20595:'and illustrating the projected trends in: i. the relationship between all federal government receipts and spending, ii. deficits or surpluses,',
20596:'and iii. treasury debt as a share of gdp. c. disclosures explaining and illustrating: i. the assumptions underlying the projections,',
20597:'ii. factors influencing trends, and iii. significant changes in the projections from period to period. 14reporting comprehensive longterm fiscal projections',
20598:'for the u.s. government, issuedaugust 29, 2008. 15september 28, 2009. page 22 sffas 37 fasab handbook, version 20 06/21 sffas',
20599:'37 a20.the board believes that these projections will provide meaningful information essential to assessing whether future budgetary resources will likely',
20600:'be sufficient to sustain public services and to meet obligations as they come due, including social insurance obligations. social insurance',
20601:'revisited: the exposure draft of november 2008 a21.having developed the proposed fiscal sustainability standard, the board returned to social insurance.',
20602:'in november 2008, the board issued the exposure draft accounting for social insurance, revised si ed. the board noted in',
20603:'the si ed that the fundamental difference of opinion on the question of liability and expense recognition for social insurance',
20604:'was reflected in the views of the respondents to the preliminary views document itself. indeed, the difference of opinion has',
20605:'persisted since the board’s initial consideration of the social insurance liability question during the development of sffas 5 and especially',
20606:'during the development of sffas 17. a22.sffas 17 presented a compromise between two strongly held views regarding liability and expense',
20607:'recognition for social insurance programs. for sffas 17, the board concluded that the best approach wasto recognize the annual cash',
20608:'flow effects of the social insurance programs in the basic financial statements; that is, revenue is the cash inflow during',
20609:'the reporting period from payroll tax contributions and income tax on social insurance benefits and expenses are the cash outflow',
20610:'during the year plus or minus the change in a “due and payable” liability. however, the board also required a',
20611:'package of information that it characterized as required supplementary stewardship information rssi. a23.for the rssi section, the board required an',
20612:'array of present values by age cohort in what became the statement of social insurance sosi. in addition, the board',
20613:'required other information, e.g., projections of cash flows over longterm projection periods using nominal dollars and as percentages of taxable',
20614:'payroll and gdp. a24.the board decided that the “bottom line” of the sosi should be an open group measure. that',
20615:'bottom line represents the total excess of actuarial present values of future benefit payments over future contributionsand taxincome forcurrent and',
20616:'future participants over a period sufficient to illustrate longterm sustainability. there had been much debate during the development of the',
20617:'standard over whether to present the open group measure or the closed group measure. history of the closed group measure',
20618:'a25.the term “group” simply referstothe participants includedin a measure. the “closedgroup” includes current participants only, e.g., for social security, current',
20619:'retirees and covered page 23 sffas 37 fasab handbook, version 20 06/21 sffas 37 workers. it does not include future',
20620:'participants; those projected to become participants during the projection period but after the valuation date. it contrasts with the “open',
20621:'group” that does include those who are currently participating and those who will participate in the future during the projection',
20622:'period. the open and closed group measures include all future flows related to the specified group. these measures contrast with',
20623:'an accrued benefit obligation measure which includes only future benefits attributed to past work in covered employment by current participants',
20624:'as of the reporting date. a26.the closed group measure hasbeenanoption forfederalfinancialreporting foralong time. from 1985 through 1994, the closed group',
20625:'measure was disclosed in a footnote in the “prototype” consolidated financial statements of the united states prototypecfs. before that, from',
20626:'1976 to 1985, a liability had been recognized for social security in the prototype cfs, using a calculation similar to',
20627:'that called for by private sector accounting standards. a27.ultimately, for sffas 17, the board decided to develop the sosi to',
20628:'provide actuarial present values of future contributions and benefitsfor the open group of participants but not theclosedgroupperse. theboardconcludedthatthesosiasconstitutedwouldbeuseful for analysis',
20629:'of sustainability and financial position of social insurance programs. a28.the vote for sffas 17 was not unanimous. three members dissented.',
20630:'their dissents focused primarily on the switch from the closed to the open group bottom line. one of the dissenting',
20631:'members said the closed group deficit was a very important measure in evaluating alternative proposals for social insurance financing. even',
20632:'though sffas 17 required instructions in a footnote on how to calculate the closed group measure, the member felt that,',
20633:'if the board truly wished to establish standards that meet the information needs of citizens, elected officials, and program managers,',
20634:'the standard should require the prominent presentation and explanation of the closed group measure rather than a footnote explaining how',
20635:'to calculate the closed group measure. the member did not see how that could possibly be interpreted as satisfying the',
20636:'mission of the board. a29.another member dissented because he felt sffas 17 did not require a clear unambiguous disclosure of',
20637:'areasonableestimateofthe government’ssocialinsuranceliability/obligation. that member argued that the due and payable liability would result in a reported financial position that would',
20638:'appear to many as significantly misleading, at best, and clearly not commensurate with the significant financial implications of this critical',
20639:'national issue. the member noted that sffas 17 required the net present value of future benefitsrelatedto the open group but',
20640:'not the closed group, and that the absence of the specified closed group measure was significant because some suggest that',
20641:'the closed group measure represents an appropriate estimate of the social insurance liability. a30.lastly, a third dissenter argued that the',
20642:'removal of the closed group number from the published financial statements removed any forthright indication of the existence of any',
20643:'page 24 sffas 37 fasab handbook, version 20 06/21 sffas 37 obligations to participants. he asked what the government’s repeated',
20644:'promises meant if there is no obligation to the participating public. he argued that the closed group number is an',
20645:'important indicator of financial stress to be faced by the next generation ofamericans, and is a proxy for an economic',
20646:'liability or an “implicit” liability. he mentioned that proposals to add social insurance benefits or increase social insurance taxes or',
20647:'to make other changes in the program should be evaluated by congress and the public against these absolute numbers and',
20648:'the strength of the government’s commitment to honor the indicated obligations. finally, he argued that the sosi should be a',
20649:'basic financial statement, which it later became with sffas 25 and sffas 26. a31.somecurrent board membersbelievethattheclosedgroupmeasureisthebest measure of the social',
20650:'insurance obligation and that the effect of the change in this measure during the reporting period is an economic cost',
20651:'that should be reported on the statement of net cost. however, other members agree that the closed group measure is',
20652:'the best measure of the obligation but do not believe the effect of the change in this measure during the',
20653:'reporting period is appropriate for the statement of net cost. they view future revenues that are included in the measure',
20654:'as contingent revenues, and they believe all other future inflows and/or revenues included in the balance sheet and the statement',
20655:'of net cost relate to earned revenues. a32.the board notes that federal credit accounting, insurance accounting, and accounting for which',
20656:'fair value measures are utilized currently incorporate future inflows and outflows in the measure of liability and expense, and that',
20657:'the basis for including future revenue in current year cost and liability measures depends on the obligating event to which',
20658:'they relate. if they relate to a past event, e.g., an insured event, then they are appropriate measuresofcost. iftheyrelatesolelytoafutureevent,e.g.,futureinsurancepoliciesinthe program,',
20659:'then they should be excluded from current costs and from liability measurement. the key is the event not the fact',
20660:'that the cash flow is in the future. they cite current fasab insurance standards in sffas 516 that include future',
20661:'revenue when calculating the net liability. a33.since the two views regarding liability and expense recognition persisted and the likelihood of',
20662:'achieving a satisfactory majority one way or the other was remote, and since the board wished to further improve social',
20663:'insurance reporting, the board concluded that a 16 sffas 5, par. 113: the liability for life insurance includes both the',
20664:'liability for unpaid claims … and a liability for net future policy benefit outflows…. the [latter] represents the expected present',
20665:'value of future outflows to be paid to, or on behalf of, existing policyholders, less the expected present value of',
20666:'future net premiums to be collected from those policyholders. the liability is estimated using appropriate financial or actuarial methods that',
20667:'include assumptions … applicable at the time the insurance contracts are made and in accordance with existing law and related',
20668:'policy …. changes in the liability for future net policy benefit outflows that result from periodic reestimations would be recognized',
20669:'as expense in the period in which the changes occur. … page 25 sffas 37 fasab handbook, version 20 06/21',
20670:'sffas 37 compromise was necessary. in developing the exposure draft of november 2008 si ed, the board believed that a',
20671:'fair presentation of the financial position, condition, and results of operations requires that the closed group measure be provided as',
20672:'part of a balanced package of information. the board believed that the closed group measure represents a reasonablygoodestimateofthenetresponsibilityof futuretaxpayers, undercurrent',
20673:'laws, to pay benefits to current participants. although this amount is subject to change due to changing longrange demographicsand otherfactors,',
20674:'it isnot asvolatileasthecomputation under the open group measure that includes all current and future participants over a projection period, e.g.,',
20675:'the next 75 years. it relates only to individuals who already are participating in the program. a34.the open group measure',
20676:'represents the net present value of all expenditures to or on behalf of the open group population and all contributions',
20677:'or other income from or on behalf of the open group population over a given projection period, e.g., 75 years.',
20678:'it is used to estimate the future financing shortfall in social insurance programs. the closed group measure involves only those',
20679:'participating in the social insurance program at the reporting date. itrepresentsthesamemeasurementmethodologyasfortheopengroup,appliedtoa closed population; that is, it is the net present',
20680:'value of all expenditures to or on behalf of the current participants and all contributions or other income from or',
20681:'on behalf of the current participants over a given projection period. a35.the open group measure is inherently more sensitive to',
20682:'assumptions about the distant future than the closed group measure. the greater sensitivity is inevitably true, despite the best efforts',
20683:'of actuaries, economists, and other professionals involved in making these projections. itismainlycausedbythefactthataclosedgroupdecreasesovertime,sothat uncertainty about what will happen in the distant',
20684:'future has less impact than is the case for an open group that grows larger during the projection period. a36.for',
20685:'the si ed, the board proposed changes to highlight the closed group number. the si ed would have required: a.',
20686:'a discussion and analysis by management of the closed group measure of social insurance along with other critical measures in',
20687:'md&a; b. a separate line presenting the closed group measure that would be presented on the balance sheet below assets,',
20688:'liabilities, and net position and not included in the totals for these classifications; c. new summary presentations on the sosi',
20689:'for closed and open group measures; d. a new statement of changes in social insurance using the closed group measure;',
20690:'page 26 sffas 37 fasab handbook, version 20 06/21 sffas 37 e. note disclosure of an accrued benefit obligation; and',
20691:'f. continuation of the projections and other supplementary reporting currently required by sffas 17 but with amendments to the display',
20692:'of cash flow information, the valuation date, and the sensitivity analysis. again, the si ed did not propose to change',
20693:'the sffas 17 liability and expense recognition standard.17 respondent’s comments on the exposure draft a37.the si ed received 20 responses',
20694:'as follows: federal internal nonfederal external users, academics, others 14 auditors 1 preparers and financial managers 5 what the exposure',
20695:'draft proposed regarding the balance sheet a38.balancesheetpresentationraiseddifficultissuesfortheboardwithrespecttothesied. in the preliminary views document of october 2006, the board had discussed its',
20696:'differing views of liability and expense recognition, views which have been and remain divergent. a39.for the siedtheboardproposed acompromise. insteadofchangingthe “dueand',
20697:'payable” liability measure of sffas 17, the board proposed new reporting featuring the 17 sffas 17, paragraphs 2223 and 30',
20698:'state that, except for unemployment insurance, the governmentwide and component entities should recognize aliability and a related expense for those',
20699:'social insurance benefits that are due and payable to or on behalf of beneficiaries at the end of the reporting',
20700:'period, including claims incurred but not reported. for ui, a liability and related expense would be recognized for 1 amounts',
20701:'due to states and territories for benefits they have paid to beneficiaries but for which the states and territories have',
20702:'not withdrawn funds from the federalunemployment trust fundutfas of fiscalyear end, and 2 estimated amounts to bewithdrawn fromutfand benefitspaidbystatesandterritoriesafterfiscalyearendforcompensabledaysoccurringpriortofiscalyearend. aui',
20703:'expense will also be recognized for the reporting period for amounts withdrawn from the federal utf by states and territories',
20704:'to pay benefits to beneficiaries that pertain solely to the current reporting period. such costs would be recognized as a',
20705:'component of expense and not as a reduction of the recognized liability. amounts paid that pertain to and reducetheliability recognized',
20706:'in the prior reporting period pursuant to this paragraph, items 1 and 2, would not be recognized as an expense',
20707:'of the current reporting period. page 27 sffas 37 fasab handbook, version 20 06/21 sffas 37 closed group measure of',
20708:'the social insurance commitment as the link or common thread among md&a, the balance sheet, the sosi, and the new',
20709:'statement of changes in social insurance amounts. thus, the closed group measure would have been presented, among otherplaces,asalineitemonthebalancesheetbelowassets,liabilities,andnetposition. it would',
20710:'not have been included in the totals for these classifications, but would have been part of a package of information.',
20711:'a40.in the si ed, the members who supported this proposal stated their belief that the closed group measure is important',
20712:'for analysis of social insurance. the closed group measure represents the net present value as of the reporting date of',
20713:'the commitment of future social insurance participants and future general taxpayers to provide benefits to current participants over the latter’s',
20714:'lifetime, based on the current participants’ past and future work in covered employment. the closed group measure also provides a',
20715:'perspective on the financing challenges for the program. it would be relevant to those who are assessing optionsfordealingwiththosechallenges. themeasurewouldnotonlydrawattentiontothe challenge',
20716:'but would also quantify it in a way that can support further analysis and decision making. a41.theproposedbalancesheetreportingwouldhaveaffectedthereportingmodel. again,the proposal was',
20717:'to present the closed group measure as a line item on the balance sheet below assets, liabilities, and net position',
20718:'and not included in the totals for these classifications. the line item was not presented formally as a new element',
20719:'of financial statementswithinthecontextofthesffac518 definitions,e.g.,a “commitment.” theboard explained that it was not formally proposing a new definition or concepts underlying a',
20720:'new reporting model at that time. in order to offer improvements in a timely manner, the board left open certain',
20721:'questions regarding the reporting model and the elements of federal financial reporting. however, the board indicated there were areas where',
20722:'additional conceptual work would be undertaken. a42.members believe that the current concepts need to do a better job of explaining',
20723:'unique federal accounting issues. concepts need to explain, for example, why the power to tax is not an asset but',
20724:'nonetheless is relevant to assessing the sustainability or the financial condition of the federal government; why current deficits are indeed',
20725:'bad but that the problem is actually longrange rather than shortrange; why the timing of a cash flow problem is',
20726:'important, and why the point estimates on the balance sheet have limitations for assessing financial condition. members believe that the',
20727:'fiscal sustainability reporting established in sffas 36 substantially improves the information communicated regarding financial condition. the board plans to continue',
20728:'to consider reporting concepts in the financial reporting model phase of its conceptual framework project. 18 sffac 5, definitions of',
20729:'elements and basic recognition criteria for accrualbasis financial statements. page 28 sffas 37 fasab handbook, version 20 06/21 sffas 37',
20730:'a43.the subjects of the balance sheet and the open vs. closed group measures of the social insurance commitment raise fundamental',
20731:'issues. over the years, some members and others have asked why social insurance should be treated differently than other programs',
20732:'that are funded by annual appropriations, and why social insurance should be selected for the balance sheet but not other',
20733:'programs, e.g., food stamps, school lunches. they do not believe that a strong basis has been established for saying social',
20734:'insurance programs are the ones to highlight through liability recognition and others can be excluded. in this regard some members',
20735:'believed one of the drawbacks of the sosi is that it does not provide a comprehensive view of government liabilitiescommitmentsexpectations.',
20736:'they note that the information provided pursuant to sffas 36 will provide that view. respondents’ comments regarding the balance sheet',
20737:'a44.respondents opposed a line item on the balance sheet by a margin of more than 2 to 1. variousobjections wereraised.',
20738:'somecitedthesied’salternativeview positionthatthe lack of a clear definition of a “commitment” on the balance sheet makes the line item a source',
20739:'of confusion. others objected that the closed group measure was misleading regarding the commitment to social insurance participants. a45.someobjectedfromtheoppositeperspective. theyobjectedtotheabsenceofaliabilityon',
20740:'the balance sheet beyond “due and payable” and found the new line item an unacceptable substitute. a46.some respondents who favored',
20741:'a line item on the balance sheet agreed with the board’s argument that it was a compromise between opposing positions.',
20742:'the board’s conclusions regarding the balance sheet a47.the board wasof two viewson the question of displaying the closedgroup measure or',
20743:'any similar measure on the balance sheet below assets, liabilities, and net position and not included in the totals for',
20744:'these classifications. some members favored the compromise approach and wished to alter the presentation – either through changes to the',
20745:'balance sheet or development of a new basic financial statement. those who opposed the new line item on the balancesheet',
20746:'arguedthat readers wouldnot have a basisfor understanding the newelement on the balance sheet, and/or that the closed groupmeasure isnot comparable',
20747:'to amounts reported on the balance sheet, and/or other significant longterm commitments should be presented, and/or the sosi is adequate.',
20748:'further, these members were not persuaded that the proposals presented to alter the presentation on the balance sheet by presenting',
20749:'the open group instead of the closed group or to instead create a new basic financial statement were necessary. thus,',
20750:'since the board could not establish a clear page 29 sffas 37 fasab handbook, version 20 06/21 sffas 37 majority',
20751:'in favor of the new line item, it decided not to go forward with the proposed balance sheet presentation of',
20752:'the closed group measure as a commitment. a48.the board then discussed developing a new basic financial statement that would present',
20753:'the key measures from the financial statements in one place. ultimately, the board agreed to require the key measures in',
20754:'a table or other singular md&apresentation, and integrate the work on a new basic financial statement with the reporting model',
20755:'project. what the exposure draft proposed regarding the statement of social insurance and the statement of changes in social insuranceamounts',
20756:'a49.regarding the statement of social insurance sosi, in the si ed the board proposed to require the closed and open',
20757:'group measures in a new sosi summary section of the cfr which the fy 2008 and 2007 cfr provided even',
20758:'though sffas 17 does not currently requireit. thesosisummarysectionprovidesinformationaboutallagecohortsandabout the components of the closed and open group measures. for example, the',
20759:'open group measure equals the closed group measure plus the contributions and the benefits of future participants over the 75year',
20760:'or other projection period. a50.the board also proposed a new basic statement, the scsiathat would have presented the changes during',
20761:'the reporting period for the closed group measure. heretofore the social insurance reporting had not required an analysis of the',
20762:'changes in the social insurance present values. the board decided that a financial statement illustrating the components of the change',
20763:'would greatly enhance the value of the presentation. the examples of line items/components for the scsiain the exposure draft were',
20764:'consistent with the social security trustees’ report see, for example, the 2007 trustees report, table iv.b9, page 66. respondents’ comments',
20765:'regarding the statement of social insurance and the statement of changes in social insuranceamounts a51.amajority of respondents supported a summary',
20766:'section for the sosi as described in the si ed. those that did not support it objected mainly to the',
20767:'presence of the closed group measure as a component of that summary. their objections to the closed group measure are',
20768:'noted above regarding other issues. some respondents objected to requiring a sosi summary section, although they did not disapprove of',
20769:'it in concept. they preferred to allow the preparer to decide whether to include it. most respondents supported the scsia.',
20770:'page 30 sffas 37 fasab handbook, version 20 06/21 sffas 37 the board’s conclusions regarding the statement of social insurance',
20771:'andthe statement of changes in social insuranceamounts a52.the board concludes that the sosi should have a summary section as described',
20772:'in the si ed. although it decided not to go forward with a line item on the balance sheet for',
20773:'the closed group measure, as explained above, the board is going forward with the md&a discussionand associatedtable orothersingular presentation of',
20774:'keymeasuresandwiththe scsia. thus, the closed group measure and the open group measure continue to be fundamentalinformation. thesummarysectionofthesosiwillillustratethecomponentsof these measures and',
20775:'how the closed group measure relates to the open group measure. a53.the summary will present both the net present value',
20776:'of the commitment to the current participants the closed group measure and to all participants the open group measure over',
20777:'the projection period. the board decided that the closed group measure should be presented on the sosi – and addressed',
20778:'in md&a – to enrich the discussion of the open group measure and to give the reader a better understanding',
20779:'of the generational implications of financing social insurance programs. a54.the board concludes that the scsiawill greatly enhance the value of',
20780:'the presentation and should be required since it has substantial support in the community as well as among board members.',
20781:'what the exposure draft proposed regarding management’s discussion andanalysis a55.as stated above, the board provided md&astandards and guidance in sffac',
20782:'3, concepts for management’s discussion and analysis and sffas 15. sffac 3 provides concepts and a foundation for the standards',
20783:'presented in sffas 15. a56.themd&astandardsinsffas15arebrief. sffas15requirestheentity’sfinancialreport to includemd&a,whichitcategorizesasrsi. sffas15requiresthe entity’s md&ato contain sections that address the entity’s mission and organization',
20784:'structure, performance goals and results, financial statements, and systems, controls, and legal compliance.19 it also requires md&ato include forwardlooking information',
20785:'regarding the possible future effects of the most important existing, currentlyknown demands, risks, uncertainties, events, conditions, and trends, while encouraging',
20786:'forwardlooking information about the possible effects of anticipated future demands, events, conditions, and trends.20 sffas 15 19sffas 15, par. 2.',
20787:'20sffas 15, par. 3 and 21. page 31 sffas 37 fasab handbook, version 20 06/21 sffas 37 does not specify',
20788:'the contents for each section. sffac 3 provides some concepts in that regard. a57.for the si ed, the board proposed',
20789:'to provide additional specific standards for the financial statement analysis section of md&afor the governmentwide entity and for component entities',
20790:'that present a sosi. based on sffac 3,21 the board proposed that, in the section devoted to financial statement analysis,',
20791:'management should explain critical measures and key amounts and why changes occurred and what the change indicates or implies for',
20792:'the program; and, how the costs and commitments incurred will be financed. a58.in addition, in the si ed the board',
20793:'proposed to require forwardinglooking information about anticipated future demands, events, conditions, and trends related to social insurance. in sffac 3,',
20794:'the board had said management should include information about anticipated future demands and events “totheextentfeasible andappropriate.” 22 inthe sied,the board',
20795:'proposed to require discussion of anticipated events, demands, etc. respondents’ comments regarding md&a a59.the respondents favored the md&arequirement by a',
20796:'margin of about to 2 to 1. those who favored the standard mentioned the benefits of management’s analysis of key',
20797:'measures and of greater transparency. almost all agreed that key or critical measures should be discussed in md&a. a60.some respondents',
20798:'objected to aspects of the md&arequirement. some objected to the focus on the closed group measure which, as noted elsewhere,',
20799:'many assert is misleading. some argue that the open group measure is essential to an assessment of financial sustainability, that',
20800:'the closed group measure does not reflect what they describe as the program’s payasyougo financing, and that the social security',
20801:'and medicare trustees’ reports emphasize almost exclusively the open group measure. other respondents noted that those who object to the',
20802:'closed group measure on the grounds that it does not reflect social insurance financing misunderstand accrual accounting, which seeks to',
20803:'capture economic events, not necessarily financing. a61.some said the proposed md&astandard would be too prescriptive or that it would require',
20804:'too much detail or repeat information that is already in the notesor rsi. some objected to a 21 see si',
20805:'ed, pars. 2327. 22 sffac 3, par. 33. page 32 sffas 37 fasab handbook, version 20 06/21 sffas 37 standard',
20806:'on social insurance that would require additional md&adiscussion beyond what sffas 15 requires or that, in their view, would be',
20807:'unrelated to social insurance. the board’s conclusions regarding md&a a62.the board concludes that the md&aprovisions of the social insurance standard',
20808:'provide flexibility and are not overly prescriptive; nor will they result in redundancy. the statement incorporates md&aconcepts from sffac 3',
20809:'that currently are not being adequately addressed. moreover, the board believes that the longterm nature of social insurance programs requires',
20810:'that management discuss anticipated future demands, events, conditions, and trends as well as those currently existing. a63.however, the board did',
20811:'make significant changes to the proposed standard after considering respondents’ comments and the views of board members. first, the board',
20812:'decided that md&ashould emphasize the open group measure rather than the closed group measure. a64. in addition, the board decided',
20813:'to require a table or other singular presentation of key measures in md&arather than make it optional, as proposed in',
20814:'the si ed see paragraph 25. in the si ed, the board had required – and continues to require –',
20815:'a narrative discussion of key measuresin md&aof the governmentwide entityand component entities that present asosi, asdescribedinparagraphs2327,and providedanoptionwherebythe entity could array',
20816:'the key measures in a table or schedule. the board decided to require a table or other singular presentation because',
20817:'it will significantly enhance the presentation by helping users grasp the relationship between social insurance amounts and other costs, assets',
20818:'and liabilities, budget deficits, and sustainability projections, and therefore the table or other singular presentation should not be optional. a65.in',
20819:'addition, a table or other singular presentation will relate the basic financial statements to each other. the basic financial statements',
20820:'in the federal reporting model do not all “articulate” with one another. amounts reported on the balance sheet or statement',
20821:'of net cost, for example, do not tie directly to the present valuesof the cash flows over the next 75',
20822:'yearsthat are presented in the sosi and now the scsia, which are also basic statements. atable or other singular presentation',
20823:'will bring all of the pieces of the unique federal reporting model together in a single place. to make this',
20824:'function of the table or other singular presentation explicit, the board changed the wording of the standard see paragraph 24',
20825:'so that the preparer is directed to certain basic financial statements to obtain the key measures. a66.lastly, the board decided',
20826:'not to require the discussion and the table or other singular presentationtobeinthe sectionofthe md&adevotedto financial statementanalysis. the board had designated',
20827:'the financial statement analysissection of md&a, which isone of the page 33 sffas 37 fasab handbook, version 20 06/21 sffas',
20828:'37 sections required by sffas 15, because the key measures to be discussed come from the financialstatements. instead,theboarddecidedtoallow ittobewherever inmd&athe',
20829:'preparerthinkswill be effective, aslong asthe specified informationis presentedtogether. however, the board believes that the information should be presented in a',
20830:'single section of md&a, and that the preparer is best positioned to decide where in md&athe presentation will be the',
20831:'most effective. what the exposure draft proposed regarding the statement of net cost a67.the proposed standard did not affect the',
20832:'statements of net cost of social insurance entities and the governmentwide entity. some argued that the change in the social',
20833:'insurance closed group measure or other net present value during the reporting period is an economic cost. theeconomiccostofsocialinsuranceprogramshasbeendebatedbytheboardover the years.',
20834:'some current board members believed that the change in the closed group measure isan economiccost and were concerned that it',
20835:'isnot highlighted on the statement of net cost in the si ed’s compromise proposal. a68.these members noted that sffac 5',
20836:'defines expense as an outflow of or other decrease in assets, an increase in liabilities, or a combination of both',
20837:'that results in a decrease in the government’s net position during the reporting period. sffac 5 defines liabilities as a',
20838:'present obligation of the federal government to provide assets or services to another entity at adeterminabledate, whenaspecifiedeventoccurs,or ondemand.24 apresent obligationrequiresapasttransactionorotherevent.25',
20839:'thesemembersbelievedthatapast transaction or other event occurs when social insurance participants work in covered employment and pay payroll taxes, that an',
20840:'economic cost is being incurred. a69.some members noted that accrual accounting has a universal definition: expenses are recognized when incurred.',
20841:'they believed that only through accrual accounting can cost or financial position of an entity be measured, which is why',
20842:'generally accepted accounting principles primarily require accrual accounting. they believe the current focus on cash flow – or on “payasyougo”',
20843:'financing with payroll taxes matched against current benefit payments – is misleading. they believe that payroll taxes received from those',
20844:'currently working in covered employment should be matched not against benefits payments to current retirees but against the economic cost',
20845:'being incurred, in order for accrual accounting to provide a decisionuseful additional perspective. 23 sffac 5, par. 53. 24 sffac',
20846:'5, par. 39. 25 sffac 5, par. 42. page 34 sffas 37 fasab handbook, version 20 06/21 sffas 37 a70.as',
20847:'is discussed above and in the preliminary views document, board members, respondentstothe preliminary views document,and,historically,allgroupswhoconsidered the question have disagreed over',
20848:'the past transaction or event that creates a liability and expense for social insurance programs. a71.those fasab members who were',
20849:'concerned that the economic cost of social insurance is not being highlighted note that fasab expectations regarding objectives of federal',
20850:'financial reporting in general and social insurance in particular are most clearly set forth in sffac 1, objectives. the fasab’s',
20851:'strategic directions report, issued november 2006, focused on the objectives in sffac 1, and established objective 2, “operating performance,” and',
20852:'objective 3, “stewardship,” as fasab’s most important focus. with respect to social insurance, these members note especially subobjectives 2a, 2b,',
20853:'and 3aregarding the need for information about costs. a72.these three subobjectives speak most clearly about financial statements showing costs associated',
20854:'with a specific period and the impact these costs have on an entity’s financial position. a73.other fasab objectives speak about',
20855:'financial statements showing other elements of financial position. the members who are concerned about economic costs believed that sosi and',
20856:'the new scsiaadequately satisfy sffac 1, objectives, objective 3b, “whether future budgetary resources will likely be sufficient to sustain public',
20857:'services and to meet obligations as they come due.” these statements would also contribute to meeting objective 3c, “whether government',
20858:'operations have contributed to the nation’s current and future well being.” a74.in addition, these members noted that information from the',
20859:'sosi, if combined with other financial statement information, could help meet objective 3a, which relates to changes in the government’s',
20860:'financial position. moreover, they believed that the proposed scsia, which all members support, will help meet objective 3a. a75.however, these',
20861:'membersbelieved that the proposed standard can be criticized for failing to address objective 2aand 2b, noted above, unless something is',
20862:'reported on the operating statement. for the si ed, they suggested adding a line item to the statement of net',
20863:'cost to show the change in the social insurance commitment during the period in close proximity to other costs, an',
20864:'approach similar to the new line item that was proposed in the si ed for the balance sheet. a76.othermembersdisagreed that',
20865:'the change inthe socialinsurancecommitmentshouldbeon the statement of net cost. they believed that cost should represent the goods and services provided',
20866:'during the period. they argued that the change in social insurance, although meaningful,isnotagoodorserviceprovided,andshouldnotbeassociatedwithsuchcosts. page 35 sffas 37 fasab handbook, version',
20867:'20 06/21 sffas 37 they argued that presenting the change in the social insurance commitment on the statement of net',
20868:'cost would be misleading, that the sosi amounts are purporting to represent something entirely different from what is on the',
20869:'balance sheet and statement of net cost, and that people expect customary elements on the operating statement for which sosi',
20870:'amounts are too uncertain. a77.they noted that the board made the sosi a basic statement and proposed that the scsia',
20871:'be a basic statement, and that the sosi and scsiaare to be presented in close proximity to the balance sheet',
20872:'and operating statement. they believed that that approach is appropriate. for them, the change in the social insurance commitment during',
20873:'the reporting period should be presented apart from the costs of the period and clearly labeled as, for example, “social',
20874:'insurance exposures.” they concluded that associating the change with period costs is inappropriate because it does not represent the complete',
20875:'change in the government’s financial condition, and that proposed fiscal sustainability reporting, which is now required pursuant to sffas 36,',
20876:'provides context and focuses on the government’s financial condition. a78.the si ed did not requirethat the change in the closed',
20877:'group measure be recognized asan operating cost of the government on the statement of net cost andthestatement of changes in',
20878:'net position. the board decided to continue the sffas 17 approach with respect to expense recognition for social insurance. however,',
20879:'the board did ask respondents to comment on the issue raised by members regarding the statement of net cost. respondents’',
20880:'comments regarding the statement of net cost a79.the respondents overwhelmingly favored the board’s decision not to include a line item',
20881:'for the change during the period in the closed group measure on the statement of net cost. many of these',
20882:'respondents asserted that they agreed with the position that the change in thismeasureisnota period cost,and that position isconsistent with theviewthat',
20883:'the closed group measure should not be presented on the balance sheet. the board’s conclusions regarding the statement of net',
20884:'cost a80.the board concludes that there is substantial support in the community for the majority position not to include a',
20885:'new line item on the statement of net cost regarding the statement of net cost as presented in the si',
20886:'ed. what the exposure draft proposed regarding note disclosure a81.thesied requirednotedisclosureof anaccruedbenefitobligation. theobjectiveofthe disclosure was to provide information for the',
20887:'many users who are interested in knowing what such an amount would be and in evaluating the obligation in this',
20888:'way. an accrued benefit obligation is a measure of the present value of future benefits scheduled to be paid to',
20889:'or on behalf of current participants based on past transactions or events as of the page 36 sffas 37 fasab',
20890:'handbook, version 20 06/21 sffas 37 valuationdate. for example, for socialsecurityandmedicarehospitalinsuranceparta, past work in covered employment; or medicare supplementary medical',
20891:'insurance parts b and d, insurance coverage in force. because it is based on past events, the accrued benefit obligation',
20892:'applies only to current participants in the programs as of the valuation date. a82.several methods for calculatinganaccruedbenefitobligationwereacceptable.26 for example, the',
20893:'social securityadministration provides, through its office of theactuary, an accrued benefit obligation for social security in a periodically updatedactuarial note.27',
20894:'a83.other approaches for calculating an accrued benefit obligation were acceptable. for example, the primary view in the fasab’s preliminary view:',
20895:'accounting for social insurance, revised, provided methodology for calculating a liability amount for social insurance programs. a84.the si ed stated',
20896:'that the accrued benefit obligation would give interested usersa generally understood frame of reference. the accrued benefit obligation is intended',
20897:'to provide a perspective on social insurance programs from the point of view of a deferred benefit or an insurance',
20898:'obligation for those users who value such information. it is equivalent to the measure that the board members who then',
20899:'held the primary view believed should be recognizedasaliability. theamountthusprovidedcanbecomparedtotheothermeasures and provide a full array of information. this number is not',
20900:'currently available in federal financial reports. respondents’ comments regarding note disclosure a85.respondentswerenearly evenlydividingregardingthenotedisclosure. somesaidthe accrued benefit obligation did not reflect',
20901:'the realities of the program; they argue that it representsaterminationvaluationandwouldnotbemeaningfulforsocialinsurance. some respondents asserted that it would require yet another number',
20902:'and this constitutes “information overload.” they and/or others objected to the use of the term “obligation” because they believe it',
20903:'implies the government has an obligation to participants, and they do not think there is any more of an obligation',
20904:'to social insurance participants than to other types of entitlement programs, such as those funded entirely by annual appropriations.” 26',
20905:'see http://www.ssa.gov/oact/notes/actnote.html. 27actuarial note: unfunded obligation and transition cost for oasdi. page 37 sffas 37 fasab handbook, version 20 06/21',
20906:'sffas 37 a86.those supporting the disclosure of the accrued benefit obligation mentioned several rationales. some noted that comprehensive financial reporting',
20907:'requires the accrued benefit obligation perspective, which they say is the only measure of financial status of social insurance programs',
20908:'that can be thought of as a liability because it only involves past transactions and events. they say the accrued',
20909:'benefit obligation provides valuable information to the public about programs upon which participants depend for retirement income and benefits. another',
20910:'respondent felt that the disclosure would help the reader relate social insurance obligations to federal employee pensions and other retirement',
20911:'benefits. others felt that the “due and payable” liability measure was simply not based on the proper accounting theory and',
20912:'concepts. the board’s conclusions regarding note disclosure a87.the board believes that the accrued benefit obligation would give interested readers a',
20913:'generally understood frame of reference and another perspective on social insurance programs. however, the board decided not to require it',
20914:'in this standard. the board is persuaded that, given that several measures of the social insurance obligation are already reported',
20915:'in the financial statements, disclosing another number would likely be overwhelming or confusing, rather than enhancing the reader’s understanding of',
20916:'the government’s social insurance obligations. in addition, the board is persuaded that, although the ssaprovides the amount for social security,',
20917:'the accrued benefit obligation is not calculated for medicare, and there was significant reluctance among members to apply the concept',
20918:'to medicare or to develop it further for that purpose. what the exposure draft proposed regarding sensitivityanalysis a88.the si ed',
20919:'proposed to amend the sffas 17 sensitivity analysis provisions to allow the preparer more flexibility. the objective of sensitivity analysis',
20920:'is to illustrate how much an estimate or projection would change if the assumptions, data, methodologies, or other inputs change.',
20921:'the board believes that the sffas 17 requirements result in too much narrative and graphs and not enough easytouse information.',
20922:'a89.although they call for illustrations of the sensitivity of projections and present values,28 the sffas 17 requirements for sensitivity analysis',
20923:'have led preparers to focus on projections that usually are depicted graphically rather than on present values. the latter have',
20924:'increased in importance since the board elevated the statement of social insurance to a 28 sffas 17, par. 274a. page',
20925:'38 sffas 37 fasab handbook, version 20 06/21 sffas 37 basic financial statement in sffas 26.29 the result has been',
20926:'a daunting array of narrative, charts, and graphs. the standard also simplifies the social insurance presentations by eliminating the sffas',
20927:'17 requirement for nominal dollar projections. the projections now will be as percentages of the gdp and taxable payroll. a90.the',
20928:'board sought to make the analysis more concise and therefore communicate better with users. the si ed proposal focused analysis',
20929:'on the sensitivity of the open and closed group measures presented in the basic financial statements –specifically, on the balance',
20930:'sheet, where the closed group measure would have been presented; on the statement of social insurance, where both the closed',
20931:'and open group measures will be presented; and on the proposed new statement of changes in the social insurance amounts,',
20932:'where the closed group measure would have been presented.30 a91.thus, the si ed proposal was intended to reduce the volume',
20933:'of sensitivity analysis information while increasing its usefulness. it provided flexibility for preparers to develop their own sensitivity analysis and',
20934:'decide what is appropriate based on trends, the utility of the information to the users and policymakers, and the relative',
20935:'burden of producing it. entities could continue to vary key assumptions or pursue other methods, including stochastic modeling. respondents’ comments',
20936:'regarding sensitivityanalysis a92.amajorityofrespondents agreedwiththeproposednew flexibility. however,some respondents asserted that sensitivity analysis should continue to include estimates of the effects of',
20937:'changes in individual assumptions. in addition, they or others noted that stochastic modeling, which theproposalencouraged, isuseful forillustrating uncertaintybut was fundamentally',
20938:'different than illustrating the sensitivity of individual assumptions. they discouraged suggesting that the preparer may consider stochastic analysis since it',
20939:'is a science still under development and including it would require much explanatory detail and complexity. some respondents mentioned that',
20940:'sensitivity analysis should be undertaken only for the open group measure. 29 presentation of significant assumptions for the statement of',
20941:'social insurance: amending sffas 25, november 1, 2004. 30 for the final standard, this is now the open group measure.',
20942:'page 39 sffas 37 fasab handbook, version 20 06/21 sffas 37 the board’s conclusions regarding sensitivityanalysis a93.the board continuesto believe',
20943:'that a flexible yet focused approach to sensitivity analysis is best. thus, the standard continues to require sensitivity analysis of',
20944:'the closed and open group measures that in the preparer’s best judgment effectively communicates with the users. thus, the preparer',
20945:'would consider future trends, the utility of the information to the users and policymakers, and the relative burden on its',
20946:'resources. a94.the board decided not to include a statement that preparers may consider stochastic modeling. theboardweighedthecautionary responses inthatregardfromtheamerican academyofactuariesandthe chiefactuary',
20947:'ofthesocialsecurityadministration. the board believes that the flexibility of the standard will allow the preparers and their advisors to illustrate sensitivity',
20948:'of the open and closed group measures by varying individual assumptions or by other means they believe are meaningful and',
20949:'comprehensible. valuation date a95.the si ed proposed to amend sffas 17’s valuation date provision by requiring that projections be adjusted,',
20950:'if feasible, after the valuation date but prior to the end of the fiscal year,ifchangesinpolicyorothermajorfactorsmateriallyaffectit. thisprovisionisidentical to that in the',
20951:'board’s recently issued sffas 36. it addresses the need for projections to reflect recent data. a96.onerespondentfoundtheterm “iffeasible” problematic. therespondent assertedthat,',
20952:'if information comes to the attention of the preparer that impacts the projection after the valuation date, the feasibility of',
20953:'using it to adjust the projection should not be a consideration. the respondent also thought it would be a problem',
20954:'from an audit perspective. a97.the board concludes that the additional requirement to consider changes in major factors occurring after the',
20955:'valuation date will enhance the usefulness of social insurance information. in addition, feasibility is a consideration in the context of',
20956:'federal financial reporting. the benefit of financial information must be weighed against its cost. boardapproval a98.thisstatementwasapprovedforissuancebyallmembersoftheboard. thewrittenballots are available for',
20957:'public inspection at the fasab office. page 40 sffas 37 fasab handbook, version 20 06/21 sffas 37 appendix b: illustrative',
20958:'table of key measures table of key measures billions of dollars 2008 2007 2006 costs net costs $3,671 $2,903 $2,890',
20959:'total taxes and other revenues 2,661 2,627 2,441 net operating cost 1,010 276 449 net position assets $1,975 $1,581 $1,497',
20960:'less: liabilities, comprising federal debt held by the public 5,836 5,078 4,868 federal employee & veterans benefits 5,319 4,769 4,679',
20961:'other liabilities 1,023 940 866 total liabilities 12,178 10,787 10, 413 net position assets net of liabilities $10,203 $9,206 $8,916',
20962:'net present value npv of future cash flows for all participants over the next 75 years open group, end of',
20963:'fiscal year $42,970 $40,948 $38,851 npv of future cash flow for all participants over the next 75 years open group,',
20964:'beginning of fiscal year 40,948 $38,851 $35,689 change in npv 2,022 2,097 3,162 unified budget deficit $455 $163 $248 social',
20965:'insurance commitments budget results spending in excess of receipts spending in excess of receipts see longterm projections statement $xx,xxx $xx,xxx',
20966:'$xx,xxx page 41 sffas 37 fasab handbook, version 20 06/21 sffas 37 appendix c: illustrative statement of social insurance, part',
20967:'i, governmentwide sosi pp ,, united states government statement of social insurance unaudited in billions of dollars 2008 2007 2006',
20968:'2005 2004 federal oldage, survivors, and disability insurance social security: contributions and earmarked taxes from: participants who have attained age',
20969:'62 $ 542 $ 477 $ 533 $ 464 $ 411 participants ages 1561 18,249 17,515 16,568 15,290 14,388 future',
20970:'participants under age 15 and births during period 17,566 16,121 15,006 13,696 12,900 all current and future participants 36,357 34,113',
20971:'32,107 29,450 27,699 expenditures for scheduled future benefits for: participants who have attained age 62 6,958 6,329 5,866 5,395 4,933',
20972:'participants ages 1561 29,091 27,928 26,211 23,942 22,418 future participants under age 15 and births during period 6,933 6,619 6,480',
20973:'5,816 5,578 all current and future participants 42,911 40,876 38,557 35,153 32,929 net present value npv of future revenue less',
20974:'future expenditures open group measure $ 6,555 $ 6,763 $ 6,450 $ 5,703 $ 5,230 page 42 sffas 37 fasab',
20975:'handbook, version 20 06/21 sffas 37 federal hospital insurance medicare part a: 2008 2007 2006 2005 2004 contributions and earmarked',
20976:'taxes from: participants who have attained eligibility age $ 202 $ 178 $ 192 $ 162 $ 148 participants who',
20977:'have not attained eligibility age 6,320 5,975 5,685 5,064 4,820 future participants 5,361 4,870 4,767 4,209 4,009 all current and',
20978:'future participants 11,883 11,023 10,644 9,435 8,977 expenditures for scheduled future benefits for: participants who have attained eligibility age 2,747',
20979:'2,558 2,397 2,179 2,168 participants who have not attained eligibility age 17,365 15,639 15,633 12,668 12,054 future participants 4,506 5,118',
20980:'3,904 3,417 3,246 all current and future participants 24,619 23,315 21,934 18,264 17,468 npv of future revenue less future expenditures',
20981:'open group measure $12,736 $12,292 $11,290 $ 8,829 $ 8,491 contributions and earmarked taxes from: participants who have attained eligibility',
20982:'age $ 461 $ 433 $ 409 $ 363 $ 332 participants who have not attained eligibility age 3,859 3,184',
20983:'3,167 2,900 2,665 future participants 1,158 1,172 906 924 891 all current and future participants 5,478 4,789 4,482 4,187 3,888',
20984:'expenditures for scheduled future benefits for: participants who have attained eligibility age 1,986 1,834 1,773 1,622 1,475 participants who have',
20985:'not attained eligibility age 14,949 12,130 12,433 11,541 10,577 future participants 4,262 4,257 3,407 3,408 3,277 all current and future',
20986:'participants 21,197 18,221 17,613 16,571 15,329 npv of future revenue less future expenditures open group measure $15,719 $13,432 $13,131 $12,384',
20987:'$11,441 federal hospital insurance medicare part b: 2008 2007 2006 2005 2004 page 43 sffas 37 fasab handbook, version 20',
20988:'06/21 sffas 37 federal hospital insurance medicare part d: 2008 2007 2006 2005 2004 contributions and earmarked taxes from: participants',
20989:'who have attained eligibility age $ 123 $ 167 $ 173 $ 185 $ 176 participants who have not attained',
20990:'eligibility age 1,380 1,627 1,700 1,790 1,857 future participants 604 611 492 572 618 all current and future participants 2,107',
20991:'2,405 2,365 2,547 2,651 expenditures for scheduled future benefits for: participants who have attained eligibility age 581 794 792 880',
20992:'773 participants who have not attained eligibility age 6,527 7,273 7,338 7,913 7,566 future participants 2,856 2,699 2,121 2,440 2,431',
20993:'all current and future participants 9,964 10,766 10,251 11,233 10,770 npv of future revenue less future expenditures open group measure',
20994:'$ 7,857 $ 8,361 $ 7,886 $ 8,686 $ 8,119 contributions and earmarked taxes from: participants who have attained eligibility',
20995:'age $ 5 $ 5 $ 5 $ 4 $ 4 participants who have not attained eligibility age 43 41',
20996:'40 37 37 future participants 54 54 56 41 39 all current and future participants 102 100 101 82 80',
20997:'expenditures for scheduled future benefits for: participants who have attained eligibility age 97 93 92 84 81 participants who have',
20998:'not attained eligibility age 88 86 84 73 72 future participants 26 26 25 16 14 all current and future',
20999:'participants 212 205 201 173 167 npv of future revenue less future expenditures open group measure $ 109 $ 105',
21000:'$ 100 $ 91 $ 87 npv of future revenue less future expenditures open group measure $ 5 $ 5',
21001:'$ 4 $ 5 $ 4 total npv of future revenue less future expenditures open group measure $42,970 $40,948 $38,853',
21002:'$35,688 $33,364 railroad retirement: 2008 2007 2006 2005 2004 black lung part c: 2008 2007 2006 2005 2004 page 44',
21003:'sffas 37 fasab handbook, version 20 06/21 sffas 37 social insurance summary 2008 2007 2006 2005 2004 participants who have',
21004:'attained eligibility age: revenue e.g., contributions and earmarked taxes $ 1,333 $ 1,260 $ 1,312 $ 1,178 $ 1,071 expenditures',
21005:'for scheduled future benefits 12,369 11,608 10,920 10,160 9,430 present value of future revenue less future expenditures 11,036 10,348 9,608',
21006:'8,982 8,359 participants who have attained age 15 up to eligibility age: revenue e.g., contributions and earmarked taxes 29,851 28,342',
21007:'27,160 25,081 23,767 expenditures for scheduled future benefits 67,950 63,056 61,699 56,137 52,687 present value of future revenue less future',
21008:'expenditures 38,099 34,714 34,539 31,056 28,920 closed group total present value of future revenue less future expenditures for current participants',
21009:'49,135 45,062 44,147 40,038 37,279 future participants those under age 15, and those to be born and to immigrate during',
21010:'period: revenue e.g., contributions and earmarked taxes 24,743 22,828 21,227 19,442 18,457 expenditures for scheduled future benefits 18,578 18,714 15,933',
21011:'15,092 14,542 present value of future revenue less future expenditures 6,165 4,114 5,294 4,350 3,915 open group total present value',
21012:'of future revenue less future expenditures for current and future participants $42,970 $40,948 $38,853 $35,688 $33,364 page 45 sffas 37',
21013:'fasab handbook, version 20 06/21 sffas 37 statement of social insurance, part ii, component entity illustrative social security administration unaudited',
21014:'in billions of dollars 2008 2007 2006 2005 2004 federal oldage, survivors, and disability insurance social security: participants who have',
21015:'attained eligibility age: contributions and earmarked taxes $ 542 $ 477 $ 533 $ 464 $ 411 expenditures for scheduled',
21016:'future benefits 6,958 6,329 5,866 5,395 4,933 present value of future expenditures in excess of future revenue 6,416 5,852 5,333',
21017:'4,931 4,522 participants who have attained age 15 up to eligibility age: contributions and earmarked taxes 18,249 17,515 16,568 15,290',
21018:'14,388 expenditures for scheduled future benefits 29,021 27,928 26,211 23,942 22,418 present value of future revenue less future expenditures 10,772',
21019:'10,413 9,643 8,652 8,030 net present value of future revenue less future expenditures for current participants closed group measure 17,218',
21020:'16,265 14,976 13,583 12,552 less: treasury securities and assets held by the programs 2,238 2,048 1,859 1,687 1,531 closed group',
21021:'unfunded obligation $14,980 $14,217 $13,117 $11,896 $11,021 future participants those under age 15 and to be born and to immigrate',
21022:'during period: contributions and earmarked taxes $ 17,566 $ 16,121 $ 15,006 $ 13,696 $ 12,900 expenditures for scheduled future',
21023:'benefits 6,933 6,619 6,480 5,816 5,578 present value of future revenue less future expenditures 10,633 9,502 8,526 7,880 7,322 net',
21024:'present value of future revenue less future expenditures for current and future participants open group measure 6,555 6,763 6,450 5,703',
21025:'5,230 less: treasury securities and assets held by the programs 2,238 2,048 1,859 1,687 1,531 open group unfunded obligation $4,317',
21026:'$4,715 $4,591 $4,016 $3,699 page 46 sffas 37 fasab handbook, version 20 06/21 sffas 37 appendix d: illustrative statement of',
21027:'changes in social insuranceamounts the following is an illustrative statement of changes in social insurance amounts. illustrative statement of changes',
21028:'in social insurance amounts 0pen group measure for the year ended september 30, 2008 in billions of dollars social insurance,',
21029:'open group measure other e.g., social medicare medicare railroad security hi smi retirement total net present value npv of future',
21030:'revenue less future expenditures for current and future participants the “open group” over the next 75 years, beginning of the',
21031:'year $6,763 $12,292 $21,793 $ 100 $40,948 reasons for changes in the npv during the year: changes in valuation period',
21032:'xxx xxx xxx xxx xxx changes in demographic data and assumptions1 xxx xxx xxx xxx xxx changes in economic data',
21033:'and assumptions2 xxx xxx xxx xxx xxx changes in law or policy3 xxx xxx xxx xxx xxx changes in methodology',
21034:'and programmatic data4 xxx xxx xxx xxx xxx changes in medicare healthcare and other healthcare assumptions xxx xxx xxx xxx',
21035:'xxx other changes xxx xxx xxx xxx xxx net change in open group measure 208 443 1,783 4 2,022 open',
21036:'group measure, end of year $6,555 $12,735 $23,576 $104 $42,970 the following note examples are adapted from the social security',
21037:'trustees’ report. the explanations of the changes will depend on the social insurance program in question. 1. changes in demographic',
21038:'assumptions affect the open group measure. final mortality data for 2008 result in slightly lower starting death rates and faster',
21039:'nearterm declines in death rates than in last year’s report. also, slightly faster rates of decline in death rates are',
21040:'assumed ultimatelyfor ages 1564 in this year’s report. these changes in ultimate rates are based on the continuing strong declines',
21041:'in mortality recently experienced by men at these page 47 sffas 37 fasab handbook, version 20 06/21 sffas 37 ages',
21042:'and a belief that the lower rates of decline experienced by women since 1982 will not continue in the future.',
21043:'all of the mortality changes result in a decrease worsening in the open group measure of about $200 billion. 2.',
21044:'ultimate economic assumptions are unchanged from last year’s report. changes in starting values for the economic assumptions and in the',
21045:'nearterm transition to the ultimate economic assumptions have a negligible effect on the social insurance closed group measure. 3. there',
21046:'were no legislative changes since the last report that are projected to have a significant effect on the longrange oasdi',
21047:'actuarial balance. 4. severalmethodologicalimprovementsandupdatesofprogramspecificdataareincludedin the 2008 measures. these changes to programmatic data and methods result in a combined increase improvement',
21048:'in the open group measure of about $171 billion. page 48 sffas 37 fasab handbook, version 20 06/21 sffas 37',
21049:'appendix e: list ofabbreviations cfr consolidated financial report cfs consolidated financial statements cpi consumer price index di disability insurance social',
21050:'security dol u.s. department of labor ed exposure draft fasab federal accounting standardsadvisory board fasb financial accounting standards board gao',
21051:'governmentaccountability office gasb governmentalaccounting standards board gdp gross domestic product hhs department of health and human services ipsasb international public',
21052:'sector accounting standards board ma medicare advantage md&a management’s discussion and analysis medicare hi hospital insurance medicare medicare smi supplementary',
21053:'medical insurance medicare oasdi oldage, survivors, and disability insurance social security oasi oldage and survivors insurance social security page 49',
21054:'sffas 37 fasab handbook, version 20 06/21 sffas 37 omb office of management and budget rrb railroad retirement board rsi',
21055:'required supplementary information scnp statement of changes in net position scsia statement ofchanges insocialinsuranceamounts sfas statements offinancialaccountingstandards sffac statements offederalfinancialaccountingconcepts',
21056:'sffas statements offederalfinancialaccountingstandards si ed social insurance exposure draft dated november 2008 smi supplementary medical insurance snc statement of net',
21057:'cost sosi statement of social insurance ssa socialsecurityadministration ui unemployment insurance utf unemployment trust fund page 50 sffas 37 fasab',
21058:'handbook, version 20 06/21 statementoffederalfinancialaccountingstandards38: accounting for federal oil and gas resources status issued april 13, 2010 effective date for',
21059:'periods beginning after september 30, 2012 affects none. affected by sffas 41, par. 2, amended the effective date in pars.',
21060:'5 and 30. summary this standard requires the value of the federal government’s estimated petroleum royalties from the production of',
21061:'federal oil and gas proved reserves to be reported in a schedule of estimated federal oil and gas petroleum royalties.',
21062:'in addition, this standard requires the value of estimated petroleumroyaltyrevenuedesignatedforothersto bereportedinascheduleof estimatedfederal oil and gas petroleum royalties to be distributed',
21063:'to others. these schedules are to be presented in required supplementary information rsi as part of a discussion of all',
21064:'significant federal oil and gas resources under management by the entity. this statement is effective as rsi for periods beginning',
21065:'after september 30, 2012. earlier implementation is encouraged. it is the board’s intent that the information required by this statement',
21066:'transition to basic information after being reported as rsi for a period of three years. prior to the conclusion of',
21067:'the threeyear rsi period, the board plans to make a determination as to whetherthe information willtransitiontobasic information asfinancial statement recognition',
21068:'or note disclosure. this statement will remain in effect until such time a determination is made. page 1 sffas 38',
21069:'fasab handbook, version 20 06/21 sffas 38 table of contents summary 1 introduction 3 purpose 3 materiality 3 effective date',
21070:'4 standards 4 scope 4 definitions 5 accounting and reporting of federal oil and gas resources by component entities 5',
21071:'consolidated financial report cfr of the united states government reporting requirements 9 effective date 10 appendixa:basis for conclusions 11 appendix',
21072:'b: illustrations 34 appendix c:abbreviations 44 appendix d: technical terms 45 page 2 sffas 38 fasab handbook, version 20 06/21',
21073:'sffas 38 introduction purpose 1. statementsoffederalfinancialaccountingstandardssffas6, accounting for property, plant, and equipment; 8, supplementary stewardship reporting; and 29, heritage assets',
21074:'and stewardship land, establish standards related to federal lands, but specifically exclude natural resources from the scope of those standards.',
21075:'extensive federal oil and gas resources1 exist on public lands throughout the country and on the outer continental shelf ocs.',
21076:'currently, federal financial reporting does not provide information about the quantity or value of these assets. 2. the board believes',
21077:'that federal oil and gas resources represent federal assets and accounting for and reporting information about these assets would enhance',
21078:'accountability for and stewardship over assets of the federal government. 3. thisstatementprovidesforamorecompleteaccountingforoilandgasresourcesavailable to the federal government. accounting for the federal',
21079:'government’s royalty share of proved reserves as an asset and reporting information on that asset as required supplementary information rsi',
21080:'would provide transparency regarding the value and changes in value of these significant assets and result in information that contributes',
21081:'to meeting federal financial reporting objectives. materiality 4. the provisions of this statement need not be applied to immaterial items.',
21082:'the determination of whether an item is material depends on the degree to which omitting or misstating information about the',
21083:'item makes it probable that the judgment of a reasonable person relying on the information would have been changed or',
21084:'influenced by the omission or the misstatement. 1 terms defined inappendix d: technical terms or the glossary are shown in',
21085:'boldface the first time they appear. page 3 sffas 38 fasab handbook, version 20 06/21 sffas 38 effective date 5.',
21086:'the standards are effective as rsi for periods beginning after september 30, 2012. earlier implementation is encouraged. 6. it is',
21087:'the board’s intent that the information required by this statement transition to basic informationafterbeingreportedasrsiforaperiodofthreeyears. priortotheconclusionof the threeyear rsi period, the',
21088:'board plans to make a determination as to whether the information will transition to basic information as financial statement recognition',
21089:'or note disclosure. this statement will remain in effect until such time a determination is made. standards scope 7. this',
21090:'statement applies to federal entities that report information about federal oil and gas resources in general purpose federal financial reports,',
21091:'including the consolidated financial report of the u.s. government cfr, in conformance with sffas 34, the hierarchy of generally accepted',
21092:'accounting principles, including the application of standards issued by the financial accounting standards board fasb. 8. this statement articulates a',
21093:'general principle that should guide preparers of general purpose federal financial reports in accounting for federal oil and gas resources.',
21094:'9. federal lands contain a variety of natural resources other than oil and gas proved reserves that are not specifically',
21095:'addressed by this statement. this statement does not require or preclude entities from reporting information about other types of federallyowned',
21096:'natural resources; however, this statement should be considered in conjunction with sffas 7, accounting for revenue and other financing sources,',
21097:'when applying sffas 34 to other types of federallyowned natural resources.2 2sffas 7, par. 45,requires,ininstances wheretherearevirtually nocosts incurredinearningexchange revenue,that federal',
21098:'entities recognize the revenue as a financing source on the statement of changes in net position, rather than the statement',
21099:'of net cost. page 4 sffas 38 fasab handbook, version 20 06/21 sffas 38 definitions 10. definitionsinparagraphs11and12arepresentedfirstintheaccountingstandardsbecause they are new',
21100:'technical terms not previously defined in federal accounting standards. 11. federal oil and gas resources: oil and gas resources overwhich',
21101:'the federal government may exercise sovereign rights with respect to exploration and exploitation and from which the federal government has',
21102:'the authority to derive revenues for its use. federal oil and gas resources do not include resources over which the',
21103:'federal government acts as a fiduciary for the benefit of a nonfederal party. 12. regional estimated petroleum royalties: regional estimated',
21104:'petroleum royalties means the estimated endofperiod value of the federal government’s royalty share of proved oil and gas reserves from',
21105:'federal oil and gas resources in each region. accountingandreportingoffederaloilandgasresourcesbycomponententities schedule of estimated federal oil and gas petroleum royalties 13. extensivefederaloilandgasresourcesexistonpubliclandsthroughoutthecountryandon',
21106:'the outer continental shelf ocs. these resources will provide economic benefits to the federalgovernment throughrevenue from leasing activitiesand the collection',
21107:'of royaltieson production. the federal government controls access to these resources. 14. federal oil and gas resources are made up',
21108:'of two primary components – reserves and undiscovered resources. reserves can be further defined as either proved or unproved while',
21109:'undiscovered resources can be further defined as either recoverable or nonrecoverable. see figure 1 – components of federal oil and',
21110:'gas resources in thebasisfor conclusions for an illustration of the universe of federal oil and gas resources and a further',
21111:'breakdown of its components. 15. the value of the federal government’s estimated petroleum royalties from the production of federaloiland gasproved',
21112:'reservesshould be reportedin aschedule of estimatedfederaloil and gas petroleum royalties by the component entity that is responsible for collecting royalties.',
21113:'this schedule should be presented in rsi as part of a discussion of all significant federal oil and gas resources',
21114:'under management by the entity. 16. the board believes that the detailed estimation methodology for valuing federal oil and gas',
21115:'resources should be developed by federal entities. in an environment heavily affected by page 5 sffas 38 fasab handbook, version',
21116:'20 06/21 sffas 38 changes in prices, technological advancements, economic and operating conditions, and known geological, engineering, and economic data,',
21117:'estimation methodologies may need to be regularly updated to reflect these changing conditions. 17. the estimates that are developed should',
21118:'approximate the present value of future federal royalty receipts on proved reserves known to exist as of the reporting date.',
21119:'the estimates should be basedon the best informationavailableat fiscal yearend, or asclose to the fiscal yearend as possible. 18. discount',
21120:'rates as of the reporting date for present value measurements of federal oil and gas resources should be based on',
21121:'interest rates on marketable treasury securities with maturities consistent with the cash flows being discounted. 19. the entity’s estimates should',
21122:'reflect its judgment about the outcome of events based on past experience and expectations about the future. estimates should reflect',
21123:'what is reasonable to assume under the circumstances. while the entity’s own assumptions about future cash flows may be used,',
21124:'the entity should review assumptions used generally in the federal government as evidenced by sources independent of the reporting entity,',
21125:'for example, those used by the bureau of economicanalysis for the national income and productaccounts. iftheentity’s own assumptionsdonotreflectdatathat areconsistent with',
21126:'sources independent of the reporting entity, an explanation of why the entity’s own assumptions are preferred should be provided. 20.',
21127:'the value of the federal government’s estimated petroleum royalties should be computed based on the calculation of federal oil and',
21128:'gas proved reserves on a regional basis. for purposes of these standards, the regions used in determining and reporting regional',
21129:'amounts or factors should be collaboratively developed by all the component entities involved in federal oil and gas resource activities.',
21130:'regions used in calculating regional estimated petroleum royalties and in applying these standards should be consistent and aligned with regions',
21131:'used internally by the component entities in administering federal oil and gas resource activities. 21. the estimates of future federal',
21132:'royalty receipts on proved reserves known to exist as of the reporting date should be divided further by commodity and',
21133:'type e.g., wet gas, dry gas, oil and lease condensate, onshore, offshore, etc. and calculated separately if material differences would',
21134:'otherwise result. each of the individual calculations should be reported separately and summed together to arrive at the federal government’s',
21135:'total estimated petroleum royalties. 22. the preferred measurement method for valuing the federal government’s estimated petroleum royalties isthe presentvalue of',
21136:'future federal royaltyreceiptson proved reserves using a riskfree discount rate as described in paragraph 17; however, alternative methods page 6',
21137:'sffas 38 fasab handbook, version 20 06/21 sffas 38 for measuring fair value or current price may be acceptable if',
21138:'it is not reasonably possible to estimate present value of future federal royalty receipts on proved reserves using the methodology',
21139:'described in paragraphs 17 through 19.3 23. once established, the estimation methodology should be consistently followed and explained in the',
21140:'financial reports. if environmental or other changes would provide for the development of an improved methodology, the nature and reason',
21141:'for the change in methodology, as well as the effect of the change, should be explained. schedule of estimated federal',
21142:'oil and gas petroleum royalties to be distributed to others 24. the majority of the federal government’s estimated petroleum royalties',
21143:'from the production of federal oil and gas proved reserves are distributed to state governments, other federal agencies, and the',
21144:'general fund of the u.s. treasuryin accordance with legislated allocation formulas. the legislated allocation formulas constitute a present obligation4 of',
21145:'the component entity that is responsible for collecting royalties to provide assets to another entity, and the underlying legislation identifiesthe',
21146:'conditionsunder which these distributions will be made. 25. the value of estimated federal oil and gas petroleum royalty revenue designated',
21147:'for others should be reported in a schedule of estimated petroleumroyaltiesto be distributed to others by the component entity that',
21148:'is responsible for collecting royalties. this schedule should be presented in rsi by type of entityaspart of a discussion of',
21149:'all significant federal oil and gas resources under management by the entity. 26. the value of the revenue to be',
21150:'distributed to others should be estimated based on the portion of the royalty share of the federal proved oil and',
21151:'gas reserves designated to be distributed to others. for example, the average annual share of the revenue distributed to 3',
21152:'calculating the present value of future federal royalty receipts employs the use of a number of estimates including estimating when',
21153:'the proved reserves will be produced over time, future oil and gas prices, and the possibility and extent of royaltyfree',
21154:'production. unforeseen circumstances may result in situations where it is not possible for the entitytoreasonablyestimatethepresentvalueoffuturefederalroyaltyreceipts. inthese situations,itmaybepossible to estimate current',
21155:'price. current price, sometimes referred to as a “freshstart” or “remeasured” price, is a general term for various attributes measured',
21156:'as of a financial statement date subsequent to the period of initial recognition, including replacement price, market price, and settlement',
21157:'price. 4 the term obligation is used in this statement with its general meaning of a duty or responsibility to',
21158:'act in a certain way. it does not mean that an obligation of budgetary resources is required for a liability',
21159:'to exist in accounting or financialreporting or that aliability inaccountingor financialreporting is required to exist for budgetary resources to be',
21160:'obligated. page 7 sffas 38 fasab handbook, version 20 06/21 sffas 38 others over the preceding twelve 12 months may',
21161:'be an acceptable basis for estimating petroleum royalties to be distributed. other methodologies may also be acceptable. annual valuation of',
21162:'estimated petroleum royalties and petroleum royalties to be distributed to others 27. the estimated petroleum royalties asset value and petroleum',
21163:'royalties to be distributed to others should be valued at the end of each fiscal year. component entity reporting requirements',
21164:'28. the component entity responsible for collecting royalties should provide the following as narrative to the schedules presented as rsi:',
21165:'a. aconcisestatementexplaininghow themanagement offederaloil andgas resources is important to the overall mission of the entity. b. abriefdescriptionoftheentity’sstewardshippoliciesforfederaloilandgasresources. the stewardship policies',
21166:'for federal oil and gas resources should describe the guiding principles established to: assess the oil and gas resource areas;',
21167:'offer those resources to interested developers; sell and assign leases to winning bidders; administer the leases; collect bonuses, rents, royalties,',
21168:'and royaltyinkind; and distribute the collections consistent with statutory requirements, prohibitions, and limitations governing the entity. c. anarrativedescribingfutureroyalty rights identifiedfor',
21169:'sale,if applicable. the narrative should provide the value of the rights identified for future sale, the location of the fields',
21170:'involved in the future sale, and the best estimate of when the rights would besold. thecalculatedvaluereportedforfutureroyaltyrightsidentifiedforsaleshould be based on the',
21171:'specificfieldto be sold and consistent with the valuation requirements of paragraph 22. d. anarrativedescribing andadisplay showingrevenuereportedbycategoryfor the reporting period should',
21172:'be presented for offshore and onshore revenues for the following categories: royalty revenue for oil and gas; rent revenue; bonus',
21173:'bid revenue for leases; and total revenue from all the above categories. e. anarrativedescribing andadisplay showing: 1 the quantity of',
21174:'oil and gas proved reserves at the end of the reporting period; page 8 sffas 38 fasab handbook, version 20',
21175:'06/21 sffas 38 2 theaverageoftheregionalaverage first purchase prices for oil and the average of the regionalaverage wellhead prices for gas',
21176:'for the reporting period; and, 3 the average royalty rate for oil and gas for the reporting period. f. anarrativedescribingtheestimationmethodologyusedtocalculatethevalueofthe',
21177:'federal government’s estimated petroleum royalties. at a minimum, the narrative explanation should include a “plain english” explanation of the measurement',
21178:'method e.g., present value, the significant assumptions incorporated into the estimate e.g., discount rates used to calculate present value, production',
21179:'decline curve, portion of proved reserves under federal lands, future oil and gas prices, inflation rates, etc, and any significant',
21180:'changes in the estimation methodology, including the underlying assumptions, from the prior year. as required by paragraph 23, the nature',
21181:'and reason for any changes, as well as the effect of the changes, should be explained. g. areference to thesourcereportsusedtocalculatethevalueofthefederal',
21182:'government’s estimated petroleum royalties. h. anarrativedescribing andadisplay showingthe sales volume, the sales value, the royalty revenue, and the estimated value',
21183:'for royalty relief produced from federal oil and gas resources for the reporting period. to the extent that regional information',
21184:'is availableandwouldcontributetounderstanding, theinformationforeachregionshould be provided. i. anarrativedescribing other significantfederal oil andgas resourcesunder management by the entity that are not addressed',
21185:'by this statement because they are not currently under lease e.g., coastal plain of thearctic national wildlife refuge. the narrative',
21186:'should be sufficient to enable the financial statement reader to gain an understanding of the full extent of federal oil',
21187:'and gasresourcesunder management by the entity. consolidated financial report cfr of the united states government reporting requirements 29. the governmentwide',
21188:'entity should provide the following information related to federal oil and gas resources in rsi as part of a discussion',
21189:'of all significant federal oil and gas resources under management by the federal government: a. aconcisestatementexplainingthenatureandvaluationoffederaloil andgas resources. page 9',
21190:'sffas 38 fasab handbook, version 20 06/21 sffas 38 b. a narrative describing and a display showing: 1 the quantity',
21191:'of oil and gas proved reserves at the end of the reporting period; 2 the average of the regionalaverage first',
21192:'purchase prices for oil and the average of the regional average first wellhead prices for gas for the reporting period;',
21193:'3 the average royalty rate for oil and gas for the reporting period; 4 the asset value for oil and',
21194:'gas by the commodities and types identified for use in calculating the federal government’s total estimated petroleum royalties for the',
21195:'reporting period see paragraph 21; and, 5 the value of estimated petroleum royalties at the end of the reporting period.',
21196:'c. a reference to specific agency reports for additional information about federal oil and gas resources. effective date 30. the',
21197:'standards are effective as rsi for periods beginning after september 30, 2012. earlier implementation is encouraged. 31. it is the',
21198:'board’s intent that the information required by this statement transition to basic informationafterbeingreportedasrsiforaperiodofthreeyears. priortotheconclusionof the threeyear rsi period, the board',
21199:'plans to make a determination as to whether the information will transition to basic information as financial statement recognition or',
21200:'note disclosure. this statement will remain in effect until such time a determination is made. the provisions of this statement',
21201:'need not be applied to immaterial items. page 10 sffas 38 fasab handbook, version 20 06/21 sffas 38 appendixa: basis',
21202:'for conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in this statement. it',
21203:'includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to',
21204:'others. the standards enunciated in this statement–not the material in this appendix–should govern the accounting for specific transactions, events, or',
21205:'conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section',
21206:'directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are',
21207:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
21208:'for conclusions of the amending statement for the rationale for each amendment. project history a1. the project began with the',
21209:'formation of a task force to conduct research. the task force produced a discussion paper in june 2000 entitled accounting',
21210:'for the natural resources of the federal government see http://www.fasab.gov/ pdffiles/natresrpt.pdf to access the report. in 2002, the board resumed',
21211:'active consideration of the issues raised by the task force after a deferral to address other issues. a2. the board',
21212:'was interested in determining whether values for federal natural resources, or some surrogate, should be capitalized and reported on the',
21213:'balance sheet. the board members believed that capitalizing federal natural resources could increase accountability for their management and improve the',
21214:'comprehensiveness, relevance, and consistency of federal financial statements. the board members agreed to address each type of natural resource e.g.,',
21215:'fluid leasable minerals such as oil and gas, solid leasable minerals such as coal and timber, etc. in separate phases.',
21216:'federal oil and gas resources were addressed first because of the literature available in other domains, the extensive historical information',
21217:'on federal lease programs and royalty collections, and the large amount of revenue received in exchange for federal oil and',
21218:'gas resources. a3. the board indicated that the pertinent questions were 1 what, if anything, should be recognized as an',
21219:'asset; and, 2 what is the source and reliability of quantity information. they believed the source and the reliability of',
21220:'the information would have a bearing on where information should be reported. a4. theextractiveindustries’ activitiesfor oil andgas canbedividedintotwocategories— upstream activities',
21221:'exploration and production activities and downstream activities page 11 sffas 38 fasab handbook, version 20 06/21 sffas 38 transportation, refining,',
21222:'and marketing activities. upstream activities can be divided into the following phases: a. prospecting5 b. acquisition of mineral rights c.',
21223:'exploration d. appraisal and evaluation e. development f. production a5. downstream activities take place after the production phase of the',
21224:'upstream activities through to the point of sale and can be divided into the following phases: a. supply and trading',
21225:'b. shipping c. refining d. storage and distribution e. marketing and retail a6. the national assessment of federal oil and',
21226:'gas resources performed by the federal government is similar to the prospecting phase of the extractive industries’ upstream activities. it',
21227:'is the only activity performed by the federal government that is similar to the extractive industries’ activities. a7. the board',
21228:'noted that, based on discussions about oil and gas lease activities in the private sector, new models for accounting and',
21229:'reporting on the federal government’s oil and gas activities would be needed because the current federal model is incomplete and',
21230:'federal activities are not similar to private sector activities. 5prospecting usually involves researching and analyzing an area’s historic geologic data',
21231:'and carrying out topographical, geological, and geophysical studies. page 12 sffas 38 fasab handbook, version 20 06/21 sffas 38 a8.',
21232:'the board released two exposure drafts eds to solicit comments on its proposed requirements for accounting for federal oil and',
21233:'gas resources. the original ed, accounting for federal oil and gas resources, was releasedon may21,2007. arevisededbythe same name was released',
21234:'on july 6, 2009. the board considered the comments received on the two eds and related field testing in reaching',
21235:'its current position. accounting for other types of natural resources a9. federal lands contain a variety of natural resources that',
21236:'are not specifically addressed by this statement, including coal, gold, and silver, as well as timber and grazing rights. originally,',
21237:'the board intended to address each category of resourcesin separate phases as notedinparagrapha2. althoughinprincipleabroaderapplicationwasdesirabletoseveral board members, the majority believes that',
21238:'the board has already devoted a substantial amount of time to the oil and gas standard and developing additional guidance',
21239:'for the other typesofresourceswouldsignificantlydelayimplementationofabroadstandard. therefore, because federal oil and gas resources represent the most significant portion of all federal natural',
21240:'resources, the majority of members felt it was important to begin recognizing them as soon as possible. a10.nonetheless, the majority',
21241:'of the members believe that the substance of the standards developed for federal oil and gas resources may serve as',
21242:'a good analogy for other categories of federal natural resources.6 therefore, while this statement does not specifically address other types',
21243:'of federal natural resources, the board believes that this statement should be considered when applying sffas 34, the hierarchy of',
21244:'generally accepted accounting principles, including the application of standards issued by the financial accounting standards board, to other types of',
21245:'federal natural resources. as a result, while not explicitly encouraging agencies to recognize other categories of natural resources, the board',
21246:'included paragraph 9 to explicitly state that this statement does not require or preclude entities from reporting information about other',
21247:'types of federallyowned natural resources; however, members believe this statement should be considered in conjunction with sffas 7, accounting for',
21248:'revenue and other financing sources, when applying sffas 34 to other types of federallyowned natural resources. a11.the board directedstaff toapplythe',
21249:'requirementsof thisstatementtoothertypesof natural resources through the issuance in the future of a technical bulletin. fiduciary oil and gas resources a12.sffas',
21250:'31, accounting for fiduciary activities, par. 12, states that “fiduciary assets may include assets other than cash, e.g., real or',
21251:'personal property held temporarily pending 6 sffas 34, paragraph 7. page 13 sffas 38 fasab handbook, version 20 06/21 sffas',
21252:'38 disposition, or held longterm in a fiduciary capacity.” both the original and revised eds included a paragraph on fiduciary',
21253:'oil and gas resources that required similar reporting for fiduciary proved oil and gas reserves. however, one of the respondents',
21254:'to the revised ed raised a question of whether fiduciaries are required to value nonmonetary assets. in addition, the board',
21255:'discussed whether there are currently any oil and gas reserve activities that would meet the definition of fiduciary activity.7 since',
21256:'this statement requires rsi reporting for federal oil and gas proved reserves and would not trigger reporting under sffas 31,',
21257:'the board is deferring the issue of whether reporting should be required for fiduciary proved oil and gas reserves. no',
21258:'reporting on fiduciary oil and gas resources is required as a result of this statement. the board will revisit the',
21259:'issue of reporting on fiduciary oil and gas resources either through the issuance of the technical bulletin mentioned in paragrapha11',
21260:'or when the board revisits accounting and reporting for federal oil and gas resources in three years as discussed in',
21261:'paragrapha38. overview of federal oil and gas resources a13.figure 1, components of federal oil and gas resources, presented after paragrapha27',
21262:'identifies the universe of federal oil and gas resources total resources. total resources incorporate “original inplace” resources, that is, resources',
21263:'in the earth before human intervention. the components are those used in the industry. information is available in varying degrees',
21264:'and with varying reliability for each component. the components are first separated into “undiscovered resources” and “reserves.” generally, undiscovered resources',
21265:'are not under lease, while reserves are under lease. undiscovered resources a14.thefirstmajor componentoftotal resourcesisundiscoveredresources. theundiscovered resources component is divided into',
21266:'the following subcomponents: a. undiscovered nonrecoverable resources b. undiscovered recoverable resources 1 undiscovered conventionally recoverable resources 2 undiscovered economically recoverable',
21267:'resources. 7 members questioned whether the federal government currently assumes any fiduciary responsibility for nonfederal oil and gas leases beyond',
21268:'the collection of royalties. page 14 sffas 38 fasab handbook, version 20 06/21 sffas 38 a15.each component and subcomponent can',
21269:'be further divided between onshore and offshore resources. onshore resources consist of resources on federal lands. offshore resources consist of',
21270:'resources on the outer continental shelf ocs. this division between onshore and offshore resources is important operationally because the source',
21271:'and volume of information varies. a16.thereis noinformation availableon undiscovered nonrecoverableresources. these resources are not addressed or included in any type',
21272:'of assessment. undiscovered nonrecoverable resources are referred to as resources that are beyond conventional technologies to be estimated and are',
21273:'not assessed. however, in the realm of “original in place” resources they may exist. a17.information on the two subcomponents of',
21274:'undiscovered recoverable resources is available for offshore oil and gas resources. this information is based on national assessments performed by',
21275:'the minerals management service mms approximately every five years, with updates on a yearly basis for certain geographic locations. the',
21276:'assessment considers recent geophysical, geological, technological, and economic information and uses a geologic play analysis approach for resource appraisal. information',
21277:'on undiscovered conventionally recoverable resources and undiscovered economically recoverable resources is provided in the mms assessment. a18.for the onshore portion',
21278:'of undiscovered recoverable resources, the u.s. geological survey usgs formerly conducted national assessments. the last comprehensive national assessment was completed',
21279:'by the usgs in 1995, and since 2000 the usgs has been reassessing basins of the u.s. that are considered',
21280:'to be priorities for the new assessment rather than assessing all of the basins of the u.s. as each basin',
21281:'is reassessed, the assessment results are added to the assessment tables, and these new values replace the assessment results from',
21282:'1995. the usgs assessment provides information on undiscovered conventionally recoverable resources but not on undiscovered economically recoverable resources like the',
21283:'mms does. a19.under existing federalaccounting standardsadvisory board fasab accounting standards, there are no requirements to provide or present information about',
21284:'the undiscovered resource components in the financial statements. information about technically recoverable resources was gathered and maintained by the energy',
21285:'informationadministrationeiainthepast. however, eianolonger reportsonthe technically recoverable resources under federal lands. therefore, as there is no reliable source for this type',
21286:'of information, federal reporting on onshore and offshore undiscovered recoverable resources is not required. page 15 sffas 38 fasab handbook,',
21287:'version 20 06/21 sffas 38 reserves a20.the second major component of total resources is reserves. the reserves component is divided',
21288:'into the following subcomponents as follows: a. unproved reserves 1 unproved possible reserves 2 unproved probable reserves b. proved reserves',
21289:'1 proved undeveloped reserves 2 proved developed reserves aproved developed nonproducing reserves bproved developed producing reserves a21.under existing fasab accounting',
21290:'standards, there are no requirements to provide or present information about the unproved reserves components in the financial statements. a22.undertheaccountingstandardsproposedin',
21291:'theoriginaled,information about onshore and offshore unproved reserves would be included in the technically recoverable resources and reportedas rsi. however,asnotedinpar.a19,althoughinformation abouttechnically',
21292:'recoverable resources was gathered and maintained by the eiain the past, eiano longer reportsonthetechnicallyrecoverableresourcesunderfederallands. therefore,asthereis no reliable source for this',
21293:'type of information, federal reporting on unproved reserves is not required. a23.quantitative information in relation to onshore and offshore proved',
21294:'reserves, including new discoveries, production, and adjustments is submitted to the eiaby oil and gas well operators onceayear. thedue dateforoperators',
21295:'to submittheinformation isapril15for activities from the preceding calendar year. a24.under existing accounting standards,thebonusbid, rent collected on thelease untiloiland gas production',
21296:'begins, and royalty revenue collected on production are accounted for as a custodial activity i.e., an amount collected for others',
21297:'by mms, the collecting entity. the collections and their distribution are reported on mms’s statement of custodial activities. component entities',
21298:'receiving a distribution and the cfr of the united states government page 16 sffas 38 fasab handbook, version 20 06/21',
21299:'sffas 38 recognize the revenue as a financing source in their respective statement of changes in net position or statement',
21300:'of operations and changes in net position. a25.in addition to the above existing accounting standards, this statement requires that the',
21301:'estimated federal royalty share of proved reserves be reported in rsi as estimated petroleum royalties by the component entity that',
21302:'is responsible for collecting royalties. the portion of the estimated petroleum royalty revenue designated to be distributed to others should',
21303:'also be reported in rsi. a26.this statement also requires that information on the quantity and consumption of proved reserves, including',
21304:'the sales volume, the sales value, the amount of royalty revenue, and the estimated value for royalty relief be provided',
21305:'as rsi. a27.on the following page, figure 1 – components of federal oil and gas resources provides a summary of',
21306:'the information presented in the preceding paragraphs. the shaded boxes in the figure represent the availability of information as follows:',
21307:'no quantity information available technically recoverable resources quantity information provided by eiaat the national level8 proved reserves quantity information provided',
21308:'by eiaat the national level9 the terms in figure 1 are defined inappendix d: technical terms under the subheading definitions',
21309:'of resource and reserve components and subcomponents. 8quantity information is currently only published at the national level; segregated information on',
21310:'the quantity of oil and gas resources under federal lands is not available. 9see footnote 8. page 17 sffas 38',
21311:'fasab handbook, version 20 06/21 sffas 38 figure 1 – components of federal oil and gas resources accounting standards components',
21312:'of federal oil and gas resources undiscovered resources reserves undiscovered non recoverable resources technically recoverable resources proved reserves proved proved',
21313:'undeveloped developed reserves reserves undiscovered recoverable resources undiscovered undiscovered conventionally economically recoverable recoverable resources resources unproved reserves unproved unproved possible',
21314:'probable reserves reserves proved proved developed developed nonproducing producing reserves reserves existing accounting standards bonus bid, rent, royalty revenue accounted',
21315:'for as custodial activity by the component entity and recognized as a financing source on the cfr and component entity',
21316:'statement of operations and changes in net position new x bonus bid, rent, royalty revenue accounted for as custodial activity',
21317:'by the component accounting entity and recognized as a financing source on the cfr and component entity standards statement of',
21318:'operations and changes in net position x asset value and revenue designated to be distributed to others reported as required',
21319:'supplementary information rsi x information on the quantity and consumption of proved reserves, including the sales volume, sales value, the',
21320:'amount of royalty revenue, and the estimated value for royalty relief reported as rsi page 18 sffas 38 fasab handbook,',
21321:'version 20 06/21 sffas 38 conceptualaspects of federal oil and gas resources as anasset for estimated petroleum royalties and a',
21322:'liability for the portion of revenue to be distributed to nonfederal entities recognition criteria a28.statement of federal financialaccounting concepts sffac',
21323:'5, definitions of elements and basic recognition criteria for accrualbasis financial statements, states that to be recognized asanelement of thefinancial',
21324:'statements, anitemmust ameet thedefinition of anelementofthefinancialstatementsandbbemeasurable. thetermmeasurablemeans that a monetary amount can be determined with reasonable certainty or is reasonably',
21325:'estimable.10 a29.measurement may require the use of estimates and approximations as well as an assessment, in a manner consistent with',
21326:'the attribute being measured, of the probability that future inflows or outflows of economic benefits or services will result from',
21327:'the item. recognition decisions also incorporate the results of assessments of the materiality and benefit versus cost of recognizing the',
21328:'item measured. thus, it is possible that an item that meets the basic recognition criteria would not be recognized due',
21329:'to measurement, materiality, or costbenefit considerations.11 consideration ofasset recognition or disclosure a30.recognition of the federal government’s estimated petroleum royalties from',
21330:'the production of federal oil and gas proved reserves as an asset was considered by the board based on sffac',
21331:'5, paragraphs 18 through 35. a31.an asset for federal accounting purposes is a resource that embodies economic benefits or services',
21332:'that the federal government controls.12 a32.to meet the definition of an asset of the federal government, a resource must possess',
21333:'two characteristics. first, it must embody economic benefits or services that can be used in the 10sffac 5, par. 5.',
21334:'11 sffac 5, par. 7. 12sffac 5, par. 18. page 19 sffas 38 fasab handbook, version 20 06/21 sffas 38',
21335:'future. second, the government must control access to the economic benefits or services and, therefore, can obtain them and deny',
21336:'or regulate the access of other entities.13 a33.first, the board established which federal oil and gas resources were being considered.',
21337:'figure 1 – components of federal oil and gas resources presents the federal oil and gas resources that were considered.',
21338:'the two major components are “undiscovered resources” and “reserves.” all of the federal oil and gas resources qualify as federal',
21339:'government assets because the government can obtain economic benefits and regulate the access of other entities as provided under federal',
21340:'law. a34.since all federal oil and gas resources controlled by the federal government are assets, the board’snext stepwastodecidewhetherthefederaloiland gasresources “asset”',
21341:'should be recognizedonafederal componententitybalancesheet. as notedin paragrapha28 above, the second criterion for recognition is that the asset “…be measurable.” a35.estimates',
21342:'of the quantity of technically recoverable oil and gas resources were available througheiainthepast. withthisquantityinformation,amonetarymeasurewastechnically feasible and, therefore, the asset qualified',
21343:'for consideration for recognition. however, the board does not believe that the information is sufficiently reliable to be recognized in',
21344:'a cost beneficial manner. a36.the eiainformation on other than proved reserves is derived from sporadic and incomplete national assessments and',
21345:'annual submissions by oil and gas producers. this makes it particularly uncertain. in addition, since these reserves are not currently',
21346:'under lease, determining the royalty share may be misleading since it is a current value measure but the underlying asset',
21347:'may be restricted and production may never occur. for those resources that are not restricted, production may occur but the',
21348:'timing and amount of royalties are very uncertain. thus, applying the same measurement technique to other than proved reserves maynotresultinavaluethatrepresentswhatitpurportstorepresent.',
21349:'therefore,federaloil andgas resourcesnot yet in the “provedreserves” categorywouldnot berecognized on the federal balance sheet due to concerns regarding reliability of',
21350:'the proposed measure. a37.sffac 1, objectives of federal financial reporting, provides the following with respect to reliability: 160. financial reporting',
21351:'should be reliable; that is, the information presented should be verifiable and free from bias and should faithfully represent what',
21352:'it purports to represent. to be reliable, financial reporting needs to be comprehensive. nothing material should be omitted from the',
21353:'information necessary to represent faithfully the 13 sffac 5, par. 22. page 20 sffas 38 fasab handbook, version 20 06/21',
21354:'sffas 38 underlying events and conditions, nor should anything be included that would likely cause the information to be misleading',
21355:'to the intended report user. reliability does not imply precision or certainty, but reliability is affected by the degree of',
21356:'estimation in the measurement process and by uncertainties inherent in what is being measured. financial reporting may need to include',
21357:'narrative explanations about the underlying assumptions and uncertainties inherent in this process. under certain circumstances, a properly explained estimate provides',
21358:'more meaningful information than no estimate at all. a38.concerning the proved oil and gas reserves from federal oil and gas',
21359:'resources, the board believes that both the quantity and the estimated federal royalty share would be reliable. thus, in this',
21360:'case, since the quantity of the estimated federal proved oil and gas reserves can be reliably estimated and converted to',
21361:'monetary terms estimated federal royalty share, the board believes the estimated federal royalty share of proved oil and gas reserves',
21362:'should be presented as basic information. however, members would like to have more information on the reliability of the valuation',
21363:'methodology before it makes a final decision on whether the information should be recognized on the face of the financial',
21364:'statements or disclosed in the notes to the financial statements. therefore, the board has decided to require the information to',
21365:'be reported in a schedule of estimated federal oil and gas petroleum royalties in rsi for three years. before the',
21366:'end of the threeyear period, the board will make a determination as to whether the information will transition to basic',
21367:'information as financial statement recognition or note disclosure. a39.the board acknowledges that royalties received from federal oil and gas leases',
21368:'will continue to be recognized on the statement of changes in net position with nonexchange revenue rather than on the',
21369:'statement of net cost with other exchange revenue as long as the asset value is reported as rsi and not',
21370:'recognized in the financial statements with a corresponding depletion expense. however, as noted above, the board would like to have',
21371:'more information before it makes a final decision regarding changes to revenue recognition. a40.while the board intends to require that',
21372:'the information transition to basic information as financial statement recognition or note disclosure, the board acknowledges that new information might',
21373:'become available that would warrant continued reporting as rsi. the board will consider its reporting options after additional information becomes',
21374:'available. measurementattributes and methods considered a41.the fasab’s projects to reexamine and expand its conceptual framework include a project on measurement',
21375:'attributes i.e., the aspect of an item that is measured, such as, for example, its historical cost or replacement cost',
21376:'for reporting purposes. this project follows logically from sffac 5, which states that an item’s being measurable is a criterion',
21377:'for page 21 sffas 38 fasab handbook, version 20 06/21 sffas 38 recognition in the financial statements but does not',
21378:'address measurement attributes or measurement methods. a42.as is true of other components of an expanded conceptual framework, the project on',
21379:'measurementattributesisexpectedtoresultinaconceptsstatement forthefuture guidance of, primarily, the board itself. the statement may include definitions and a discussion of the features of',
21380:'different measurement attributes and methods as well as other concepts that should assist the board in developing future standards. while',
21381:'the project on measurement attributes is underway, the board will select the measurement attributes for each standard under deliberation based',
21382:'on available definitions. a43.concerning the dollar amount to be reported for the estimated federal royalty share of proved reserves, the',
21383:'board considered various measurement attributes and methods, including the following: a. historical cost historical proceeds – the amount of cash,',
21384:'or its equivalent, paid to acquire an asset, commonly adjusted after acquisition for amortization or other allocations. b. fair value',
21385:'–the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction',
21386:'between market participantsat the measurement date. c. net realizable settlement value – the total nondiscounted amount of cash, or its',
21387:'equivalent, into which an asset is expected to be converted in due course of business less direct costs, if any,',
21388:'necessary to make that conversion. the net realizable value requires a reasonable estimate of future flows receipts and costs associated',
21389:'with converting assets to cash. d. presentordiscountedvalueoffuturecashflows –thepresentordiscountedvalueof future cash inflows into which an asset is expected to be converted',
21390:'in due course of business less present values of cash outflows necessary to obtain those inflows. a44.after deliberating on the',
21391:'above attributes and methods, the board decided that defining a measurement attribute in terms that are common to the oil',
21392:'and gas industry would be the best approach. therefore, the board proposed to use a regional average first purchase price',
21393:'for oil and lease condensate, a regional average first purchase price for natural gas plant liquids ngpls, and a regional',
21394:'average wellhead price for gas to value federal estimated petroleum royalties. this measurement approach was included in the may 2007',
21395:'ed. page 22 sffas 38 fasab handbook, version 20 06/21 sffas 38 a45.also included in the may 2007 ed was',
21396:'an alternative view from the board member representing the congressional budget office, expressing the view that fair value is the',
21397:'appropriate basis for valuing federal oil and gas resources. at the time, the other board membershadrejectedfairvaluebecauseofthe lackof current transactionsbetweenmarket participants',
21398:'involving the sale of the federal royalty share for proved oil and gas reserves. a46.in conjunction with the comment period',
21399:'on the may 2007 ed, the board requested that the proposal be field tested by the u.s. department of the',
21400:'interior doi. after reviewing the results of the field testing performed by doi see paragraphsa61 througha68 and talking with doi',
21401:'representatives see paragraphsa69 anda70 about the alternative methodology that it developed, the board determined that the estimates that are developed',
21402:'should approximate the present value of future federal royalty receipts on proved reserves known to exist as of the reporting',
21403:'date. the estimates should be based on the best information available at fiscal yearend, or as close to the fiscal',
21404:'yearend as possible. in addition, discount rates as of the reporting date for present value measurements of federal oil and',
21405:'gas assets and liabilities should be based on interest rates on marketable treasury securities with maturities consistent with the cash',
21406:'flows being discounted. a47.while present value is typically considered to be a method for measuring fair value, the present value',
21407:'measurement approach required by this standard is based on an entity specific discount rate, specifically the interest rates on marketable',
21408:'treasury securities, and does not consider the price that market participants demand for bearing the uncertainty inherent in the cash',
21409:'flows i.e., neither the cash flows nor the discount rate is adjusted for a marketriskpremium. atypicalfair valuemeasuremente.g., statement offinancial accountingstandardssfas157,',
21410:'fair value measurements14 is determined based on the assumptionsthat marketparticipants woulduseinpricingtheasset. ameasurementthat does not include an adjustment for the market',
21411:'riskpremium would not represent a fair value measurementsincemarketparticipantswouldincludeoneinpricingthepetroleumroyalties. therefore, the present value measurement approach required by this standard is not',
21412:'a marketbased fair value measure. a48.there is some concern that doi may not be able to implement and/or obtain a',
21413:'favorable audit opinion on the present value methodology that it proposed as a result of its field testing. to permit',
21414:'additional flexibility in the measurement methods for valuing federal estimated petroleum royalties, the board has also determined that marketbased methods',
21415:'for measuring fair value or other methods for measuring current price will be acceptable. fair value incorporates the effects of',
21416:'uncertainty that are inherent in the cash flows expected inthe futurefrom oiland gasactivities, including theeffectsof theadditionalreturn demanded by market participants',
21417:'to assume the risk of that uncertainty. therefore, the 14 fasb accounting standards codification™ asc 82010. page 23 sffas 38',
21418:'fasab handbook, version 20 06/21 sffas 38 standard provides for a measurement method that is based on either 1 the',
21419:'present value of future federal royalty receipts on proved reserves known to exist as of the reporting date using a',
21420:'riskfree discount rate without incorporating market risk, 2 marketbased methods for measuring fair value, or 3 other methods for measuring',
21421:'current price. asset valuation methodology a49.the board believes that the detailed estimation methodology for valuing federal oil and gas resources',
21422:'should be developed by federal entities. in an environment heavily affected by changes in prices, technological advancements, economic and operating',
21423:'conditions, and known geological, engineering, and economic data, estimation methodologies may need to be regularly updated to reflect these changing',
21424:'conditions. sources of information that were once available to preparers may be replaced or become obsolete. on the other hand,',
21425:'new andmorereliabledatasourcesmaybecomeavailable. permittingthepreparersflexibilityin developing an estimation methodology that keeps pace with the environment will prevent the accounting standards from becoming',
21426:'outdated. a50.eiahas been used as the source of information on proved reserves data in the past and may prove to',
21427:'continue to be the appropriate source for such information in the future. however, the board has chosen not to explicitly',
21428:'designate eiaas the source of information; an explicit designation of the source of information would prevent the preparer from fully',
21429:'complying with the standards if the source were no longer available at some point in the future. use of regional',
21430:'data to value the federalasset “estimated petroleum royalties” a51.the board believes that the most relevant, reliable, and costbeneficial measurement of',
21431:'“estimatedpetroleumroyalties” wouldbeobtainedbyusingregionalinformation. theboard believes this approach would provide conservative, representative regional values of estimated petroleum royaltieswithout having to calculate the',
21432:'value on a fieldbyfield basis. theboardbelievesitwould not bepracticabletomakecalculationsonafieldbyfieldbasis. there are more than 60,000 leases maintained by doi with approximately 115,000',
21433:'producing wells. consideration of liability recognition or disclosure a52.recognition of royalty distributions to nonfederal entities as a liability was considered',
21434:'by the board based on sffac 5 paragraphs 36 through 48. page 24 sffas 38 fasab handbook, version 20 06/21',
21435:'sffas 38 a53.aliability is a present obligation15 of the federal government to provide assets or services to another entity at',
21436:'a determinable date, when a specified event occurs, or on demand.16 a54.aliability ofthefederalgovernmenthastwoessential characteristics. first, aliability constitutes a present obligation',
21437:'to provide assets or services to another entity. second, either a law or an agreement or understanding between the government',
21438:'and another entity identifies conditions or events that will determine when the obligation will be settled.17 a55.paragraph 15 requires that',
21439:'the component entity responsible for collecting royalties report the value of the federal government’s estimated petroleum royalties in a schedule',
21440:'of estimated federal oil and gas petroleum royalties. the value of the estimated petroleum royalties would be based on the',
21441:'royalty share of the federal oil and gas resources classified as “proved reserves.” in addition to the royalties that the',
21442:'component entity collects on proved reserves that are produced, it also collects lease sale and rent revenue from federal government',
21443:'oil and gas leases. the component entity distributes nearly all of these proceeds to others e.g., the general fund of',
21444:'the u.s. treasury, other federal agencies, and stategovernmentsinaccordancewithlegislatedallocationformulas. thecomponententity also receives a very small portion of the revenue collected to',
21445:'fund its operations. the amount used to fund its operations is legislated by congress as part of the component entity’s',
21446:'annual appropriation. for example, the amount received by the component entity was approximately one percent 1% of annual revenues collected',
21447:'in 2006.18 a56.the board believes that in addition to presenting a schedule of the estimated petroleum royaltiestobereceived,thecomponent entityresponsibleforcollectingroyaltiesshouldalso present a',
21448:'schedule of the estimated petroleum royalties to be distributed to others because nearly all of the revenue from royalties, lease',
21449:'sales, and rent are ultimately distributed to others e.g., the general fund of the u.s. treasury, other federal agencies, and',
21450:'state governments. 15 the term obligation is used in this statement with its general meaning of a duty or responsibility',
21451:'to act in a certain way. it does not mean that an obligation of budgetary resources is required for a',
21452:'liability to exist in accounting or financialreporting or that aliability inaccounting or financialreporting is required to exist for budgetary resources',
21453:'to be obligated. 16 sffac 5, par. 39. 17 sffac 5, pars. 41 through 48. 18 the one percent was',
21454:'derived by dividing [note 23. custodial distributions to mms, revenues to fund operations] by [total revenue on the statement of',
21455:'custodialactivity] for 2006. page 25 sffas 38 fasab handbook, version 20 06/21 sffas 38 future rights to royalty streams identified',
21456:'for sale a57.when rights to a future royalty stream are identified to be sold, the value of those rights should',
21457:'be reported in rsi as “future royalty rights identified for sale.” reporting the approximate value at the balance sheet date',
21458:'alerts the reader to the pending sale and the potential value of the asset to be sold. a58.thevalue of thefutureroyaltyrightsidentifiedforsaleisbased',
21459:'onthe specificfieldidentified for sale. because the fields are known, this provides a more field specific value for the rights identified',
21460:'to be sold. original exposure draft a59.the original ed, accounting for federal oil and gas resources, was issued may 21,',
21461:'2007 withcommentsrequestedbyseptember21,2007. however,becausetheboardreceiveda request for the comment period to be extended and because few responses had been received, the board',
21462:'agreed to extend the comment period until january 11, 2008. comment letters a60.eight commentletterswerereceivedontheoriginaled. the followingpointspresent a highlevel summary of',
21463:'the comments received: a. the majority of respondentsagreed with the overall concept of recognizing an asset for the federal government’s',
21464:'natural resources and a liability for the related royalty revenues designated to be distributed to others. b. two of the',
21465:'eight respondents stated that standards on federal natural resources should include all federal natural resources and not be limited to',
21466:'only oil and gas resources. c. one of the eight respondents commented on the complex nature of the original ed.',
21467:'d. no respondents supported the use of the probabilistic method of estimation as proposed in the alternative view of the',
21468:'original ed. e. two respondents supported the use of present value or fair value with discounting similar to the alternative',
21469:'view proposal instead of the valuation method as proposed in the original ed that utilizes the average first purchase or',
21470:'wellhead price. page 26 sffas 38 fasab handbook, version 20 06/21 sffas 38 f. the majority of respondents agreed that',
21471:'the numerous disclosures proposed in the original ed appeared excessive and might not pass a cost/benefit test. g. there was',
21472:'general support for royalty relief disclosures. h. of the five respondents that directly addressed the question on fiduciary disclosures, four',
21473:'stated that the cost of such disclosures would outweigh any perceived benefits. i. the majority of respondents supported the recommendation',
21474:'for more limited disclosures in the cfr. however, one respondent stated that because natural resources are sovereign assets, the major',
21475:'disclosures would more appropriately appear in the cfr and not agency financial statements. field testing a61.in addition to the comment',
21476:'letters received on the original ed, the board also considered theresultsofafieldtestoftheproposedstandardsperformedbyadoifieldtestteam. the field test team consisted of mms offshore mineralsmanagement',
21477:'economics and resource evaluation experts and petroleum engineers; bureau of land management petroleum engineers and resource evaluation experts; and mms',
21478:'custodial reporting branch senior accountants with expertise in financial reporting. a62.field tests are part of fasab’s due process and help',
21479:'fasab to establish effective standards. participating federal entities volunteer to go through the exercise of “implementing” the proposed standards as',
21480:'if they were in place and then provide feedback to fasab regarding the process. field tests can proactively identify potential',
21481:'problems related to the implementation of proposed standards and allow fasab to gather valuable information about implementation costs. a63.the field',
21482:'test team presented the board with a number of significant considerations, including the lack of availability of quantity information on',
21483:'proved reserves under federal lands. the original ed had proposed that the valuation of federal oil and gas resources be',
21484:'based on information to be provided by eiaon quantity of proved reserves under federal lands. however, this information has not',
21485:'been made available as of the date of the revised ed, and does not appear to be forthcoming. a64.in addition',
21486:'to the reliance on proved reserves data required to be provided by eia, the field test team noted a number',
21487:'of other concerns, including: a. the desire to divide proved reserves by type of commodity e.g., crude oil, lease condensate,',
21488:'and natural gas and compute the asset value separately; page 27 sffas 38 fasab handbook, version 20 06/21 sffas 38',
21489:'b. the need to develop a methodology for determining what portion of all proved reserves fall under federal domain; c.',
21490:'the need to exclude royalty relief volumes and estimate the value of commodities received in kind and delivered to the',
21491:'department of energy to fill the strategic petroleum reserve; d. the effect of intermediate production between the effective date of',
21492:'the reserves estimate and the effective date of the booked value; e. the effect of estimates such as the royalty',
21493:'accrual and prior year production adjustments made in the current year; f. how to distinguish between long and shortterm liabilities',
21494:'for the associated liability for revenue distributions to others; g. appropriate treatment of interest payments related to oil and gas',
21495:'or commodities other than oil and gas once the custodial provisions are deleted from sffas 7 paragraphs 45, 275, and',
21496:'277; h. the impact of material intragovernmental transactions and eliminations on the yearend reporting process; and, i. the need to',
21497:'revise all, or almost all, of the existing posting models in the accounting system. a65.the field test team also completed',
21498:'a field test questionnaire using a present value approach. this questionnaire included many of the same concerns as noted in',
21499:'paragraphs a63anda64 above. inaddition,the presentvalueapproachalsoincorporatedpresent value calculations for factors such as the present value of royalties received over time, estimates',
21500:'of future gas prices, transportation allowances, and discount and inflation rates. a66.in both estimates the ed view as well as',
21501:'the present value view, the field test team used share of production as a proxy for share of proved reserves.',
21502:'one of the members expressed concernsabouttheuseofproductionasaproxyforunderlyingreservesbecause it assumes 1 the same percentage of reserves are brought to market each year',
21503:'from all locationsor at least, on averagebetweenfederaland nonfederal and2toomuchyear to year variance in production patterns makes underlying reserve estimates fluctuate',
21504:'by an equal amount. a67.staff askedanoilandgasanalystatthe congressionalbudget officeforhisthoughtsonthe methodology. he responded that he understands the concern with the first assumption',
21505:'page 28 sffas 38 fasab handbook, version 20 06/21 sffas 38 because it is likely that not the same fraction',
21506:'of reserves will be accessed in each year. however, he stated that averaging between federal and nonfederal would control for',
21507:'some of that variance, though it is not possible to know just how much. he stated that this simplifying assumption',
21508:'is fairly reasonable given the approximate nature of the analysis. the analyst noted that with the second assumption, the variance',
21509:'might be eliminated or reduced by using a moving average rather than a yeartoyear measure. for example, a 5year or',
21510:'10year moving average of total federal production over total production would control some of the yearly differences between federal and',
21511:'nonfederal. a68.the field test questionnaires were extremely useful in helping the board develop the standards proposed in the revised ed.',
21512:'discussion with doi representatives a69.in addition to the board’s consideration of the comment letters received and the field test questionnaires,',
21513:'three members of the field test team and two representatives from doi’s office of the secretary met with the board',
21514:'at the october 23, 2008, meeting to discuss issues raised in its comment letter on the original ed and the',
21515:'related field test questionnaires. a70.at that meeting, doi representatives indicated that they would be open to having less detailed implementation',
21516:'guidance in the standards if they were given a longer implementation period two to three years with a phasein from',
21517:'rsi to basic information, and the ability to return to fasab for implementation guidance if a reasonable methodology could not',
21518:'be agreed to by the auditors. revised exposure draft a71.the revised ed, accounting for federal oil and gas resources, was',
21519:'issued july 6, 2009, with comments requested by september 8, 2009. a72.upon release of the revised ed, notices and press',
21520:'releases were provided to the federal register, fasab news, the journal of accountancy, aga today, the cpa journal, government executive,',
21521:'the cpa letter, government accounting and auditing update, the cfo council, the council of inspectors general on integrity and efficiency,',
21522:'the financial statementaudit network, and committees of professional associations generally commenting on exposure drafts in the past. a73.this broad announcement',
21523:'was followed by direct mailings or emails of the revised ed to: page 29 sffas 38 fasab handbook, version 20',
21524:'06/21 sffas 38 a. relevant congressional committees: senate committee on energy and natural resources, senate committee on finance, senate committee',
21525:'on indian affairs, house committee on financial services, and house committee on natural resources; b. public interest groups and think',
21526:'tanks: national congress of american indians ncai, national and regional; alliance to save energy; brookings institution; cato institute; center on',
21527:'budget and policy priorities; citizensagainst government waste; the concord coalition; the heritage foundation; national parks conservationassociation npca; natural resources defense',
21528:'council nrdc; omb watch; resources for the future rff; sierra club; urban institute; and world resources institute wri; c. respondents',
21529:'to the prior ed or their successors; d. agencies that manage and/or account for federal natural resources: doi; department of',
21530:'agriculture usda, deputy cfo; usda forest service; and doi bureau of land management; e. the oil and gas industry: world',
21531:'petroleum council wpc,american petroleum institute api, society of petroleum engineers spe, and ryder scott company; and, f. other: doi, office',
21532:'of the special trustee ost; energy information administration eia; department of energy, deputy cfo; securities and exchange commission; u.s. geological',
21533:'service usgs; and kpmg doi’s financial statement audit partner. a74.in addition, the ed was publicized during the fasab update session',
21534:'at the financial statementaudit network monthly meeting on july 21, 2009, and at the department of the treasury’s 19thannual government',
21535:'financial management conference onaugust 5, 2009. a75.toencourageresponses,remindernoticesweresent tothe fasablistservand each of the above individuals/organizations onaugust 20, 2009. comment letters a76.nine',
21536:'comment letters were received from the following sources: federal internal nonfederal external users, academics, others 2 auditors 1 preparers and',
21537:'financial managers 6 page 30 sffas 38 fasab handbook, version 20 06/21 sffas 38 a77.the following provides a highlevel summary',
21538:'of the comments received on the revised ed: a. the majority of respondents agreed that federal entities should be provided',
21539:'with flexibility in developing the asset valuation estimation methodology. doi also agreed with the provision of flexibility with the caveat',
21540:'that a more detailed implementation guide be developed. b. the majority of respondents agreed with the board’s selection of present',
21541:'value of future federal royalty receipts on proved reserves known to exist as of the reporting date as the preferred',
21542:'measurement method. doi also agreed with the preferred measurement method but noted that the proposed valuation from their field test',
21543:'questionnaire was based upon omb’s economic assumptions about future treasury marketable security rates. c. half of the respondents agreed with',
21544:'the board’s proposal to permit an alternative marketbased fair value measurement consistent with fasb sfas 157, fair value measurement, if',
21545:'it is not reasonably possible to estimate using present value. one of the respondents disagreed with the use of fair',
21546:'value based on sfas 157 because the oil and gas market is so volatile. doi also agreed with the provision',
21547:'of an alternative measurement method but disagreed with the use of fair value based on sfas 157 because they do',
21548:'not think the asset should be measured at a market exit price19 since it is extremely unlikely that the asset',
21549:'would ever be sold. d. the majority of respondents agreed that federal entities should be permitted to change their methodology',
21550:'for valuing the federal government’s estimated petroleum royalties if environmental or other changes would provide for the development of an',
21551:'improved methodology. one respondent disagreed on the basis that it could impair the government’s ability to prepare consolidated financial statements',
21552:'for the federal government. e. the majority of respondents agreed that it would be appropriate to provide guidance regarding reporting',
21553:'gains and losses from changes in assumptions and selecting the discount rates similar to that provided in sffas 33. doi',
21554:'also agreed with the provision of guidance on reporting gains and losses with the caveat that a more detailed implementation',
21555:'guide be developed. f. half of the respondents agreed with the disclosure requirements for oil and gas fiduciary activities. two',
21556:'respondents disagreed because they have cost/benefit concerns. one respondent disagreed partly because of cost/benefit concerns and 19 exit price is',
21557:'the price that would be received to sell an asset or paid to transfer a liability fasb asc 8201020. page',
21558:'31 sffas 38 fasab handbook, version 20 06/21 sffas 38 partly because fiduciaries are generally not required by other standardssetters',
21559:'to value noncash assets. doi agreed with the disclosures and indicated that the information could be fairly readily reported. g.',
21560:'all of the respondents agreed with the threeyear phasein of information from rsi to basicinformation. however,as discussedmoreinnumbera77ibelow,themajority of respondentswouldpreferthat,followingthethreeyearphaseinperiod,theinformation be',
21561:'presented as basic information in the notes rather than recognized on the face of the financial statements. h. there was',
21562:'not a consistent view among respondents regarding application of the standard to other types of natural resources. two of the',
21563:'respondents agreed with the inclusion of paragraph 9 relating to other types of natural resources. one respondent did not believe',
21564:'that the ed provided enough detail to form a response. another respondent preferred that fasab explicitly require agencies to use',
21565:'valuation, accounting, and financial reporting methods consistent with the provisions of the final standardforalltypesofnaturalresources. anotherrespondent—doi—providedsome clarifying language that they believed',
21566:'would help fill a void in guidance that could lead to potentially inaccurate or inconsistent reporting. i. themajorityofrespondentsagreedwiththealternativeviewcontainedinthejuly2009 revised ed,',
21567:'which proposed that, following the threeyear transition period as rsi, the value of federal oil and gas resources and annual',
21568:'changes be disclosed as basic informationinthenotes, ratherthanrecognizedonthefaceofthefinancialstatements. one respondent disagreed with the alternative view in the revised ed because they',
21569:'supported the eventual presentation of all natural resources on the face of federal financial statements. another respondent disagreed with the',
21570:'alternative view in the revised ed on the basis that the quantity and value of oil and gas resources and',
21571:'related revenuesand depletion expenseswould bematerial to the financial statements of the entities reporting those items; therefore, the omission or misstatement',
21572:'of that information makes it probable that the judgment of a reasonable person relying on the information would be changed',
21573:'or influenced. a78.theboarddidnotrelyonthenumberinfavoroforopposedtoagivenposition. information about the respondents’ majority view is provided only as a means of summarizing the comments. the',
21574:'board considered the arguments in each response and weighed the merits of the points raised. a79.after deliberating the comments received',
21575:'on the revised exposure draft, the majority of the board voted to require the information as rsi for three years',
21576:'and then put the project back on the agenda after two years to decide whether the asset would be recognized',
21577:'in the financial statements or disclosed in the notes. the board plans to utilize the experience page 32 sffas 38',
21578:'fasab handbook, version 20 06/21 sffas 38 gained by doi and others during the rsi period to inform their decision',
21579:'regarding financial statement recognition versus note disclosure. a80.after considering respondents’ views on applying the standard on accounting for federal oil',
21580:'and gas resources to other types of natural resources, the board directed staff to apply the requirementsof thisstatement to other',
21581:'types of naturalresourcesthroughtheissuanceof a technicalbulletin. atechnicalbulletinwillprovideanother opportunityfor respondents to directly comment on the standards as they relate to other types',
21582:'of natural resources. a81.after debating the advantages and disadvantages of limiting the alternative measurement method to sfas 157 fair value,',
21583:'as had been proposed in the revised ed, the board unanimously agreed to broaden the acceptable alternative measurement methods during',
21584:'the rsi phase to allow for greater flexibility in development of a valuation methodology. boardapproval a82.this statement was approved for',
21585:'issuance by all members of the board. the written ballots are available for public inspection at the fasabs offices. page',
21586:'33 sffas 38 fasab handbook, version 20 06/21 sffas 38 appendix b: illustrations please note: the examples in thisappendix are',
21587:'illustrative only; they are populated with hypothetical amounts and do not represent authoritative guidance. illustrations are not provided for all',
21588:'requirements. page 34 sffas 38 fasab handbook, version 20 06/21 sffas 38 required supplementary information schedule of estimated federal oil',
21589:'and gas petroleum royalties asset value as of september 30, 20x3 in thousands offshore region 1 region 2 region 3',
21590:'region 4 region 5 total dry gas $4,500,000 $3,960,000 $2,880,000 $3,240,000 $3,420,000 $18,000,000 wet gas 500,000 440,000 320,000 360,000 380,000',
21591:'2,000,000 ngpls 500,000 440,000 320,000 360,000 380,000 2,000,000 oil 5,500,000 4,840,000 3,520,000 3,960,000 4,180,000 22,000,000 condensate 250,000 220,000 160,000 180,000',
21592:'190,000 1,000,000 total offshore $11,250,000 $9,900,000 $7,200,000 $8,100,000 $8,550,000 $45,000,000 onshore region 1 region 2 region 3 region 4 region',
21593:'5 total dry gas $2,625,000 $2,310,000 $1,680,000 $1,890,000 $1,995,000 $10,500,000 wet gas 250,000 220,000 160,000 180,000 190,000 1,000,000 ngpls 250,000',
21594:'220,000 160,000 180,000 190,000 1,000,000 oil 3,000,000 2,640,000 1,920,000 2,160,000 2,280,000 12,000,000 condensate 125,000 110,000 80,000 90,000 95,000 500,000 total',
21595:'onshore $6,250,000 5,500,000 $4,000,000 $4,500,000 $4,750,000 $25,000,000 total offshore and onshore $17,500,000 $15,400,000 $11,200,000 $12,600,000 $13,300,000 $70,000,000 page 35 sffas',
21596:'38 fasab handbook, version 20 06/21 sffas 38 schedule of estimated federal oil and gas petroleum royalties asset value as',
21597:'of september 30, 20x2 in thousands offshore region 1 region 2 region 3 region 4 region 5 total dry gas',
21598:'$5,250,000 $4,620,000 $3,360,000 $3,780,000 $3,990,000 $21,000,000 wet gas 1,000,000 880,000 640,000 720,000 760,000 4,000,000 ngpls 1,000,000 880,000 640,000 720,000 760,000',
21599:'4,000,000 oil 7,250,000 6,380,000 4,640,000 5,220,000 5,510,000 29,000,000 condensate 500,000 440,000 320,000 360,000 380,000 2,000,000 total offshore $15,000,000 $13,200,000 $9,600,000',
21600:'$10,800,000 $11,400,000 $60,000,000 onshore region 1 region 2 region 3 region 4 region 5 total dry gas $4,000,000 $3,520,000 $2,560,000',
21601:'$2,880,000 $3,040,000 $16,000,000 wet gas 500,000 440,000 320,000 360,000 380,000 2,000,000 ngpls 500,000 440,000 320,000 360,000 380,000 2,000,000 oil 4,750,000',
21602:'4,180,000 3,040,000 3,420,000 3,610,000 19,000,000 condensate 250,000 220,000 160,000 180,000 190,000 1,000,000 total onshore $10,000,000 $8,800,000 $6,400,000 7,200,000 $7,600,000 $40,000,000',
21603:'total offshore and onshore $25,000,000 $22,000,000 $16,000,000 $18,000,000 $19,000,000 $100,000,000 page 36 sffas 38 fasab handbook, version 20 06/21 sffas',
21604:'38 schedule of estimated federal oil and gas petroleum royalties to be distributed to others as of september 30 in',
21605:'thousands 20x3 20x2 other federal agencies department of the treasury $56,000,000 $80,000,000 department of energy 420,000 600,000 other20 1,330,000 1,900,000',
21606:'indian tribes and agencies 350,000 500,000 states and others 10,500,000 15,000,000 total estimated petroleum royalties to be distributed to others',
21607:'$68,600,000 $98,000,000 management of federal oil and gas resources the minerals management service mms plays an integral part in the',
21608:'implementation of the president’s national energy policy nep. the nep is a comprehensive strategy designed to secureamerica’s energy future by',
21609:'reducing dependence on foreign sources, increasing domesticfossilfuelproduction,improvingenergyconservationefforts,anddevelopingalternative and renewable energy sources. the mms is responsible for managing the nation’s oil',
21610:'and natural gas resources on the outer continental shelf ocs and the mineral revenues from the ocs and federal lands.',
21611:'the mms management process can be broken down into six essential analysis components: preleasing, postleasing and preproduction, production and post',
21612:'production, revenue collection, fund disbursement, and revenue compliance. stewardship policies for federal oil and gas resources the mms’s responsibilities as',
21613:'stewards of the physical oil and gas resources on the ocs begin when the mms conducts preleasing analysis activities, which',
21614:'include the assessment of oil and gas resources that may be offered for lease. following the preleasing assessment, the mms',
21615:'develops a plan for offering those resources to developers. in the case of oil and gas development, this planning process',
21616:'is designed to consider both the environmental and economic concerns of the nation by providing opportunities for input from the',
21617:'public, the private 20material distributions should be listed separately by entity. page 37 sffas 38 fasab handbook, version 20 06/21',
21618:'sffas 38 sector, states, and congress. the mms conducts public planning processes for each individual lease sale. oncea sale iscompleted,',
21619:'the mms evaluatesthe bidstoensurethat the governmentwillreceive fair market value. the evaluation determines whether the bid can be accepted and a',
21620:'lease issued. once a lease is assigned to a winning bidder, the mms begins postleasing and preproduction activities. these activities',
21621:'include a permitting and approval process for all exploration, development, and production activities proposed by the lease operators. mms staff',
21622:'inspects each operation in order to confirm that all activities are conducted in an environmentally and physically safe manner. similar',
21623:'inspections also occur during the production and post production activities to help ensure the federal government is receiving accurate royalties',
21624:'from production and facilities are decommissioned in a manner that protects the environment. once a lease is in place, the',
21625:'federal government’s share of production from both offshore and onshore operations may be recovered as royaltyinvalue riv or royaltyinkind rik.',
21626:'federal oil and gas leasing laws and lease terms provide the government with the option of receiving production royalty payments',
21627:'either in money “in value” or oil and gas production “in kind”. through royalty revenue collection and fund disbursement, the',
21628:'mms achieves optimal value by ensuring that all revenues from federal oil and gas leases are efficiently, effectively, and accurately',
21629:'collected, accounted for, and disbursed to states, other federal component entities, and the u.s. treasury. the mms also performs revenue',
21630:'compliance activities to ensure the federal government has received fair market value and that companies comply with applicable laws, regulations,',
21631:'and lease terms. through this mineral asset management process, the mms serves as a leading mineral asset manager for the',
21632:'federal government, the states, and theamerican people. future royalty streams identified for sale future royalty streams from two specific oil',
21633:'fields have been identified to be sold. the estimated value of the future royalty streamidentified to be sold from field',
21634:'number one in the gulf of mexico is $4.8 million based on the following calculation: the royalty stream from one',
21635:'million barrels are to be sold at a $40.00 sale price per barrel per field number one first purchase price',
21636:'for oil with a 12 percent royalty rate for field number one. the estimated value of the future royalty streamidentified',
21637:'to be sold from field number two in the gulf of mexico is $2.7 million based on the following calculation:',
21638:'the royalty stream from 750 thousand barrels are to be sold at a $30.00 sale price per barrel per field',
21639:'number two first purchase price for oil with a 12 percent royalty rate for field number two. the future royalty',
21640:'streams are expected to be sold sometime during the next fiscal year. page 38 sffas 38 fasab handbook, version 20',
21641:'06/21 sffas 38 revenue reported by category fiscal year 20x3 in thousands federal offshore federal onshore total dry gas royalty',
21642:'$900,000 $200,000 $1,100,000 wet gas royalty 600,000 100,000 700,000 ngpls royalty 300,000 100,000 400,000 oil royalty 1,500,000 300,000 1,800,000 lease',
21643:'condensate royalty 100,000 40,000 140,000 subtotal $3,400,000 $740,000 $4,140,000 rent $200,000 $40,000 $240,000 bonus bid 2,000 0 2,000 subtotal $202,000',
21644:'$40,000 $242,000 total $3,602,000 $780,000 $4,382,000 page 39 sffas 38 fasab handbook, version 20 06/21 sffas 38 revenue reported by',
21645:'category fiscal year 20x2 in thousands federal offshore federal onshore total dry gas royalty $1,000,000 $225,000 $1,225,000 wet gas royalty',
21646:'700,000 150,000 850,000 ngpls royalty 400,000 150,000 550,000 oil royalty 1,600,000 325,000 1,925,000 lease condensate royalty 100,000 60,000 160,000 subtotal',
21647:'$3,800,000 $910,000 $4,710,000 rent $200,000 $50,000 $250,000 bonus bid 3,000 0 3,000 subtotal $203,000 $50,000 $253,000 total $4,003,000 $960,000 $4,963,000',
21648:'the above tables of revenue reported by category presents royalty revenue for dry gas, wet gas, natural gas plant liquids',
21649:'ngpls, oil and lease condensate, as well as rent revenue and bonus bidrevenue,byoffshoreleasesandbyonshoreleasesforthecurrentandpriorreportingperiods. in addition, totals for the dry and',
21650:'wet gas royalty revenue categories, ngpls royalty revenue category, oil and lease condensate royalty revenue categories, the rent revenue category,',
21651:'and the bonus bid revenue category are reported, with a total for all revenue reported. page 40 sffas 38 fasab',
21652:'handbook, version 20 06/21 sffas 38 estimated petroleum royalties end of fiscal year 20x3 quantity in thousands purchase price $',
21653:'royalty rate % dry gas mcf 60,100,000,000 $4.00/mcf 14.0% wet gas mcf 40,000,000,000 $4.00/mcf 15.0% ngpls bbl 2,000,000 $23.00/bbl 9.0%',
21654:'oil bbl 11,000,000 $40.00/bbl 13.0% lease condensate bbl 2,100,000 $29.00/bbl 15.0% estimated petroleum royalties end of fiscal year 20x2 quantity',
21655:'in thousands purchase price $ royalty rate % dry gas mcf 58,100,000,000 $5.00/mcf 12.0% wet gas mcf 36,800,000,000 $5.00/mcf 13.0%',
21656:'ngpls bbl 1,900,000 $24.00/bbl 8.0% oil bbl 10,000,000 $42.00/bbl 11.0% lease condensate bbl 2,000,000 $30.00/bbl 13.0% the tables above provide',
21657:'the quantity, purchase price, and royalty rate by category of estimated petroleum royalties at the end of the current and',
21658:'prior reporting periods. federal regional oil and gas sales information the tables on the following pages reflect sales volume, sales',
21659:'value, royalty revenue earned, and estimated value for royalty relief information for fiscal year 20xx. sales volume represents the quantity',
21660:'of a mineral commodity sold during the reporting period. sales value represents the dollar value of the mineral commodity sold',
21661:'during the reporting period. royalty revenue earned represents a stated share or percentage of the value of the mineral commodity',
21662:'produced. page 41 sffas 38 fasab handbook, version 20 06/21 sffas 38 royalty relief is the reduction, modification, or elimination',
21663:'of any royalty payment due to promote development, increase production, or encourage production of marginal resources on certain leases or',
21664:'categories of leases. the estimated value for royalty relief is an approximated calculation of royalty relief. the estimated value for',
21665:'royalty relief is calculated based on a formula developed by the department of the interior. the sales volume, sales value,',
21666:'royalty revenue earned, and the estimated value for royalty relief are presented on a regional basis. the information is presented',
21667:'on a regional basis to provide users of the financial statements with the regional variances in the prices of oil',
21668:'and gas for decisionmaking purposes, to reflect the amount of royalty relief granted and to forecast future royalty revenue. federal',
21669:'regional oil and gas information fy 20xx dry gas information in thousands region sales volume mcf sales value $ royalty',
21670:'revenue earned $ estimated value for royalty relief $ [region 1] 2,800,000 $8,100,000 $1,200,000 n/a [region 2] 2,900,000 7,300,000 1,100,000',
21671:'n/a [region 3] 3,000,000 7,700,000 1,200,000 4,000,000 [region 4] 2,800,000 6,200,000 900,000 n/a [region 5] 2,700,000 4,500,000 700,000 n/a totals',
21672:'14,200,000 $33,800,000 $5,100,000 $4,000,000 fy 20xx wet gas information in thousands region sales volume mcf sales value $ royalty revenue',
21673:'earned $ estimated value for royalty relief $ [region 1] 1,800,000 $5,400,000 $800,000 n/a [region 2] 1,900,000 4,800,000 700,000 n/a',
21674:'[region 3] 2,000,000 5,100,000 800,000 n/a [region 4] 1,800,000 4,100,000 600,000 n/a [region 5] 1,800,000 3,000,000 400,000 n/a totals 9,300,000',
21675:'$22,400,000 $3,300,000 n/a page 42 sffas 38 fasab handbook, version 20 06/21 sffas 38 fy 20xx natural gas plant liquids',
21676:'ngpls information in thousands region sales volume bbl sales value $ royalty revenue earned $ estimated value for royalty relief',
21677:'$ [region 1] 500,000 $7,100,000 $1,000,000 n/a [region 2] 400,000 5,700,000 800,000 n/a [region 3] 500,000 10,200,000 1,400,000 3,200,000 [region',
21678:'4] 400,000 8,900,000 1,300,000 n/a [region 5] 300,000 7,200,000 1,100,000 n/a totals 2,100,000 $39,100,000 $5,600,000 $3,200,000 fy 20xx oil information',
21679:'in thousands region sales volume bbl sales value $ royalty revenue earned $ estimated value for royalty relief $ [region',
21680:'1] 300,000 $4,500,000 $700,000 n/a [region 2] 300,000 5,600,000 800,000 n/a [region 3] 100,000 1,800,000 100,000 n/a [region 4] 4,500,000',
21681:'11,500,000 1,800,000 n/a [region 5] 4,500,000 9,100,000 1,700,000 n/a totals 9,700,000 $32,500,000 $5,100,000 n.a fy 20xx lease condensate information in',
21682:'thousands region sales volume bbl sales value $ royalty revenue earned $ estimated value for royalty relief $ [region 1]',
21683:'80,000 500,000 70,000 n/a [region 2] 70,000 600,000 90,000 n/a [region 3] 50,000 200,000 20,000 n/a [region 4] 500,000 1,200,000',
21684:'200,000 n/a [region 5] 500,000 1,000,000 190,000 n/a totals 1,200,000 $3,500,000 $570,000 n/a page 43 sffas 38 fasab handbook, version',
21685:'20 06/21 sffas 38 appendix c:abbreviations asc fasb accounting standards codification™ bbl barrels cfr consolidated financial report doi department of',
21686:'the interior ed exposure draft eia energy information administration fasab federalaccounting standardsadvisory board fasb financialaccounting standards board mcf thousand cubic',
21687:'feet mms minerals management service ocs outer continental shelf ngpls natural gas plant liquids rsi required supplementary information sffac statement',
21688:'of federal financialaccounting concepts sfas statement of financialaccounting standards sffas statement of federal financialaccounting standards u.s. united states usgs u.s.',
21689:'geological survey page 44 sffas 38 fasab handbook, version 20 06/21 sffas 38 appendix d: technical terms the terms explained',
21690:'inappendix d have specific technical meanings within the oil and gas industry and may be useful in applying the requirements',
21691:'of this statement. definitions of resource and reserve components and subcomponents provided below are definitions used by federal entities to',
21692:'describe oil and gas resource and reservecomponentsandsubcomponents.21 this sectionofappendixddefinestheterms used in figure 1 – components of federal oil and gas',
21693:'resources. undiscovered resources resources estimated from broad geologic knowledge or theory and existing outside of known fieldsorknownaccumulationsareundiscoveredresources. undiscoveredresourcescanexistin untested prospects',
21694:'on unleased acreage, or on undrilled lease acreage, or in known fields. in known fields, undiscovered resources occur in undiscovered',
21695:'pools that are controlled by distinctly separate structural features or stratigraphic conditions. the mineral management service mms and the u.s.',
21696:'geological survey usgs formerly conducted national assessments of undiscovered oil and gas resources together. the former was responsible for the',
21697:'offshore while the latter was responsible for onshore and state waters. the last such assessment was in 1995. mms updates',
21698:'their assessment approximately every five years in accordance with doi’s fiveyear leasing program, with the last update in 2006.22 since',
21699:'1995, the usgs has not conducted an overall update for onshore and state waters, but has conducted assessments updates on',
21700:'a basin or area level. the assessment considers recent geophysical, geological, technological, and economic information and uses a geologic play',
21701:'analysis approach for resource appraisal. 21 unlessotherwise noted,the definitions in this section were adapted from1the ocs report, estimated oiland gas',
21702:'reserves, gulf of mexico, december 31, 2000, mms 2003050; available online at https://www.gomr.mms.gov/pdfs/2003/2003050.pdf; last accessed december 2, 2009 and 2',
21703:'the ocs report, estimated oil and gas reserves pacific outer continental shelf as of december 31, 1997, mms 990023; available',
21704:'online at http://www.mms.gov/omm/pacific/offshore/oilgaspdfs/990023.pdf; last accessed december 2, 2009. 22 mmsassessment of undiscovered technically recoverable oil and gas resources of the',
21705:'nation’s outer continental shelf, 2006 mms 2006assessment; available online at http://www.mms.gov/revaldiv/ pdfs/2006nationalassessmentbrochure.pdf; last accessed december 2, 2009. page 45 sffas',
21706:'38 fasab handbook, version 20 06/21 sffas 38 undiscovered resources are hydrocarbons estimated on the basis of geologic knowledge and',
21707:'theory to exist outside of known accumulations. they are presumed to occur in unmapped and unexploredareas. thespeculativeandhypotheticalresourcecategoriescompriseundiscovered resources. undiscovered resources',
21708:'are classified as either undiscovered nonrecoverable resources or undiscovered recoverable resources. undiscovered nonrecoverable resources the portion of undiscovered petroleuminitiallyinplace quantities',
21709:'not currently considered to be recoverable. aportionofthese quantitiesmaybecomerecoverableinthe futureascommercial circumstances change, technological developments occur, or additional data are acquired. undiscovered',
21710:'recoverable resources an assessment provides estimates of undiscovered recoverable resources in two categories for federal offshore oil and gas resources.',
21711:'however assessments for federal onshore oil and gas resources provide information for only one, the undiscovered, conventionally recoverable resources. both',
21712:'are described below: 1. undiscovered, conventionally recoverable resources: the portion of the hydrocarbon potentialthat isproducible, usingpresentorreasonablyforeseeabletechnology, withoutany consideration of economic',
21713:'feasibility.23 2. undiscovered, economically recoverable resources: the portion of the undiscovered conventionally recoverable resources that is economically recoverable under imposed',
21714:'economic scenarios. reserves in accordance with the society of petroleum engineers spe, the world petroleum congresses wpc, and theamericanassociation of',
21715:'petroleum geologists aapg, the definition for “reserves” and the following explanatory paragraphs are presented as follows:24 reserves are those quantities',
21716:'of petroleum which are anticipated to be commercially recovered from known accumulations from a given date forward. all reserve estimates',
21717:'23mmsassessment of undiscovered technically recoverable oil and gas resources of the nation’s outer continental shelf, 2003 update; available online at',
21718:'http://www.mms.gov/revaldiv/pdfs/2003 nationalassessmentupdate.pdf; last accessed december 2, 2009. 24 wpc/spe/aapg petroleum reserves definitions – 1997; available online at http://www.spe.org/spesite/ spe/spe/industry/reserves/petroleumreserves; last',
21719:'accessed december 2, 2009. page 46 sffas 38 fasab handbook, version 20 06/21 sffas 38 involve some degree of uncertainty.',
21720:'the uncertainty depends chiefly on the amount of reliable geologic and engineering data available at the time of the estimate',
21721:'and the interpretation of these data. the relative degree of uncertaintymaybe conveyed by placing reservesinto one of two principal classifications,',
21722:'either 1 unproved or 2 proved. unproved reserves after a lease qualifies under title 30, section 250.115/116 of the code',
21723:'of federal regulations, the mms field naming committee reviews the new producible lease to assign it to an existing field',
21724:'or, if the lease is not associated with an established geologic structure, to a new field. regardless of where the',
21725:'lease is assigned, the reserves associated with the lease are initially considered to be unproved reserves. unproved reserves are based',
21726:'on geologic or engineering information similar to that used in estimates of proved reserves, but, technical, contractual, economic, or regulatory',
21727:'uncertainties preclude such reserves from being classified as proved. unproved reserves may be divided into two subclassifications, possible and probable,',
21728:'which are similarly based on the level of uncertainty. unproved possible reserves are less certain than unproved probable reserves and',
21729:'can be estimated with a low degree of certainty, which is insufficient to indicate whether they are more likely to',
21730:'be recovered than not. reservoir characteristics are such that a reasonable doubt exists that the project will be commercial. after',
21731:'a lease qualifies under title 30, section 250.115/116 of the code of federal regulations, the reserves associated with the lease',
21732:'are initially classified as unproved possible. unproved probable reserves are less certain than proved reserves and can be estimated witha',
21733:'degreeof certaintysufficient toindicate theyaremorelikelytoberecovered than not. reserves in fields for which a schedule leading to a development and production plan',
21734:'dpp has been submitted to the mms have been classified as unproved probable. proved reserves proved reserves can be estimated',
21735:'with reasonable certainty to be recoverable under current economic conditions, such as prices and costs prevailing at the time of',
21736:'the estimate. proved reserves must either havefacilitiesthat are operationalat the timeof the estimate to processand transport those reserves to market',
21737:'or a commitment or reasonable expectation to install such facilities in the future. proved reserves can be subdivided into undeveloped',
21738:'and developed. page 47 sffas 38 fasab handbook, version 20 06/21 sffas 38 proved undeveloped reserves are classified proved undeveloped',
21739:'when a relatively large expenditureisrequiredtoinstallproductionand/ortransportationfacilities, acommitmentby the operator is made, and a timeframe to begin production is established. proved undeveloped',
21740:'reserves are reserves expected to be recovered from 1 yet undrilled wells, 2 deepening existing wells, or 3 existing wells',
21741:'for which a relatively large expenditure is required for recompletion. proved developed reserves are classified as proved developed when the',
21742:'reserves are expected to be recovered from existing wells including reserves behind pipe. reserves are considered developed only after necessary',
21743:'production and transportation equipment have been installed or when the installation costs are relatively minor. proved developed reservesaresubcategorizedasproducingornonproducing. thisdistinctionismadeatthe reservoir',
21744:'level and not at the field level. any developed reservoir in a developed field that has not produced or has',
21745:'not had sustained production during the past year is considered to contain proved developed nonproducing reserves. this category includes reserves',
21746:'contained in nonproducing reservoirs, reserves contained behindpipe, and reservoirs awaiting well workovers or transportation facilities. once the first reservoir in',
21747:'a field begins production, the reservoir is considered to contain proved developed producing reserves, and the field is considered on',
21748:'production. ifareservoirhadsustainedproductionduringthelastyear,itisconsidered to contain proved developed producing reserves. end of the terms in figure 1 that are defined under the',
21749:'subheading definitions of resource and reserve components and subcomponents other definitions adjustments:thequantitywhichpreserves an exactannualreservesbalance within each state or state subdivision.',
21750:'these adjustments are the yearly changes in the published reserve estimatesthat cannot be attributed tothe estimatesfor otherreserve changecategoriesbecause ofthesurveyandstatisticalestimationmethodsemployed. for',
21751:'example,variationsasaresultof changes in the operator frame, different random samples or imputations for missing or unreported reserve changes, could contribute to',
21752:'adjustments.25 25 energy informationadministration, u.s. crude oil, natural gas, and natural gas liquids reserves 2007annual report, glossary eia2007annual report glossary;',
21753:'available online at http://www.eia.doe .gov/oilgas/naturalgas/datapublications/crudeoilnaturalgasreserves/cr.html; last accessed december 2, 2009. page 48 sffas 38 fasab handbook, version 20 06/21 sffas',
21754:'38 basin:adepression in the earth’s surface that collects sediment loose, uncemented pieces of rock or minerals.26 bonus bid: leases issued',
21755:'in areas known to contain minerals are awarded through a competitivebiddingprocess. abonusbid, as usedinthisstatement,representsthecash consideration paid to the united states',
21756:'by the successful bidder for a mineral lease. the payment is made in addition to the rent and royalty obligations',
21757:'specified in the lease.27 crude oil:amixture of hydrocarbons that exists in the liquid phase in natural underground reservoirs and remains',
21758:'liquid at atmospheric pressure after passing through surface separating facilities. crudeoilmayalsoinclude:1smallamountsofhydrocarbonsthatexistinthegaseous phase in natural underground reservoirs but are liquid at',
21759:'atmospheric pressure after being recovered from oil well gas in lease separators, and that subsequently are commingled with the crude',
21760:'oil stream28 without being separately measured; and, 2 small amounts of nonhydrocarbons produced with the oil.29 dry gas: the actual',
21761:'or calculated volumes of natural gas which remain after: 1. the liquefiable hydrocarbon portion has been removed from the gas',
21762:'stream i.e., gas after lease, field, and/or plant separation 2. any volumes of nonhydrocarbon gases have been removed where they',
21763:'occur in sufficient quantity to render the gas unmarketable.30 estimated petroleum royalties:theestimatedendofperiodvalueofthefederalgovernment’s royalty share of proved oil and gas reserves',
21764:'from federal oil and gas resources. estimated production: the volumes of oil and gas that are extracted or withdrawn from',
21765:'reservoirs during the report year. estimated value for royalty relief: the estimated value for royalty relief is the calculated approximation',
21766:'of royalty relief based on a formula developed by doi. 26 the usgs “geologic glossary”; available online at http://www.nature.nps.gov/geology/usgsnps/misc/ glossaryatoc.html;',
21767:'last accessed december 2, 2009. 27 glossary of mineralterms, minerals revenue management, minerals management service, u.s. department of the interior',
21768:'mrm glossary of mineral terms; available online at http://www.mrm.mms .gov/stats/pdfdocs/glossary.pdf; last accessed december 2, 2009. 28 acrude oil stream is',
21769:'crude oil produced in a particular field or a collection of crude oils with similar qualities from fields in close',
21770:'proximity, which the petroleum industry usually describes with a specific name, such as west texas intermediate eia182 domestic crude oil',
21771:'first purchase report instructions; available online at http://www.eia.doe.gov/pub/oilgas/petroleum/surveyforms/eia182i.pdf; last accessed december 2, 2009. 29 eia2007annual report glossary. 30 eiaglossary, available',
21772:'at http://www.eia.doe.gov/glossary/; last accessed december 1, 2009. page 49 sffas 38 fasab handbook, version 20 06/21 sffas 38 extensions: the',
21773:'reserves credited to a reservoir because of enlargement of its proved area. normally the ultimate sizeof newly discovered fields, or',
21774:'newlydiscovered reservoirsin old fields, is determined by wells drilled in years subsequent to discovery. when such wells add to the',
21775:'proved area of a previously discovered reservoir, the increase in proved reserves is classified as an extension.31 federal oil and',
21776:'gas resources: oil and gas resources over which the federal government may exercise sovereign rights with respect to exploration and',
21777:'exploitation and from which the federal government has the authority to derive revenues for its use. federal oil and gas',
21778:'resources do not include resources over which the federal government acts as a fiduciary for the benefit of a nonfederal',
21779:'party. field:an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, thesamegeneralgeologicalstructuralfeatureand/orstratigraphictrappingcondition. theremay be',
21780:'two or more reservoirs in a field that are separated vertically by impervious strata, laterally by local geologic barriers, or',
21781:'by both. the area may include one lease, a portion of a lease, or a group of leases with one',
21782:'or more wells that have been approved as producible.32 first purchase price:the actualamount paid bythe first purchaser for crude oil',
21783:'as it leaves the leaseon whichit was produced.33 a“firstpurchase” constitutesa transferofownership of crude oil during or immediatelyafterthe physicalremoval of the',
21784:'crude oilfrom aproduction propertyfor the first time. gas:amixture of hydrocarbon compounds and small quantities of various nonhydrocarbons existing in the',
21785:'gaseous phase or in solution with crude oil in natural underground reservoirs at reservoir conditions.34 hydrocarbon:an organic chemical compound of',
21786:'hydrogen and carbon in the gaseous,liquid,or solid phase. the molecular structure of hydrocarbon compounds varies from the simplest methane, a',
21787:'constituent of natural gas to the very heavy and very complex.35 lease: any contract, profitshare arrangement, joint venture, or other',
21788:'agreement issued or approved by the united states under a mineral leasing law that authorizes exploration for, extraction of, or',
21789:'removal of oil or gas.36 31 eia2007annual report glossary. 32mms ocs estimated oil and gas reserves gulf of mexico, december',
21790:'31, 2005 mms 2009022; available online at http://www.gomr.mms.gov/pdfs/2009/2009022.pdf; last accessed december 2, 2009. 33adapted from form eia182 domestic crude oil',
21791:'first purchase report instructions. 34 eia2007annual report glossary. 35eiaglossary. 36 30 u.s.c. §1702 5. page 50 sffas 38 fasab handbook,',
21792:'version 20 06/21 sffas 38 lease condensate:amixture consisting primarily of pentanes and heavier hydrocarbons which is recovered as a liquid',
21793:'from natural gas in lease or field separation facilities. this category excludes natural gas plant liquids, such as butane and',
21794:'propane, which are recovered at downstream natural gas processing plants or facilities.37 natural gas plant liquids ngpls:those hydrocarbons in natural',
21795:'gas that are separated as liquids at natural gas processing plants, fractionating and cycling plants, and, in some instances, field',
21796:'facilities. lease condensate is excluded. products obtained include ethane; liquefied petroleum gases propane, butanes, propanebutane mixtures, ethanepropane mixtures; isopentane; and',
21797:'other small quantities of finished products, such as motor gasoline, special naphthas, jet fuel, kerosene, and distillate fuel oil.38 net',
21798:'of sales and acquisitions39: the net change in the quantity of reserve estimates, either positive or negative, as a result',
21799:'of reserves gained through purchase and deducted through sale during the report year. new discoveries in old fields: the volumes',
21800:'of proved reserves of crude oil, natural gas, and/or natural gas liquids discovered during the report year in new reservoirs',
21801:'located in old fields.40 new field discoveries:the volumes of proved reserves of crude oil, natural gas and/or natural gas liquids',
21802:'discovered in new fields during the report year.41 37 eia2007annual report glossary. 38 eiaglossary. 39 acquisitions arethevolume of proved reserves',
21803:'gained by the purchase of existing fields or properties, from the date of purchase or transfer eia2007annual report glossary. 40',
21804:'eia2007annual report glossary. 41 ibid. page 51 sffas 38 fasab handbook, version 20 06/21 sffas 38 oil: see crude oil.',
21805:'outer continental shelf ocs:all submerged lands seaward and outside the area of lands beneath navigable waters. lands beneath navigable waters',
21806:'are interpreted as extending from the coastline 3 nautical miles into thearctic ocean, theatlantic ocean, the pacific ocean, and the',
21807:'gulf of mexico, excluding the coastal waters off texas and western florida. lands beneath navigable waters are interpreted as extending',
21808:'from the coastline 3 marine leagues into the gulf of mexico off texas and western florida.42 play:agroup of pools that',
21809:'share a common history of hydrocarbon generation, migration, reservoir development, and entrapment.43 pool:adiscovered or undiscovered accumulation of hydrocarbons, typically within',
21810:'a single stratigraphic interval.44 proved reserves: for crude oil and gas, proved reserves are the estimated quantities that geological and',
21811:'engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating',
21812:'conditions. for lease condensate and natural gas plant liquids, proved reserves are the estimated quantities demonstrated with reasonable certainty to',
21813:'be recoverable in future years in conjunction with the production of proved gas reserves, underexisting economicand operating conditions.45 the total',
21814:'quantity of proved reserves is calculated by adding the quantity of reserves reported as revisions and adjustments, net of sales',
21815:'and acquisitions, total recoveries and deducting estimated production during the report year.46 42 mrm glossary of mineral terms. 43mms 2006assessment.',
21816:'44ibid. 45eia2007annual report glossary. 46 for a more detailed explanation of proved reserves and its components, see the section ofappendix',
21817:'d titled definitions of resource and reserve components and subcomponents. page 52 sffas 38 fasab handbook, version 20 06/21 sffas',
21818:'38 region: the term region or regional refers to the geographic area or areas for which estimated petroleum royalties are',
21819:'calculated.47 regional estimated petroleum royalties: regional estimated petroleum royalties means the estimated endofperiod value of the federal government’s royalty share',
21820:'of proved oil and gas reserves from federal oil and gas resources in each region. rent: annual payments, normally a',
21821:'fixed dollar amount per acre, required to preserve the rights to aleasewhiletheleaseis notinproduction. arent schedule isestablishedatthe timealease is issued.48 47for',
21822:'example, offshore federal oil and gas resources have typically been classified into regions such as:alaska region – the federal outer',
21823:'continental shelfalaska; pacific region – the federal ocs pacific washington, oregon, and california; gulf of mexico gom region – the',
21824:'federal ocs gulf of mexico texas, louisiana, mississippi, alabama,andgomportionof florida;andatlantic region –thefederalocs atlanticportionofalleastcoaststates. for onshore federal oil and gas resources,',
21825:'the u.s. department of energy typically divides the united states into regions,which arereferredtoas petroleumadministrationfor defensedistricts padd,forplanningpurposes. the result is a',
21826:'geographic aggregation of the 50 states and the district of columbia into five districts, with padd i further split into',
21827:'three subdistricts, as follows: paddieastcoast: paddianew england –connecticut,maine,massachusetts,new hampshire,rhode island, and vermont; padd ib centralatlantic – delaware, district of columbia,',
21828:'maryland, new jersey, new york, and pennsylvania; and, padd ic loweratlantic – florida, georgia, north carolina, south carolina, virginia, and',
21829:'west virginia. padd ii midwest – illinois, indiana, iowa, kansas, kentucky, michigan, minnesota, missouri, nebraska, north dakota, ohio, oklahoma, south',
21830:'dakota, tennessee, and wisconsin. padd iii gulf coast – alabama,arkansas, louisiana, mississippi, new mexico, and texas. padd iv rocky mountain',
21831:'– colorado, idaho, montana, utah, and wyoming. paddv westcoast – alaska,arizona,california,hawaii,nevada,oregon,andwashington. 48mrm glossary of mineral terms. page 53 sffas 38',
21832:'fasab handbook, version 20 06/21 sffas 38 reservoir: aporous and permeable underground formation containing an individual and separate natural accumulation',
21833:'of producible hydrocarbons oil and/or gas which is confined by impermeable rock or water barriers and is characterized by a',
21834:'single natural pressure system.49 revisions: changes to prior yearend proved reserves estimates, either positive or negative, resulting from new information',
21835:'other than an increase in proved acreage extension. revisions include increases of proved reserves associated with the installation of improved',
21836:'recovery techniquesorequipment. theyalsoincludecorrectionofpriorreportyeararithmeticalorclerical errors and adjustments to prior yearend production volumes to the extent that these alter reported prior year',
21837:'reserves estimates.50 revisions and adjustments: the net change in the quantity of reserve estimates, either positive or negative, as a',
21838:'result of adding changes reported as revisions and adjustments during the report year. royalty: any payment based on the value',
21839:'or volume of production which is due to the united states on production of oil or gas from the outer',
21840:'continental shelf or federal lands, or any minimum royalty owed to the united states under any provision of a lease.51',
21841:'royaltyinkind:aprogram operated under the provisions of the mineral leasingact of 1920 andtheoutercontinentalshelflandsactof1953. thefederalgovernment,aslessor,maytake part or all of its oil and',
21842:'gas royalties “in kind” a volume of the commodity as opposed to “in value” money. under the oil royaltyinkind program,',
21843:'the government sells oil at fair market value to eligible refiners who do not have access to an adequate supply',
21844:'of crude oil at equitable prices.52 royalty rate: aproportionateinterestintheproductionvalueofmineraldepositsduethelessor from the lessee in accordance with a lease agreement.53 royalty relief:',
21845:'existing statutes authorize mms to grant royalty relief to operators on the production of oil and gas resources from federal',
21846:'oil and gas leases. royalty relief is the reduction, modification, or elimination of any royalty to operators to promote development,',
21847:'increase production, or encourage production of marginal resources on certain leases or categories of leases.54 49 eia2007annual report glossary. 50',
21848:'ibid. 51 adapted from 30 u.s.c. § 1702 14. 52mrm glossary of mineral terms. 53 ibid. 54 43 u.s.c. §',
21849:'1337a. page 54 sffas 38 fasab handbook, version 20 06/21 sffas 38 sales value: the proceeds received for the sale',
21850:'of a product. sales value is calculated by multiplying the sales volume by unit price. sales volume: the volume, or',
21851:'quantity, of the product that is sold. the sales volume is measured in thousand cubic feet mcf for gas and',
21852:'in barrels bbl for oil. technically recoverable resources: the term used to describe the total quantity of undiscovered recoverable resources',
21853:'and unproved reserves. proved reserves are not included in the estimated quantity of technically recoverable resources. wellhead price:thevalueofthepurchasednaturalgasatthemouthofthewell. ingeneral,the wellhead',
21854:'price isconsidered to be the sales price obtainable from a third party in an arms length transaction. posted prices, requested',
21855:'prices, or prices as defined by lease agreements, contracts, or tax regulations should be used where applicable.55 55 eiaglossary. page',
21856:'55 sffas 38 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards39: subsequent events: codification ofaccounting and financial reporting standards contained in theaicpastatements',
21857:'onauditing standards status issued august 4, 2010 effective date upon issuance affects amends sffas 5, footnote 17. affected by none.',
21858:'summary theamerican institute of certified publicaccountants’ aicpa statements onauditing standards sasau section 560, subsequent events, includes accounting and financial reporting',
21859:'guidance that is not discussed in the authoritative literature that establishes accounting principles. the objective of this statement is to',
21860:'incorporate that guidance into the authoritative literature ofthefasab. insofar asausection 560 establishedprinciples pertainingto the preparation of basicinformation and required supplementaryinformation',
21861:'rsi1 it would be more appropriately included in the accounting and financial reporting standards of the fasab than in the',
21862:'auditing literature. accordingly, this statement does not establish new accounting guidance but ratherincorporatesthe existingguidanceto the extent appropriatein the federalgovernment environment',
21863:'into the fasab standards. in developing this statement, the fasab also considered incorporating existingaicpaguidance regarding an entity’s ability to continue',
21864:'as a going concern and related party transactions. however, for reasons presented in the basis for conclusions appendixa, the fasab',
21865:'does not provide accounting standards in these areas at this time. the requirements in this statement will improve financial reporting',
21866:'by incorporating authoritative accounting and financial reporting literature into a single source and thereby better enabling entities to prepare basic',
21867:'information and rsi in conformity with generally accepted accounting principles gaap. the statement addresses the circumstances under which an entity',
21868:'should recognize or disclose events or transactions occurring after the end of the reporting period but before issuance of the',
21869:'financial report. 1 the fasab is in the process of reclassifying all items of required supplementary stewardship information rssi. once',
21870:'the board reclassifies all the items, the rssi category will be eliminated. until such time, this statement also applies to',
21871:'rssi. page 1 sffas 39 fasab handbook, version 20 06/21 sffas 39 table of contents summary 1 introduction 3 purpose',
21872:'3 materiality 3 effective date 3 accounting standards 3 scope 3 definitions 4 subsequent events 5 effect on current standards',
21873:'6 effective date 7 appendixa: basis for conclusions 8 appendix b:abbreviations 13 page 2 sffas 39 fasab handbook, version 20',
21874:'06/21 sffas 39 introduction purpose 1. accounting and financial reporting guidance regarding subsequent events2 has been included in sass of',
21875:'theaicpa. the objective of this statement is to incorporate that guidance into the statements of federal financialaccounting standards. materiality 2.',
21876:'theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an item is material depends on the degree to which omitting or misstating information about the',
21877:'item makes it probable that the judgment of a reasonable person relying on the information would have been changed or',
21878:'influenced by the omission or the misstatement. effective date 3. the requirements in this statement are effective upon its issuance.',
21879:'accounting standards scope 4. this statement establishes accounting and financial reporting standards for subsequent events and applies to the accounting',
21880:'for, and disclosure of, subsequent events not addressed in other applicable gaap. 5. otherapplicablegaapmayaddresstheaccountingtreatmentofeventsortransactionsthat occur after the end of the',
21881:'reporting period but before the financial statements are issued. if an event or transaction is within the scope of other',
21882:'applicable gaap, then an entity should 2 terms defined in the glossary appendix c are in boldface type the first',
21883:'time they appear in this statement. page 3 sffas 39 fasab handbook, version 20 06/21 sffas 39 follow the guidance',
21884:'in that applicable gaap, rather than the guidance in this standard. the following are examples of other applicable gaap that',
21885:'prescribe the accounting and disclosures for specific subsequent events. note that this is not meant to be an exhaustive list.',
21886:'statementoffederalfinancialaccountingstandards sffas17, accounting for social insurance, par. 24. sffas 27, identifying and reporting earmarked funds, par. 23. sffas 36, reporting',
21887:'comprehensive longterm fiscal projections for the u.s. government, par. 33. 6. also, this statement amends sffas 5, accounting for liabilities',
21888:'of the federal government, footnote 17. 7. this statement applies to the basic information and required supplementary information rsi3 of',
21889:'all federal reporting entities that are presented in conformity with gaap.4 definitions 8. subsequent events: events or transactions that affect',
21890:'the basic information or rsi that occur subsequent to the end of the reporting period but before the financial report',
21891:'is issued. 9. recognized events: subsequent events that provide additional evidence with respect to conditions that existed at the end',
21892:'of the reporting period and affect the estimatesinherent in the process of preparing basic information and rsi. 10. nonrecognized events:',
21893:'subsequent events that provide evidence with respect to conditions that did not exist at the end of the reporting period',
21894:'but arose subsequent to that date. 3 basic information and rsi are required components of a financial report prepared in',
21895:'conformity with gaap. in the federalgovernmentenvironment,afinancial report is known asa performanceandaccountabilityreport oranagency financial report and may include other components required',
21896:'by legislation or administrative directives. 4 the fasab is in the process of reclassifying all items of required supplementary stewardship',
21897:'information rssi. once the board reclassifies all the items, the rssi category will be eliminated. until such time, this statement',
21898:'also applies to rssi. page 4 sffas 39 fasab handbook, version 20 06/21 sffas 39 subsequent events 11. eventsortransactionsthataffectthebasicinformationorrsisometimesoccursubsequent to',
21899:'the end of the reporting period but before the financial report is issued. some of those transactionsandevents referredto asrecognized events',
21900:'require adjustmentswhileothers referred to as nonrecognized events may require disclosure in the basic information or rsi. 12. recognized events consist',
21901:'of those events that provide additional evidence with respect to conditions that existed at the end of the reporting period',
21902:'and affect the estimatesinherent in the process of preparing basic information and rsi. in evaluating the conditions on which theestimateswerebased,allinformationthat',
21903:'becomesavailable priortothe issuanceofthe financial report should be used. the basic information or rsi as applicable should be adjusted for any',
21904:'changes in estimates resulting from the use of such evidence. 13. identifyingrecognizedeventscallsfortheexerciseofprofessionaljudgmentandknowledge of the facts and circumstances. the receipt of',
21905:'information regarding the impairment of an asset or the incurrence of a liability subsequent to the end of the reporting',
21906:'period may be indicative of conditions existing at the end of the reporting period, thereby calling for adjustment of the',
21907:'basic information or rsi before the issuance of the financial report. for example, the settlement of litigation for an amount',
21908:'different from the liability recorded in the accounts would require adjustment of the basic information if the event that gave',
21909:'rise to the litigation, such as a personal injury occurring on government property, had taken place prior to the end',
21910:'of the reporting period. in this example, the resolution of an uncertainty may confirm the impairment of an asset or',
21911:'incurrence of a liability as of the end of the reporting period. 14. subsequenteventsaffectingtherealizationofassetssuchasreceivablesandinventoriesor the settlement of estimated liabilities will',
21912:'ordinarily require adjustment of the basic information or rsi because such events typically represent the culmination of conditions that existed',
21913:'over a relatively long period of time. 15. nonrecognized events consist of those events that provide evidence with respect to',
21914:'conditions that did not exist at the end of the reporting period, but arose subsequent to that date. these events',
21915:'should not result in adjustment of the basic information or rsi. some of these events, however, may be of such',
21916:'a nature that their disclosure in basic information or rsi is required to keep the basic information or rsi from',
21917:'being misleading. subsequent eventssuch aschanges inthequotedmarket pricesof securitiesordinarilyshould not result in adjustment of the basic information or rsi because such',
21918:'changes typically reflect a concurrent evaluation of new conditions. page 5 sffas 39 fasab handbook, version 20 06/21 sffas 39',
21919:'16. examples of nonrecognized events that may require disclosure in basic information or rsi, but should not result in adjustment,',
21920:'include the enactment of legislation, after the end of the reportingperiod,toestablishamajor federal programor anappropriationto provide benefits or services to protect',
21921:'the public’s health and safety during a major disaster that occurred after the end of the reporting period but before',
21922:'the financial report is issued. the disclosures should concern matters that will probably affect the judgments and decisions of those',
21923:'relying on the financial report. 17. when a financial report is reissued, certain events may have occurred subsequent to the',
21924:'original issuance that requires disclosure in the reissued financial report. events requiring disclosure inthereissuedfinancialreportare thosethat areconsidered important to ausers understanding',
21925:'of the reissued financial report. these events, occurring between the time of original issuance and reissuance of the financial report,',
21926:'should not result in adjustment of the basicinformation orrsi unless the adjustment meetsthe criteria forthe correction of an error or',
21927:'the criteria for priorperiod adjustments as set forth in sffas 21, reporting correction of errors and changes in accounting principles,',
21928:'amendment of sffas 7, accounting for revenue and other financing sources. this also applies for events occurring subsequent to the',
21929:'original issuance when a financial report is reissued in comparative form with a financial report of subsequent periods. effect on',
21930:'current standards 18. in addition, sffas 5, footnote 17 is amended as follows to conform to the above requirements: contingencies',
21931:'are different from “subsequent events.” as used in the accounting/audit literature. subsequent events are events or transactions that affect the',
21932:'basic information or required supplementary information rsi and occur subsequent to the end of the reporting period but before the',
21933:'financial report is issued. balance sheet date, but prior to the issuance of the financial statements and auditor’s report, that',
21934:'have a material effect on the financial statements and therefore require adjustment or disclosure in the statements. some of those',
21935:'transactions and events referred to as recognized events require adjustments to the basic information or rsi while others referred to',
21936:'as nonrecognized events may require disclosure in the basic information or rsi. asubsequenteventmayaffectacontingencybyprovidinginformationthat resolves an uncertainty related to a contingent',
21937:'liability and confirm the impairment of an asset or incurrence of a liability as of the end of the reporting',
21938:'period. page 6 sffas 39 fasab handbook, version 20 06/21 sffas 39 effective date 19. the requirements in this statement',
21939:'are effective upon its issuance. the provisions of this statement need not be applied to immaterial items. page 7 sffas',
21940:'39 fasab handbook, version 20 06/21 sffas 39 appendixa: basis for conclusions thisappendixdiscussessome factorsconsideredsignificantbyfasab membersinreaching the conclusions in this statement.',
21941:'it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than',
21942:'to others. the standards enunciated in this statement–not the material in this appendix–should govern the accounting for specific transactions, events,',
21943:'or conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status',
21944:'section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections',
21945:'are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the',
21946:'basis for conclusions of the amending statement for the rationale for each amendment. a1. representativesoftheaicparequestedthattheu.s. accountingstandardssetters consider adopting certain guidance',
21947:'for accounting and financial reporting issues that now reside in the professional auditing literature. in july 2008, the fasab joined',
21948:'the governmentalaccounting standards board in responding to this request. a2. theaicpasassaddress certainaccountingandfinancial reportingissues notincludedin the fasab’s authoritative literature that establishes',
21949:'accounting principles. those initially identified issues concerned subsequent events, an entity’s ability to continue as a going concern going concern,',
21950:'and related parties. the fasab believes that the presentation of principles used in the preparation of a financial report is',
21951:'more appropriately included in accounting and financial reporting standards rather than in the auditing literature. subsequent events a3. au section',
21952:'560, subsequent events, discusses events or transactions that occur subsequenttotheendofthereportingperiodbutpriortotheissuanceofthefinancialreport. such events require either adjustment or disclosure in the basic',
21953:'information or rsi and the auditing literature discusses the two types of events for consideration. a4. the fasab believes that',
21954:'incorporating the accounting and financial reporting guidance essentially as it exists in theaicpaliterature would only change the source of the',
21955:'guidance and not significantly affect practice. upon evaluating the auditing literature for subsequent events,the fasabdecided that theguidanceisreadilyadaptable to thefederalgovernment environment',
21956:'with only minor terminology enhancements. page 8 sffas 39 fasab handbook, version 20 06/21 sffas 39 going concern a5. au',
21957:'section 341, the auditor’s consideration of an entity’s ability to continue as a going concern, identifies certain factors that could',
21958:'indicate that there may be substantial doubt about a nongovernmental entity’s ability to continue as a going concern and provides',
21959:'examples of information that an entity might disclose if the conditions warrant such disclosures. however, the fasab considered the nature',
21960:'of the federal government and determined that goingconcern as contemplated in the commercial sense is not applicable to federal government',
21961:'financial reporting. additionally, the fasab considered that related guidance has been developed as discussed below and, as a result, decided',
21962:'to exclude the going concern standard from the statement. a6. on september 28, 2009, the fasab issued sffas 36, reporting',
21963:'comprehensive long term fiscal projections for the u.s. government. this standard concerns the consolidated financial report cfr of the federal',
21964:'government and requires the reporting of information to help users determine whether future budgetary resources will likely be sufficient to',
21965:'sustain public services and to meet obligations as they come due. it will thereby facilitate assessments of the extent to',
21966:'which financial burdens without related benefits were passed on by current year taxpayers to future year taxpayers. a7. on the',
21967:'other hand, the fasab noted that some federal government component units may experience fiscal challenges and may need to seek',
21968:'additional funding from congress to continuetheirmissions. insuchinstancesandbecausesffas36onlyappliestothecfr, the fasab expects that the entity would address the matter in the management’s',
21969:'discussionandanalysis md&a sectionofitsfinancial report. sffas15, management’s discussion and analysis, paragraph 3 provides guidance for reporting information in an entity’s md&a.',
21970:'related parties a8. au section 334, related parties, attributes the requirement for related party disclosures to the financialaccounting standards board’s',
21971:'fasbaccounting standards codification asc 850 statement of financialaccounting standards 57, related party disclosures, and provides indicators of related party transactions.',
21972:'the fasab determined that the related party guidance was not readily adaptable to the federal government and discussed the applicability',
21973:'of related fasab projects and current federal financial reporting practices to the issue of related party transactions. a9. the fasab',
21974:'has an ongoing federal entity project that is intended to define and characterize federal reporting entities and to establish criteria',
21975:'for including various page 9 sffas 39 fasab handbook, version 20 06/21 sffas 39 organizational units in a reporting entity.',
21976:'also, the project will involve research on the various types of relationships that the federal government has established to carry',
21977:'out its public policy functions. the fasab believes that it would be premature to incorporate the related party guidance before',
21978:'it completes its federal entity project. consequently, the fasab decided to conduct research on related parties as part of the',
21979:'federal entity project and use the research results to develop related party guidance applicable to the federal government environment. a10.in',
21980:'addition, the fasab noted that federal agencies typically purchase goods and services from other federal agencies or organizational units within',
21981:'the same agency and the fasab has provided guidance to assist in reporting this activity. the guidance includes, but is',
21982:'not limited to: a. sffas 4, managerial cost accounting standards and concepts; b. sffas 5, accounting for liabilities of the',
21983:'federal government; c. sffas 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting;',
21984:'and d. sffas 30, interentity cost implementation: amending sffas 4, managerial cost accounting standards and concepts. a11.thefasab expectsthatthisstatement will not',
21985:'alter current reportingpractices. however, some are concerned that reporting practices may change if the auditing guidance changes before the federal',
21986:'entity project is completed. if so, the fasab would issue a technical bulletin to assist the federal financial reporting community.',
21987:'exposure draft a12.the board published the exposure draft ed, subsequent events: codification of accounting and financial reporting standards contained in',
21988:'the aicpa statements on auditing standards,onoctober20,2009,withcommentsrequestedbydecember28,2009. upon release of the ed, notices and press releases were provided to: the federal',
21989:'register, fasab news, the journal ofaccountancy,agatoday, the cpajournal, government executive, the cpaletter, and governmentaccounting andauditing update, the cfo council, the',
21990:'council of inspectors general on integrity and efficiency, the financial statementaudit network, and committees of professional associations generally commenting on',
21991:'eds in the past. page 10 sffas 39 fasab handbook, version 20 06/21 sffas 39 a13.this broad announcement was followed',
21992:'by direct mailings of the exposure draft to the subcommittee on federal financial management, government information, and international security, committee',
21993:'on homeland security and governmentalaffairs, united states senate, and the subcommittee on government management, organization, and procurement, committee on oversight',
21994:'and government reform, house of representatives. a14.the board received 17 responses from the following sources: federal internal nonfederal external users,',
21995:'academics, others 2 auditors 3 1 preparers and financial managers 11 totals 14 3 a15. respondents agreed that accounting principles',
21996:'regarding subsequent events should be incorporated into the fasab’s authoritative literature and they generally agreed that the going concern and',
21997:'related party guidance were not readily adaptable to the federal government environment. while some respondents believed that it would be',
21998:'helpful to consider providing additional guidance, such as fasb requirements for subsequent events, the objective of the board’s project was',
21999:'to incorporate the guidance presented in the audit literature rather than developing additional guidance or requiring changes in current practices.',
22000:'a16. in addition, some respondents believed that it would be helpful to clarify aspects of the statement. particularly, a respondent',
22001:'noted that in federal financial reporting, the term financial statements may refer to a financial report. afinancialreportincludesbasic information, required supplementary',
22002:'information rsi, and required supplementary stewardship information rssi,5 and may include other accompanying information oai. the respondent believed that the',
22003:'statement should be clarified to state that it applies to basic statements and disclosures. however, if the statement applies to',
22004:'a financial report, it should clarify the components or categories of the report and how it applies to those categories.',
22005:'theboardclarifiedthisconcernbyclearlyindicatingthatthestatementapplies to basic information and rsi. the board’s standards are authoritative for only the basic information and rsi and do',
22006:'not apply to the other portions of a document e. g., performance andaccountability report,agency financial report in which basic information',
22007:'and rsi are included. further, auditors of the financial statements have certain 5thefasab hasrecategorizedallrssiitems exceptforstewardshipinvestments. oncethefasab reclassifiesthe remainingrssiitem,thecategory willbeeliminated. seesffac6,par.a15.',
22008:'page 11 sffas 39 fasab handbook, version 20 06/21 sffas 39 responsibilities to read oai. any identified material inconsistencies between',
22009:'oai and the basic information and rsi and any identified material misstatements of fact in oai would affect the audit',
22010:'and/or the auditor’s report. a17.another respondent believed that the definition of subsequent events should explicitly state that subsequent events pertain',
22011:'to material events and transactions and the term material shouldbeusedthroughoutthestatementasapplicable. also,onerespondentbelievedthat the term material should be included in the definition',
22012:'of subsequent events presented in sffas 5, footnote 17. the forward to the fasab’s pronouncements as amended, june 30, 2009,',
22013:'discusses the term materiality. it states, the board intends that application of authoritative guidance belimited to items that are material.',
22014:'“materiality” hasnot been strictlydefinedinthe accountingcommunity; rather, it has been a matter of judgment on the part of preparers of financial',
22015:'statements and the auditors who attest to them. consequently, paragraph 2 of the statement provides the board’s position on the',
22016:'matter of materiality regarding this statement. a18. an additional respondent believed that the examples in paragraph 16 should be clarified',
22017:'to help readers understand what type of events should be considered nonrecognized events. the board revised the examples of nonrecognized',
22018:'events in paragraph 16 to clarify that such events provide evidence with respect to conditions that did not exist at',
22019:'the end of the reporting period but arose subsequent to that date. the examples include legislative enactments occurring subsequent to',
22020:'the end of the reporting period. also, additional guidance was added to assist readers in determining nonrecognized events that should',
22021:'be disclosed. boardapproval a19.thisstatementwasapprovedforissuancebyallmembersoftheboard. thewrittenballots are available for public inspection at the fasabs offices. page 12 sffas 39 fasab handbook,',
22022:'version 20 06/21 sffas 39 appendix b:abbreviations aicpa americaninstituteofcertifiedpublicaccountants asc accounting standards codification au auditingstandards codifiedbytheaicpa cfr consolidated financial report',
22023:'fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board gaap generallyacceptedaccountingprinciples md&a management’s discussionandanalysis oai otheraccompanyinginformation rsi required supplementary information rssi required supplementary stewardship',
22024:'information sas statement onauditingstandards sfas statement offinancialaccountingstandards sffac statement offederalfinancialaccountingconcepts sffas statement offederalfinancialaccountingstandards page 13 sffas 39 fasab handbook, version',
22025:'20 06/21 statementoffederalfinancialaccountingstandards40: definitional changes related to deferred maintenance and repairs:amending statement of federal financial accounting standards 6,accounting for property,',
22026:'plant, and equipment status issued may 11, 2011 effective date for periods beginning after september 30, 2011. earlier implementation encouraged.',
22027:'affects sffas 6, par. 77, 78, 80, 82, 83, and 84. affected by none. summary deferred maintenance and repairs dm&r',
22028:'is maintenance and repair activity that was not performed when it should have been or was scheduled to be and',
22029:'which is put off or delayed to a futureperiod. althoughdm&risnotsufficientlymeasurabletosupportrecognitionordisclosure as basic information, it is nonetheless a cost and has',
22030:'been reported as required supplementary information rsi. information about dm&r has been required because the information is important to help',
22031:'financial statement users assess the efficiency and effectiveness of the federal government’s management of property, plant, and equipment. the board',
22032:'believes reliable governmentwide data are needed to assist users in making assessments related to property, plant, and equipment. this statement',
22033:'amends statement of federal financialaccounting standards sffas 6, accounting for property, plant, and equipment pp&e. the amendments 1 clarify that',
22034:'“deferred maintenance” reporting includes deferred repairs, 2 revise the examples of maintenance and repair activities to better reflect current practices',
22035:'and encompass activities associated with heritage assets, multiuse heritage assets and stewardship land as well as equipment and otherpersonalproperty, and',
22036:'3 addressissuesrelated tothedistinctionbetween maintenance, repairs, and new capital expenditures. these amendments represent a first step toward improving reporting on deferred',
22037:'maintenance and repairs. the board isworking, and will continue to work, closely with stakeholdersinterested in improving management of and reporting',
22038:'on federal pp&e and related deferred maintenance. by addressing definitional issues as a first step, the board will facilitate continued',
22039:'cooperation with stakeholders toward improved financial reporting especially as it plans to address measurement and reporting issues. page 1 sffas',
22040:'40 fasab handbook, version 20 06/21 sffas 40 table of contents summary 1 introduction 3 purpose 3 materiality 4 standards',
22041:'4 scope 4 effect on existing standards sffas 6 4 effective date 6 appendixa: basis for conclusions 7 appendix b:abbreviations',
22042:'19 page 2 sffas 40 fasab handbook, version 20 06/21 sffas 40 introduction purpose 1. issues regarding both federal real',
22043:'property management and dm&r are currently being addressed by stakeholders including members of congress,1 federal agencies2 as well as federal',
22044:'and nonfederal councils.3 as part of a coordinated effort among key federal stakeholders, the board iscommitted to providing timelyguidance on',
22045:'issuescurrentlybeing addressed. the board believes clarifying the definition of maintenance and repairs is an important first step in improving the',
22046:'accounting and reporting of dm&r. 2. the objective of this statement is to incorporate definitional changes in response to concernsraised',
22047:'bythe financialand technical4communities. theboard also considered the findings of a federal facilities council ffc committee on operations & maintenance review',
22048:'of sffas 6. the major sffas 6 concerns it identified include: a different interpretationsamong agencies and auditorsregarding what to report',
22049:'and howto report, b introduction of terms not used in the technical community, c terms in the maintenance definition loosely',
22050:'defined, and d terms in the maintenance definition not reflective of actual practice. 3. additionally, the board desires to improve',
22051:'and, where needed, develop accounting and reporting guidance relative to dm&r that best reflects or enhances current federal practices. sffas',
22052:'14, amendments to deferred maintenance reporting amending sffas no. 6, accounting for property, plant, and equipment and sffas 8, supplementary',
22053:'stewardship reporting,issued inapril1999,reclassified deferred maintenance dmto rsi 1federalrealpropertydisposalenhancementact of2009. h.r. 2495,111th congress,1st session. federalreal propertydisposalpilotprogram. s.1667,110th congress,2nd session. 2presidential executive',
22054:'order 13327, federal real propertyasset management signed february 4th , 2004 established the following policy in section 1,” it is',
22055:'the policy of the united states to promote the efficient and economical use of americas real property assets and to',
22056:'assure management accountability for implementing federal real property management reforms. based on this policy, executive branch departments and agencies shall',
22057:'recognize the importance of real property resources through increased management attention, the establishment of clear goals and objectives, improved policies',
22058:'and levels of accountability, and other appropriate action.” 3 national research council nrc study on predicting outcomes of investments in',
22059:'maintenance and repair for federal facilities. this study will be conducted by a panel of experts. the committee plans to',
22060:'finish its report by december 31, 2010. 4this statement uses thephrase “technical community” to refer to agency personnel responsible for',
22061:'the management of property, plant, and equipment including technical issues such as maintenance and repair. page 3 sffas 40 fasab',
22062:'handbook, version 20 06/21 sffas 40 primarily as a result of auditor concerns. since then, asset assessment methodologies have matured',
22063:'andadministration initiatives5 have prompted agencies to develop condition assessment, measurement, and reporting systems. however, these methodologies and systems are not',
22064:'uniform throughout government, resulting in a lack of comparability. materiality 4. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an item is material depends',
22065:'on the degree to which omitting or misstating information about the item makes it probable that the judgment of a',
22066:'reasonable person relying on the information would have been changed or influenced by the omission or the misstatement. standards scope',
22067:'5. this statement revises maintenance and repair m&r terminology in statement of federal financialaccounting standards sffas 6, as amended, by',
22068:'modifying the definition of maintenance and by replacing the term “deferred maintenance” with “deferred maintenance and repairs.” effect on existing',
22069:'standards sffas 6 6. sffas 6, paragraph 78 is replaced with the following text: maintenance and repairs are activities directed',
22070:'toward keeping fixed assets in an acceptable condition.1activitiesinclude preventive maintenance; replacement of parts, systems,1a or components; and other activities needed',
22071:'to preserve or maintain the asset. maintenance and repairs, as distinguished from capital improvements, exclude activities directed towardsexpanding the capacityof',
22072:'an asset or otherwise upgrading it to serve needs different from, or significantly greater than, its current use. 5 presidential',
22073:'executive order 13327. page 4 sffas 40 fasab handbook, version 20 06/21 sffas 40 [footnote 1 – 1 the determination',
22074:'of acceptable condition may vary both between entities and among sites within the same entity. management shall determine what level',
22075:'of condition is acceptable.] [footnote 1a – 1a the term “systems” can refer to either 1 information technology assets e.g.,',
22076:'hardware, internal use software, data communication devices, etc. or 2 groupings assemblages of component parts belonging to a building, equipment',
22077:'or other personal property.] 7. the term “maintenance” is replaced with “maintenance and repairs” and conforming grammatical changes are made',
22078:'in the following paragraphs of sffas 6: a. paragraph 77 – “deferred maintenance and repairs” are is maintenance and repairs…',
22079:'b. paragraph 80 – …for deferred maintenance and repairs may… c. paragraph 82 – …in a forecast of maintenance and',
22080:'repairs expense, these forecasts may serve as a basis against which to compare actual maintenance and repairs expense and estimate',
22081:'deferred maintenance and repairs. d. paragraph 83 – at a minimum, the following information shall be presented as required supplementary',
22082:'information for all pp&e each of the four categoryies established in sffas 6 the pp&e standard should be included. identification',
22083:'of each major class [footnote 6 to remain; omitted here for brevity] of asset for which maintenance and repairs haves',
22084:'been deferred. method of measuring deferred maintenance and repairs for each major class of pp&e. if the condition assessment survey',
22085:'method of measuring deferred maintenance and repairs is used, the following should be presented for each major class of pp&e:',
22086:' description of requirements or standards for acceptable operating condition,  any changes in the condition requirements or standards, and',
22087:'asset condition[footnote 7to remain; omitted herefor brevity] and a range or a point estimate of the dollar amount of maintenance',
22088:'and repairs needed to return assets to their it to its acceptable operating condition. page 5 sffas 40 fasab handbook,',
22089:'version 20 06/21 sffas 40 if the total lifecycle cost method is used, the following should be presented for each',
22090:'major class of pp&e:  the original date of the maintenance and repairs forecast and an explanation for any changes',
22091:'to the forecast,  prior year balance of the cumulative deferred maintenance and repairs amount,  the dollar amount of',
22092:'maintenance and repairs that was defined by the professionals who designed, built or manage the pp&e as required maintenance and',
22093:'repairs for the reporting period,  the dollar amount of maintenance and repairs actually performed during the period,  the',
22094:'difference between the forecast and actual maintenance and repairs,  any adjustments to the scheduled amounts deemed necessary by the',
22095:'managers of the pp&e,[footnote 8 revised] and  the ending cumulative balance for the reporting period for each major class',
22096:'of asset experiencing deferred maintenance and repairs. [footnote 8 8adjustments may be necessary because the cost of maintenance and repairs',
22097:'foregone may not be cumulative. for example, if periodic painting is skipped twice it is not necessarily true that the',
22098:'cost would be double the scheduled amount.] the above listed disclosure requirements are not applicable to the u.s. government wide',
22099:'financial statements. sffas 32, consolidated financial report of the united states government requirements: implementing statement of federal financial accounting concepts',
22100:'4 “intended audience and qualitative characteristics for the consolidated financial report of the united states government,” providesfor required supplementary information',
22101:'applicable to the u.s. governmentwide financial statements for these activities. e. paragraph 84 – …noncritical amounts of maintenance and repairs',
22102:'needed……noncritical amounts of maintenance and repairs needed… effective date 8. this statement is effective for periods beginning after september 30,',
22103:'2011. earlier implementation is encouraged. the provisions of this statement need not be applied to immaterial items. page 6 sffas',
22104:'40 fasab handbook, version 20 06/21 sffas 40 appendixa: basis for conclusions this appendix discusses some factors considered significant by',
22105:'board members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others.',
22106:'some factors were given greater weight than other factors. the guidance enunciated in the statement–not the material in this or',
22107:'other appendices –should govern the accounting for specific transactions, events, or conditions. this statement may be affected by later statements.',
22108:'the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this',
22109:'statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be',
22110:'updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale',
22111:'for each amendment. project history a1. in late 2008 the board reviewed its technical agenda and initiated a dm project.',
22112:'the dm project was highly ranked by constituents who provided input on the board’s technical agenda.afasab taskforcewasconvened to studythe findings',
22113:'of a past reviewandrecent federal and industry developments. the task force is addressing issues in two phases – 1 definitions',
22114:'and 2 measurement and reporting. this statement is the result of the definitions phase. it addresses areas the task force',
22115:'identified as needing clarification. the taskforcedeveloped definitionaloptionsfortheboard’sconsideration and the amendments in this statement are intended to clarify important matters. the',
22116:'board notes that the minimum required supplementary information currently required at paragraph 83 of sffas 6 may be further modified',
22117:'as a result of the outcome of subsequent work related to the measurement and reporting phase of this project. primary',
22118:'goals of the proposedamendments goal of dm&r reporting a2. concerning the goal of dm&r reporting, the board believes there is',
22119:'confusion regarding what is required in the financial reports under the current definitions. the board’s ultimate goal for dm&r information',
22120:'is that it serves as a useful tool for all decision makers, including congress, oversight bodies, management, and citizens. to',
22121:'be useful, it must provide information about needed m&r that has yet to be performed. therefore, management should present a',
22122:'reasonableestimatesofthecost of maintenanceandrepairactivitiesthat page 7 sffas 40 fasab handbook, version 20 06/21 sffas 40 it would haveperformed in support of',
22123:'itsmission if resourceshad been available inthepast. in addition, management should provide explanatory material. a3. achieving the goal of dm&r reporting',
22124:'requires many judgments regarding what is needed in each situation. these definitional changes are a first step in improving the',
22125:'usefulness of dm&r reporting. several definitional issues were discussed by the task force. for some issues, changes were proposed and',
22126:'in others they were not. the primary issue for which a change wasnotproposedinthe exposure draft wasadefinitionofacceptablecondition. the rationaleforthatdecisionisprovidedbelow. issuesaddressedbytheexposuredraftand the',
22127:'board’s decisions are discussed following a summary of the exposure draft outreach and responses. acceptable condition and judgment a4. m&r',
22128:'planning requires decisions about the level of condition to which an asset should be maintained – for example, “as new”',
22129:'condition or “fair” condition. when management elects to use the condition assessment survey method, sffas 6 also requires that information',
22130:'concerning requirements or standards for acceptable condition be reported; assisting users in understanding what condition the agency judges to be',
22131:'“acceptable.” the board acknowledges that a view exists among certain practitioners and users of dm&r information that because sffas 6',
22132:'guidance allows decisions about acceptable levels of condition it is too flexible. further, it requires agencies to rely heavily on',
22133:'unspecified human judgment in the area of “acceptable” condition. a5. preparers and users who hold this view opine that unless',
22134:'fasab includes guidance defining “acceptable condition” in the dm&r standards, agencies will continue to have disparate goals regarding dm&r. in',
22135:'their opinion, this could lead to a inaccurate dm&r reporting because of inconsistent definitions of “acceptable condition,” b flawed m&r',
22136:'planning, and c dm&r reporting that is not informative to readers. after careful consideration of this view, the board believes',
22137:'that the guidance these preparers/users seek would be management policies. providing such guidance is not an appropriate role for an',
22138:'accounting standards setting body. the board believes that the standards provide general guidance tobecoupled with managerialjudgment based onsuch factorsas agencymission',
22139:'and asset use. in the next phase of the project, the board will ask the task force to consider factors',
22140:'that management might appropriately consider in determining acceptable condition. summary of outreach efforts a6. the exposure draft was issued may',
22141:'4, 2010 with comments requested by june 25, 2010. upon release of the exposure draft, notices and press releases went',
22142:'to the federal register, fasab news, the journal of accountancy, aga today, the cpa journal, government executive, thecfo council,thecouncil of',
22143:'inspectorsgeneralon integrityand page 8 sffas 40 fasab handbook, version 20 06/21 sffas 40 efficiency, the financial statementaudit network; and members',
22144:'of both the federal real property council and the federal facilities council and committees of professional associations generally commenting on',
22145:'exposure drafts in the past. a7. this broad announcement was followed by direct mailings of the exposure draft to the',
22146:'house committee on oversight and government reform, the senate committee on homeland security and governmentalaffairs, and theamericanassociation of state highway',
22147:'and transportation officials. a8. areminder noticewas providedonjune14th andprofessionalassociationswerecontacted via telephone on or about that date. responses to the exposure draft',
22148:'a9. thirtyfour responses were received. table 1.0 summarizes received responses by respondent type. table 1.0 summary of respondent types to',
22149:'dm&r maintenance definition exposure draft respondent type federal internal nonfederal external total preparers and financial managers 28 1 29 users,',
22150:'academics, others 1 2 3 auditors 2 0 2 total 31 3 34 a10.the board did not rely on the',
22151:'number in favor of or opposed to a given position. information about the respondents’ majority view is provided only as',
22152:'a means of summarizing the comments. the board considered the arguments in each response and weighed the merits of the',
22153:'points raised. the following paragraphs discuss respondent comments and board decisions. page 9 sffas 40 fasab handbook, version 20 06/21',
22154:'sffas 40 adding “repairs” to title and body of definition a11.the task force reported much confusion regarding the proper treatment',
22155:'of repairs. due to thisconfusion,someagenciesmaynotbereportingdeferredrepairs. asaresult,theboard proposed that the term “deferred maintenance” should be revised to “deferred maintenance and repairs.”',
22156:'the majority of respondents agreed with the board’s proposal to add “repairs” to the title and body of the revised',
22157:'definition in order to clarify that deferred “repairs” as well as deferred “maintenance” need to be reported. a12.two respondents objected',
22158:'based on the assumption that “repairs” cannot be planned. however,thisisnotalwaysnorusuallythecase. thereareinfactmanyrepairsthatcanbe planned for based on historical and statistical analyses such',
22159:'as a study of failure rates. also, not all repairs are of an emergency or corrective nature as some repairs',
22160:'are adaptive which lend themselves to planning. some agencies have programs inplace that attempt to predict repairsandinsomecasesthesepredictionscancoverover90%ofthe repairactivity over a',
22161:'two year time horizon. for example, roof maintenance plans include an analysis of the condition assessment which can forecast when',
22162:'a roof or portion thereof might fail and require repair. a13.the remaining respondent who disagreed believes including repairs will cause',
22163:'continued confusionduetothelackofdefinitionforthisterm. however,basedonboththetaskforce’s recommendation as well as the majority of respondents who are in favor of this change, it is',
22164:'apparent that the communityatlarge believes that including this term helps to clarify conflictinginterpretationsanddivergentpractices. althoughtheboarddoesnotbelievethat from an accounting point of view,',
22165:'maintenance and repairs should be distinguished from each other, it does recognize that some within the technical community do make',
22166:'a distinction. accordingly, the original definition6 by virtue of excluding other than “normal” repairs” contributes to the underreporting of deferred',
22167:'maintenance and repairs as well as the lack of consistency both within and among agencies. while it is the board’s',
22168:'intention that for financial reporting purposes m&r not be treated separately, the board acknowledges the view that maintenance generally retains',
22169:'an asset’s functionality whereas repair generally restores an asset’s functionality. a14.it should be noted that although the board believes that',
22170:'“repairs” should be added to the definition, it does acknowledge that various interpretations surrounding unique circumstances may warrant future guidance.',
22171:'6sffas 6, paragraph 78. page 10 sffas 40 fasab handbook, version 20 06/21 sffas 40 illustrative list ofactivities a15.the second',
22172:'sentence of the definition provides an illustrative list of activities which is not meant to be all inclusive. the board',
22173:'believes that the list of activities contained in the secondsentenceof the existing definition should bechangedtobetterreflect current federal and industry practices',
22174:'as well as encompass m&r activities related to heritage assets, multiuse heritage assets, stewardship land, equipment and other personal property',
22175:'in addition to buildings. a16.in reviewing the reasons cited by the minority of respondents who disagreed with the proposed changes',
22176:'to the illustrative list of activities, it isclear that some of the issuesraised should be dealt with via implementation guidance',
22177:'while others require board clarification. specifically: a. systems – one respondent objected to adding “systems” since it appeared confusing to',
22178:'include a term which relates to equipment along with terms associated with buildings. another respondent objected to adding “systems” since',
22179:'it referenced information technology assets which are already included by virtue of being an asset class within property, plant, and',
22180:'equipment. the board desires to clarify that the term “systems” can referto either 1information technologyassets e.g., hardware, internal use software,',
22181:'data communication devices, etc. which are in fact covered bysffas 6 as amended or 2 groupings assemblages of component parts',
22182:'belonging to a building, equipment or other personal property. furthermore, depending on an agency’s capitalization criteria, systems and/or their replacements',
22183:'may or may not be capitalized. because the maintenance and repair definition is an umbrella definition covering many categories and',
22184:'classes of assets, it would be both impractical and inappropriate to limit the meaning of terms such as “systems” that',
22185:'cut across such a broad spectrum of assets. b. greater clarity of terms – two respondents sought greater clarity in',
22186:'each of the proposed terms. one respondent preferred retaining “normal repairs” since it distinguishes itself from major and extraordinary repairs.',
22187:'the board believes that standards should be general. if needed, detailed guidance can be provided through implementation guidance. however, the',
22188:'board will work with the task force to consider examples in the next phase of the project. in addition, agencies',
22189:'are encouraged to seek implementation guidance as needed before the effective date. c. eliminate entire list one respondent preferred eliminating',
22190:'the entire list or at least excluding preventative maintenance entirely stating that maintenance work is routine, recurring, repetitive, and periodic',
22191:'in nature and as such is never deferred but rather extended. thus, according to this respondent deferred maintenance is minor',
22192:'in magnitude and too difficult to measure and report. the board does not subscribe to page 11 sffas 40 fasab',
22193:'handbook, version 20 06/21 sffas 40 the notion that deferred maintenance and repair activities are immaterial in nature at all',
22194:'agencies. furthermore, the board’s research and overall respondent support fromthe communityatlarge for the proposed changesreflect that greater clarity and not',
22195:'less is needed in the definition. d. audit misapplication one respondent was concerned that auditors will treat the list as',
22196:'allinclusive. the board desires to make it clear that the list is illustrative only and does not purport to identify',
22197:'all activities that an agency might consider to be either maintenance or repair. e. accounting for disposal costs one respondent',
22198:'sought guidance on disposal activities. disposal activities are beyond the scope of this project. f. information technology assets one respondent',
22199:'sought inclusion of internal use software. as previously stated, this sffas 6 as amended in fact applies to all categories',
22200:'and classes of pp&e including internaluse software. g. impact on capitalization one respondent was concerned that systems might be capitalized',
22201:'even though capacity increases or upgrades are not accomplished. the board notes two points in this matter: 1 depending on',
22202:'an agency’s capitalization criteria, systems and/or their replacements may or may not be capitalized and 2 it does not intend',
22203:'at this time making any definitional changes that would require an agency to change its capitalization policies or criteria. phrase',
22204:'elimination:acceptable services and expected life a17.the majority of respondents agreed with the board’s proposal to eliminate the phrase, “so that',
22205:'it continues to provide acceptable services and achieves its expected life.” of the three respondents who disagreed, the following issues',
22206:'were raised: a. one objected to removing the “useful [sic] life” reference since it takes away a key quantitative factor',
22207:'for the evaluation of management’s determination of the relative length of time in which an asset’s acceptable condition would be',
22208:'expected to be maintained, andundermines theconcept of useful life recognition in thebasicfinancial statements and notes. b. one objected to deleting',
22209:'“acceptable services” since the term “acceptable condition” does not encompass “acceptable services.” according to this respondent the term “acceptable services”',
22210:'seems more measurable and indicative of adequate functionality and support of mission than “acceptable condition.” page 12 sffas 40 fasab',
22211:'handbook, version 20 06/21 sffas 40 c. one objected to both phrases being removed since the phrase “acceptable services” helps',
22212:'convey the meaning of “acceptable condition” and the phrase “expected life” is also useful as it helps set the boundaries',
22213:'of the fasab definition subsequent acquisitions that extend an asset’s “useful life” are capitalized and outside the scope of “deferred',
22214:'maintenance.” a18.theboardconsideredeachoftheargumentspresentedanddecidedeliminatingthisphrase helps to eliminate ambiguity and reflect actual asset management practices. a. first,theboardnotesthatthechangesmadetothemaintenanceandrepairsdefinition are limited to the application of',
22215:'this standard in regards to presenting dm&r information in rsi. therefore, elimination of the “expected life” reference does not infringe',
22216:'on management’s determination of an asset’s acceptable condition. furthermore, because the definition islimited todm&r, the boarddoesnot believe the “expected life”',
22217:'concept used for capitalization and depreciation is impacted in any meaningful way. b. to help eliminate confusion and clarify the',
22218:'intent regarding dm&r reporting, the board desires to simplify the definition wherever practicable. notwithstanding health and/or safety implications, the board',
22219:'believes that the most basic function for an adequate m&r program is to keep an asset in an acceptable condition',
22220:'consistent with management’s expectations. therefore, management is in the best position to first define and then assess whether or not',
22221:'a nexus exists between asset condition and “acceptable services.” although the term “acceptable condition” may not always encompass “acceptable services,”',
22222:'management is responsible for that determination. accordingly, undefined terms such as “acceptable services” that might have multiple meanings within an',
22223:'agency, let alone among agencies, run counter to the board’s intent of clarification. c. theboardbelievesthatlinkingdm&rtoan “expectedlife” estimateisnotuseful. from anoperationalperspective,m&ractivitiesmaynotsolelybeperformedforthepurpose of',
22224:'allowing pp&eto achieve itsexpected life becausehealthand safetyconsiderations maybeparamount. furthermore,estimatesofexpectedlifemaychangeovertimedue to operating conditions, actual maintenance practices, or technical changes. as an',
22225:'asset’s expected life changes, the life assigned in the accounting records should be appropriately updated. however, this presents practical problems',
22226:'if m&r is tied to meeting an expected life – for example, which expected life is to be used and',
22227:'what happenswhen theexpectedlife isexceeded. therefore,the board believesthat linking m&r to attainment of an expected life is not appropriate. page 13',
22228:'sffas 40 fasab handbook, version 20 06/21 sffas 40 originally intended vs. current use. a19.two issues were raised by respondents',
22229:'who did not agree with the proposed change from “originally intended” to “current use.” first, it was noted that “current',
22230:'use” will be misunderstood and misapplied and instead the board should adopt the phrase “the use for which it is',
22231:'currently configured.” second, it was noted that “current use” would be a poor benchmark for definitional purposes and that the',
22232:'original intent could in fact be ascertained via reviewing various agency documents. the board notes that the task force considered',
22233:'the term proposed by the respondent and found it to be problematic because it introducesa newtermwithoutaconsistentmeaning. forexample,theterm “configure” raisesquestions as',
22234:'to definition. specifically, “configured” when and by whom? does this imply a purely technical configuration based on schematic drawings or',
22235:'operational configuration based on logistics? the board does not wish to introduce new terms that could cause further confusion or',
22236:'create any additional ambiguity. concerning the second issue, the board notes that the task force found the opposite to be',
22237:'true: current use is the most appropriate benchmark especially when one considers changes in mission or code i.e., construction, health,',
22238:'and/or safety requirements over the years and that original intent cannot always be readily ascertained via a review of agency',
22239:'documents. other comments capital improvements a20.one respondent raised a concern regarding the exclusion of capital improvements from dm&r reporting. additionally,',
22240:'the board has been made aware of several other concerns over this matter. the concerns include: a. failure to include',
22241:'“total correction costs” in the definition would significantly under report all costs to correct existing capitalized assets; e.g., maintenance, repairs',
22242:'and estimated capital improvements b. some special purpose reports include unfunded capital needs along with dm&r information and this is',
22243:'beneficial to users c. some repair activities may incidentally improve assets e.g., damaged lighting fixtures may be replaced with more',
22244:'energy efficient lighting fixtures and there is uncertainty regarding treatment of such projects page 14 sffas 40 fasab handbook, version',
22245:'20 06/21 sffas 40 d. there is uncertainty regarding planned m&r activities relating to fully depreciated fixed assets and fixed',
22246:'assets that are not recognized in the accounting records due to capitalization thresholds a21.the board believes that the existing goal',
22247:'of differentiating those activities that might be considered capital improvements or new assets from m&r should be maintained. dm&r reporting',
22248:'addresses concerns about management of existing assets. while unmet capital needs i.e., capital improvements and new acquisitions are relevant to',
22249:'decision makers, they do not as clearlyrelate to reporting on past transactionsand eventsasdm&rdoes.as such,unmetcapitalneedsshouldnotbeincludedinthecalculationofdm&r. dm&rarises because an asset exists that',
22250:'is not maintained in accordance with an agency’s established m&r policy; dm&r have financial consequences apart from unmet capital needs',
22251:'which are relevant to decision makers. a22.the board is mindful that the distinction between m&r activities and improvements to existing',
22252:'assets isoften not clear. some m&ractivities that could enhance an asset may not generally be considered by accountants as “capital',
22253:'improvements” and recognized as additions to the agency’s assets. in addition, there will be uncertainty regarding the unit of analysis',
22254:'– whether an entire facility is “the asset” or its individual components are “assets.” therefore, depending on the unit of',
22255:'analysis, an activity might be considered m&r or replacement of an old asset with a new one. it is not',
22256:'the board’s intention that a precise distinction be attained in every case. rather, agencies should not include new asset, capital',
22257:'improvement, and/or enhancement needs in dm&r and should treat like circumstances similarly over time since a consistently followed practice that',
22258:'is well described will assist decision makers. a23.by reaffirming that m&r excludes capital improvements, the board is striving to ensure',
22259:'the definition of dm&r for purposes of financial reporting will be one and the same as in the condition index7',
22260:'calculation of the federal real property profile frpp. this should result in agencies having to develop only one estimate of',
22261:'dm&r for both purposes. a24.in the exposure draft, the board sought not only input on the proposed changes, but also',
22262:'other changes, points, issues and/or considerations which may not have been specifically addressed in the exposure draft. twentytwo respondents provided',
22263:'additional comments that covered a broad array of issues ranging from editorial notes to acknowledging the 7 it should be',
22264:'noted that the revised maintenance and repair definition as contained in this standard is intended to be the basis for',
22265:'the numerator so that a uniform reporting requirement definition exists throughout federal government. condition index ci is a general measure',
22266:'of the constructed asset’s condition at a specific point in time. ci is calculated as the ratio of repair needs',
22267:'to plant replacement value prv. formula: ci = 1 $repair needs/$prv x 100. source: 2009 gsa’s guidance for real property',
22268:'inventory reporting dated july 14, 2009. page 15 sffas 40 fasab handbook, version 20 06/21 sffas 40 positive effects of',
22269:'revising the definition as well as the ambitious nature of this project. in summary the comments received include: a. one',
22270:'respondent suggested that the board should not be overly prescriptive because one size does not fit all. b. one respondent',
22271:'said the difficulty will be in transferring accounting requirements into the operations and maintenance arena. c. one respondent suggested that',
22272:'the board should consider distinguishing between types of repairs. d. one respondent recommends that the federal real property council frpc',
22273:'and the general servicesadministration require agencies to report active and inactive dm. e. one respondent suggested that guidance could be',
22274:'enhanced that dm&r applies to all classifications and classes of pp&e i.e., in addition to real property. the board notes',
22275:'that sffas 6, paragraph 83 requires dm&r information for each category of pp&e by major class. f. one respondent stated',
22276:'that acceptable condition differs between equipment and facilities. for equipment it may be defined as missioncapable or serviceable. g. one',
22277:'respondent suggested adding guidance on using gsa’s frpp information for the annual data calls. replacement costs or ranges of such',
22278:'costs are needed to determine whether or not funding dm&r is economically advantageous compared to asset replacement. h. one respondent',
22279:'stated that there is a borderline between financial reporting of dm&r and technical or project completion of m&r. in their',
22280:'opinion, m&r should be viewed over an asset’s lifecycle and not by a financial reporting period. dm&r on noncapitalized general',
22281:'pp&e a25.while views were sought on this issue, no changes in practice relating to dm&r on non capitalized general pp&e',
22282:'should result from this statement. sffas 6, paragraph 83, providesminimumreportingrequirements. theboardwillclarifytheserequirementsduring the next phase of this project. a26.the board asked',
22283:'if the respondents believed that dm&r reporting should be limited to dm&r related to capitalized general pp&e as well as',
22284:'noncapitalized stewardship pp&e or directed broadly to fixed assets. sixteen respondents were in favor of reporting dm&r page 16 sffas',
22285:'40 fasab handbook, version 20 06/21 sffas 40 broadly to fixed assets whereas fourteen respondents were in favor of limiting',
22286:'dm&r reporting to capitalized general pp&e as well as stewardship pp&e. a. respondentsinfavor ofreportingdm&rbroadlytofixedassetsprovidedthefollowing comments: i. dm&r should apply to',
22287:'all assets because capitalization thresholds are not recognized in asset management practices and should be consistent with gsa’s real property',
22288:'profile all assets. ii. dm&r on all fixed assets is a better indication of risk to the government’s varied missions.',
22289:'iii. fixed assets relate better to m&r since all or most assets require maintenance. iv. since there is confusion between',
22290:'what a capital asset is versus pp&e, dm&r should be reported under fixed assets. v. if an agency has a',
22291:'significant number of fully depreciated assets for which dm&r is reported, a reevaluation of useful life estimates is in order.',
22292:'vi. if an agency has a significant number of assets that do not meet its capitalization thresholdfor which the agencybelievesdm&rshouldbereported,',
22293:'areevaluation of the capitalization threshold is in order. vii. consideration should be given to allowing a threshold for dm&r reporting',
22294:'purposes that may or may not be different from the threshold used for capitalizing pp&e. viii. dm&r is more pertinent',
22295:'to users than depreciation or historical cost information inasmuch as it represents future costs to be incurred. ix. limitations to',
22296:'dm&r reporting could cause potential data conflicts with other sources of information used by program and congressional offices. b. respondents',
22297:'in favor of reporting dm&r limited to capitalized general pp&e and stewardship pp&e provided the following comments: i. dm&r shouldretainassociationtopp&e.',
22298:'addingdm&rfor noncapitalized assets skews any resultant analysis to pp&e. dm&r should trace and be auditable to pp&e. page 17 sffas',
22299:'40 fasab handbook, version 20 06/21 sffas 40 ii. capitalization thresholds reflect cost/benefit considerations balancing the cost of precision versus',
22300:'the costs to compile data. iii. if an asset is expensed, it has been deemed immaterial and dm&r should follow',
22301:'suit. iv. a separate threshold for dm&r on noncapitalized assets should be allowed to encourage such reporting. v. apply a',
22302:'uniform dm&r threshold applicable only for governmentwide reporting purposes. vi. reporting dm&r for fixed assets in essence undervalues the pp&e',
22303:'reflected on the balance sheet. vii establishing limits definitions for “fixed assets” will be very difficult in practice adding additional',
22304:'costs. viii. agencies should use judgment in determining whether dm&r be limited or applied broadly; user benefits should exceed costs',
22305:'of preparing said information. board deliberations a27.the board discussed respondent input but has made a decision only regarding the proposed',
22306:'amendments to sffas 6 relating to the definition of dm&r. input and suggestions regarding other topics will be considered in',
22307:'the next phase of the project – measurement, reporting and asset impairment. the basis for conclusions primarily addresses board deliberations',
22308:'on definitional issues. boardapproval a28.this statement was approved for issuance by all members of the board. the written ballots are',
22309:'available for public inspection at the fasabs offices. page 18 sffas 40 fasab handbook, version 20 06/21 sffas 40 appendix',
22310:'b:abbreviations cfo chief financial officers council dm deferred maintenance dm&r deferred maintenance and repair fasab federalaccountingstandardsadvisoryboard ffc federal facilities council',
22311:'frpc federal real property council frpp federalrealpropertyprofilegsaassetmanagementdatabase gaap generally accepted accounting principles gao governmentaccountabilityoffice gsa generalservicesadministration m&r maintenance and repair',
22312:'omb office of management and budget pp&e property, plant and equipment rsi required supplementary information sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards page',
22313:'19 sffas 40 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards41: deferral of the effective date of sffas 38,accounting for federal oil',
22314:'and gas resources status issued july 6, 2011 effective date effective upon issuance. affects sffas 38, pars. 5 and 30,',
22315:'by replacing the year “2011” with “2012.” affected by none. summary this statement defers the effective date of statement of',
22316:'federalfinancialaccounting standards sffas 38, accounting for federal oil and gas resources, for one year. the standards contained in sffas 38',
22317:'will become effective as required supplementary information for periods beginning after september 30, 2012, with earlier implementation encouraged. page 1',
22318:'sffas 41 fasab handbook, version 20 06/21 sffas 41 table of contents summary 1 standards 3 scope 3 amendment to',
22319:'sffas 38 3 effective date 3 appendixa:basis for conclusions 4 project history 4 request for deferral 5 due process 5',
22320:'comment letters 6 appendix b:abbreviations 8 page 2 sffas 41 fasab handbook, version 20 06/21 sffas 41 standards scope 1.',
22321:'this statement applies to federal entities that report information about federal oil and gas resources in general purpose federal financial',
22322:'reports, including the consolidated financial report of the u.s. government cfr, in conformance with sffas 34, the hierarchy of generally',
22323:'accepted accounting principles, including the application of standards issued by the financial accounting standards board. amendment to sffas 38 2.',
22324:'paragraphs 5 and 30 of sffas 38, accounting for federal oil and gas resources, are amended as follows: the standards',
22325:'are effective as rsi for periods beginning after september 30, 20112012. earlier implementation is encouraged. effective date 3. this standard',
22326:'is effective upon issuance. the provisions of this statement need not be applied to immaterial items. page 3 sffas 41',
22327:'fasab handbook, version 20 06/21 sffas 41 appendixa: basis for conclusions this appendix discusses some factors considered significant by board',
22328:'members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. individual',
22329:'members gave greater weight to some factors than to others. the standards enunciated in this statement–not the material in this',
22330:'appendix–should govern the accounting for specific transactions, events, or conditions. this statement may be affected by later statements. the fasab',
22331:'handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within',
22332:'the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to',
22333:'reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale for each',
22334:'amendment. project history a1. fasab issued statement of federal financial accounting standards sffas 38, accounting for federal oil and gas',
22335:'resources, on april 13, 2010. this standard requires the value of the federal government’s estimated petroleum royalties from the production',
22336:'of federal oil and gas proved reserves be reported in a schedule of estimated federal oil and gaspetroleum royalties. in',
22337:'addition, this standard requires the value of estimated petroleum royalty revenue designated for others be reported in a schedule of',
22338:'estimated federal oil and gas petroleum royalties to be distributed to others. these schedules are to be presented as required',
22339:'supplementary information rsi as part of a discussion of all significant federal oil and gas resources under management by the',
22340:'entity. sffas 38 is effective as rsi for periods beginning after september 30, 2011 with earlier implementation encouraged. a2. it',
22341:'is the board’s intent that the information required by sffas 38 transitions to basic information after being reported as rsi',
22342:'for a period of three years. prior to the conclusion of the threeyear rsi period, the board plans to make',
22343:'a determination as to whether the information will transition to basic information as financial statement recognition or note disclosure. sffas',
22344:'38 will remain in effect until such time as a determination is made. a3. on september 30, 2010, fasab staff',
22345:'was informed that the department of the interior doi wasconsidering requesting a oneyear deferral of the effective date of sffas',
22346:'38 due to the recent reorganization of the minerals management service mms into several different bureaus under the newly created',
22347:'bureau of ocean energy management, regulationandenforcementboemre. mmshadbeenthecomponententityresponsible for collecting royalties and charged with preparing the information to be reported under',
22348:'sffas 38. page 4 sffas 41 fasab handbook, version 20 06/21 sffas 41 a4. on october 7, 2010, fasab staff',
22349:'notified a boemre representative that in order to issue an amendment to the standard by september 2011, staff would need',
22350:'to receive doi’s formaldeferralrequest intime toprepare adraft exposuredraft edforthe december2010 board meeting. request for deferral a5. the formal request was',
22351:'received from boemre on november 18, 2010. the request explained that mms’s successor organization will be divided into three new',
22352:'entities. first, the boemre and the bureau of safety and environment enforcement will divide the duties of the former offshore',
22353:'energy and minerals management organization, with the former managing the development of conventional and renewable resources and minerals on the',
22354:'outercontinentalshelf,andthelatterprovidingsafetyandenvironmentaloversight. these new bureaus will report to the assistant secretary of land and minerals management. second, the office of natural',
22355:'resources revenue onrr will perform the roles of the former minerals revenue management organization and report to the assistant secretary',
22356:'for policy, management and budget. a6. boemre’srequeststatedthatmanyissuesandchallengeshavearisenasadirectresultof these organizational changes that will greatly complicate the implementation of sffas 38 for',
22357:'fiscal year 2012. accordingly, a oneyear deferral of sffas 38 was requested. a7. while a reorganization in and of itself',
22358:'would not normally be a justification for deferring a standard, the board members noted that the nature and extent of',
22359:'the mms reorganization goes above and beyond what would be considered within the normal course of operations. the board therefore',
22360:'approved the oneyear deferral, but emphasized that earlier implementation is encouraged and strongly urged that the standard be implemented for',
22361:'fiscal year 2012 if at all possible. due process a8. the exposure draft ed, deferral of the effective date of',
22362:'sffas 38, accounting for federal oil and gas resources, was released on january 5, 2011, with comments requested by february',
22363:'7, 2011. a9. upon release of the ed, notices and press releases were provided to the fasab email listserv, the',
22364:'federal register, the journal of accountancy, aga today, the cpa journal, government executive, the cpa letter, government accounting and auditing',
22365:'update, the cfo council, the council of inspectors general on integrity and efficiency, and the financial statement audit network, and',
22366:'committees of professional associations generally page 5 sffas 41 fasab handbook, version 20 06/21 sffas 41 commenting on exposure drafts',
22367:'in the past e.g., greater washington society of cpas, aga financial management standards board. a10.this broad announcement was followed by',
22368:'direct emailings of the press release to: a. relevant congressional committees: senate committee on energy and natural resources, senate committee',
22369:'on finance, house committee on financial services, and house committee on natural resources; b. public interest groups and think tanks:alliance',
22370:'to save energy, the brookings institution, the cato institute, center on budget and policy priorities, citizensagainst government waste, the concord',
22371:'coalition, the heritage foundation, national parks conservationassociation npca, natural resources defense council nrdc, omb watch, resources for the future rff,',
22372:'sierra club, the urban institute, and world resources institute wri; c. respondents to sffas 38 and related eds or their',
22373:'successors; d. agencies that manage and / or account for federal natural resources: department of the interior doi office of',
22374:'the secretary; doi bureau of land management ; doi bureau of ocean energy management, regulation and enforcement; doi u.s. geological',
22375:'service usgs; department of agriculture usda, deputy cfo; and usda forest service. a11.to encourage responses, reminder notices were provided to',
22376:'the fasab email listserv on january 28, 2011, and february 8, 2011. comment letters a12.four comment letters were received from',
22377:'the following sources: federal internal nonfederal external users, academics, others 0 2 auditors 0 0 preparers and financial managers 2',
22378:'0 a13.the board considered responses to the exposure draft at its february 23, 2011, public meeting. the board did not',
22379:'rely on the number in favor of or opposed to a given position. information about the respondents’ majority view is',
22380:'provided only as a means of summarizing the comments. the board considered the arguments in each response and page 6',
22381:'sffas 41 fasab handbook, version 20 06/21 sffas 41 weighed the merits of the points raised. the respondents’ comments are',
22382:'summarized below. a14.threeofthefourrespondentswereinfavorofdeferringtheeffectivedate. onerespondent disagreed, citing the need for doi to incorporate the reporting for oil and gas resources into',
22383:'its newly reorganized reporting structure as it is being developed. the board considered both views and decided to approve the',
22384:'oneyear deferral, noting that the additional time providedtodoitoimproveupon itsestimation process inlightofthe majorreorganizationof mms would be preferable. a15.this statement was approved',
22385:'for issuance by all members of the board. written ballots are available for public inspection at the fasab’s offices. page',
22386:'7 sffas 41 fasab handbook, version 20 06/21 sffas 41 appendix b:abbreviations boemre bureau of ocean energy management, regulation and',
22387:'enforcement cfr consolidated financial report of the u.s. government doi department of the interior ed exposure draft fasab federalaccountingstandardsadvisoryboard mms',
22388:'minerals management service onrr office of natural resources revenue rsi required supplementary information sffas statementoffederalfinancialaccountingstandards u.s. united states page 8',
22389:'sffas 41 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards42: deferred maintenance and repairs:amendingstatementsoffederalfinancialaccountingstandards6,14, 29 and 32 status issued april 25, 2012',
22390:'effective date for fiscal years beginning after september 30, 2014 affects sffas 6, paragraphs 7784 andappendix c are rescinded. sffas',
22391:'14 is rescinded. sffas 29, paragraphs 26, 28, 41, and 42 are amended. sffas 32, paragraphs 12b.,12c., and 24 are',
22392:'rescinded. technical release 9, section iii. affected by none. summary deferred maintenanceandrepairsdm&rreportingenablesthegovernment tobeaccountable to citizens for the proper administration and',
22393:'stewardship of its assets. specifically, dm&r reporting assists users by providing an entitys realistic estimate of dm&r amounts and the',
22394:'effectiveness of asset maintenance practices the entities employ in fulfilling their missions. thisstatement amendsthe requiredsupplementaryinformation rsipresentationrequirements contained in statement of',
22395:'federal financialaccounting standards sffas 6, accounting for property, plant, and equipment and also provides conforming amendments as explained within the',
22396:'scope andapplicability section at paragraph 6. the amendments require entities to: 1 describe their maintenance and repairs m&r policies and',
22397:'how they are applied, 2 discuss how they rank and prioritize m&r activities among other activities, 3 identify factors considered',
22398:'in determining acceptable condition standards, 4 state whether dm&r relate solely to capitalized general property, plant and equipment pp&e and',
22399:'stewardship pp&e or also to non capitalized or fully depreciated general pp&e, 5identifypp&e for which management does not measure and/or',
22400:'report dm&r and the rationale for the exclusion of other than noncapitalized or fully depreciated general pp&e, 6 provide beginning',
22401:'and ending dm&r balances by category of pp&e, and 7 explain significant changes from the prior year. other significant amendments',
22402:'contained in this statement include 1 requiring that condition standards, related assessment methods, and reporting formats be consistently applied unless',
22403:'management determines that changes are necessary, 2 eliminating the requirement to report condition information, and 3 eliminating the i optional',
22404:'reporting of lowhigh dm&r estimates as well as ii option to report critical and noncritical dm&r. additionally, the amendments note',
22405:'the importance of communication with, and input from, professionals in diverse disciplines in compiling and reporting dm&r information. page 1',
22406:'sffas 42 fasab handbook, version 20 06/21 sffas 42 table of contents summary 1 introduction 3 purpose 3 materiality 3',
22407:'effective date 3 accounting standards 4 scopeandapplicability 4 appendixa:basis for conclusions 12 appendix b: sample illustration 23 appendix c:abbreviations 29',
22408:'page 2 sffas 42 fasab handbook, version 20 06/21 sffas 42 introduction purpose 1. theobjectiveofthisstatementistoimprovethemeasurementofdeferredmaintenanceand repairs dm&r by incorporating changes',
22409:'responsive to concerns raised by the financial and technical1 communities. the board also considered, where appropriate, a government accountability office',
22410:'gao study2 specific to repair and maintenance backlog issues surrounding federal real property. materiality 2. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an',
22411:'item is material depends on the degree to which omitting or misstating information about the item makes it probable that',
22412:'the judgment of a reasonable person relying on the information would have been changed or influenced by the omission or',
22413:'the misstatement. effective date 3. this statement is effective for periods beginning after september 30, 2014. earlier implementation is encouraged.',
22414:'1this statement uses the phrase “technical community” or “technical communities” to refer to entity personnel responsible for the management of',
22415:'property, plant, and equipment pp&e, including maintenance and repair. 2gao report no. gao0910 datedoctober 2008. federal real property. government’s fiscal',
22416:'exposure from repair and maintenance backlogs is unclear. page 3 sffas 42 fasab handbook, version 20 06/21 sffas 42 accounting',
22417:'standards scope andapplicability 4. this statement applies to federal entities that present general purpose federal financial reports in conformance with',
22418:'generally accepted accounting principles as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the',
22419:'hierarchy of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board. 5. this',
22420:'statement replaces the definitions, measurement and reporting requirements for deferred maintenance and repairs established in sffas 6, as amended by',
22421:'sffas 40, definitional changes related to deferred maintenance and repairs: amending statement of federal financial accounting standards 6, accounting for',
22422:'property, plant, and equipment. sffas 6, chapter 3: deferred maintenance and repairs, paragraphs 77 through 84, and appendix c, deferred',
22423:'maintenance and repairs illustration are rescinded. 6. in addition to sffas 6, this statement also provides the following conforming amendments:',
22424:'a. sffas 14, amendments to deferred maintenance reporting amending sffas 6, accounting for property, plant and equipment, and sffas 8,',
22425:'supplementary stewardship reporting, is rescinded. b. sffas 29, heritage assets and stewardship land, is amended to adopt the revised terminology',
22426:'and to rescind requirements for reporting condition3 information. c. sffas 32, consolidated financial report of the united states government requirements:',
22427:'implementing statement of federal financial accounting concepts 4 “intended audience and qualitative characteristics for the consolidated financial report of the',
22428:'united states government,” isamended to adopttherevisedterminology and to rescind certain requirements. d. technical release 9, implementation guide for statement of',
22429:'federal financial accounting standards 29: heritage assets and stewardship land, section iii: assessing and reporting condition is amended to explain',
22430:'the status of guidance relating to condition reporting. 3 terms defined in the glossary are shown in boldface the first',
22431:'time they appear. page 4 sffas 42 fasab handbook, version 20 06/21 sffas 42 definition 7. deferred maintenance and repairs',
22432:'dm&r are maintenance and repairs that were not performed when they should have been or were scheduled to be and',
22433:'which are put off or delayed for a future period. 8. maintenance and repairs are activities directed toward keeping fixed',
22434:'assets in an acceptable condition.4 activities include preventive maintenance; replacement of parts, systems,5 or components; and other activities needed to',
22435:'preserve or maintain the asset. maintenance and repairs, as distinguished from capital improvements, exclude activities directed towards expanding the capacity',
22436:'of an asset or otherwise upgrading it to serve needs different from, or significantly greater than, its current use. measurement',
22437:'9. amounts for dm&r may be measured using: a. condition assessment surveys, b. lifecycle cost forecasts, or c. other methods',
22438:'that are similar to the condition assessment survey or lifecycle costing methods. 10. condition assessment surveys are periodic6 visual i.e.,',
22439:'physical inspections of property, plant and equipment pp&e to determine their current condition and estimated cost to correct any deficiencies.',
22440:'11. lifecycle costing is an acquisition or procurement technique which considers operating, maintenance, and other costs in addition to the',
22441:'acquisition cost of assets. since it results in 4 thedetermination of acceptable condition may vary both between entities and among',
22442:'sites within the same entity. management shall determine what level of condition is acceptable. 5 the term “systems” can refer',
22443:'to either 1 information technology assets e.g., hardware, internal use software, data communication devices, etc. or 2 groupings assemblages of',
22444:'component parts belonging to a building, equipment or other personal property. 6 this statement does not require an entity’s entire',
22445:'portfolio to be inspected each year. it is permissible to schedule condition assessment surveys on a cyclical i.e., calendar basis',
22446:'or a frequency based on consideration of risk provided scheduling is done in accordance with established practices. page 5 sffas',
22447:'42 fasab handbook, version 20 06/21 sffas 42 forecasts of maintenance and repairs expense, these forecasts may serve as a',
22448:'basis against which to compare actual maintenance and repairs expense to arrive at an estimate of deferred maintenance and repairs.',
22449:'12. management should determine which methods to apply and what condition standards are acceptable. once determined, condition standards, related assessment',
22450:'methods7, and reporting formats should be consistently applied unless management determines that changes are necessary. although condition information is essential',
22451:'in developing dm&r amounts, reporting of condition information is not required. changes to methods or formats that management determines are',
22452:'necessary should be accompanied by an explanation documenting the rationale forthechange and anyrelatedimpact onthedm&restimates. to best meet the goal of',
22453:'dm&r reporting, communication with, and consideration of, input from professionals in diverse disciplines such as engineering, facilities management, finance, budgeting',
22454:'and accounting is necessary. 13. dm&r should be measured and reported for capitalized general pp&e and stewardship pp&e. dm&r also',
22455:'may be measured and reported for noncapitalized or fully depreciated general pp&e. dm&r should include funded maintenance and repairs m&r',
22456:'that have been delayed for a future period as well as unfunded m&r. dm&r on inactive and/or excess pp&e should',
22457:'be included to the extent that it is required to maintain inactive or excess pp&e in acceptable condition. for example,',
22458:'inactive pp&e may be maintained or repaired either to comply with existing laws and regulations, or to preserve the value',
22459:'of pp&e pending disposal. component entity required supplementary information 14. dm&r reporting should provide 1 dm&r beginning and ending balances',
22460:'for the reporting period and 2 narrative information related to dm&r activities. entities are required to present both qualitative and',
22461:'quantitative information. 15. at a minimum, the following information should be presented as required supplementary information rsi for all pp&e',
22462:'each category established in sffas 6, as amended, should be included regardless of the measurement method chosen. 7assessment methods are',
22463:'techniques or procedures used in a process of systematically evaluating an entitys pp&e in order to project m&r, renewal, or',
22464:'replacement needs that will maintain or preserve its ability to support the entitys mission or activities it is assigned to',
22465:'serve. page 6 sffas 42 fasab handbook, version 20 06/21 sffas 42 qualitative a. a summary of the entity’s m&r',
22466:'policies and brief description of how they are applied; i.e., method of measuring dm&r b. policies for ranking and prioritizing',
22467:'m&r activities8 c. factors the entity considers in determining acceptable condition standards d. whether dm&r relates solely to capitalized general',
22468:'pp&e and noncapitalized stewardship pp&e or also to amounts relating to noncapitalized or fully depreciated general pp&e e. capitalized general',
22469:'pp&e, and noncapitalized heritage assets and stewardship land for which management does not measure and/or report dm&r and the rationale',
22470:'for the exclusion f. if applicable, explanation of any significant changes9 to 1 the policies and factors subject to the',
22471:'reporting requirements established in a. through e. above and 2 dm&r amounts from the prior year10 quantitative g. estimatesofthebeginningandendingbalancesofdm&rfor eachmajor',
22472:'category11 of pp&e for which maintenance and repairs have been deferred 8as an example, entities may report 1 how they',
22473:'will pursue reducing their dm&r backlog and how they will be impacted by budget or funding shortfalls or reductions, and',
22474:'2 whether or not the entity has used return on investment analyses in its ranking and prioritizing of either m&r',
22475:'or dm&r. 9 the determination of whether or not an item is significant is a matter of professional judgment. this',
22476:'determination is separate and distinct from materiality considerations that include considering the likely influence that such information could have on',
22477:'judgments or decisions of financial statement users. 10 consistent with paragraph 12,once determined, condition standards and related assessmentmethods and reporting',
22478:'formats should be consistently applied. 11sffas 6 sets forth three categories of pp&e: 1 general pp&e; 2 heritage assets; and',
22479:'3 stewardship land. page 7 sffas 42 fasab handbook, version 20 06/21 sffas 42 consolidated financial report of the us',
22480:'government required supplementary information 16. the disclosure requirements listed in paragraphs 14 and 15 above are not applicable to the',
22481:'u.s. governmentwidefinancialstatements. theu.s. governmentwidefinancialstatements should include the following rsi: a. a description of what constitutes dm&r and how it was',
22482:'measured b. amounts of dm&r for each major category of pp&e i.e., general pp&e, heritage assets, and stewardship land; and',
22483:'c. a general reference to specific component entity reports for additional information conformingamendments to other statements and technical releases 17.',
22484:'this statement amends requirements in sffas 29 and 32 to replace ‘deferred maintenance’with ‘deferredmaintenanceandrepairs’andtorescind certainrequirementsin sffas 29 and 32, including',
22485:'the requirement to report condition information. thechanges to sffas 29 and 32 are presented in paragraphs 18 and 19 below.',
22486:'18. paragraphs 26, 28, 41 and 42 of sffas 29, heritage assets and stewardship land, are amended as follows: [26]',
22487:'entities shouldreport thecondition11 ofthe heritageassetswhich maybereported with the deferred maintenance information12 as required supplementary information. entities should include a reference',
22488:'to the condition and deferred maintenance and repairs information13 if reportedin required supplementaryinformation elsewhereinthe report containing the basic financial statements.',
22489:'paragraph 26 footnote references: 11 condition isthephysicalstateof anasset. thecondition of an asset isbased on an evaluation of the physical status/state',
22490:'of an asset, its ability to perform as planned, and its continued usefulness. evaluating an asset’s condition requires knowledge of',
22491:'the asset, its performance capacity and its actual ability to perform, and expectations for its continued performance. the condition of',
22492:'a longlived asset is affected by its durability, the quality of itsdesign and construction, its use, the adequacy of maintenance',
22493:'that has been performed, and many other factors, including: accidents an unforeseen and unplanned or unexpected event or page 8',
22494:'sffas 42 fasab handbook, version 20 06/21 sffas 42 circumstance, catastrophes a tragic event, disasters a sudden calamitous event bringing',
22495:'great damage, loss, or destruction, and obsolescence. examples of condition information include, among others, 1 averages of standardized condition rating',
22496:'codes; 2 percentage of assets above, at, or below acceptable condition; or 3 narrative information. 12 see sffas 6, chapter',
22497:'3, deferred maintenance par. 7784 for information regarding definition, measurement and disclosures specific to deferred maintenance. 13 see sffas 42,',
22498:'deferred maintenance and repairs, amending statements of federal financial accounting standards 6, 14, 29 and 32 for information regarding definition,',
22499:'measurement and required supplementary information. sffas 14,amendmentstodeferredmaintenancereportingamending sffas 6, accounting for property, plant and equipment and sffas 8, supplementary stewardship',
22500:'reporting, defined deferred maintenance as rsi. the board believed that a period of experimentation was necessary for deferred maintenance information',
22501:'and that classifying it as rsi would be more appropriate during the experimentation period. the board may revise this standard',
22502:'based on experience gained during this time and the development of additional criteria. [28.c. ]ageneral reference to agency reports for',
22503:'additional information about heritage assets, such as agency stewardship policies for heritage assets, and physical units by major categories of',
22504:'heritage assets, and the condition of the heritage assets. [41] entities should report the condition22 of the stewardship land which',
22505:'may be reported with the deferred maintenance information23 as required supplementary information. entities should include a reference to the condition',
22506:'and deferred maintenance and repairs information24 if reported in required supplementary information elsewhere in the report containing the basic financial',
22507:'statements. paragraph 41 footnote references: 22 condition isthephysicalstate of an asset. the conditionof anassetisbasedon an evaluation of the physical status/state',
22508:'of an asset, its ability to perform as planned, and its continued usefulness. evaluating an asset’s condition requires knowledge of',
22509:'the asset, its performance capacity and its actual ability to perform, and expectations for its continued performance. the condition of',
22510:'a longlived asset is affected by its durability, the quality of itsdesign and construction, its use, the adequacy of maintenance',
22511:'that has been performed, and many other factors, including: accidents an unforeseen and unplanned or unexpected event or circumstance, catastrophes',
22512:'a tragic event, disasters a sudden calamitous page 9 sffas 42 fasab handbook, version 20 06/21 sffas 42 event bringing',
22513:'great damage, loss, or destruction, and obsolescence. examples of condition information include, among others, 1 averages of standardized condition rating',
22514:'codes; 2 percentage of assets above, at, or below acceptable condition; or 3 narrative information. 23 see sffas 6, chapter',
22515:'3, deferred maintenance par. 7784 for information regarding definition, measurement and disclosures specific to deferred maintenance. 24 see sffas 42,',
22516:'deferred maintenance and repairs, amending statements of federal financial accounting standards 6, 14, 29 and 32, for information regarding definition,',
22517:'measurement and required supplementary information. sffas 14,amendmentstodeferredmaintenancereportingamending sffas 6, accounting for property, plant and equipment and sffas 8, supplementary stewardship',
22518:'reporting, defined deferred maintenance as rsi. the board believed that a period of experimentation was necessary for deferred maintenance information',
22519:'and that classifying it as rsi would be more appropriate during the experimentation period. the board may revise this standard',
22520:'based on experience gained during this time and the development of additional criteria. [42. c.]ageneral reference to agency reports for',
22521:'additional information about stewardship land, such as agency stewardship policies for stewardship land, and physical units by major categories of',
22522:'stewardship land use, and the condition of the stewardship land. 19. paragraphs 12b., 12c., and 24 of sffas 32: consolidated',
22523:'financial report of the united states government requirements: implementing statement of federal financial accounting concepts 4 “intended audience and qualitative',
22524:'characteristics for the consolidated financial report of the united states government” are rescinded. 12. b. the text “the above listed',
22525:'required supplementary information is not applicable to the u.s. governmentwide financial statements. sffas 32 provides for required supplementary information applicable',
22526:'to the u.s. governmentwide financial statements for these activities.” is added as a separate bullet following the existing text for',
22527:'par. 83. 12. c. the text “the u.s. governmentwide financial statements need not separately report stratification between critical and noncritical',
22528:'amounts of maintenance needed to return each major class of asset to its acceptable operating condition as well as management’s',
22529:'definition of these categories. sffas 32 provides for optional information applicable to the u.s. government page 10 sffas 42 fasab',
22530:'handbook, version 20 06/21 sffas 42 wide financial statements for these activities.” is added to par. 84 as the final',
22531:'sentences. 24. the u.s. governmentwide financial statements should include the following required supplementary information: a. a broad description of deferred',
22532:'maintenance, b. amounts or ranges of amounts of deferred maintenance for each major asset category i.e., general property, plant, and',
22533:'equipment; heritage assets, and stewardship land for which maintenance has been deferred, c. a general reference to component entity reports,',
22534:'and d. optional reporting of the stratification between critical and noncritical amounts of maintenance needed to return each major asset',
22535:'category to its acceptable operating condition. 20. this statement amends requirements in technical release 9, section iii, to acknowledge the',
22536:'rescission of requirementsto report condition information asrsi. the followingtextisto be inserted before section iii: statement of federal financialaccounting standards 42,',
22537:'deferred maintenance and repairs, amending statements of federal financial accounting standards 6, 14, 29 and 32, rescinded the requirement to',
22538:'report condition information regarding heritage assets and stewardship land as rsi. the following guidance offers insights regarding condition assessments and',
22539:'factors that may influence reporting of deferred maintenance and repairs information. the guidance has not been updated to conform to',
22540:'the new standards and should be considered other literature until revised implementation guidance, if any is provided. effective date 21.',
22541:'this statement is effective for periods beginning after september 30, 2014. earlier implementation is encouraged. the provisions of this statement',
22542:'need not be applied to immaterial items. page 11 sffas 42 fasab handbook, version 20 06/21 sffas 42 appendixa: basis',
22543:'for conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in this statement. it',
22544:'includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to',
22545:'others. the standards provided in this statement–not the material in this appendix–should govern the accounting for specific transactions, events, or',
22546:'conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section',
22547:'directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are',
22548:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
22549:'for conclusions of the amending statement for the rationale for each amendment. project history a1. concerns pertaining to dm&r reporting',
22550:'have arisen since the issuance of sffas 6. the two most common concerns related to 1 the lack of comparability',
22551:'in assessing asset condition both within and among entities and 2 measurement and reporting practices and formats that vary greatly',
22552:'among entities. in its most recent real property study gao report no. gao0910 dated october 2008, the gao noted that',
22553:'entities define and estimate dm&r differently in part due to the degree of flexibility afforded by both sffas 6 and',
22554:'the federal real property profile reporting guidelines. as a result, confusion and uncertainty exists among users of dm&r information. a2.',
22555:'primarilyasaresultofauditorconcerns,sffas14, amendments to deferred maintenance reporting amending sffas 6, accounting for property, plant and equipment and sffas 8, supplementary stewardship',
22556:'reporting, amended sffas 6 and sffas 8 to reclassify deferred maintenance information as required supplementary information instead of a disclosure',
22557:'in the notes to the financial statements. a3. at the time, the board believed that a period of experimentation would',
22558:'be desirable for deferred maintenance information and that classifying it as rsi was appropriate during the experimentation period. as a',
22559:'result, the standards for estimating deferred maintenance were intentionallyflexible. however, ata minimum, the board expected to developguidance on determining acceptable',
22560:'condition and revise the standards based on experience gained during the experimentation period. a4. since completing deliberations on sffas 40,',
22561:'definitional changes related to deferred maintenance and repairs: amending statement of federal financial accounting standards page 12 sffas 42 fasab',
22562:'handbook, version 20 06/21 sffas 42 6, accounting for property, plant, and equipment, the board has continued seeking advice and',
22563:'guidance from stakeholders interested in improving the management of, and reporting on, federal pp&e and related dm&r. a5. as demonstrated',
22564:'by sffas 40, the board has spent considerable time and effort working with key stakeholders and the communityatlarge evaluating much',
22565:'of the experience gained during the experimentation period. as a result, the board has both reaffirmed and refined its position',
22566:'regarding dm&r measurement and reporting. a6. twoexternalreportsservedastheinitialbasisforthescopeofthetaskforce’swork.12 the firstreportdeferredmaintenancereportingforfederalfacilities, thenationalacademies, 2001, isbn 0309563399 was a critique of the deferred maintenance',
22567:'definition in sffas 6, accounting for property, plant, and equipment. this report was prepared by the federal facilities council under',
22568:'the auspices of the national academies. the report was reviewed by the task force and provided a foundation for the',
22569:'proposed amendments contained in sffas 40. the second report gao report no. gao0910 dated october 2008 was a gao study',
22570:'specific to federal real property repair and maintenance backlog issues. in that study, the gao discussed the need for comparability',
22571:'and realistic estimates of deferred maintenance so that the government’s fiscal exposure could be revealed. a7. the task force’s work',
22572:'was not constrained by either of these external reports. task force members contributed entity specific information which also included input',
22573:'from internal and external audit communities. summary of outreach efforts a8. the exposure draft was issued june 27, 2011 with',
22574:'comments requested by september 16, 2011. upon release of the exposure draft, notices and press releases went to the federal',
22575:'register, fasab news, the journal of accountancy, aga today, the cpa journal, government executive,thecfocouncil,the council ofinspectorsgeneralon integrityand efficiency cigie, the',
22576:'financial statement audit network; members of both the federal real property council and the federal facilities council and committees of',
22577:'professional associations generally commenting on exposure drafts in the past. 12 during 2008 fasab established atask force to address deferred',
22578:'maintenance and asset impairment issues. the task force consists of government and nongovernment representatives from various disciplines such as: real',
22579:'property/facilities management, personal property management, appraisal and valuation services, engineering, architecture, accounting, internal auditing, external auditing, finance, and budgeting. page',
22580:'13 sffas 42 fasab handbook, version 20 06/21 sffas 42 responses to the exposure draft a9. twentytwo responses were received.',
22581:'table 1.0 summarizes responses by respondent type. table 1.0 summary of respondents by type to exposure draft respondent type federal',
22582:'internal nonfederal external total preparers and financial managers 11 0 11 users, academics, others 5 3 8 auditors 3 0',
22583:'3 total 19 3 22 a10.the board did not rely on the number in favor of or opposed to a',
22584:'given position. information about the respondents’ majority view is provided only as a means of summarizing the comments. the board',
22585:'considered the arguments in each response and weighed the merits of the points raised. the following paragraphs discuss significant issues',
22586:'identified by respondents followed by board decisions. respondents’ comments on the exposure draft no longer requiring condition reporting refining the',
22587:'goal of dm&r a11.the majority of respondents agreed with the board’s proposalto no longer require condition reporting. respondents who disagreed',
22588:'noted that 1 condition reporting for key infrastructure which directly affects public safety provides a measure of the effectiveness of',
22589:'the allocated budget to maintain those critical assets, 2 condition reporting has become the “standard” to understand the overall condition',
22590:'of facilities, and 3 all federal agencies are requiredtoreport condition information anddm&rbythefederalrealpropertycouncil reporting requirements. page 14 sffas 42 fasab handbook,',
22591:'version 20 06/21 sffas 42 a12.the goal of dm&r is to provide reliable information on the estimated cost of the',
22592:'pp&e maintenance and repairs that have been deferred. to that end, this statement no longer requires that condition information be',
22593:'reported. although condition reporting is important and is the basis of an entity’s dm&r estimate, the board determined that it',
22594:'is not an essential component of financial reports. the board’s rationale for this decision is that condition assessment methods and',
22595:'reporting continue to evolve and there are no federal wide uniform assessment or measurement methods that would increase comparability and',
22596:'understandability. therefore,summarizedconditioninformation may notprovidemeaningful information to users. the board believes the wide variation among entities in condition assessment methods and',
22597:'reporting i.e., different condition ratings/rankings could obscure user understanding of the government’s fiscal exposure realistic dm&r estimate. the board believes',
22598:'that this is an area where entity administrative burden can be alleviated given the questionable benefits of summarized condition information.',
22599:'a13.this statementeliminates the requirement toreport conditioninformation. however, entities may include condition information in a manner they believe best presents and',
22600:'contextualizes dm&r and related performance matters. presenting beginning and ending dm&r balances and explanation of significant changes a14.the majority of',
22601:'respondents agreed with the board’s proposal to require that entities present beginning and ending dm&r balances and explain significant changes.',
22602:'respondents who disagreed noted that because many variables impact the change in dm&r estimates a significant change could result in',
22603:'wide disparities among the component entities. a15.the board believes that presenting dm&r balances and discussing significant changes increases comparability while',
22604:'also enhancing entityspecific consistency. some respondents have noted that discussing significant changes is not only reasonable, but required inasmuch as',
22605:'it is a part of determining the underlying causes to such changes. as one respondent noted, discussing changes is essential',
22606:'for transparency and accountability. a16.the board believes that users need to know how much the m&r requirements increased decreasedindollartermsandtheeffectofthischangeonthedm&rbalances. moreover,',
22607:'it is important for users to 1 understand the events that occurred during the year and why they brought about',
22608:'significant increases or decreases and 2 whether or not dm&r levels have changed e.g., the amount declined. to that end,',
22609:'federal entities are required to present their dm&r beginning and ending balances. as illustrated in appendix b, entities should present',
22610:'these balances by category i.e., general pp&e, heritage assets, and stewardship land, and explain significant changes by major asset category.',
22611:'the determination of whether an item is significant is a matter of professional judgment. this page 15 sffas 42 fasab',
22612:'handbook, version 20 06/21 sffas 42 determinationisseparateanddistinctfrommaterialityconsiderations. factorsthatmightbe considered when determining whether an item is significant include the: 1 absolute',
22613:'dollar amount of the change in dm&r estimates, 2 percent change in dm&r estimates, 3 perceived importance of the reason',
22614:'for the change to financial statement users, and 4 potential consequences arising from the change e.g., effect on mission. the',
22615:'board believes that this will increase comparability and the relevance and reliability of the dm&r estimates and will significantly enhance',
22616:'entityspecific consistency from year to year. applying reported methods and reporting formats consistently using an interdisciplinary and integrated approach a17.the',
22617:'majority of respondents agreed with the board’s proposal to require that entities apply reported methods and reporting formats consistently unless',
22618:'management determines that changes are necessary and if changes to methods or formats are necessary, such changes should be explained.',
22619:'furthermore, respondents agreed that input from professionals in diverse disciplines is necessary to effectively compile and report dm&r. a18.because consistency',
22620:'in measurement and reporting significantly adds to the informational valueof dm&r estimatesi.e., trend information is useful to decisionmakers,management must use',
22621:'consistent assessment techniques, measurement methods and reporting formats from yeartoyear. however, if management decides to change methods or formats, such',
22622:'changes should be accompanied by an explanation documenting the rationale for the change and anyrelated impact to the dm&r estimates.',
22623:'this is consistent with task force concerns that 1 entities be allowed to adopt new and improved methods or technologies',
22624:'that might be brought about in the area of asset management and 2 greater rigor and discipline is needed in',
22625:'the area of dm&r measurement and reporting. a19.staff research found that some agencies have interpreted sffas 6 requirements to apply',
22626:'only to unfunded dm&r activities.13 as a result, inaccurate reporting and increased lack of consistency and comparability has resulted. theboard',
22627:'notes whetherfunded or not, dm&r should be reported. for example, if funding exists but competing demands cause a schedule slippage',
22628:'and result in a delay to a future period, such costs should be reported as dm&r. a20.staff research also found',
22629:'that some entities have not reported dm&r because they have not distinguished between needed capital improvements e.g., activities which extend',
22630:'the useful life of pp&e and needed repairs e.g., activities which allow pp&e to attain its original useful life. sffas',
22631:'34, the hierarchy of generally accepted accounting principles, 13 department of defense inspector general report dated september 25, 2009, deferred',
22632:'maintenance on the air force c130 aircraft report no. d2009112. page 16 sffas 42 fasab handbook, version 20 06/21 sffas',
22633:'42 including the application of standards issued by the financial accounting standards board, statesthat “[g]enerally acceptedaccountingprinciplesrecognizethe importanceof reporting transactions and',
22634:'events in accordance with their substance. consideration should be given to whether the substance of transactions or events differs materially',
22635:'from their form.”14 for dm&r amounts to be comparable, entities must consider the substance rather than the form—that is, the',
22636:'terms applied by management—of future activities relating to pp&e. a21.an interdisciplinary and integrated approach is necessary to address completeness and',
22637:'consistencyandmeet thegoalofdm&rreporting. thisincludes communicatingamongand considering input from experts in diverse disciplines such as engineering, facilities management, finance, budgeting, and accounting.',
22638:'such input should be considered when determiningacceptableconditionandrelatedcoststoremedyassets. suchanapproachwill help to 1 ensure the increased value and efficacy of the reported',
22639:'information, 2 meet diverse user needs, and 3 foster system integration and process improvements via continual interaction among entity staff.',
22640:'narrative information describing m&r policies and other nonfinancial information a22.themajorityofrespondentsagreedwiththe board’s proposaltorequirethatentities provide narrative information describing m&r policies and other',
22641:'nonfinancial information including any significant changes to policies and other factors from the prior year. respondents who disagreed noted that',
22642:'combining policy statements across a reporting entity with heterogeneous assets and varying missions is difficult. a23.the board believes that users',
22643:'need to understand how entities carryout their stewardship responsibilities. moreover, many entities maintain such information as part of their overall',
22644:'management and stewardship responsibilities. a24.although flexibility is necessary in the areas of determining asset condition and defining acceptable condition, the',
22645:'board believes that additional disclosures are required in order to increase consistency, comparability, and the reliability and relevance of dm&r',
22646:'estimates. consequently, the board believes that: a. disclosing m&r policies and how they are applied in practice assists users in',
22647:'understanding how an entity manages its dm&r. b. disclosing policies for ranking and prioritizing m&r activities assists users in understanding',
22648:'how an entity efficiently and effectively manages its m&r resources.as 14 sffas 34, footnote 5. page 17 sffas 42 fasab',
22649:'handbook, version 20 06/21 sffas 42 such, preparers may provide general context in their explanations concerning the amount of the',
22650:'ending balance that the entity would need to incur in the nearterm to avoid adverse impact to the entity’s mission.',
22651:'additionally, the board believes that in order to enhance the relevance and reliability of the entity’s estimated dm&r amount, an',
22652:'entity should explain how it decides to allocate its available resources. for example, entities frequently give top priority to maintenance',
22653:'and repair activities that maintain employee or constituent health and safetyor are requiredto satisfyregulatory mandates. once this is accomplished, entity',
22654:'rankings may be adjusted for asset condition assessments, and management considerations that include: capital improvement plans, asset disposal plans, and',
22655:'budgetary funding outlook. c. identifying factors the entity considers in selecting acceptable condition standards assists users in understanding the unique',
22656:'nature of the entity’s mission and operating environment and how these affect asset management. regardless of whether entities report condition',
22657:'information, the underlying rationale an entity uses in making this managerial judgment enhances the relevance and reliability of the entity’s',
22658:'estimated dm&r. for example, an entity might set different acceptable condition standards for identical assets because of geographical or environmental',
22659:'factors specific to each. d. disclosing whether dm&r relates solely to capitalized general pp&e and non capitalized stewardship pp&e or',
22660:'also includes amounts relating to noncapitalized or fully depreciated general pp&e assists users in understanding how an entity manages its',
22661:'dm&r. partially as a result of increased emphasis in the reporting of real property information, it has come to the',
22662:'board’s attention that some entities, in addition to tracking dm&r on capitalized general and noncapitalized stewardship pp&e, also track and',
22663:'report dm&r on expensed or fully depreciated general pp&e; i.e., all accountable pp&e. e. identifying pp&e for which management does',
22664:'not measure and/or report dm&r and the rationale for the exclusion assists users in understanding how an entity efficiently and',
22665:'effectively manages its m&r resources. management should clearly disclose and provide a rationale for this exclusion. for example, pp&e designated',
22666:'as excess and subject to disposal or considered unserviceable may not have any associated dm&r. eliminating dollar ranges and critical',
22667:'/ noncritical designations a25.themajorityof respondentsagreedwiththeboard’s proposal to eliminate dollar ranges and critical / noncritical designations. however, a respondent noted that',
22668:'the intent of distinguishing critical from noncritical dm&r was to provide insight into the timing of such expenditures. as such,',
22669:'the respondent asked the board to consider an alternative to providinginformationconcerningtheendingbalance that theentitywould needtoachievein the near term in order to',
22670:'avoid adverse impact to the entity’s mission. page 18 sffas 42 fasab handbook, version 20 06/21 sffas 42 a26.the board',
22671:'notes that requiring dm&r designations would be 1 overly prescriptive and difficult for agencies to calculate, 2 inconsistent with board',
22672:'actions todate that acknowledge the imprecise nature of dm&r estimates and 3 contrary to the goal of focusing on a',
22673:'singular dm&r estimate. however, the board does believe that this may be beneficial information that preparers could consider providing. a27.the',
22674:'stratification between critical and noncritical dm&r at sffas 6, paragraph 84 was intended to be optional and not an unnecessary',
22675:'burden to entities. it has come to the board’sattentionthatthefederalrealproperty guidelines define “critical” attheasset level i.e., asset classification defines if m&r',
22676:'is critical or not whereas the sffas 6 guidelines have been interpreted to apply to the discrete m&r activity i.e.,',
22677:'the nature of the work defines if m&r is critical or not. furthermore, some entities are following treasury guidelines which',
22678:'define “critical” as a matter of consequence or exigency i.e., impact of not performingthem&rwork/activity.15 consistentwiththetaskforce’srecommendation,itis the board’s opinion that having',
22679:'three separate definitions for “critical” has led to confusion, increased lack of comparability, and estimates that are not necessarily reflective',
22680:'of what entities expect to incur. the board believes that the reporting of critical and noncritical dm&r is not useful,',
22681:'can lead to inconsistency, and therefore should be not be addressed in the statement. other matters active and inactive pp&e',
22682:'a28.measuring dm&r related to active and inactive pp&e helps ensure that dm&r estimates capture reliable information on the estimated cost',
22683:'of the pp&e maintenance and repairs that have been deferred. for example, entities are often required by law or regulation',
22684:'to obtain approvals prior to disposing real property deemed inactive or excess. if entities continue to measure dm&r on pp&e',
22685:'pending disposition, dm&r estimates may be overstated because m&r having a low probability of occurrence may be included. as a',
22686:'result, dm&r that is not expected to be incurred due to an asset’s inactive status may be separately identified in',
22687:'order to provide for a more realistic dm&r estimate, if deemed material. 15 june 17, 2010,appendix 4 of chapter 4700',
22688:'in vol. 1 of the treasury financial manual, other financial report fr notes data and instructions. “critical deferred maintenance is',
22689:'urgently needed, absolutely necessary, and is an element that needs immediate attention. furthermore, critical deferred maintenance is any deferred maintenance',
22690:'that poses a serious threat to the public or employee safety or health, natural or cultural resources, and a bureau’s',
22691:'ability to carry out its assigned mission.” page 19 sffas 42 fasab handbook, version 20 06/21 sffas 42 assessment method',
22692:'factors and selection criteria a29.in measuring dm&r, entities are free to choose among assessment methods described in this statement. for',
22693:'example, an entity may elect to use a lifecycle method to assess its pp&e as part of its overall project',
22694:'management strategy to enhance its ability to predict future maintenance and repair requirements. another entity may elect to use a',
22695:'parametric method16 due to the size and complexity of its portfolio and to realize efficiencies and cost savings while another',
22696:'entity requiring assetspecific condition information may select the condition assessment survey method. the board realizes that entities need to consider',
22697:'many factors when selecting assessment methods. such factors could include: a. nature, size and complexity of the pp&e portfolio, b.',
22698:'mission requirements, c. cost versus benefit, d. changes in economic outlook, e. project management strategy, f. nature or type of',
22699:'asset to be inspected, g. assetspecific condition assessment requirements, h. environmental or weather conditions, i. availability of commercialofftheshelf cots software,',
22700:'j. availability of governmentofftheshelf gots software, k. software scalability and related vendor support, l. regulatory requirements, and m. health and',
22701:'safety considerations. 16 similar to the lifecycle costing method, the parametric method is an accepted technique that entails performing condition',
22702:'assessments at the system level rather than the component level. page 20 sffas 42 fasab handbook, version 20 06/21 sffas',
22703:'42 a30.in order to obtain greater consistency and comparability this statement provides that once selected,conditionstandards,relatedassessmentmethodsandreportingformatsshouldbe consistently applied unless management determines',
22704:'that changes are necessary. general selection criteria management could use in evaluating different assessment methods include the following: conditionassessment surveys',
22705:'i.e., visual, physical inspections pros generates dm&r estimates more timely identification of health and safety issues usually identifies and prioritizes',
22706:'work items / specific repairs modified surveys are affordable knowledgebased surveys e.g., risk management strategies eliminate over and underinspection engineeredbased',
22707:'surveys provide consistent and credible results cons traditional surveys are expensive does not always identify or prioritize work items /',
22708:'specific repairs wasteful overinspection, risky underinspection inspector bias could distort results life cycle costing methods i.e., modeling pros generates dm&r',
22709:'estimates affordable efficient focuses on buildings and systems facilitates evaluation of large portfolios cons determining the cumulative costs of deferring',
22710:'maintenance does not identify or prioritize work items / specific repairs not always appropriate for smaller portfolios could require expensive',
22711:'updating of initial procurement information credibility issues page 21 sffas 42 fasab handbook, version 20 06/21 sffas 42 boardapproval a31.this',
22712:'statement was approved for issuance by all members of the board. the written ballots are available for public inspection at',
22713:'the fasabs offices. page 22 sffas 42 fasab handbook, version 20 06/21 sffas 42 appendix b: sample illustration appendix bdeferred',
22714:'maintenance and repairs illustration this appendix illustrates the requirements at paragraphs 14 and 15. the examples shown here are for',
22715:'illustrative purposes only. different entities may develop different asset classes and descriptive terminology consistent with the set categories of general',
22716:'pp&e, heritage assets, and stewardship land. the following narrative discussion and illustration 1, general purpose display meettheminimumrequirementsofthisstandard. thevariousillustrationsarenotmeant to articulate',
22717:'with one another and should be viewed on a standalone basis. xyz entitydeferred maintenance and repairs for fiscal year 20x2',
22718:'the xyz entity operatesover 1,300 facilitiesthroughout the world, preservesnearly300 national historical landmarks of natural, cultural, educational, or artistic importance, and',
22719:'isresponsible for maintaining over 80,000 acres of stewardship land. most of the facilities are predominantly used for office space and',
22720:'warehousing defense assets. additionally, the entity operates a hospital at one of its remote sites. it is entity policy to',
22721:'ensure that medical equipment and critical equipment systems are maintained and managed in a safe and effective manner. therefore, deferred',
22722:'maintenance and repairs do not arise for these two types of equipment and no periodic assessment is performed. additionally, since',
22723:'1 it is entity policy to maintain and preserve all fixed property, plant and equipment pp&e regardless of recorded values',
22724:'and 2 accounting and asset management systems do not differentiate m&r between pp&e capitalized i.e., items whose cost exceeds the',
22725:'capitalization threshold versus those expensed, dm&r estimates reported herein relate to all pp&e whether capitalized or not or fully depreciated.',
22726:'defining and implementing m&r policies in practice. as permitted under sffas 42, deferred maintenance and repairs, amending statements of federal',
22727:'financial accounting standards 6, 14, 29 and 32, the entity employs a parametric estimating method for the largest portion of',
22728:'its portfolio real property such as office and warehouse space and the condition assessment method for its hospital facility, defense',
22729:'and stewardship assets. with the exception of the hospital facility which is inspected on a yearly basis, the entity’s real',
22730:'property portfolio is assessed on a 3 to 5 year rotating calendar. both methodsmeasurecurrentrealpropertyasset condition and documentrealpropertydeterioration. page 23 sffas',
22731:'42 fasab handbook, version 20 06/21 sffas 42 real property assessment methods produce both a cost estimate of deferred maintenance',
22732:'and repairs, and a facility condition index fci. both measures are indicators of the overall condition of the entity’s facilities.',
22733:'the parametric estimating methodology involves an independent, rapid visual assessment of nine different systems within each facility to include: structure,',
22734:'roof, exterior, interior finishes, hvac heating, ventilation, and air conditioning, electrical, plumbing, conveyance, and program support equipment. the parametric estimating',
22735:'method is designed to be costeffective and appropriate for application to a large population of facilities; results are not necessarily',
22736:'applicable for individual facilities or small populations of facilities. theentity’shospitalisinspected ona yearlybasisemployinga physicalinspection methodwhich focuses on component as well as',
22737:'system distresses in addition to identifying deficiencies. the entity’s defense assets are routinely surveyed by unit and depot maintenance personnel',
22738:'and stewardship assets are routinely surveyed by onsite personnel and regional inspection teams. asstatedabove, it isentitypolicytoensure that medicalequipment and critical',
22739:'facilityequipment systems are maintained and managed in a safe and effective manner. therefore, deferred maintenance and repairs assessment methods are',
22740:'generally not applied to equipment assigned to hospitals as any dm&r would be negligible. ranking and prioritizing m&ractivities. maintenance and',
22741:'repair activities are first prioritized via health, safety and regulatory considerations at all facilities. once this is accomplished, the fci',
22742:'values are then ranked based on the ratings obtained during the condition assessment site visits. rankings are generally adjusted to',
22743:'take into account current capital improvement efforts underway, future capital improvement plans, asset disposal plans, and budgetary funding outlook. factors',
22744:'considered in settingacceptable condition. for office and warehouse space, the entity defines acceptable condition in accordance with standards comparable to',
22745:'those used in private industry. for example, industry standards for administrative buildings can vary substantially depending upon their classification as',
22746:'either a classa, b, or c property. such classificationsare affected bybuilding location, design, and age. condition standards for warehouses are',
22747:'primarily set by local jurisdictions and consider factors such as accommodating loads, materials to be stored, the associated handling equipment,',
22748:'the receiving and shipping operations, associated trucking, and the needs of the operating personnel. acceptable condition for the hospital facility',
22749:'is in accordance with federal statutory requirements and requirements adopted by the health care facilities industry substantially comparabletotherequirementsat42c.f.r. part 483entitled,',
22750:'requirements for states and long term care facilities. page 24 sffas 42 fasab handbook, version 20 06/21 sffas 42 military',
22751:'specifications and standards for defense assets vary greatly depending upon numerous factorssuchasthenatureand typeof equipmentandmissionexpectations.acceptablecondition standards for defense assets are set',
22752:'at levels deemed to be mission capable or serviceable. heritage assetsand stewardship land adopt scientificconservation standards to preserve assets in',
22753:'a manner that fulfills the entity’s obligation to stabilize, protect, and preserve the assets. significant changes from prior year and',
22754:'related events. the overall net increase of $2.0 billion in dm&r is a result of the $3.0 billion increase in',
22755:'general pp&e dm&r, offset by a $1.0 billion decrease in heritage assets dm&r. funded dm&r decreased by $1.0 billion as',
22756:'result of the entity’s strategic initiative to repair and restoremanyofitshistoricallandmarks. however,unfundeddm&rpertainingtoinactive/excess general pp&e increased by $3.0 billion as a result',
22757:'of 1 the transfer of properties from other federalentities,2newlyidentified propertiesandequipment nolongerneeded bythe entity, and 3 continued degradation of properties awaiting',
22758:'final disposition. management policy is to comply with legal requirements to maintain inactive/excess property in safe condition and to pursue',
22759:'costbeneficial measures to preserve the value of properties. the entity in collaboration withother entitiesandmembersof congressisin theprocessof finalizingplanstoeitherdispose of or find',
22760:'alternate uses for the aforementioned properties. for such properties, dm&r include those m&r activities management believes are warranted but not',
22761:'necessarily the m&r appropriate for an equivalent active property. page 25 sffas 42 fasab handbook, version 20 06/21 sffas 42',
22762:'the following illustration presents information on major pp&e categories experiencing material amounts of deferred maintenance and repairs and meets the',
22763:'basic illustration requirements of this standard: illustration 1 general purpose display deferred maintenance and repair costs dollars in millions 20x2',
22764:'ending balance asset category dm&r 20x2 beginning balance dm&r general pp&e heritageassets stewardship land total $33,500 5,000 2,500 $41,000 $30,500',
22765:'6,000 2,500 $39,000 the following illustration 2 presents information on major pp&e categories experiencing material amounts of deferred maintenance and',
22766:'repairs with an emphasis on active versus inactive/excess assets: illustration 2 emphasis onactive vs. inactive and excess deferred maintenance and',
22767:'repair costs dollars in millions 20x2 20x2 ending balance beginning balance asset category dm&r dm&r active: general pp&e $46,875 $45,000',
22768:'heritageassets 0 1,500 stewardship land 1,500 1,500 subtotal active 48,375 48,000 inactive and excess: general pp&e 13,125 10,500 subtotal –general',
22769:'pp&e – inactive and excess 13,125 10,500 total $61,500 $58,500 page 26 sffas 42 fasab handbook, version 20 06/21 sffas',
22770:'42 the following illustration 3 presents information on major asset classes experiencing material amountsof deferredmaintenanceand repairswithanemphasison active versusinactive/excess assets: illustration',
22771:'3 emphasis onactive vs. inactive and excess byasset class deferred maintenance and repair costs dollars in millions 20x2 20x2 ending',
22772:'balance beginning balance asset category / class dm&r dm&r active: general pp&e: structures $14,375 $14,000 aircraft 53 5 missiles 139',
22773:'58 ships 1,058 937 subtotal general pp&e active 15,625 15,000 stewardship land 500 500 heritageassets 0 500 subtotal all active',
22774:'16,125 16,000 inactive and excess: general pp&e buildings 2,500 2,500 structures 1,875 1,000 subtotal general pp&e inactive and 4,375 3,500',
22775:'excess total $20,500 $19,500 page 27 sffas 42 fasab handbook, version 20 06/21 sffas 42 the following illustration 4 presents',
22776:'information on major pp&e categories experiencing material amounts of deferred maintenance and repairs with an emphasis on funded and unfunded',
22777:'maintenance and repairs: illustration 4 emphasis on funded and unfunded m&r deferred maintenance and repair costs dollars in millions 20x2',
22778:'20x2 ending balance beginning balance asset category dm&r dm&r funded m&r: general pp&e active $26,500 $30,000 general pp&e inactive and',
22779:'excess 19,500 16,000 heritageassets 0 2,000 subtotal funded 46,000 48,000 unfunded m&r: general pp&e active 15,000 15,000 general pp&e inactive',
22780:'and excess 6,000 0 heritageassets 10,000 10,000 stewardship land 5,000 5,000 subtotal unfunded 36,000 30,000 total $82,000 $78,000 page 28',
22781:'sffas 42 fasab handbook, version 20 06/21 sffas 42 appendix c: abbreviations dm&r deferred maintenance and repairs fasab federalaccountingstandardsadvisoryboard fci',
22782:'facility condition index frpp federalrealpropertyprofilegsaassetmanagementdatabase gao governmentaccountabilityoffice gpp&e general property, plant and equipment m&r maintenance and repairs omb office of',
22783:'management and budget pp&e property, plant, and equipment rsi required supplementary information sffas statementoffederalfinancialaccountingstandards u.s. united states page 29 sffas',
22784:'42 fasab handbook, version 20 06/21 sffas 42 deferred maintenance and asset impairment dmai task force members u. s. agencies',
22785:'department ofagriculture, u.s. forest service department of commerce, national oceanographic andatmosphericadministration department of defense, office of the secretary of defense',
22786:'department of defense,acquisition, technology, and logistics department of defense, comptroller department of energy, office of engineering and construction management department',
22787:'of interior department of labor, office of the inspector general department of state department of state, u.s. agency for international',
22788:'development department of state, international boundary and water commission department of the treasury, financial management service department of veteransaffairs general',
22789:'servicesadministration general servicesadministration, public buildings service central office nationalaeronautics and spaceadministration office of management and budget smithsonian institution page 30',
22790:'sffas 42 fasab handbook, version 20 06/21 sffas 42 task force member firms american institutes for research duller studios federal',
22791:'facilities council, committee on sustainable operations and maintenance institute for responsible infrastructure stewardship kpmg llp navigant capitaladvisors page 31 sffas',
22792:'42 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards43: funds from dedicated collections:amending statementoffederalfinancialaccountingstandards27,identifyingand reporting earmarked funds status issued june 1, 2012',
22793:'effective date for fiscal years beginning after september 30, 2012 affects sffas 27accounting standards section paragraphs 1139 affected by none.',
22794:'summary thisstatementamendsstatementoffederalfinancialaccountingstandards27, identifying and reporting earmarked funds, by: changing the term earmarked funds to funds from dedicated collections. modifying the',
22795:'definition of a fund from dedicated collections by: clarifying that at least one source of funds external to the federal',
22796:'government must exist for a fund to qualify as a fund from dedicated collections, and adding an explicit exclusion for',
22797:'any fund established to account for pensions, other retirement benefits, other postemployment or other benefits provided for federal employees civilian',
22798:'and military. permitting either consolidated or combined data on funds from dedicated collections to be provided. permitting certain component entities',
22799:'to report on funds from dedicated collections for amounts related tothestatement of changes innet positionina note ratherthan on the face',
22800:'of the statement. illustrating optional formats for displaying information on the face of the balance sheet and statement of changes',
22801:'in net position. page 1 sffas 43 fasab handbook, version 20 06/21 sffas 43 table of contents summary 1 introduction',
22802:'3 purpose 3 materiality 3 accounting standard 3 applicability and scope 3 amendments 4 financial statement presentation and disclosures for',
22803:'component entities 7 financial statements and disclosures for the u.s. governmentwide 11 updates for subsequent issuances 11 implementation guidance 12',
22804:'effective date 12 appendixa:basis for conclusions 13 appendix b:text ofsffas 27accountingstandards,asamended 22 appendix c: illustrative component entity financial statements 33',
22805:'appendix d:earmarkedfunds taskforceparticipatingagencies 40 appendix e:abbreviations 41 page 2 sffas 43 fasab handbook, version 20 06/21 sffas 43 introduction purpose',
22806:'1. theboardevaluatedstatement offederalfinancialaccountingstandards sffas27, identifying and reporting earmarked funds, which has been in effect since fiscal year fy 2006, and',
22807:'identified areas for improvement. the review found some aspects of the requirements that should be clarified and identified challenges inherent',
22808:'in presenting understandable information that meets the reporting objectives of sffas 27. this statement amends the requirements to resolve these',
22809:'matters. materiality 2. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an item is material depends on the degree to which omitting or misstating',
22810:'information about the item makes it probable that the judgment of a reasonable person relying on the information would have',
22811:'been changed or influenced by the omission or the misstatement. accounting standard applicability and scope 3. this statement applies to',
22812:'federal entities that present general purpose federal financial reports, including the consolidated financial report of the u.s. government cfr, in',
22813:'conformance with generally accepted accounting principles as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas',
22814:'34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board.',
22815:'4. this statementamends statementoffederalfinancialaccountingstandardssffas27, identifying and reporting earmarked funds. page 3 sffas 43 fasab handbook, version 20 06/21 sffas 43',
22816:'amendments new term for “earmarked funds” 5. the title of sffas 27 is amended as follows: sffas 27, identifying and',
22817:'reporting funds from earmarked funds dedicated collections.1 6. the term “earmarked funds” is changed to “funds from dedicated collections” in',
22818:'the accounting standards of sffas 27 and conforming grammatical changes are made throughout sffas 27.2 paragraphs amended for terminology are:',
22819:'11 – 18, 20 – 24, 26 – 34, and 39. the entire text as amended is presented inappendix b.',
22820:'definition of funds from dedicated collections 7. sffas 27, paragraph 11 is amended as follows: [11]earmarked funds f generally, funds',
22821:'from dedicated collections are financed by specifically identified revenues,3a provided to the government by nonfederal sources, often supplemented by other',
22822:'financing sources, which remain available over time. these specifically identified revenues and other financing sources are required by statute to',
22823:'be used for designated activities, benefits or purposes, and must be accounted for separately fromthegovernment’sgeneralrevenues. thethreerequiredcriteriaforan earmarked fund from dedicated',
22824:'collections are: 1. astatutecommittingthe federalgovernmentto usespecificallyidentifiedrevenues and/or otherfinancingsources thatareoriginallyprovidedtothefederalgovernmentbya nonfederal source3b only for designated activities, benefits or purposes; 2. explicit',
22825:'authority for the earmarked fund to retain revenues and/or other financing sources not used in the current period for future',
22826:'use to finance the designated activities, benefits, or purposes; and 3. arequirementtoaccountforandreport4on the receipt, use, andretentionofthe revenues and/or other financing',
22827:'sources that distinguishes the earmarked fund from the federal government’s general revenues. 1 terms defined in the glossary are shown',
22828:'in boldface the first time they appear. 2for example, in places the adjective “earmarked” has been changed to “such” funds,',
22829:'for example in paragraph 24 of sffas 27. page 4 sffas 43 fasab handbook, version 20 06/21 sffas 43 footnote',
22830:'3a: such specifically identified revenue can be either exchange or nonexchange. footnote 3b: in some cases, specifically identified revenues or',
22831:'other financing sources are collected from a nonfederal source byone agencyand transferred orappropriated to another. for example, social security taxes',
22832:'are collected from nonfederal entities employees and employers by the internal revenue service. those amounts are subsequentlyappropriatedandtransferredtothesocialsecurityadministration. this internal process',
22833:'does not change the nature of the revenue or other financing source i.e., specificallyidentified revenues or other financing sourcesoriginally collected',
22834:'from a nonfederal source. footnote 4:a“report” may be something other than standalone financial statements for the earmarked fund from dedicated',
22835:'collections. predominant source of funds 8. to distinguish the definition from explanatory text relating to its application, a new subheading',
22836:'– “application of the definition” – is inserted in sffas 27 before paragraph 12. 9. sffas 27, paragraph 13 is',
22837:'amended as follows: [13] fund inthisstatement’sdefinition ofearmarked fundsfromdedicated collections refers to a “fiscal and accounting entity with a selfbalancing set',
22838:'of accounts recording cash and other financial resources, together with all related liabilities and residual equities or balances, andchangestherein,whicharesegregatedforthepurpose of',
22839:'carryingonspecific activities or attaining certain objectives in accordance with special regulations, restrictions, or limitations.”5 classification and reporting should be made',
22840:'at the level of an individual fund. afundshouldbeclassifiedasa “fundfrom dedicatedcollections” ifit meetsthe criteria in paragraphs 11.2 and 11.3 and either:',
22841:'1. itspredominantsourcesofrevenueandotherfinancingsourcesarenonfederalsources meeting the paragraph 11.1 criterion, or 2. it hasnonfederal sources of revenue and other financing sourcesmeeting the paragraph',
22842:'11.1 criterion5a that are material to the reporting entity. for example, as currently funded, medicare parts b and d do',
22843:'not have nonfederal sources as described in paragraph 11 as their predominant revenue and other financing sources. however, medicare parts',
22844:'b and d do have revenue and other financing sources material to the reporting entity that meet the criteria in',
22845:'paragraph 11. therefore, medicare parts b and d should be classified as funds from dedicated collections. page 5 sffas 43',
22846:'fasab handbook, version 20 06/21 sffas 43 footnote 5: national council on governmentalaccounting statement 1, par. 16. footnote 5a: in',
22847:'situations where there is a mixed source of funding so that not all of the revenue and other financing sources',
22848:'meet the criteria in paragraph 11 and the proportion and/or amounts vary from year to year so that it is',
22849:'difficult to determine a predominant source and/or assess materiality, acceptable options for classification include but are not limited to: 1.',
22850:'longterm expectations rather than periodic results that may fluctuate 2. 36month averages changes in classification of funds from year to',
22851:'year should be disclosed. 10. sffas 27, paragraph 14 is amended as follows: [14] whereas earmarked funds from dedicated collections',
22852:'are financed by specifically identifiedrevenuesandotherfinancing sources, the general fund isfinanced byreceiptsnot earmarked dedicated by law for a specific purpose and',
22853:'by the proceeds of general borrowing. although there are exceptions, funding decisions regarding activity financed from general receipts usually govern',
22854:'one fiscal year and are made as part of the process of enacting one of the annual appropriations acts. in',
22855:'contrast, legislation establishing earmarked funds from dedicated collections reflects a longer if not indefinite government commitment to collect, hold and',
22856:'spend identified revenues for a designated activity, benefit or purpose. earmarked ffunds from dedicated collections may have be given authority',
22857:'to make expenditures by means of a permanent indefinite appropriation, often enacted by authorizing legislation. if not, an appropriation provided',
22858:'in annual appropriation acts is necessarytomakeexpenditures. whethertheappropriation budgetauthority isprovidedby authorizing legislation or annual appropriations acts, the cumulative results of operations',
22859:'earmarked funds is are reserved or restricted to the designated activity, benefit or purpose. funds excluded 11. sffas 27, paragraph',
22860:'18 is amended as follows: [18] certain categories of funds are excluded from the reporting requirements of this standard. intragovernmental',
22861:'funds are excluded because they are revolving funds that conduct business primarily within and between government agencies. credit financing accounts',
22862:'are also excluded. credit financing accounts are nonbudgetary funds that do not accumulate results of operations; they primarily serve as',
22863:'clearing accounts for cash activity relating to federal credit programs. fiduciary funds, which are not governmentowned, are also excluded. funds',
22864:'established to account for pensions, other retirement benefits, other page 6 sffas 43 fasab handbook, version 20 06/21 sffas 43',
22865:'postemployment benefits, and other employee benefits provided to federal employees civilian or military should not be classified as funds from',
22866:'dedicated collections because such funds account for employeremployee transactions and requirements tailored to those transactionsareprovided bysffas 5, accounting for liabilities',
22867:'of the federal government, paragraphs 5696.6a in addition, because these funds recognize significant longterm liabilities, the large negative net position',
22868:'offsets much of the generally positive net position of other funds from dedicated collections. the result at the governmentwide level',
22869:'is that the large negative net position of these funds obscures the large cumulative amount that needs to be repaid',
22870:'by the general fund in order for the dedicated collections to be used for their intended purposes. footnote 6a: because',
22871:'classification and reporting should be made at the level of an individual fund, portions of funds, such as the federal',
22872:'employees compensation account portion of the unemployment trust fund, should not be excluded because of this provision. component entity: disclosures',
22873:'and eliminations 12. sffas 27, paragraphs 19 and 20 through 24 and paragraph 26 and related headings are amended as',
22874:'follows: financial statement presentation and disclosures for component entities financial statement presentation [19] [ earmarked nonexchange revenue and other financing',
22875:'sources, including appropriations, and net cost of operations should be shown separately on the statement of changes in net position.',
22876:'also tthe portion of cumulative results of operations and unexpended appropriations attributable to earmarked funds from dedicated collections should be',
22877:'shown separately on both the statement of changes in net position and the balance sheet. this standard does not require',
22878:'earmarked funds from dedicated collections to be separately shown on the statement of net cost. nonexchange revenue and other financing',
22879:'sources, including appropriations, and net cost of operations for funds from dedicated collections should be shown separately on the statement',
22880:'of changes in net position if: 1. dedicated collections are the predominant source of revenue and other financing sources for',
22881:'the component entity, or 2. one or more of the entity’s funds from dedicated collections page 7 sffas 43 fasab',
22882:'handbook, version 20 06/21 sffas 43 a. is of immediate concern to constituents of the fund, b. is politically sensitive',
22883:'or controversial, c. is accumulating large balances, or d. the information provided in the financial statements would be a primary',
22884:'source of financial information for the public for example, the social security and medicare programs are of immediate concern to',
22885:'their constituents; both programs have a direct current or future impact on the majority of the general public. [19a] entitiesmaypresent',
22886:'combinedorconsolidatedamountsandthepresentationmust be labeledaccordingly. seeappendix c:proformaillustrations for examplesofaccounting entries and financial reporting. [19b] component entities that do not separately show amounts',
22887:'from dedicated collections on the statement of changes in net position should refer on the face of the statement of',
22888:'changes in net position to the note on funds from dedicated collections. [20] most earmarked revenues and other financing sources',
22889:'that are dedicated collections are reported in the basic financial statements of the entity carrying out the program and responsible',
22890:'for administration of the fund. if more than one component entity is responsible for carrying out the program financed with',
22891:'earmarked revenuesand other financing sources revenues and other financing sources that are dedicated collections, and the separate portions of the',
22892:'program can be clearly identified with a responsible component entity, then each component entity should report its portion in accordance',
22893:'with the requirements of this standard. if separate portions cannot be identified, the component entity with program management responsibility should',
22894:'report the fund.7 footnote 7: to determine program management/accounting responsibility, agencies should consider the legislation authorizing the program; the memorandum',
22895:'of understanding that establishes responsibilities; and the provisions of sffac 2, entity and display, as amended by this standard. disclosure',
22896:'[21]acomponent entity should disclose8all earmarked funds from dedicated collections for which it has program management responsibility by either a list,',
22897:'by official title, or a statement indicating where the information list can be obtained e.g., a website reference or page',
22898:'8 sffas 43 fasab handbook, version 20 06/21 sffas 43 contact information.an earmarked fund from dedicated collections should not be',
22899:'characterized as a “trust” in general purpose external financial reports of federal entities. the use of the term “trust fund”',
22900:'is acceptable only in the fund’s official title. footnote 8: disclosure is reporting information in notes or narrative regarded as',
22901:'an integral part of the basic financial statements. [22] the following informationshouldbe disclosed for each individual earmarked funds from dedicated',
22902:'collections.an exception is provided for component entities having numerous individual earmarked funds from dedicated collections. paragraph 24 discusses criteria to',
22903:'consider in selecting individual funds for disaggregated disclosure. the following information should be disclosed for selected individual earmarked funds from',
22904:'dedicated collections, and in aggregate for all remaining earmarked funds from dedicated collections, and in total for all the entity’s',
22905:'earmarked funds from dedicated collections: 1. condensed information about assets and liabilities showing investments in treasury securities, other assets, liabilities',
22906:'due and payable, other liabilities, cumulative results of operations and net position. 2. condensed information providing gross cost, exchange revenue,',
22907:'net cost of operations, nonexchange revenues by major type and all other, other financing sources by major type and all',
22908:'other, and change in net position. entities may present combined or consolidated amounts and the presentation must be labeledaccordingly. the',
22909:'information requiredbythisparagraphforearmarkedfunds maybe presentedseparatelyontheface of theentitysbasicfinancialstatementsordisclosedinthe accompanying notes. the information must be in sufficient detail to support reporting requirements for',
22910:'the u.s. governmentwide financial statements in paragraphs 29 and 30. information for funds not presented individually may be aggregated. but',
22911:'must be provided even if the aggregate total is immaterial. the total cumulative results of operations net position shown in',
22912:'the note disclosure should agree with thecumulative results of operations total net position for earmarked funds from dedicated collections shown',
22913:'on the face of the component entity’s basic financial statements balance sheet.9 seeappendix d: examples of note disclosure of summary',
22914:'financial information for an illustration of the disclosure required by this paragraph. footnote 9: for the u.s. treasury and any',
22915:'other component entity where earmarked fund investments are eliminated within the component entity, the note disclosure should include eliminations, similar',
22916:'to the note disclosure provided by the u.s. governmentwide financial statements as described in paragraph 30. page 9 sffas 43',
22917:'fasab handbook, version 20 06/21 sffas 43 footnote 9 was rescinded by sffas 43, revisions to identifying and reporting funds',
22918:'from dedicated collections: amending statement of federal financial accounting standards 27 [23] the following information should be disclosed for each',
22919:'individually reported earmarked fund from dedicated collections, or portion thereof, for which a component entity has program management responsibility see',
22920:'paragraph 24. 1. adescription of each funds purpose, how the entity accounts for and reports the fund, and its authority',
22921:'to use those revenues and other financing sources. 2. the sources of revenue or other financing for the period and',
22922:'an explanation of the extent to which they are inflows of resources to the government or the result of intragovernmental',
22923:'flows. 3. any change in legislation during or subsequent to the reporting period and before the issuance of the financial',
22924:'statements that significantly changes the purpose of the fund or that redirects a material portion of the accumulated balance. [24]',
22925:'selecting earmarked funds from dedicated collections to be presented individually requires judgment. the preparer should consider both quantitative and qualitative',
22926:'criteria. acceptable criteria include but are not limited to: a. quantitative factors such as 1. the percentage of the reporting',
22927:'entity’s earmarked revenues from dedicated collections or 2. cumulative results of operations from earmarked such funds; and b. qualitative factors',
22928:'such as 1. whether an earmarked fund from dedicated collections isof immediate concern to constituents of the fund, 2. whether',
22929:'it is politically sensitive or controversial, 3. whether it is accumulating large balances, or 4. whether the information provided in',
22930:'the financial statements would be the primary source of financial information for the public. page 10 sffas 43 fasab handbook,',
22931:'version 20 06/21 sffas 43 [25] the total cumulative results of operations net position of all earmarked funds from dedicated',
22932:'collections shown in the note disclosure should agree with the cumulative results of operations net position of earmarked funds from',
22933:'dedicated collections shown on the face of the component entity’s balance sheet and the statement of changes in net position.',
22934:'[26] in accordance with the provisions of paragraph 20 or footnote 5a of paragraph 13, if a component entity reports',
22935:'a different portion of an earmarked fund program funded by dedicated collections than it reported in prior years, it should',
22936:'not restate its prior year financial statements. it should disclose the change in a note. this applies if a component',
22937:'entity does not report an earmarked fund from dedicated collections, or portion thereof, that it reported in the previous year.',
22938:'it also applies if a component entity does reports an earmarked fund from dedicated collections, or portion thereof, that it',
22939:'did not report in the previous year. financial statements and disclosures for the u.s. governmentwide financial statements 13. requirements for',
22940:'the u.s. governmentwide financial statements are amended as follows: [30] specific information should be disclosed for selected earmarked funds from',
22941:'dedicated collections. paragraph 24 discusses criteria to consider in selecting individual funds for disaggregated disclosure. the following information should be',
22942:'provided for selected individual earmarked funds from dedicated collections and, in aggregate for all remaining earmarked funds from dedicated collections,',
22943:'and in total for all funds from dedicated collections with eliminations necessary to produce the governmentwide total of earmarked funds.',
22944:'1. condensed information about assets, liabilities and net position. 2. condensed information on gross cost, exchange revenue, net cost, nonexchange',
22945:'revenues and other financing sources, and change in net position. the disclosure may present combined or consolidated amounts and the',
22946:'presentation must be labeled accordingly. updates for subsequent issuances 14. footnote 6 of sffas 27, which refers to the exposure',
22947:'draft for sffas 31, is updated to refer to sffas 31. page 11 sffas 43 fasab handbook, version 20 06/21',
22948:'sffas 43 15. paragraph 37 of sffas 27 is updated as follows: [paragraph 37 wassuperseded by paragraph 34 of sffas',
22949:'31, which rescinded paragraphs 83 through 87 of sffas 7.] implementation guidance 16. in the year this standard becomes effective,',
22950:'entities should restate prior period amounts displayed on the face of the financial statements and disclosed in notes. effective date',
22951:'17. this statement is effective for periods beginning after september 30, 2012. early adoption is not permitted. the provisions of',
22952:'this statement need not be applied to immaterial items. page 12 sffas 43 fasab handbook, version 20 06/21 sffas 43',
22953:'appendixa: basis for conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in this',
22954:'statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors',
22955:'than to others. the standards enunciated in this statement–not the material in this appendix–should govern the accounting for specific transactions,',
22956:'events, or conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a',
22957:'status section directing the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative',
22958:'sections are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review',
22959:'the basis for conclusions of the amending statement for the rationale for each amendment. note: this statement changes the term',
22960:'“earmarked funds” to “funds from dedicated collections.” conforming changes have been made for clarity and grammar. project background a1. sffas',
22961:'27 was established to distinguish between funds from dedicated collections and all other funds. funds from dedicated collections have characteristics',
22962:'that justify special accountability. an explicit commitment associated with the statutory establishment of such funds is created that raises an',
22963:'expectation on the part of the public that the government will use the amounts collected from specific sources and accumulated',
22964:'in funds from dedicated collections for their stated purpose. resource inflow is accounted for separately from general tax receipts, allowing',
22965:'the program’s status to be more easily examined. a2. sffas27becameeffectiveinfiscalyear2006. itrequiredeachcomponententitytodisplay nonexchange revenue and other financing sources, and net cost',
22966:'of operations3attributed to fundsfrom dedicated collections and allother funds separately on the statement of changes in net position. the component',
22967:'entity also displays the portions of cumulative results of operations and unexpended appropriations attributable to funds from dedicated collections and',
22968:'all other funds separately on the statement of changes in net position and on the balance sheet. the governmentwide financial',
22969:'statements display revenue, other financing 3 revenue from dedicated collections can be either exchange or nonexchange. exchange revenue is included',
22970:'in the net cost of operations on the statement of changes in net position. page 13 sffas 43 fasab handbook,',
22971:'version 20 06/21 sffas 43 sources and net cost of operations attributed to funds from dedicated collections and all other',
22972:'funds separately on the u.s. government statement of operations and changes in net position. the u.s. government balance sheet displays',
22973:'separately the portions of net position attributable to funds from dedicated collections and all other funds. a3. theboardreviewedsffas27todetermineiftheintendedobjectiveswerebeingachieved. followinganinitial reviewby',
22974:'staff, a task forcethat included representatives from 23 federal agencies was formed. the task force assisted the board by identifying',
22975:'concerns, testing alternatives, and reviewing proposals. outcome of task force evaluation a4. the following major issues were identified by fasab',
22976:'staff and the task force: a. term “earmarked” – competing meanings of the term “earmarked” were causing confusion. this statement',
22977:'changes the term “earmarked funds” to “funds from dedicated collections.” conforming changes have been made throughout. b. appropriateness of classifications',
22978:'– the appropriateness of certain types of funds being classified as funds from dedicated collections was questioned for the following',
22979:'reasons: i. no nonfederal external source of funding exists for some funds reported as funds from dedicated collections, ii. classification',
22980:'of funds with mixed sources of funding where the predominant source is general fund appropriations may be misleading, and iii.',
22981:'funds established to account for pensions, other retirement benefits, other postemployment benefits, and other employee benefits provided to federal employees',
22982:'civilian and military should not be reported as funds from dedicated collections because such funds account for employeeemployer transactions and',
22983:'requirements tailored to those transactions are provided by sffas 5, accounting for liabilities of the federal government. c. understandability –',
22984:'presenting funds from dedicated collections information on the face of componentlevel financial statements may not be the most understandable format',
22985:'for financial statement readers. d. eliminations – there was confusion over whether and how to perform and disclose eliminations. page',
22986:'14 sffas 43 fasab handbook, version 20 06/21 sffas 43 a5. these issues are discussed in more detail in the',
22987:'sections that follow. summary of outreach efforts a6. the exposure draft, revisions to identifying and reporting earmarked funds: amending statement',
22988:'of federal financial accounting standards 27, was issued june 22, 2011, with comments requested by august 22, 2011. upon release',
22989:'of the exposure draft, notices and press releases were provided to a. the federal register; b. fasab news; c. the',
22990:'journal of accountancy, aga today, the cpa journal, government executive, and the cpa letter, and government accounting and auditing update;',
22991:'d. the cfo council, the council of the inspectors general on integrity and efficiency, and the financial statement audit network;',
22992:'and e. committees of professional associations generally commenting on exposure drafts in the past. a7. this broad announcement was followed',
22993:'by direct mailings of the exposure draft to the members of the earmarked funds task force. a list of the',
22994:'participating agencies is provided at appendix d. a8. to encourage responses, a notice was sent to the fasab’s listserv and',
22995:'to the fasab’s twitter followers. in addition, a reminder was provided on august 16, 2011, to our listserv. we also',
22996:'contacted affected agencies directly if a response had not been received by the date requested. result a9. we received 23',
22997:'responses from the following sources: federal internal nonfederal external users, academics, others 3 auditors 2 1 preparers and financial managers',
22998:'17 page 15 sffas 43 fasab handbook, version 20 06/21 sffas 43 a10.the board did not rely on the number',
22999:'in favor of or opposed to a given position. information about the respondents’ majority view is provided only as a',
23000:'means of summarizing the comments. the board considered the arguments in each response and weighed the merits ofthepointsraised. therespondents’ commentsaresummarizedbelowandarediscussed',
23001:'in detail in the sections that follow. a11.terminology: all respondents agreedthatthe term “earmarkedfunds” shouldbechanged, and most respondents agreed with the',
23002:'term “funds from dedicated collections.” a12.appropriateness of classifications: a. all respondents agreed with the requirement for an external source of',
23003:'funding. b. a majority of respondents agreed with the board’s proposal addressing the predominant source of funding when evaluating individual',
23004:'funds. c. all respondents agreed with the exclusion of certain funds. a13.understandability: a. amajorityofrespondentsagreedwiththeboard’sminorityproposaltopermitnoteonly reporting. b. amajorityofrespondents agreedwiththeoptionofanalternative formatof parenthetical',
23005:'amounts within line item titles. a14. eliminations: a majority of respondents agreed that combined or consolidated amounts may be reported',
23006:'and must be labeled accordingly. a15.other: a. amajorityofrespondentsagreedwithanexplicitrequirementfordatatobeinsufficient detail to support governmentwide reporting. b. amajorityofrespondents agreedwiththeproposedeffectivedateoffiscalyear 2012. terminology – “earmarked',
23007:'funds” changed to “funds from dedicated collections” a16.the board believes that the term “earmarked funds” has become confusing to readers',
23008:'because of the increasing focus on a similar term, “earmarking,” which refers to earmarked spending. earmarking occurs when congressional direction',
23009:'provided in legislation, report page 16 sffas 43 fasab handbook, version 20 06/21 sffas 43 language or other communication designates',
23010:'appropriations for a specific purpose. in contrast, thereportingrequirements of sffas27 arefocusedoncollections that are distinct from the government’s general revenues and',
23011:'are dedicated for a specific purpose. a17.the board believes that the new term, “funds from dedicated collections,” is a unique',
23012:'and descriptive term that will not be confused with other commonly used terms. in addition, it explicitly states the reason',
23013:'for separate reporting dedicated collections. appropriateness of classifications a18.a primary objective of sffas 27 was that: …under this standard the',
23014:'financial statements would thus present – in a transparent manner – the cumulative financing provided by earmarked funds to the',
23015:'general fund that will need to be repaid in order to use funds from dedicated collections for the designated activities,',
23016:'purposes or benefits.4 a19.the need for greater transparency was explained as follows: …the consolidated net position of the federal government',
23017:'reported on the u.s. governmentwide financial statements does not include the effect of the claim on the u.s. treasury that',
23018:'the various funds hold, just as the consolidated net position does not include the effect of other intragovernmental claims. instead,',
23019:'the u.s. governmentwide financial statements include the cumulative results of operations of earmarked funds – currently a large positive balance',
23020:'– as an offset against the cumulative results of operations of the general fund –currently alargenegativebalance. theresult is thatthefinancingprovidedby earmarked',
23021:'fund operations to general fund operations – which would otherwise be financed through the issuance of debt to the public,',
23022:'tax increases or other financing sources – is not shown on the face of the u.s. government balance sheet.5 a20.by',
23023:'providing separate presentation of the cumulative results of operations attributable to funds from dedicated collections, the commitment to restrict the',
23024:'use of net position, or “net assets,” accumulated in funds from dedicated collections would be apparent. in developing sffas 27,',
23025:'the board noted that a 2001 report identified three hundred and ninetytwo possible funds from dedicated collections. annual revenues and',
23026:'other financing sources for those funds ranged from negligible amounts to over half a trillion dollars. accumulated balances ranged from',
23027:'zero to over a trillion dollars.6 however, upon implementation in 2006, five of the sixteen largest funds from dedicated collections',
23028:'reported a negative net position. a21.not previously having been aware of funds from dedicated collections with negative net positions, staff',
23029:'questioned whether these funds are appropriately included as funds from dedicated collections. further research showed that some of the funds',
23030:'with negative net 4 sffas 27, basis for conclusions, paragraph 63. 5 sffas 27, basis for conclusions, paragraph 62. 6',
23031:'sffas 27, basis for conclusions, paragraph 3. page 17 sffas 43 fasab handbook, version 20 06/21 sffas 43 positions did',
23032:'not receive any funding from dedicated collections. for example, the department of defense medicare eligible retiree health care fund receives',
23033:'income from three sources: an annual treasury payment made on behalf of the military services at the beginning of the',
23034:'year based on average budgeted force strengths, annual payments from the treasury to amortize the unfunded liability, and investment income',
23035:'on treasury securities. a22.the intent of sffas 27 was that the specifically identified revenues and other financing sources required to',
23036:'meet the criteria in paragraph 11 of sffas 27 should be from a source that is nonfederal – that is,',
23037:'a source that is external to the federal government. evidence of that intent is found in the sffas 27 explanation',
23038:'that such funding raises an expectation on the part of the public that the government will use the amounts collected',
23039:'from specific sources and accumulated in earmarked funds for their stated purpose7. however, sffas 27 did not explicitly state that',
23040:'a nonfederal source of funds was required and current reporting practices vary. to ensure that funds reported as funds from',
23041:'dedicated collections are those where such a public expectation exists, this statement provides amendments to sffas 27 to explicitly state',
23042:'that the source of the specifically identified revenues or other financing source must be external to the federal government, and',
23043:'to clarify the distinction between funds from dedicated collections and the general fund. funds with mixed sources of funding a23.inimplementingsffas',
23044:'27, agenciesclassified numerous fundsprimarily funded by general fund appropriations as funds from dedicated collections. the board believes that guidance is',
23045:'needed for funds with mixed sources of funding that is, a combination of a revenues and other financing sources that',
23046:'meet the criteria in paragraph 11 of sffas 27 nonfederal and b general fund appropriations federal. in some such cases,',
23047:'the funding from nonfederal sources is insignificant both to the component entity and the government as a whole. the board',
23048:'believes that because a “fund” usually associated with a treasury account fund symbol is the smallest financial accounting unit in',
23049:'the federal government, a fund with mixed sources of funding including dedicated collections presents special challenges in meeting the objectives',
23050:'of sffas 27. conceptually, the portion representing dedicated collections should be separately identified. in the board’s view, separately accounting for',
23051:'the portion of these funds representing dedicated collections would impose reporting burdensin excessof anybenefits. however, classifying both dedicated collections and',
23052:'general fund appropriations as “dedicated collections” would overstate restricted revenue in component entity reports. 7sffas 27, basis for conclusions, paragraph',
23053:'54. page 18 sffas 43 fasab handbook, version 20 06/21 sffas 43 a24.to avoid such overstatements while minimizing reporting burdens,',
23054:'the board believes that to be classifiedasafundfromdedicatedcollections, afundshouldbepredominantly funded by revenues from nonfederal sources that meet the definition and criteria',
23055:'in paragraph 11 of sffas 27 “nonfederal revenues”. however,if the nonfederal revenues supporting the fund are material to the reporting',
23056:'entity, the board believes that the fund should be classified as a fund from dedicated collections even if the nonfederal',
23057:'revenues are not the predominant source of inflows of the fund for which they are collected. the board believes that',
23058:'this approach will result in a costeffective solution. material nonfederal revenues that meet the definition and criteria in paragraph 11',
23059:'of sffas 27 will be disclosed and costs will not be incurred to provide special accountability for immaterial amounts of',
23060:'nonfederal revenue that meet the criteria but are commingled with other financing sources provided through general fund appropriations. the board',
23061:'has accordingly provided an exception to the “predominant source of funds” principle in cases where the revenue that meets the',
23062:'criteria of paragraph 11 of sffas 27 is material to the reporting entity. in such cases, such as medicare parts',
23063:'b and d, the entire fund should be included. funds excluded a25.the board believes that funds established to account for',
23064:'pensions, other retirement benefits, other postemployment benefits, and other employee benefits provided to federal employees civilian and military should not',
23065:'be reported as funds from dedicated collections because such fundsaccount foremployeeemployertransactions and requirements tailored to those transactions are provided by',
23066:'sffas 5, accounting for liabilities of the federal government, paragraphs 5696. sffas 5 addresses accountability for intragovernmental and employee contributions',
23067:'toward the cost of employee benefits and any resulting liabilities. a26.in addition, because these funds recognize significant longterm liabilities, the',
23068:'large negative net position offsets much of the generally positive net position of other funds from dedicated collections. the result',
23069:'at the governmentwide level is that these funds reduce thecumulative amounttoberepaidbythe generalfundin orderfor thededicatedcollections to be used for their intended',
23070:'purposes. accordingly, this statement provides that such funds should be excluded from the category of funds from dedicated collections. understandability',
23071:'a27.members of the task force expressed concerns regarding the understandability of the display of separate amounts on the face of',
23072:'the component entity financial statements for funds from dedicated collections and all other funds, as currently required by sffas 27.',
23073:'the task force believes that this adds complexity to an already challenging financial presentation. further, it may prevent display of',
23074:'comparative financial statements on the page 19 sffas 43 fasab handbook, version 20 06/21 sffas 43 same page. the task',
23075:'force believes that all information concerning funds from dedicated collections in the component entity financial statements should be disclosed in',
23076:'the notes. a28.the board believes that component entity financial statements need not display funds from dedicated collections and all other',
23077:'fund totals separately on each line item, provided that certain key data remains on the face of the statements. component',
23078:'entity financial statementsmustbereadwiththeunderstanding that they provideinformationabouta single component of the federal government. each component acts as an agent of that',
23079:'government and restrictions are placed on the use of most funds available to agencies whether the funds are from dedicated',
23080:'collections or not. while special accountability for the use of funds can be conveyed through component entity reports by presenting',
23081:'information on significant individual funds, the cumulative financial implications of total funds from dedicated collections are best understood from the',
23082:'governmentwide perspective since the focus is on intragovernmental borrowing. a29.however, the board believes that users may be misled if a',
23083:'component entity has no information on the face of the basic financial statements about the magnitude of funds from dedicated',
23084:'collections that are reserved for use for designated activities, benefits, or purposes. accordingly, the board is requiring that component entities',
23085:'continue to report net position attributable to funds from dedicated collections on the balance sheet. in addition, the board believes',
23086:'certain component entities should continue to report funds from dedicatedcollections separately onthe faceof thestatementof changes innet position,and that component entities',
23087:'not required to report on the face of the statement should include a reference to the note on the face',
23088:'of the statement of changes in net position. eliminations a30.sffas 27 provided confusing guidance on eliminations for component entities by',
23089:'implying that the funds from dedicated collections disclosure should include eliminations between funds from dedicated collections and all other funds.',
23090:'practice has varied as a result. the amendments eliminate the confusing guidance and instead provide that combined or consolidated totals',
23091:'are permitted so long as they are properly labeled. a31.the primary objective of sffas 27 relates to intragovernmental borrowing/investing: under',
23092:'this standard the financial statements would thus presentin a transparent mannerthe cumulative financing provided by earmarked funds to the general',
23093:'fund that will need to be repaid in order to use earmarked funds for the designated activities, purposes or benefits.8',
23094:'8 sffas 27, basis for conclusions, paragraph 63. page 20 sffas 43 fasab handbook, version 20 06/21 sffas 43 a32.another',
23095:'objective of sffas 27 relates to special accountability: all earmarked funds have characteristics that justify special accountability. while many government',
23096:'programs raise implied commitments for the future, there is a more explicit commitment associated with the statutory establishment of earmarked',
23097:'funds. the government raises an expectation on the part of the public that the government will use the amounts collected',
23098:'from specific sources and accumulated in earmarked funds for their stated purpose.9 a33.the above objectivesof sffas 27 focus primarily on',
23099:'the accumulated net position of funds from dedicated collections. because net position is not affected by eliminations, presentation of eliminations',
23100:'is not necessary to meet the objectives of sffas 27. in addition, because the focus of special accountability is necessarily',
23101:'on individual funds or programs – members question whether the consolidated total is useful for assessing the status of funds',
23102:'from dedicated collections available for the individual purposes established in law. a34.members believe that a broader study of fund reporting',
23103:'is needed. specifically, a fund reporting project would address the question of whether consolidated or combined amounts are more usefulwhen',
23104:'reporting on aspecific class of funds. untilsuch a study is completed, the board believes it is acceptable to report either',
23105:'consolidated or combined amounts and the amounts must be labeled accordingly. support for governmentwide reporting a35.to address concerns expressed by',
23106:'representatives of the department of the treasury, this statement also proposes amendments to explicitly require that component entity reporting should',
23107:'fully support the required governmentwide reporting on funds from dedicated collections in accordance with paragraphs 29 – 33 of sffas',
23108:'27. boardapproval a36.thisstatementwasapprovedforissuancebyallmembersoftheboard. writtenballotsare available for public inspection at the fasab’s offices. 9 sffas 27, basis for conclusions, paragraph 54.',
23109:'page 21 sffas 43 fasab handbook, version 20 06/21 sffas 43 appendix b: text of sffas 27accounting standards, as amended',
23110:'definition of funds from dedicated collections 11. generally, funds from dedicated collections are financed by specifically identified revenues,3a provided to',
23111:'the government by nonfederal sources, often supplemented by other financing sources, which remain available over time. these specifically identified revenues',
23112:'and other financing sources are required by statute to be used for designated activities, benefits or purposes, and must be',
23113:'accounted for separately from the federal government’s general revenues. the three required criteria for a fund from dedicated collections are:',
23114:'1. astatutecommittingthefederalgovernmenttousespecificallyidentified revenues and/or other financing sources that are originally provided to the federal government by a nonfederal source3b only',
23115:'for designated activities, benefits or purposes; 2. explicitauthorityforthefundtoretainrevenuesand/orotherfinancingsourcesnot used in the current period for future use to finance the designated',
23116:'activities, benefits, or purposes; and 3. arequirementtoaccountforandreport4on thereceipt, use,andretentionofthe revenues and/or other financing sources that distinguishes the fund from the',
23117:'federal government’s general revenues. footnote 3a: such specifically identified revenues can be either exchange or nonexchange. footnote 3b: in some',
23118:'cases, specifically identified revenues or other financing sources are collected from a nonfederal source by one agency and transferred or',
23119:'appropriated to another. for example, social security taxes arecollectedfrom nonfederal entities employees andemployers by theinternalrevenue service. those amounts are subsequently',
23120:'appropriated and transferred to the social security administration. this internalprocess does notchangethenatureoftherevenueorotherfinancing source i.e., specifically identified revenues or other financing',
23121:'sources originally collected from a nonfederal source. footnote 4:a“report” may be something other than standalone financial statements for the fund',
23122:'from dedicated collections. page 22 sffas 43 fasab handbook, version 20 06/21 sffas 43 application of the definition 12. the',
23123:'requirement to account for revenues and other financing sources that are statutorily availableonlyfordesignatedactivities,benefitsorpurposesisusuallycreatedbystatute. a fund from dedicated collections may be',
23124:'classified in the statute, the unified budget, or both, asatrust,special,orpublicenterprisefund. applicationofthisstandard,however,shallnot be based on how a statute or the unified',
23125:'budget labels the fund. rather, the board intends that the term “funds from dedicated collections” be applied based on the',
23126:'substance of the statute and consistent with the three criteria described above. 13. fund in this statement’s definition of funds',
23127:'from dedicated collections refers to a “fiscal and accounting entity with a selfbalancing set of accounts recording cash and other',
23128:'financial resources, togetherwith allrelatedliabilities and residualequitiesorbalances, andchanges therein, which are segregated for the purpose of carrying on specific activities or',
23129:'attaining certain objectives in accordance with special regulations, restrictions, or limitations.”5 classificationandreportingshouldbemadeatthelevelofanindividualfund. afundshould be classified as a “fund from dedicated',
23130:'collections” if it meets the criteria in paragraphs11.2 and 11.3 and either: 1. its predominant sources of revenue and other',
23131:'financing sources are nonfederal sources meeting the paragraph 11.1 criterion, or 2. it has nonfederal revenue and other financing sources',
23132:'meeting the paragraph 11.1 criterion5a that are material to the reporting entity. for example, as currently funded, medicare parts b',
23133:'and d do not have nonfederal sources as described in paragraph 11 as their predominant revenue and other financing sources.',
23134:'however, medicare parts b and d do have revenue and other financing sources material to the reporting entity that meet',
23135:'the criteria in paragraph 11. therefore, medicare parts b and d should be classified as funds from dedicated collections. footnote',
23136:'5: national council on governmentalaccounting statement 1, par. 16. footnote5a: insituations wherethereisamixedsourceof fundingsothatnotallof the revenue andother financingsources meet thecriteriain paragraph',
23137:'11 and theproportionand/or amounts of funding sources vary from year to year so that it is difficult to determine a',
23138:'predominant source and/or assess materiality, acceptable options for classification include but are not limited to: 1. longterm expectations rather than',
23139:'periodic results that may fluctuate 2. 36month averages changes in classification of funds from year to year should be disclosed.',
23140:'page 23 sffas 43 fasab handbook, version 20 06/21 sffas 43 distinct from the general fund 14. whereas funds from',
23141:'dedicated collections are financed by specifically identified revenues and other financing sources, the general fund is financed by receipts not',
23142:'dedicated by law for a specific purpose and by the proceeds of general borrowing. although there are exceptions, funding decisions',
23143:'regarding activity financed from general receipts usually govern one fiscal year and are made as part of the process of',
23144:'enacting one of the annual appropriations acts. in contrast, legislation establishing funds from dedicated collections reflects a longer if not',
23145:'indefinite government commitment to collect, hold and spend identified revenues for a designated activity, benefit or purpose. funds from dedicated',
23146:'collectionsmaybegivenauthoritytomakeexpendituresbymeansofapermanent indefinite appropriation, often enacted by authorizing legislation. if not, an appropriation provided in annualappropriationactsisnecessarytomakeexpenditures. whetherthebudgetauthority is provided by authorizing',
23147:'legislation or annual appropriations acts, the funds are reserved or restricted to the designated activity, benefit or purpose. distinct from',
23148:'fiduciary activities 15. the activity of funds from dedicated collections differs from fiduciary activities primarily in thatinfunds from dedicatedcollections, fundassetsaregovernmentowned.',
23149:'afiduciary activity is the collection or receipt, management, protection, accounting, investment and disposition by the federal government of cash or',
23150:'other assets in which nonfederal individualsorentitieshave an ownership interest that the federalgovernment must uphold.6 therefore, even though a fund from',
23151:'dedicated collections is designated exclusively for a specific activity, benefit or purpose, the federal government does not have a fiduciary',
23152:'relationship with the individuals or groups who potentially will benefit from the fund. footnote 6: see sffas 31,accounting for fiduciaryactivities,',
23153:'for more on fiduciary activity in the federal government and the differences between private trust funds and federal government trust',
23154:'funds. distinct from private sector trust funds 16. althoughfundsfromdedicatedcollectionsarepredominantlyinfundsthataredesignatedby law as trust funds, the meaning of the term “trust” in',
23155:'the federal government differs significantly from its meaning in the private sector. whereas funds from dedicated collections in the federal',
23156:'government are distinct from fiduciary activities, a trust in the private sector necessarily involves a fiduciary relationship. 17. afundfrom dedicatedcollectionsshouldnotbecharacterizedasa',
23157:'“trust” ingeneral purpose external financial reports of federal entities. the use of the term “trust fund” is acceptable only in',
23158:'the fund’s official title. page 24 sffas 43 fasab handbook, version 20 06/21 sffas 43 exclusions from reporting requirements 18.',
23159:'certain categories of funds are excluded from the reporting requirements of this standard. intragovernmental funds are excluded because they are',
23160:'revolving funds that conduct businessprimarilywithinandbetweengovernmentagencies. creditfinancingaccountsare also excluded. credit financing accounts are nonbudgetary funds that do not accumulate results of',
23161:'operations; they primarily serve as clearing accounts for cash activity relating to federal credit programs. fiduciary funds, which are not',
23162:'governmentowned, are also excluded. funds established to account for pensions, other retirement benefits, other postemployment benefits, and other employee benefits',
23163:'provided to federal employees civilian or military should not be classified as funds from dedicated collections because such funds account',
23164:'for employeremployee transactions and requirements tailored to those transactionsareprovided bysffas 5, accounting for liabilities of the federal government, paragraphs 5696.',
23165:'6a in addition, because these funds recognize significant longterm liabilities, the large negative net position offsets much of the generally',
23166:'positive net position of other funds from dedicated collections. the result at the governmentwide level is that the large negative',
23167:'net position of these funds obscures the large cumulative amount that needs to be repaid by the general fund in',
23168:'order for the dedicated collections to be used for their intended purposes. footnote 6a: because classification and reporting should be',
23169:'made at the level of an individual fund, portions of funds, such as the federal employees compensationaccount portion of the',
23170:'unemployment trust fund, should not be excluded because of this provision. reporting for funds from dedicated collections financial statement presentation',
23171:'and disclosures for component entities financial statement presentation 19. the portion of cumulative results of operations and unexpended appropriations attributable',
23172:'to funds from dedicated collections should be shown separately on the balance sheet. this standard does not require funds from',
23173:'dedicated collections to be separately shown on the statement of net cost. nonexchange revenue and other financing sources, including appropriations,',
23174:'and net cost of operations for funds from dedicated collections should be shown separately on the statement of changes in',
23175:'net position if: 1. dedicated collections are the predominant source of revenue and other financing sources for the component entity,',
23176:'or 2. one or more of the entity’s funds from dedicated collections page 25 sffas 43 fasab handbook, version 20',
23177:'06/21 sffas 43 a. is of immediate concern to constituents of the fund, b. is politically sensitive or controversial, c.',
23178:'is accumulating large balances, or d. the information provided in the financial statements would be a primary source of financial',
23179:'information for the public. for example, the social security and medicare programs are of immediate concern to their constituents; both',
23180:'programs have a direct current or future impact on the majority of the general public. 19a. entities may present combined',
23181:'or consolidated amounts and the presentation must be labeled accordingly. 19b. component entities that do not separately show amounts from',
23182:'dedicated collections on the statement of changesin net position should refer on the face of the statement of changesin net',
23183:'position to the note on funds from dedicated collections. 20. most revenues and other financing sources that are dedicated collections',
23184:'are reported in the basic financial statements of the entity carrying out the program and responsible for administrationofthefund. ifmorethanonecomponententityisresponsibleforcarryingout the',
23185:'program financed with revenues and other financing sources that are dedicated collections, and the separate portions of the program can',
23186:'be clearly identified with a responsible component entity, then each component entity should report its portion in accordancewiththerequirementsofthisstandard. ifseparateportionscannotbeidentified, the',
23187:'component entity with program management responsibility should report the fund.7 footnote 7: to determine program management/accounting responsibility, agencies should consider',
23188:'the legislation authorizing the program; the memorandum of understanding that establishes responsibilities; and the provisions of sffac 2, entity and',
23189:'display, as amended by this standard. disclosure 21. acomponent entity shoulddisclose8allfunds fromdedicatedcollections forwhichithas program management responsibility byeither a list by',
23190:'official title or a statement indicating wherethe listcanbeobtainede.g., awebsitereferenceor contactinformation. afund from dedicated collections should not be characterized as a',
23191:'“trust” in general purpose external financial reports of federal entities. the use of the term “trust fund” is acceptable only',
23192:'in the fund’s official title. page 26 sffas 43 fasab handbook, version 20 06/21 sffas 43 footnote 8: disclosure is',
23193:'reporting information in notes or narrative regarded as an integral part of the basic financial statements. 22. information should be',
23194:'disclosed for each individual fund from dedicated collections. an exception is provided for component entities having numerous individual funds from',
23195:'dedicated collections. paragraph 24 discusses criteria to consider in selecting individual funds for disaggregated disclosure. the following information should be',
23196:'disclosed for selected individual funds from dedicated collections, in aggregate for all remaining funds from dedicated collections, and in total',
23197:'for all the entity’s funds from dedicated collections: 1. condensed information about assets and liabilities showing investments in treasury securities,',
23198:'other assets, liabilitiesdue and payable, other liabilities, cumulative results of operations and net position. 2. condensed information providing gross cost,',
23199:'exchange revenue, net cost of operations, nonexchange revenues by major type and all other, other financing sources by major type',
23200:'and all other, and change in net position. entities may present combined or consolidated amounts and the presentation must be',
23201:'labeled accordingly. the information required by this paragraph for funds from dedicated collections may be presented separately on the face',
23202:'of the entitys basic financial statements or disclosed in the accompanying notes. the information must be in sufficient detail to',
23203:'support reporting requirements for the u.s. governmentwide financial statements in paragraphs 29 and 30. information for funds not presented individually',
23204:'may be aggregated. the total net position shown in the note disclosure should agree with the total net position for',
23205:'funds from dedicated collections shown on the face of the component entity’s balance sheet.9 footnote 9 was rescinded by sffas',
23206:'43, revisions to identifying and reporting funds from dedicated collections: amending statement of federal financial accounting standards 27. 23. the',
23207:'following information should be disclosed for each individually reported fund from dedicated collections, or portion thereof, for which a component',
23208:'entity has program management responsibility see paragraph 24. 1. adescriptionofeachfundspurpose, howthe entity accounts for and reportsthe fund, and its authority',
23209:'to use those revenues and other financing sources. 2. thesourcesofrevenueorotherfinancingfortheperiodandanexplanationoftheextent to which they are inflows of resources to the government',
23210:'or the result of intragovernmental flows. 3. any change in legislation during or subsequent to the reporting period and before',
23211:'the issuance of the financialstatementsthat significantly changesthe purposeof the fund or that redirects a material portion of the accumulated balance.',
23212:'page 27 sffas 43 fasab handbook, version 20 06/21 sffas 43 24. selecting funds from dedicated collections to be presented',
23213:'individually requires judgment. the preparer should consider both quantitative and qualitative criteria. acceptable criteria include but are not limited to:',
23214:'a. quantitative factors such as 1. the percentage of the reporting entity’s revenues from dedicated collections or 2. cumulative results',
23215:'of operations from such funds; and b. qualitative factors such as 1. whetherafundfromdedicatedcollectionsisofimmediateconcerntoconstituents of the fund, 2. whether it is',
23216:'politically sensitive or controversial, 3. whether it is accumulating large balances, or 4. whether the information provided in the financial',
23217:'statements would be the primary source of financial information for the public. 25. the total net position of all funds',
23218:'from dedicated collections shown in the note disclosure should agree with the net position of funds from dedicated collections shown',
23219:'on the face of the component entity’s balance sheet. 26. in accordance with the provisions of paragraph 20 or footnote',
23220:'5a of paragraph 13, if a component entity reports a different portion of a program funded by dedicated collections than',
23221:'it reported in prior years, it should not restate its prior year financial statements. it should disclose the change. this',
23222:'applies if a component entity does not report a fund from dedicated collections that it reported in the previous year.',
23223:'it also applies if a component entity reports a fund from dedicated collections that it did not report in the',
23224:'previous year. note on investments 27. investments in treasury securities for funds from dedicated collections should be accompanied by a',
23225:'note that explains the following issues: the u.s. treasury does not set aside assets to pay future expenditures associated with',
23226:'funds from dedicated collections. instead, the cash generated from such funds is used by the u.s. treasury for general government',
23227:'purposes. page 28 sffas 43 fasab handbook, version 20 06/21 sffas 43 treasury securities are issued to the fund as',
23228:'evidence of dedicated collections and provide thefund with the authorityto draw upon the u.s. treasuryfor future authorized expenditures although for',
23229:'some funds, this is subject to future appropriation. treasury securities held by a fund from dedicated collections are an asset',
23230:'of the fund and a liability of the u.s. treasury, so they are eliminated in consolidation for the u.s. governmentwide',
23231:'financial statements. when the fund from dedicated collections redeems its treasury securities to make expenditures, the u.s. treasury will finance',
23232:'those expenditures in the same manner that it finances all other expenditures. 28. below is one example of a note',
23233:'that addresses the points in paragraph investments in treasury securities for funds from dedicated collections should be accompanied by a',
23234:'note that explains the following issues: above. intragovernmental investments in treasury securities the federal government does not set aside assets',
23235:'to pay future benefits or other expenditures associated with funds from dedicated collections or name/s of fund/s. the dedicated cash',
23236:'receiptscollectedfromthe publicinto the fund are deposited in the u.s. treasury, which uses the cash for general government purposes. treasury securities',
23237:'are issued to the component entity as evidence of its receipts. treasury securities are an asset to the component entity',
23238:'and a liability to the u.s. treasury. because the component entity and the u.s. treasury are both parts of the',
23239:'government, these assets and liabilities offset each other from the standpoint of the governmentasawhole. forthisreason,theydonotrepresentanassetoraliabilityin the u.s. governmentwide financial statements.',
23240:'treasurysecuritiesprovidethe component entity with authority to draw upon the u.s. treasury to make future benefit payments or other expenditures. when',
23241:'the component entity requires redemption of these securities to make expenditures, the government financesthoseexpendituresout of accumulated cash balances, by raising',
23242:'taxes or other receipts, by borrowing from the public or repaying less debt, or by curtailing other expenditures. this is',
23243:'the same way that the government finances all other expenditures. page 29 sffas 43 fasab handbook, version 20 06/21 sffas',
23244:'43 financial statement presentation and disclosures for the u.s. government wide financial statements financial statement presentation 29. funds from dedicated',
23245:'collections should be shown separately on the u.s. government statementofoperationsandchangesinnetposition. theportionofnetpositionattributable to funds from dedicated collections should be shown separately',
23246:'on the u.s. government balancesheet.10 seeappendixc: proformaillustrations forexamplesofaccounting entries and financial reporting. footnote10:net positionis composedofunexpendedappropriations and cumulative results of operations',
23247:'forcomponententities. sinceunexpendedappropriationsarenotapplicableattheu. s.governmentwide level, net position equals cumulative results of operations. disclosure 30. specific information should be disclosed for selected',
23248:'funds from dedicated collections. paragraph 24 discusses criteria to consider in selecting individual funds for disaggregated disclosure. the following information',
23249:'should be provided for selected individual funds from dedicatedcollections, inaggregateforall remaining fundsfromdedicatedcollections, andin total for all funds from dedicated collections.',
23250:'1. condensed information about assets, liabilities and net position. 2. condensedinformationongrosscost,exchangerevenue,netcost,nonexchange revenues and other financing sources, and change in net',
23251:'position. the disclosure may present combined or consolidated amounts and the presentation must be labeled accordingly 31. the information for',
23252:'funds from dedicated collections should be disclosed in the notes accompanying the basic financial statements. information for funds not shown',
23253:'individually maybeaggregatedseeparagraph24. atotalcolumnshouldbepresentedthatrelatesthe disaggregated data to the data on the face of the principal financial statements. the net position shown',
23254:'in the note disclosure should agree with the portion of net position attributable to funds from dedicated collections shown on',
23255:'the face of the balance sheet. 32. anotedisclosureshouldprovideareferencetocomponentreportsforadditionalinformation about individual funds from dedicated collections. page 30 sffas 43 fasab handbook,',
23256:'version 20 06/21 sffas 43 33. anotedisclosureshouldprovide ageneraldescriptionoffunds from dedicatedcollections and an explanation of how the federal government as a',
23257:'whole could provide the resources represented by the balance in treasury securities held by funds from dedicated collections. 34. afundfrom',
23258:'dedicatedcollectionsshouldnotbecharacterizedasa “trust” ingeneral purpose external financial reports of federal entities. the use of the term “trust fund” is acceptable only',
23259:'in the fund’s official title. basis ofaccounting 35. allamountsreportedanddisclosedinthereportingentity’sbasicfinancialstatementsorthe notes thereto, as required in paragraphs 19 through 34, should be',
23260:'recognized and measured using the standards provided in generally accepted accounting principles applicable to the federal government. effective date and',
23261:'implementation 36. thisstandardiseffectiveforperiodsbeginningafterseptember 30,2005. earlyadoptionis not permitted. in the year this standard becomes effective, entities should not restate the prior',
23262:'period columns of the basic financial statements and related disclosures. effect on existing standards 37. [paragraph37wassupersededbyparagraph34ofsffas31,whichrescindedparagraphs 83 through 87 of',
23263:'sffas 7.] 38. this standardamendsstatement offederalfinancialaccountingconceptssffac2, entity and display, footnote 3, as follows: for some trust funds, the collection of',
23264:'the revenues is performed by an organizational entity acting in a custodial capacity that differs from the organizational entity that',
23265:'administersthetrustfund. inthoseinstances,theorganizationalentitythatcollectsthe revenue would be responsible for reporting only the collection and subsequent disposition of the funds. the organizational entity',
23266:'responsible for carrying out the programs financed by a trust fund, or in the case of multiple responsible entities, the',
23267:'entity with the preponderance of fund activity, will report all assets, liabilities, revenues and expenses of the fund, notwithstanding the',
23268:'fact that another entity has custodial responsibility for the assets. in the case of multiple responsible entities, if the separate',
23269:'page 31 sffas 43 fasab handbook, version 20 06/21 sffas 43 portions of the program can be clearly identified with',
23270:'a responsible component entity, then each component entity should report its portion in accordance with the requirements of sffas 27,',
23271:'identifying and reporting funds from dedicated collections. if separate portions cannot be identified, the component entity with program management responsibility',
23272:'should report the fund. 39. this standard amends sffac 3, management’s discussion and analysisconcepts, paragraph 26 as follows: financial results,',
23273:'position and conditionmd&ashould help those who read it to understand the entitys financial results and financial position and the entitys',
23274:'effect on the financial position and condition of the government. it should give readers the benefit of managements understanding of',
23275:'the significance and potential effect from both a shortand a longterm perspective of: the variations discussed in paragraph 14 in',
23276:'terms of major changes in types or amounts of assets, liabilities, costs, revenues, obligations and outlays; particular balances and amounts',
23277:'shown in the basic financial statements, including the notes, such as those dealing with earmarked funds dedicated collections, if relevant',
23278:'to important financial management issues and concerns; and the entitys required supplementary stewardship information because rssi describes economic conditions that',
23279:'cannot be expressed in the basic financial statements. the provisions of this statement need not be applied to immaterial items.',
23280:'page 32 sffas 43 fasab handbook, version 20 06/21 sffas 43 appendix c: illustrative component entity financial statements component entities',
23281:'have the option to use separate lines or columns to display information on funds from dedicated collections on the face',
23282:'of the balance sheet and statement of changes in net position optiona, or to use an alternative format, such as',
23283:'parenthetical amounts within line item titles option b. the following examples are illustrative only and are intended to show how',
23284:'the information required in paragraph 19 might be displayed. these examples are not intended to be all inclusive and other',
23285:'acceptable alternatives may be developed by preparer. note:although these illustrations show combined totals for dedicated collections and all other funds',
23286:'where those two categories of funds are reported separately, component entities may also opt to report consolidated amounts for dedicated',
23287:'collections and all other funds, respectively i.e., after eliminations within each category of funds. regardless of whether combined or consolidated',
23288:'amounts are reported for each category of funds, entitywide totals for all funds should be consolidated amounts. page 33 sffas',
23289:'43 fasab handbook, version 20 06/21 sffas 43 optiona: illustrative balance sheet withamounts in separate lines fy2xx1 fy2xx0 entity assets:',
23290:'fund balance with treasury $xxx $xxx cash and other monetary assets xxx xxx investments: intragovernmental xxx xxx with the public',
23291:'xxx xxx receivables: intragovernmental xxx xxx with the public xxx xxx inventories and related properties xxx xxx physical assets xxx',
23292:'xxx total entity assets xxx xxx nonentity assets: fund balance with treasury xxx xxx cash xxx xxx receivables: intragovernmental xxx',
23293:'xxx with the public xxx xxx total nonentity assets xxx xxx total assets $xxx $xxx page 34 sffas 43 fasab',
23294:'handbook, version 20 06/21 sffas 43 liabilities: liabilities covered by budgetary resources: intragovernmental liabilities: payables governmental liabilities: payables total liabilities',
23295:'covered by budgetary resources liabilities not covered by budgetary resources: intragovernmental liabilities: payables governmental liabilities: payables amounts held for others',
23296:'total liabilities not covered by budgetary resources total liabilities net position unexpended appropriations funds from dedicated collections combined totals– see',
23297:'note x unexpended appropriations – all other funds combined totals cumulative results of operations funds from dedicated collections combined totals',
23298:'– see note x cumulative results of operations – all other funds combined totals total net position – funds from',
23299:'dedicated collections combined totals – see note x total net position – all other funds combined totals total net position',
23300:'total liabilities and net position fy2xx1 fy2xx0 $xxx $xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx',
23301:'xxx xxx xxx xx xx xx xx xx xx xx xx xx xx xx xx xxx xxx $xxx $xxx page',
23302:'35 sffas 43 fasab handbook, version 20 06/21 sffas 43 option b: illustrative balance sheet with parentheticalamounts fy 2xx1 fy',
23303:'2xx0 entity assets: fund balance with treasury $xxx $xxx cash and other monetary assets xxx xxx investments: intragovernmental xxx xxx',
23304:'with the public xxx xxx receivables: intragovernmental xxx xxx with the public xxx xxx inventories and related properties xxx xxx',
23305:'physical assets xxx xxx total entity assets xxx xxx nonentity assets: fund balance with treasury xxx xxx cash xxx xxx',
23306:'receivables: intragovernmental xxx xxx with the public xxx xxx total nonentity assets xxx xxx total assets $xxx $xxx liabilities: liabilities',
23307:'covered by budgetary resources: intragovernmental liabilities: payables $xxx $xxx governmental liabilities: payables xxx xxx total liabilities covered by budgetary resources',
23308:'xxx xxx page 36 sffas 43 fasab handbook, version 20 06/21 sffas 43 fy 2xx1 fy 2xx0 liabilities not covered',
23309:'by budgetary resources: intragovernmental liabilities: payables xxx xxx governmental liabilities: payables xxx xxx amounts held for others xxx xxx total',
23310:'liabilities not covered by budgetary resources xxx xxx total liabilities xxx xxx net position unexpended appropriations includes funds from dedicated',
23311:'xxx xxx collectionsof$xxinfy2xx1and$xxin fy2xx0combinedtotals – see note x cumulative results of operations includes funds from dedicated xxx xxx collections of',
23312:'$xx in fy 2xx1 and $xx in fy 2xx0 combined totals see note x total net position includes funds from',
23313:'dedicated collections of $xx xxx xxx in fy 2xx1 and $xx in fy 2xx0 combined totals see note x total',
23314:'liabilities and net position $xxx $xxx page 37 sffas 43 fasab handbook, version 20 06/21 sffas 43 optiona: illustrative statement',
23315:'of changes in net position withamounts in separate columns note: certain component entities are not required to report on the',
23316:'face of the statement of changes in net position. entities may present combined or consolidated amounts and the presentation must',
23317:'be labeled accordingly. funds from all other eliminations consolidated dedicated funds totals collections combined combined totals totals fy 2xx1 see',
23318:'note x cumulative results of operations: beginning balance, as adjusted xxx xxx x xxx budgetary financing sources: other adjustments xxx',
23319:'xxx x xxx appropriations used xxx xxx xxx nonexchange revenue xxx xxx x xxx donations and forfeitures of cash and',
23320:'cash xxx xxx xxx equivalents transfers in/out without reimbursement xxx xxx x xxx other xxx xxx x xxx other financing',
23321:'sources donations and forfeitures of property xxx xxx xxx transfers in/out without reimbursement xxx xxx x xxx imputed financing xxx',
23322:'xxx x xxx other xxx xxx x xxx total financing sources xxx xxx x xxx net cost of operations xxx',
23323:'xxx x xxx net change xxx xxx x xxx cumulative results of operations xxx xxx x xxx unexpendedappropriations: beginning balance',
23324:'xxx xxx x xxx budgetary financing sources: appropriations received xxx xxx x xxx appropriations transferred in/out xxx xxx x xxx',
23325:'other adjustments xxx xxx x xxx appropriations used xxx xxx xxx total budgetary financing sources xxx xxx x xxx total',
23326:'unexpendedappropriations xxx xxx x xxx net position xxx xxx x xxx page 38 sffas 43 fasab handbook, version 20 06/21',
23327:'sffas 43 option b: illustrative statement of changes in net position with parentheticalamounts note: certain componententities are not required to',
23328:'report on thefaceofthestatement of changes in net position. cumulative results of operations: beginningbalance, as adjustedincludes funds from dedicatedcollections of $xx',
23329:'in fy xxxx and $xx in fy xxxx combined totals see note x budgetary financing sources: other adjustmentsappropriations usednonexchange revenue',
23330:'donations and forfeitures of cash and cash equivalents transfers in/out without reimbursement other other financing sources donations and forfeitures of',
23331:'property transfers in/out without reimbursement imputed financingother total financing sources includes funds from dedicated collections of $xx in fyxxxx and',
23332:'$xx in fy xxxx combined totals see note x net cost of operations includes funds from dedicated collections of $xx',
23333:'in fy xxxx and $xx in fy xxxx combined totals – see note x net change cumulative results of operations',
23334:'includes funds from dedicated collectionsof $xxin fyxxxxand$xxinfyxxxxcombined totals see note x unexpendedappropriations: beginning balance includes funds from dedicated collections of',
23335:'$xx in fy xxxx and $xx in fy xxxx combined totals – see note x budgetary financing sources: appropriations received',
23336:'appropriations transferred in/out other adjustmentsappropriations used total budgetary financing sources includes funds from dedicated collections of $xx in fy xxxx',
23337:'and $xx in fy xxxx combined totals see note x total unexpended appropriations includes funds from dedicated collections of $xx',
23338:'in fy xxxx and $xx in fy xxxx combinedtotals see note x net position fy2xx1 fy2xx0 xxx xxx xxx xxx',
23339:'xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx',
23340:'xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx',
23341:'xxx xxx page 39 sffas 43 fasab handbook, version 20 06/21 sffas 43 appendix d: earmarked funds task force participating',
23342:'agencies u.s. department ofagriculture department of commerce commodity futures trading commission department of defense department of energy environmental protectionagency federal',
23343:'communications commission governmentaccountability office department of health and human services department of homeland security department of housing and urban development',
23344:'department of the interior department of justice department of labor office of management and budget office of personnel management railroad',
23345:'retirement board securities and exchange commission social securityadministration state department department of transportation treasury department main treasury and cfr reporting',
23346:'department of veteransaffairs page 40 sffas 43 fasab handbook, version 20 06/21 sffas 43 appendix e:abbreviations fasab federalaccountingstandardsadvisoryboard fy fiscal',
23347:'year sffac statement offederalfinancialaccountingconcepts sffas statement offederalfinancialaccountingstandards u.s. united states page 41 sffas 43 fasab handbook, version 20 06/21 statement',
23348:'offederal financialaccounting standards 44: accounting for impairment of general property, plant, and equipment remaining in use status issued january 3,',
23349:'2013 effective date for fiscal periods beginning after september 30, 2014 with early implementation encouraged affects none. affected by none.',
23350:'summary this statement establishes accounting and financial reporting standards for impairment of general property, plant, and equipment gpp&e remaining in',
23351:'use, except for internal use software. gpp&e is considered impaired when there is a significant and permanent decline in the',
23352:'service utility of gpp&e or expected service utility for construction work in progress.a decline is permanent when management has no',
23353:'reasonable expectation that the lost service utility will be replaced or restored.1 this statement does not anticipate that entities will',
23354:'have to establish additional or separate procedures beyond those that may already exist, such as those related to deferred maintenance',
23355:'and repairs, to search for impairments. impairments can be identified and brought to management’s attention in a variety of ways.',
23356:'although a presumption exists that there are existing processes and internal controls in place to reasonably assure identification and communication',
23357:'of potential material impairments, this statement does not require entities to conduct an annual or other periodic survey solely for',
23358:'the purpose of applying these standards. management may determine that existing processes and internal controls are not sufficient to reasonably',
23359:'assure identification of potential material impairments and implement appropriate additional processes and internal controls. entity management should consider documenting the',
23360:'decisions it makes while determining how toimplementtherequirementsofthisstatement. suchdecisionsshouldincludeconsiderationof materiality. materiality considerations should include an assessment of the impact to the',
23361:'cost of services before and after the impairment. 1 this statement should not be directed to those gpp&e assets e.g.,',
23362:'lower operating level assets, administrative support equipment, etc. that have an immaterial impact on cost of services. entities that determine',
23363:'they have an amount of gpp&e such that no impairment could have a material effect would not have to be',
23364:'concerned with the implementation of the statement. each entity should undertake some advanced consideration to tailor and justify its implementation',
23365:'in light of materiality considerations specific to the entity. page 1 sffas 44 fasab handbook, version 20 06/21 sffas 44',
23366:'recognition of impairment losses is dependent upon a twostep process that entails a identifying potentialimpairmentsand btesting for impairment. the lossesshould',
23367:'be reasonably estimated by determining the portion of the decline in the net book value of the gpp&e attributable to',
23368:'the lost service utility. this statement improves financial reporting by requiring entities to report the effects of gpp&e impairments in',
23369:'their financial statements when they occur rather than as a part of the ongoing depreciation expense for the gpp&e or',
23370:'upon disposal of the gpp&e. this will enable users of financial statements to discern the cost of impairments when they',
23371:'occur, the financial impact on the reporting entity, and the cost of services provided following the impairment. this statement also',
23372:'enhances comparability of financial statements between entities by requiring all entities to account for impairments in a similar manner. page',
23373:'2 sffas 44 fasab handbook, version 20 06/21 sffas 44 table of contents summary 1 introduction 4 purpose 4 materiality',
23374:'4 effective date 5 standards 5 scopeandapplicability 5 definition of impairment 6 identificationofpotentialimpairmentloss –atwostepprocess 6 determiningtheappropriatemeasurementapproach 9 recognizing and reporting',
23375:'impairment losses 12 diminished service utility without recognized impairment loss 12 gpp&e that no longer provides service 12 remediating previously',
23376:'reported impairments 13 recoveries 13 consolidated financial report of the u.s. government 13 effective date 14 appendixa:basis for conclusions 15',
23377:'appendix b: flowchart, decision table and illustrations 29 appendix c:abbreviations 59 page 3 sffas 44 fasab handbook, version 20 06/21',
23378:'sffas 44 introduction purpose 1. statementoffederalfinancialaccountingstandards sffas6, accounting for property, plant, and equipment, contains principlesbased guidance concerning general property, plant,',
23379:'and equipment gpp&e2 that is removed from service due to total full impairment ofgpp&e or other reasons. sffas 6 requires',
23380:'that gpp&e be removed from gpp&e accounts along with associated accumulated depreciation/amortization, if prior to disposal, retirement, or removal from',
23381:'service it no longer provides service in the operations of the entity.3 sffas 6 does not address situations where there',
23382:'is less than total full impairment of gpp&e. 2. sffas 10, accounting for internal use software, provides guidance for the',
23383:'impairment of internal use software.4 this statement does not alter existing requirements regarding internal use software. 3. this statement provides',
23384:'accounting and reporting requirements for partial impairments of gpp&e remaining in use and construction workinprocess. materiality 4. the provisions of',
23385:'this statement need not be applied to immaterial items. the determination of whether an item is material depends on the',
23386:'degree to which omitting or misstating information about the item makes it probable that the judgment of a reasonable person',
23387:'2 terms defined in the glossary are shown in boldface the first time they appear. 3 refer to technical release',
23388:'14, implementation guidance on the accounting for the disposal of general property, plant, & equipment, which provides implementation guidance that',
23389:'clarifies existing sffas 6 requirements and is intended to help differentiate between permanent and other than permanent removal from service',
23390:'of gpp&e. the implementation guidance also recognizes the many complexities involved in the disposal of gpp&e, as well as delineates',
23391:'events that trigger discontinuation of depreciation and removal of gpp&e from accounting records. 4 sffas 10, at paragraphs 28 through',
23392:'31, provides additional procedures for recognizing and measuring impairment related to internal use software. the provisions in sffas 10 and',
23393:'sffas 6 are the same regarding situations where the software or gpp&e is impaired and will be removed from service',
23394:'in its entirety. both standards provide that the loss is measured as the difference between the book value and the',
23395:'net realizable value, if any. however, sffas 10 also provides for instances where 1 operational software is only partly impaired',
23396:'and 2 developmental software becomes impaired. page 4 sffas 44 fasab handbook, version 20 06/21 sffas 44 relying on the',
23397:'information would have been changed or influenced by the omission or the misstatement. effective date 5. the standards are effective',
23398:'for reporting periods beginning after september 30, 2014. earlier implementation is encouraged. standards scope andapplicability 6. this statement applies to',
23399:'federal entities that present general purpose federal financial reports, including the consolidated financial report of the u.s. government cfr, in',
23400:'conformance with generally accepted accounting principles, as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas',
23401:'34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board.',
23402:'7. this statement applies to gpp&e5 except internal use software. this statement establishes guidance on accounting for the impairment of',
23403:'gpp&e remaining in use, including construction work in process. the provisions of this statement are to be applied when indicators',
23404:'of potential impairment, as specified in this statement, are identified by the entity. the entity is not required to conduct',
23405:'an annual or other periodic survey solely for the purpose of applying these standards. existing processes that may identify indicators',
23406:'for potential impairment include routine assessments regarding the continued operational and functional capacityof gpp&e, entitymission requirements, impacts of significant events',
23407:'or changes in circumstances, and deferred maintenance and repairs. the results of such processes may serve as the basis for',
23408:'applying these standards. 5gpp&e is any property,plant,and equipmentpp&eusedinproviding goods orservicesand includes,among other types of pp&e, multiuse heritage assets, capitalized improvements',
23409:'to stewardship land, and construction workinprocess. pp&e includes land and land rights that are acquired for or in connection with',
23410:'items of gpp&e used to provide government services or goods. gpp&e does not include heritage assets, such as historic and',
23411:'national landmarks, and stewardship land; reportingfor theseassets should beinaccordance with sffas 29, heritage assets and stewardship land. the cost of',
23412:'gpp&e is capitalized, i.e., recorded as assets on the balance sheet. for detailed characteristics of and accounting for gpp&e, see',
23413:'sffas 6, par. 23 through 45. page 5 sffas 44 fasab handbook, version 20 06/21 sffas 44 definition of impairment',
23414:'8. impairment is a significant6and permanent decline in the service utility of gpp&e, or expected service utility for construction work',
23415:'in process. entities generally hold gpp&e because of the servicestheyprovide orwillprovide in the future; consequently, impairments affect theservice utilityof the',
23416:'gpp&e. the eventsor changes in circumstances that lead to impairments are not considered normal and ordinary.7 that is, at the',
23417:'time the gpp&e was acquired, the event or change in circumstance would not have been a expected to occur during',
23418:'the useful life of the gpp&e or, b if expected, sufficiently predictable to be considered in estimating its useful life.',
23419:'9. the service utility of gpp&e is the usable capacity that at acquisition was expected to be used to provide',
23420:'service, as distinguished from the level of utilization, which is the portion of the usable capacity currently being used. the',
23421:'current usable capacity of gpp&e may be lessthanitsoriginalusable capacityduetothe normalor expecteddeclineinusefullife or to impairing events or changes in circumstances, such',
23422:'as physical damage, obsolescence, enactment or approval of laws, or regulations or other changes in environmental or economic factors, or',
23423:'change in the manner or duration of use. usable capacity may be different from maximum capacity8 in circumstances in which',
23424:'surplus capacity the excess capacity over the usable capacity is needed for safety, economic, operational readiness or other reasons. gpp&e',
23425:'that experience decreases in utilization, and the simultaneous existence of or increases in surplus capacity not associated with a decline',
23426:'in service utility are not considered impaired. identification of potential impairment loss – atwostep process 10. generally, gpp&e remaining in',
23427:'use is impaired if the decline in the service utility of the gpp&e is significant and deemed permanent. 6 the',
23428:'determination of whether or not an item is significant is a matter of professional judgment. such judgments may be based',
23429:'on: 1 the relative costs of providing the service before and after the decline, 2 the percentage decline in serviceutility,or3otherconsiderations.',
23430:'determiningifadeclineinserviceutilityissignificantisseparateanddistinct from materiality considerations that include considering the likely influence that such disclosure could have on judgments or decisions of',
23431:'financial statement users. 7 normal andordinary aredefined as events or circumstances that fallwithin the expected useful life of the pp&e',
23432:'such as standard maintenance and repair requirements. 8 maximum capacity is the usable capacity plus any surplus capacity. page 6',
23433:'sffas 44 fasab handbook, version 20 06/21 sffas 44 11. the determination of whether gpp&e remaining in use is impaired,',
23434:'as defined in paragraph 8 above, includes a identifying potential impairment indicators and b testing for impairment. gpp&e would be',
23435:'identified as potentially impaired as a result of the occurrenceof significant eventsor changesin circumstances, or routine asset management processes. step',
23436:'1 – identify indicators of potential impairment 12. some common indicators of potential impairment include those listed below. the indicators',
23437:'identified are not conclusive evidence that a measurable or reportable impairment exists. entities should carefully consider the surrounding circumstances to',
23438:'determine whether a test of potential impairment is necessary given the circumstances. a. evidence of physical damage b. enactment or',
23439:'approval of laws or regulations which limit or restrict gpp&e usage c. changes in environmental or economic factors d. technological',
23440:'changes or evidence of obsolescence9 e. changes in the manner or duration of use of gpp&e f. construction stoppage or',
23441:'contract termination g. gpp&e idled or unserviceable for excessively long periods10 gpp&e identified from significant events or changes in circumstances',
23442:'13. events or changes in circumstances affecting gpp&e that may indicate impairment are sometimes significant. significant events or changes in',
23443:'circumstances are conspicuous or 9 technological changes or evidence of obsolescence should be considered along with other factors when assessing',
23444:'impairment. forexample,ifobsoletegpp&e continues tobeused,theserviceutilityexpectedatacquisitionmaynot be diminished. further, when obsolescence is expected, the declining service utility of gpp&e subject to obsolescence',
23445:'can be addressed through depreciation, particularly by using accelerated methods that yield a lower capital cost per year as its',
23446:'utility diminishes when compared to that of later versions of the same asset. 10 refer to technical release 14, implementation',
23447:'guidance on the accounting for the disposal of general property, plant, & equipment, which provides implementation guidance that clarifies existing',
23448:'sffas 6 requirements and is intended to help differentiate between permanent and other than permanent removal from service of gpp&e.',
23449:'the implementation guidance also recognizes the many complexities involved in the disposal of gpp&e, as well as delineates events that',
23450:'trigger discontinuation of depreciation and removal of gpp&e from accounting records. page 7 sffas 44 fasab handbook, version 20 06/21',
23451:'sffas 44 known to the entity’s management or oversight entities. this statement does not require entities to conduct an annual',
23452:'or periodic survey solely to identify potential impairments of gpp& e. rather, significant events or changes in circumstances affecting gpp&e',
23453:'that may indicate impairment are conspicuous or known to the entity’s management or oversight entities and are generally expected to',
23454:'have prompted consideration11 by management, oversight entities, or others e. g., the media. gpp&e identified fromasset management reviews e.g., portfolio',
23455:'surveys 14. existing asset management processes may include portfolio surveys that consider matters such as the continued operational and functional',
23456:'capacity of gpp&e, entity mission requirements, or deferred maintenance and repairs assessments. potentially impaired gpp&e may be identified from such',
23457:'surveys and further evaluated through the twostep process. reduced demand should not be considered a discrete or sole indicator of',
23458:'impairment 15. asexplainedinparagraph9above,reduceddemandfortheservicesofgpp&eshouldnot be considered a discrete or sole indicator of impairment. instead, there should also be evidence of an',
23459:'underlying potential impairment resulting in the reduced demand. in these circumstances, the causes behind such changes in demand should be',
23460:'evaluated in light of the indicators listed in paragraph 12 and the gpp&e should be tested for impairment. step 2',
23461:'impairment test 16. gpp&e identified through the processes described in paragraphs 10 through 15 should be tested for impairment by',
23462:'determining whether the following two factors are present: a. the magnitude of the decline in service utility as defined in',
23463:'par. 9 is significant. the costs are now disproportionate to the new expected service utility. such costs should include operational',
23464:'and maintenance costs. judgment is required to determine whether the decline is significant. such judgments may be based on: 1',
23465:'the relative costsofprovidingtheservicebeforeandafterthedecline,2the percentage declinein service utility, or 3 other considerations. b. the decline in service utility is expected to',
23466:'be permanent. the decline is considered permanent when management has no reasonable expectation that the lost 11 consideration might include',
23467:'but is not limited to management discussions, internal managerial analyses or reviews, conferences or consultations with experts, media or public',
23468:'relations interviews, or external industry scrutiny. page 8 sffas 44 fasab handbook, version 20 06/21 sffas 44 service utility will',
23469:'be replaced or restored. that is, management expects that the gpp& e will remain in service so that its remaining',
23470:'service utility will be utilized. in contrast, reasonable expectation that the lost service utility will be replaced or restored may',
23471:'exist when management has: 1 specific plans to replace or restore the lost service utility of this gpp&e, 2 committed',
23472:'or obligated funding for remediation efforts, or 3 a history of remediating lost service utilityin similar cases or for similar',
23473:'gpp& e. 17. for construction work in process, the testing of impairment discussed in paragraph 16 above should be performed',
23474:'over the period of expected future service utility rather than current service utility. determining theappropriate measurementapproach 18. impairment losses on',
23475:'gpp&e that will continue to be used by the entity12 should be estimated using a measurement method that reasonably13 reflects',
23476:'the diminished service utility of the gpp&e. the goal of the measurement methods discussed below is to reasonably estimate the',
23477:'portion of the net book value associated with the diminished service utility of the gpp&e. aspecific method, including one of',
23478:'the methods listed below, would not be considered appropriate if it would result in an unreasonable net book value associated',
23479:'with the remaining service utility of the gpp&e. within an entity, one method may not be appropriate for measuring all',
23480:'impairments.also, a reasonable method may nonetheless result in no impairment loss to be recognized. regardless of the method used, recognition',
23481:'of the loss should be limited to the asset’s net book value at the time of impairment. widely recognized methods',
23482:'for measuring impairment include: a. replacementapproach. impairment of gpp&ewith physicaldamagegenerally may be measured using a replacementapproach. thisapproach usesthe estimated cost',
23483:'to replace the lost service utility of the gpp&e at today’s standards14 to identify the portion of the historical cost',
23484:'of the gpp&e that should be written off. for federal real property purposes, this cost can be derived from the',
23485:'plant replacement value prv. 12 see sffas 6, accounting for property, plant, and equipment, paragraphs 38 and 39 for guidance',
23486:'regarding gpp& e that will not continue to be used by the entity. 13 given a choice among comparable methods,',
23487:'entities should adopt the most efficient and practical method available under the circumstances. 14 for example, “at today’s standards” would',
23488:'generally mean the use of current market prices for materials, labor, manufactureditems andequipmentusingcurrent building,manufacturing,or fabricationtechniques in compliance with current statutory,',
23489:'regulatory, or industry standards. page 9 sffas 44 fasab handbook, version 20 06/21 sffas 44 this estimate can be converted',
23490:'to historical cost by restating i.e., deflating the estimated costto replace the diminished service utilityusing an appropriate cost index. alternatively,',
23491:'it may be appropriate to apply the ratio of the estimated cost to replace the diminished service utility over total',
23492:'estimated cost to replace the gpp&e, to the net book value of the gpp&e. b. restoration approach. impairment of improvements',
23493:'made to stewardship land and multiuse heritageassetswith physical damage maygenerallybe measuredbyusinga restoration approach. this approach uses the estimated cost to',
23494:'restore the diminished service utility of the gpp&e to identify the portion of the historical cost of the gpp&e that',
23495:'should be written off. this approach does not include any amounts attributable to improvements and additions to meet today’sstandards. the',
23496:'estimated restoration cost canbeconvertedtohistoricalcost byrestating i.e., deflatingtheestimated restoration cost using an appropriate cost index. alternatively, it may be appropriate to',
23497:'apply the ratio of estimated restoration cost to restore the diminished service utility over total estimated restoration cost to the',
23498:'net book value of the gpp&e. c. service units approach. impairment of gpp&e that are affected by enactment or approval',
23499:'of laws or regulations or other changes in environmental/economic factors or are subject to technological changes or obsolescence generally may',
23500:'be measured using a service units approach. this approach compares the service units provided by thegpp&ebeforeandaftertheimpairment eventorchangeincircumstancetoisolate the historical cost',
23501:'of the service utility of the gpp&e that cannot be used due to the impairment event or change in circumstance.',
23502:'the amount of impairment is determined by evaluating the service provided by the gpp&e either maximum estimated service units or',
23503:'total estimated service units throughout the life of the gpp&e before and after the event or change in circumstance. d.',
23504:'deflated depreciated current cost approach. impairment of gpp&e that are subject to a change in manner or duration of use',
23505:'generally may be measured using a deflated depreciated current cost approach. this approach quantifies the cost of the service currently',
23506:'being provided by the gpp&e and converts that cost to historical cost. acurrent cost for a gpp&e to replace the',
23507:'current level of service is estimated. this estimated current cost is then depreciated to reflect the fact that the gpp&e',
23508:'is not new, and then is subsequently deflated to convert it to historical cost dollars. a potential impairment loss results',
23509:'if the net book value of the gpp&e exceeds the estimated historical cost of the current service utility i.e., deflated',
23510:'depreciated current cost. e. cash flow approach. impairment of cash or revenue generating gpp&e, such as those used for business',
23511:'or proprietarytype activities, may be assessed using a cash flow approach. under this approach, an impairment loss should be recognized',
23512:'only if page 10 sffas 44 fasab handbook, version 20 06/21 sffas 44 the net book value of the gpp&e',
23513:'1 is not recoverable and 2 exceeds the higher of its net realizable value15 or valueinuse estimate.16 the net book',
23514:'value of the gpp&e is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result',
23515:'from the use and eventual disposition of the gpp&e. that assessment should be based on the net bookvalue of the',
23516:'gpp&e at the date it is tested for recoverability, whether in use or under development. if the net book value',
23517:'is not recoverable, the impairment lossisthe amount by which the net bookvalue of thegpp&e exceeds the higher of its net',
23518:'realizable value or valueinuse estimate. no impairment loss exists if the net book value is less than the higher of',
23519:'the gpp&e’s net realizable value or valueinuse estimate. f. lower of 1 net book value or 2 higher of net',
23520:'realizable value or valueinuse approach. gpp&e impaired from either construction stoppages or contract terminations, which are expected to provide service,',
23521:'should be reported at their recoverable amount; the lower of 1 the gpp&e’s net book value or 2 the higher',
23522:'of its net realizable value or valueinuse estimate. impaired gpp&e, which are not expected to provide service, should be accounted',
23523:'for and reported in accordance with sffas 6. recognizing and reporting impairment losses 19. the loss from impairment should be',
23524:'recognized and reported in the statement of net cost whenmanagementconcludesthat theimpairmentis1a significantdeclinein service utility and 2 expected to be permanent.',
23525:'such loss may be included in program costs or costs not assigned to programs consistent with sffas 4, managerial cost',
23526:'accounting standards and concepts. however, in cases where an entity decides that an impairment loss should not be recognized, it',
23527:'could consider the need for adjustments to the gpp&e’s depreciation methods, useful life or salvage value estimates, as appropriate. 15',
23528:'net realizable value is the estimated amount that can be recovered from selling, or any other method of disposing of',
23529:'an item less estimated costs of completion, holding and disposal. 16 statement of federal financialaccounting concepts sffac 7, measurement of',
23530:'the elements of accrualbasis financial statements in periods after initial recording, paragraph 50, defines valueinuse as “…the benefit to be',
23531:'obtained by an entity from the continuing use of an asset and from its disposal at the end of its',
23532:'useful life.” paragraph 51further states that “valueinuseis a remeasuredamount for assets used to provide services. it can be measured at',
23533:'the present value of future cashflows that the entity expects to derive from the asset, including cash flows from use',
23534:'of theasset andeventual disposition.value inuseisentityspecificanddiffers from fair value. fair valueisintendedtobe an objective, marketbased estimate of the exchange price of an',
23535:'asset between willing parties. value in use is an entity’s own estimation of the service potential of an asset that',
23536:'it holds to provide a specific service.” underscoring added for emphasis page 11 sffas 44 fasab handbook, version 20 06/21',
23537:'sffas 44 20. the impairment loss should be recognized and reported regardless of whether the gpp&e remaining in use is',
23538:'being depreciated individually or as part of a composite group. the impairment loss may be reported as a separate line',
23539:'item or line items on the statement of net cost. deciding to display a separate line item or items on',
23540:'the statement of net cost requires judgment. the preparer should consider quantitative and qualitative criteria. acceptable criteria include but are',
23541:'not limited to quantitative factors such as the percentage of thereporting entityscostthatresultedfromthe impairment andthesizeofthe impairment loss relative to the gpp&e;',
23542:'and qualitative factors including whether the loss would be of interest to decision makers and other users. 21. ageneraldescriptionofthegpp&eremaininginuse for',
23543:'whichanimpairmentlossis recognized, the nature e.g., damage or obsolescence and amount of the impairment, and the financialstatement classification of theimpairment lossshould',
23544:'be disclosed in the notes to the financial statements. such disclosures should be made in the period the impairment loss',
23545:'is recognized. diminished service utility without recognized impairment loss 22. events, changes in circumstances, or asset management reviews might indicate',
23546:'that the future service utility of gpp&e remaining in use has been adversely affected. however, if future service utility has',
23547:'been adversely affected but the impairment test determines that a loss need not be recognized, a change to the estimates',
23548:'used in depreciation calculations such as estimated useful life and salvage value should be considered. gpp&e that no longer provides',
23549:'service 23. gpp&e that no longer provides service or in the case of construction work in process where there is',
23550:'no expectation of future service by the entity, should be accounted for in accordance with sffas 6, paragraphs 38 and',
23551:'39, and technical release 14, implementation guidance on the accounting for the disposal of general property plant, & equipment. remediating',
23552:'previously reported impairments 24. subject to the entitys capitalization policies, if an entity later remediates the previously impaired gpp&e remaining',
23553:'in use, the costs incurred to replace or restore the lost service utility should be accounted for in accordance with',
23554:'applicable standards. for example, costs page 12 sffas 44 fasab handbook, version 20 06/21 sffas 44 to prepare the site',
23555:'and install replacement facilities would be recognized in accordance with sffas 6, accounting for property, plant, and equipment. recoveries 25.',
23556:'the impairment loss should be reported net of any associated recovery when the recovery and loss occur in the same',
23557:'year. recoveries reported in subsequent years should be reported as revenue or other financing source as appropriate. if not otherwise',
23558:'apparent in the financial statements, the amount and financial statement classification of recoveries should be disclosed in the notes. the',
23559:'accounting for recoveries should be in accordance with sffas 7, accounting for revenue and other financing sources and concepts for',
23560:'reconciling budgetary and financial accounting. consolidated financial report of the u.s. government 26. the u.s. governmentwide financial statements should disclose',
23561:'the following if an impairment loss for gpp&e remaining in use is recognized: a. a general description of what constitutes',
23562:'gpp&e impairment, b. the consolidated gpp&e impairment losses recognized by component entities, and c. a references to component entity reports',
23563:'for additional information. effective date 27. the requirements of this statement are effective for reporting periods beginning after september 30,',
23564:'2014. earlier implementation is encouraged. the provisions ofthisstatement need not be applied to immaterial items. page 13 sffas 44 fasab',
23565:'handbook, version 20 06/21 sffas 44 appendixa: basis for conclusions this appendix discusses some factors considered significant by board members',
23566:'in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members',
23567:'gave greater weight to some factors than to others. the standards enunciated in this statement–not the material in this appendix–should',
23568:'govern the accounting for specific transactions, events, or conditions. this statement may be affected by later statements. the fasab handbook',
23569:'is updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within the',
23570:'text of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect',
23571:'future changes. the reader can review the basis for conclusions of the amending statement for the rationale for each amendment.',
23572:'project history a1. in statement of federal financial accounting standards sffas 23, eliminating the category national defense property, plant, and',
23573:'equipment, issued in may 2003, the board identified impairment as one of three areas the other two being depreciation and',
23574:'deferred maintenance that it desired to consider integrating into a comprehensive project. complete impairment was addressed in sffas 6, accounting',
23575:'for property, plant, and equipment, through the requirements that general pp&e “…be removed from general pp&e accounts along with associated',
23576:'accumulated depreciation/amortization, if prior to disposal, retirement or removal from service, it no longer provides service in the operations of',
23577:'the entity. this could be either because it has suffered damage, becomes obsolete in advance of expectations, or is identified',
23578:'as excess.” however, sffas 6 does not address partial impairment, even though the effects of partial impairment may be material',
23579:'in some cases. the board decided to address asset impairment at the time it addressed deferred maintenance. subsequent to the',
23580:'issuance of ? statement of federal financial accounting standards 40: definitional changes related to deferred maintenance and repairs: amending statement',
23581:'of federal financial accounting standards 6, accounting for property, plant, and equipment in may 2011, the board initiated work on',
23582:'addressing potential enhancements to existing fasab guidance regarding impairment. a2. in evaluating an approach applicable to federal gpp&e, the board',
23583:'considered the approaches used in the following documents: financialaccountingstandards boardfasbstatementoffinancialaccounting standards sfas 144,accounting for the impairment or disposal of longlived',
23584:'assets superseded by fasbaccounting standards codification asc 360 page 14 sffas 44 fasab handbook, version 20 06/21 sffas 44 governmentalaccountingstandards',
23585:'boardgasbstatementgasbs42, accounting and financial reporting for impairment of capital assets and for insurance recoveries17 internationalpublicsectoraccountingstandardipsas 21, impairment of noncash generating',
23586:'assets ipsas 26, impairment of cashgenerating assets aworking group was organized to assist the board in analyzing the impairment standards',
23587:'promulgatedbythefasb, gasb, andtheinternationalpublicsectoraccountingstandards board ipsasb. the working group’s analysis was initially screened by the deferred maintenance andasset impairment dmai task',
23588:'force and subsequently tested with a broader community beyond the task force to obtain other points of view. the consensus',
23589:'recommendation was to use the gasbs 42 approach as a baseline for the development of a federal asset impairment standard.',
23590:'significant and permanent decline in service utility a3. this statement requires recognizing a potential impairment loss only when there is',
23591:'a significant and permanent decline in the gpp&e’s service utility. in reaching this decision, the board considered and weighed a',
23592:'the need for relevant, reliable, and consistent financial reporting and b entity burden. a. for financial reporting to be: i',
23593:'relevant a logical relationship must exist between the information provided and the purpose for which it is needed. gpp&e impairment',
23594:'information is relevant because it is capable of making a difference in a user’s assessment of how well the entity',
23595:'is meeting its federal asset stewardship responsibilities. ii reliable information needs to be comprehensive and nothing material should be omitted',
23596:'nor should anything be included that would likely cause the information to be misleading. the reporting of gpp&e impairments significantly',
23597:'adds to the informational value and reliability of amounts presented in the entity’s balance sheet and statement of net cost.',
23598:'17 ©financialaccountingfoundation,governmentalaccountingstandards board,401merrit7,norwalk,ct. all rights reserved. gasbs 42, november 2003. page 15 sffas 44 fasab handbook, version 20 06/21 sffas',
23599:'44 iii consistent over time an accounting principle or reporting method should be used for all similar transactions and events',
23600:'unless there is good cause to change. establishing gpp&e impairment standards significantly adds to consistent financial reporting. b. the board',
23601:'is aware of the increased demands that entities confront due to initiatives that attempt to better align and integrate entity',
23602:'mission, budget, and performance objectives. as such, the board desires to issue a gpp&e impairment standard that entities can effectively',
23603:'adopt without undue administrative burden while still satisfying the objectives of federal financial reporting. recognizing impairments a4. as discussed in',
23604:'paragraphs 13 and 14, impairments can be identified and brought to management’s attention in a variety of ways. although a',
23605:'presumption exists that there are existing processes and internal controls in place to reasonable assure such identification and communication, this',
23606:'statement does not require entities to conduct an annual or other periodic survey solely for the purpose of applying these',
23607:'standards. in the event management determines existing processes and internal controls are not sufficient to reasonablyassure identification of potential material',
23608:'impairments, additional processes and internal controls may be necessary. a5. the board notes that not all significant events and/or changes',
23609:'in circumstances discussed by oversight bodies, management, or the media would necessarily be considered material to an entity’s financial statements.',
23610:'consequently, an entity must exercise judgment in this regard considering whether omitting or misstating information about the significant event and/or',
23611:'changes in circumstances makes it probable that the judgment of a reasonable person relying on the information would be changed',
23612:'or influenced by the omission or the misstatement. however, in caseswhere an entity decides that a significant event or change',
23613:'in circumstance is immaterial, it should consider the need for adjustments to the gpp&e’s depreciation methods, useful life or salvage',
23614:'value estimates. the board also notes that common indicators of potential impairment can be discovered during different types of asset',
23615:'management reviews that include the following types of gpp& e assessments: a. condition assessments revealing evidence of physical damage, deterioration,',
23616:'and/or distresses such as for a building 1 damaged by fire or flood, 2 not adequately maintained or repaired, 3',
23617:'associated with significant amounts of deferred maintenance and repairs and/or 4 exhibiting signs of advanced degradation that might adversely impact',
23618:'expected duration of use, each requiring remedial or page 16 sffas 44 fasab handbook, version 20 06/21 sffas 44 replacement/restoration',
23619:'efforts to restore service utility b. functionality assessments revealing evidence of reduced capacity, inadequate configuration, change in entity mission, change',
23620:'in the manner or expected use, and enactment or approval of laws, regulations, codes or other changes in environmental factors,',
23621:'such as new water quality standards that a water treatment plant does not meet and cannot be modified to meet',
23622:'c. obsolescence assessments revealing evidence of technological development or obsolescence, such as that related to a major piece of diagnostic',
23623:'or research equipment for example, a magnetic resonance imaging machine or a scanning electron microscope that is rarely or never',
23624:'used because newly acquired equipment provides better service common indicators of potential impairment a6. the board considered the general approaches',
23625:'used by other standardssetters regarding the issues of impairment identification and testing. the dmai task force identified the gasb approach',
23626:'as being the most germane for federal application and recommended adopting its use with appropriate modifications. as a result, this',
23627:'statement consists of a twostep process of a identifying potentially impaired gpp&e through indictors of impairment and b testing todetermine',
23628:'whether apotential impairment exists by comparing the net book value of the gpp&e to a valuation reflecting the current state',
23629:'of the gpp&e. a7. recognizing the administrative burden and costs involved in applying a test of potential impairment, the board',
23630:'desires to make clear that the indicators identified at paragraph 12 in and of themselves are not conclusive evidence that',
23631:'a measurable or reportable impairment exists. entities should carefully consider the surrounding circumstances to determine if a test of potential',
23632:'impairment may be unnecessary given the circumstances. a8. in order to limit the universe of gpp&e tested for potential impairment',
23633:'because of cost benefit considerations, the board proposes two modifiers to the indicators: a the magnitude of the decline in',
23634:'service utility is significant and b the decline in service utility is permanent. the first modifier would limit testing for',
23635:'potential impairment to only gpp&e that have experienced a significant decline in service utility. the second modifier would limit testing',
23636:'to only those gpp&e where the decline in service utility is expected to be permanent. the decline is considered permanent',
23637:'when management has no reasonable expectation that the lost service utility will be replaced or restored and that the gpp&e’s',
23638:'remaining service utility can continue providing value. page 17 sffas 44 fasab handbook, version 20 06/21 sffas 44 a9. gpp&e',
23639:'is to be considered impaired only when both of these two modifiers are present. when either of these conditions is',
23640:'not present, the decline in the service utility of the gpp& e may be recognized through other methods such as',
23641:'changing useful life or salvage value estimates. determining if magnitude of decline in service utility is significant a10.because measurement of',
23642:'a potential impairment is not required unless a significant decline in service utility occurs, management should assess the magnitude of',
23643:'the service decline. in cases where there is physical damage to gpp&e, the significance can often be objectively assessed because',
23644:'the costs of remediation i.e., replacement or restoration may be relatively easy to determine, at least within a range of',
23645:'estimates. in circumstances otherthanthoseinvolving physicaldamage,significancemaybediscernedby less objective assessments such as: 1 whethermanagementactstoaddressthesituation.managementdecisionsmay be indicative of a potential decline in service',
23646:'utility. for example, a specific action taken by management after a service decline may confirm that expenses exceed future benefit.',
23647:'likewise, a decision by management to not address a service decline maybe an indication the decline is notsignificantand a testof',
23648:'impairment is not required. 2 the costs are disproportionate with the new expected service utility. for example, when comparing the',
23649:'benefits and related costs associated with the new expected service utility after the potential impairment with those benefits and related',
23650:'costs existing prior to the impairment, management may confirm that costs significantly exceed future benefit.as a result, the decline is',
23651:'significant and a test of impairment is required. selecting a measurementapproach a11. professional judgment should be used when selecting a',
23652:'method to measure the decline in service utility of gpp&e. generally, potential impairments: a. reflecting degradation or physical damage may',
23653:'be measured using a replacement approach or, for multiuse heritage assets, a restoration approach. b. reflecting a change resulting from',
23654:'enactment or approval of laws or regulations or other changes in environmental/economic factors or from technological development or page 18',
23655:'sffas 44 fasab handbook, version 20 06/21 sffas 44 obsolescence generally may be measured using a service units approach. c.',
23656:'reflecting a change in manner or duration of use or change in mission generally may be measured using deflated depreciated',
23657:'current cost approach. d. for cash or revenuegenerating gpp&e may be measured using the cash flow approach. e. arising from',
23658:'construction stoppages or contract terminations for assets which are expected to provide service, should be reported at their recoverable amount;',
23659:'the lower of 1 the gpp&e’s net book value or 2 the higher of its net realizable value or valuein',
23660:'use estimate. a12. the board emphasizes that in estimating the diminished service utility of the gpp&e, the measurement approach chosen',
23661:'should yield a reasonable estimate reflecting the diminished service capacity of the gpp&e. before using a specific method a determination',
23662:'should be made that it will result in 1 a reasonable estimate of diminished service capacity for the specific asset',
23663:'and 2 a reasonable net book value associated with the remaining service utility of the gpp&e. there should not be',
23664:'a presumption of reasonableness attached to the use of any of these methods if the resultant calculations reflect an unreasonable',
23665:'estimate of the remaining service utility of the gpp&e. for example, if using the replacement approach, a cost estimate to',
23666:'remediate the damage to an asset is equal to or greater than the asset’s total replacement cost, the resultant calculation',
23667:'would lead to a full writedown of the carrying value. however, if the asset is to remain in use, the',
23668:'full write down would be inappropriate because some service potential remains. in such a case, management should look to another',
23669:'method such as the deflated depreciated current cost approach to estimate the historical cost of the asset’s residual service capacity',
23670:'that will continue to be used. additionally, within an entity, one method may not be appropriate for measuring asset impairments',
23671:'across all categories or classes of assets. the board notes that a reasonable methodology may not result in the recognition',
23672:'of an impairment loss. among comparable methods – choose the most efficient a13.the board recognizes that there may be cases',
23673:'where more than one comparable method could be used to measure the decline in an asset’s service utility. in such',
23674:'cases, the entity should use whichever method most reasonably reflects the diminished service utility. in cases where the methods under',
23675:'consideration are expected to yield similar results, management should adopt the most efficient method available given the circumstances. page 19',
23676:'sffas 44 fasab handbook, version 20 06/21 sffas 44 reduced demand a14.theboardnotesthat reduceddemandforthe servicesofgpp&e shouldnot beconsidered as a discrete or',
23677:'sole indicator of potential impairment. that is, reduced demand absent evidence of an underlying potential impairment resulting in that reduced',
23678:'demand is not an indicator of impairment. for example, decreased demand for the processing services of a mainframe computer because',
23679:'former users of the mainframe have transitioned to pc and serverbased systems should be considered a change in demand not',
23680:'requiring impairment testing. however, if associated with anindicator of potential impairment such as evidenceof obsolescence, then the mainframe should be',
23681:'tested for potential impairment. a15.in addition, a decrease in demand solely resulting from the conclusion of a special project requiring',
23682:'large amounts of processing time on a mainframe computer that runs other applications should not be considered for impairment testing.',
23683:'a16.a decrease in occupancy is another example of a change in demand. if a decrease in the occupancy of hospital',
23684:'beds prompts management to close a hospital, a change in manner or duration of use has also resulted and a',
23685:'test for impairment should be performed. however, a test for impairment is not required if the decrease in hospital beds',
23686:'results solely because the hospital is changing froman overcrowded condition to one in which occupancy rates are now below the',
23687:'maximum allowed. however, care should be taken to ensure that there is not a potential indicator of impairment that could',
23688:'require testing. estimating potential impairment losses a17.measuring the cost of the lost service utility generally requires the use of estimates',
23689:'or approximations. according to statement of federal financial accounting concepts sffac 5, definitions of elements and basic recognition criteria for',
23690:'accrualbasis financial statements, to be recognized an item must be measurable, meaning that a monetary amount can be determined with',
23691:'reasonable certainty or is reasonably estimable underscoring added for emphasis. for this reason, the board notes that it 1 does',
23692:'not seek exact precision in determining the lost service utility of the asset and 2 does not intend to direct',
23693:'or prescribe the use of any particular approach listed in paragraph 18. a18.however, the board notes that care should be',
23694:'taken when estimating potential impairment losses. for example, if a multiuse heritage asset requires testing for potential impairment, the restoration',
23695:'approach and not the replacement approach would generally provide for more accurate estimates. although these approaches may appear to be',
23696:'identical, they are not. thereplacementapproachestimatesthecosttoreplacethelostserviceutilityofthegpp& e at today’s standards whereas the restoration approach does not. in either case, the page',
23697:'20 sffas 44 fasab handbook, version 20 06/21 sffas 44 required estimates used for the calculation inputs are different and',
23698:'can significantly affect thepotentialimpairmentlossmeasurement. differenceswillarisebecausethereplacement approach uses estimates reflecting today’s current labor and material options and costs, modern standards, and',
23699:'installation methods whereas the restoration approach uses estimates that generally require using historically accurate e.g., aesthetic or historic materials and',
23700:'construction methods approved by an historic architect or historic preservationist to preserve the historic nature and value of the multiuse',
23701:'heritage asset. a19.entities should also ensure that impairment loss calculations exclude improvements or betterments. for example, assume that a portion',
23702:'of an old warehouse currently not being used suffers roof damage due to heavy snowfall. the entity decides not to',
23703:'repair the roof and to contain the damage by securing the adjoining area ensuring that there are no safety hazards.',
23704:'in this case, estimates for the construction of a new warehouse, including its roof should not include amounts for new',
23705:'types of roof ventilation systems, solar panel features, or green energy improvements, etc. including such improvements or betterments might significantly',
23706:'affect the potential impairment loss measurement. gpp&e impairment loss reversals and remediation a20.impairments may be subsequently remediated or otherwise restored',
23707:'or may be reduced in future periods. the board concluded that reversals of gpp&e impairment losses should not be recognized.',
23708:'in reaching the decision not to allowfor reversals of gpp&e impairment losses, the board concluded that because reversal events are',
23709:'expected to be rare occurrences, there is no compelling need for complexity or increased burden as benefits do not appear',
23710:'to justify costs. a21.the board concluded remediation of a previously reported impairment loss, is achangethat results in an addition to',
23711:'the cost basis. specifically, should management later decide to replace or restore an assets lost service utility the costs incurred',
23712:'to do so become part of the gpp&es new cost basis. it is the boards opinion that such a practice',
23713:'is consistent with the operating performance objective of federal financial reporting; users will be able to evaluate the service efforts,',
23714:'costs, and accomplishments of the reporting entity based on the revised cost basis. recoveries a22.recoveries may be accounted for as',
23715:'either exchange or nonexchange transactions, depending on the nature of the related revenue that would be recorded. in accordance with',
23716:'sffas 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting: page 21 sffas',
23717:'44 fasab handbook, version 20 06/21 sffas 44 a. exchange revenues should be recognized when goods or services are provided',
23718:'to the public or another government entity at a price.an example would be commercial insurance purchased in connection with gpp&e',
23719:'belonging to a publicprivate arrangement. b. nonexchange revenues should be recognized when a specifically identifiable, legally enforceable claim to resources',
23720:'arises, to the extent that collection is probable more likely than not and the amount is reasonably estimable. an example',
23721:'would be a donor’s pledged contribution associated with a capital project restoration effort. in cases where the collecting and reporting',
23722:'entities are different, it is important to note that nonexchangerevenueamountsshouldbe measuredbythecollectingentitiesand recognized for financial statement reporting by the entities legally',
23723:'entitled to the revenue. distinguishing between depreciation and impairment a23.depreciation systematically and rationally allocates the historical cost of the gpp&es',
23724:'service utility to the benefitting periods. the asset’s costs are allocated i.e., the asset is depreciated across multiple periods based',
23725:'on asset management plans and formulas, including such variablesasexpected useful life of the asset, usage patterns, and residual or salvage',
23726:'value, if any. costs are allocated because: 1 the gpp&e is expected to benefit more than one period and 2',
23727:'generally, there is no other practical orefficient way to directly assign or associate cause i.e., entity activity or event and',
23728:'effect i.e., service utility consumption. that is, depreciation is allocated, because specific causation cannot be ascertained. a24.on the other hand,',
23729:'impairment occurs when there is a significant and permanent decline in the service utility during the depreciation period of gpp&e',
23730:'remaining in use, and that decline is reasonably estimable in monetary terms. essentially, an event or circumstance alters the utility',
23731:'and/or value of the asset such that the systematic and rational allocation process noted in paragraph a23 directly above can',
23732:'no longer be reasonably applied and must be also altered accordingly. moreover, primarily due to the significant nature of the',
23733:'event or changed circumstances, an entity candirectly assignorassociate causethe event or circumstance and effect change in anticipated utility and/or value',
23734:'of the asset. as a result, the lost or diminished service utility arising from the impairment can be directly assigned',
23735:'in a practical and efficient manner. a25.to the extent that an entitys depreciation policies and practices reflect a pattern of',
23736:'service utility consumption that reasonably accounts for discrete events and/or changed circumstances, impairment losses may not apply. for example, if',
23737:'an entity operates in multiple climates within a country or maintains a global presence, its regular and ongoing page 22',
23738:'sffas 44 fasab handbook, version 20 06/21 sffas 44 depreciation may account for lost or diminished service utility resulting from',
23739:'damages likely to arise from reasonably anticipated climate or other environmental conditions. this could be evidenced by an entity deriving',
23740:'its useful life estimates from current and historical fixed asset records or maintenance and repair accounts, which include such events',
23741:'and/or circumstances. in such cases, the entity might shorten the useful life estimate, alter the anticipated consumption pattern, or reduce',
23742:'its salvage value estimate. consequently, depreciation would inherently consider the conditions giving rise to the impairment, thus avoiding the need',
23743:'to recognize an impairment loss. perceived costs versus benefits a26.the board believes that the benefits of implementing this statement outweigh',
23744:'its administrative costs of implementation. the board has clarified the statement so that users understand that theyarenot requiredtosearch out impairments',
23745:'orto apply thestatement to immaterial items. entities should consider gpp&e impairments in the context of their existing practices and apply',
23746:'this statement only when there is an indicator of significant impairment present. although gasb, ipsasb, and fasb pronouncements are available',
23747:'to provide federal preparers with guidance relative to impairments, issuance of a statement by fasab will eliminate the need, time,',
23748:'and effort to search principles from another standardsetterorconsideranalogousentitytransactions. otherperceivedbenefitsinclude:reporting impairments when they occur rather than through depreciation expense or disposal,',
23749:'providing management with information useful for capital investment decisions, discerning the cost of impairments and impact on the entity and',
23750:'the cost of services provided following the impairment, and lastly, enhancing comparability between entities. summary of outreach efforts a27.the exposure',
23751:'draft ed, accounting for impairment of general property, plant, and equipment remaining in use, was released on february 28, 2012,',
23752:'with comments requested by may 28, 2012. a28.upon release of the ed, notices and press releases were provided to the',
23753:'fasab email listserv, the federal register, the journal of accountancy, aga today, the cpa journal, government executive, the cpa letter,',
23754:'government accounting and auditing update, the cfo council, the council of inspectors general on integrity and efficiency, and the financial',
23755:'statement audit network, and committees of professional associations generally commenting on exposure drafts in the past e.g., greater washington society',
23756:'of cpas, aga financial management standards board. a29.this broad announcement was followed by direct emailings of the press release to:',
23757:'page 23 sffas 44 fasab handbook, version 20 06/21 sffas 44 a. relevant congressional committees: senate committee on homeland security',
23758:'and governmental affairs and house committee on oversight and government reform; b. publicinterest groups: the institute for responsible infrastructure stewardship',
23759:'and the national academy of sciences’ federal facilities council; c. respondents to sffas 42, deferred maintenance and repairs amending statements',
23760:'of federal financial accounting standards 6, 14, 29 and 32. a30.twentythree 23 responses werereceived. table1.0summarizes responses by respondent type. table',
23761:'1.0 summary of respondent types to exposure draft federal nonfederal respondent type internal external total preparers and financial managers 16',
23762:'0 16 users, academics, others 2 2 4 auditors 2 1 3 total 20 3 23 a31.the board did not',
23763:'rely on the number in favor of or opposed to a given position. information about the respondents’ majority view is',
23764:'provided only as a means of summarizing the comments. the board considered the arguments in each response and weighed the',
23765:'merits of the points raised. the following paragraphs discuss significant issues identified by respondents followed by board decisions. respondents’ comments',
23766:'on the exposure draft a32.respondents generally favored the exposure draft. by a 9to1 ratio respondents agreed with the board’s proposal',
23767:'to recognize impairment losses. additionally, 22 of the 23 respondents agreed with the board that entities are not expected to',
23768:'alter existing assessment methods as a direct consequence of this statement. some respondents offered suggestions that the board adopted and',
23769:'revised the exposure draft accordingly. the most significant changes made to the proposed standards include: 1 simplifying the definition of',
23770:'impairment bynotreferencingeither “gradualorsudden” and 2clarifying entity reporting requirements. the most significant additions made to the basis for conclusions page 24',
23771:'sffas 44 fasab handbook, version 20 06/21 sffas 44 include 1 clarifying that recoveries take the form of exchange or',
23772:'nonexchange revenues and 2 a discussion concerning what distinguishes depreciation from impairment. highlighted below are some respondent concerns that the',
23773:'board decided to address. identifying indicators of potential impairment a33.somerespondents expressed concernover theindicators. concerns rangedfromthe indicators being viewed as conclusive',
23774:'evidence of impairment necessitating an impairment loss test to the indicators being too vague and in need of expansion to',
23775:'address magnitude, permanence, and materiality. as stated at paragraph a7, the board desires to make clear that the indicators identified',
23776:'at paragraph 12 in and of themselves are not conclusive evidence that a measurable or reportable impairment exists. furthermore, they',
23777:'are the first step in a twostep process and as a result cannot be deemed conclusive. entities should carefully consider',
23778:'the surrounding circumstances to determine whether a test of potential impairment may be unnecessary given the circumstances. furthermore, as stated',
23779:'at paragraphs a6 through a9 in the section entitled common indicators of potential impairment, the paragraph 12 indicators are not',
23780:'meant to be definitive in nature nor a fully inclusive list. therefore, management must exercise discretion and judgment when assessing',
23781:'potential impairment losses. a34.other respondents shared a concern that their auditors would require specific reviews or that the audit community',
23782:'could not determine the extent of additional audit procedures that could result from this statement. the board believes that this',
23783:'issue gets back to internal controls and processes. the board is of the opinion that in most cases management would',
23784:'not have to apply additional or separate procedures to identify potential impairments. rather, management might have to document 1 linkage',
23785:'to asset management systems refer to paragraphs a4 and a5 that identify and communicate potential impairments and 2 materiality so',
23786:'that auditors would accept that the financial statements are presented fairly. at a minimum, management can be expected to document',
23787:'how it interprets and expects to apply this statement. materiality a35.some respondents sought clarification concerning materiality. the board has made',
23788:'clear that this matter depends on the degree to which omitted or missing information could influence a reasonable person’s judgment',
23789:'and that this statement is not to be applied to immaterial items. the board notes two important matters in this',
23790:'regard. first, when assessing materiality management should consider the impact of the potential impairment to the entity’s cost of services.',
23791:'it is not the board’s intent to direct application of this statement to those gpp&e assets e.g., lower operating level',
23792:'assets, administrative page 25 sffas 44 fasab handbook, version 20 06/21 sffas 44 support equipment, etc. that have an immaterial',
23793:'impact on cost of services. second, entitiesthat determine they have an amountof gpp&e suchthat no impairment could have a material',
23794:'effect would not have to be concerned with the implementation of the statement. each entity should undertake some advanced consideration',
23795:'to tailor and justify its implementation in light of materiality considerations specific to the entity. measurement a36.somerespondents expressed concernover themeasurement',
23796:'approaches. concerns ranged from the approaches not being appropriate for real property asset classes to the statement having too many',
23797:'methods from which to select. as stated at paragraphs 18 and a17, entities should use an approach that reasonably estimates',
23798:'the asset’s diminished serviceutility. theboardhasmade clearthat itseeks reasonableimpairmentlossestimates and is not prescribing any particular approach. preparers are not restricted to',
23799:'the approaches shown at paragraph 18 and may use other approaches that accomplish the following two objectives: 1 reasonably estimate',
23800:'the diminished service utility and 2 reasonably estimate net book value associated with the remaining service utility. gpp&e exemptions a37.some',
23801:'respondents noted provisions of this statement should not apply to certain gpp&e categories, classes, or base units. the board explored',
23802:'the respondents’ rationales for seekingtowaivetherequirementsanddeterminedthat noexemptionswould be warranted. a careful reading and implementation of the statement would preclude application of',
23803:'this statement to some gpp&e classes. specifically, as stated at paragraph 8, the events or changesin circumstances that lead to',
23804:'impairments are not considered normal and ordinary. that is, at the time the gpp&e was acquired, the event or change',
23805:'in circumstance would not have been a expected to occur during the useful life of the gpp&e or, b if',
23806:'expected, sufficiently predictable to be considered in estimating the useful life. for example, in the case of military equipment “normal',
23807:'and ordinary” would come with the expectation that the gpp&e would be responding to contingencies and entering into combat operations',
23808:'at some future time. as a result, lost service utility arising from such events or circumstances could not be considered',
23809:'unanticipated and would fall outside the realm of this statement. additionally, gpp&e classified as mission critical will rarely be partially',
23810:'and permanently impaired as its service utility would generally be replaced or restored and if not, the asset would be',
23811:'removed from active service because it would no longer be mission capable. a38.the board notes that in those cases where',
23812:'an entity considers certain gpp&e to be non mission critical or immaterial, management can 1 read the views of the',
23813:'board concerning materiality as detailed in paragraph a35 above, and 2 reevaluate its capitalization page 26 sffas 44 fasab handbook,',
23814:'version 20 06/21 sffas 44 threshold and depreciation policies and procedures. for example, under the requirements of this statement, office',
23815:'furniture and fixtures that have been capitalized could become impaired. however, management may determine that any resultant impact to its',
23816:'cost of services would be immaterial. in such cases, an entity may elect to prospectively change its capitalization criteria and/or',
23817:'alter its depreciation policies. boardapproval a39.this statement was approved for issuance by all members of the board. the written ballots',
23818:'are available for public inspection at the fasabs offices. page 27 sffas 44 fasab handbook, version 20 06/21 sffas 44',
23819:'appendix b: flowchart, decision table and illustrations page 28 sffas 44 fasab handbook, version 20 06/21 sffas 44 select a',
23820:'method that reasonably represents diminished service utility by considering potential indicators and type of pp&e. if more than one method',
23821:'is reasonable, select the most efficient and practicable method. measurement illustrations that methods potential indicators type of pp&e reference may',
23822:'be appropriate replacement physical damage all gpp&e par. 18 a 1c approach restoration physical damage multiuse heritage par. 18 b',
23823:'2b approach pp&e service units physical damage all gpp&e par. 18 c 1d, 3a, 3b approach enactment or approval of',
23824:'laws/regulations changesinenvironmental or economic factors technological changes or obsolescence deflated change in manner or all gpp&e par. 18 d 4a',
23825:'depreciated duration of use. current cost approach cash flow any of the indicators as cash or revenue par. 18 e',
23826:'7a, 7b, 7c, 7d approach listed at paragraph 12 a generating gpp&e through g lower of 1 net construction stoppage',
23827:'/ all gpp&e par. 17 & 18 f 5, 6a, 6b, 7b book value or contract terminations 2 higher of',
23828:'net realizablevalue or valueinuse approach other industryaccepted methods may be appropriate = excluding internal use software illustrations this remainder of',
23829:'this appendix illustrates the application of the provisions of this statement to assist in clarifying their meaning. the facts assumed',
23830:'in these examples are illustrative only and are not intended to modify or limit the requirements of this statement or',
23831:'to indicate the boards endorsement of the situations or methods illustrated. additionally, these illustrations are not page 29 sffas 44',
23832:'fasab handbook, version 20 06/21 sffas 44 intended to provide guidance on determining the application of materiality; as such, estimated',
23833:'impairment lossesare labeled as “potential” in each illustration because they would still require a further assessment as to whether the',
23834:'estimated loss is material and should be recognized. application of the provisions of this statement may require assessing facts and',
23835:'circumstances other than those illustrated here and require reference to other applicable standards to ensure each situation is considered in',
23836:'the appropriate context. illustration 1a temporary declines in service utility: physical damage to an office building with mold contamination 18',
23837:'assumptions in 2012, entity officials became aware of extensive mold contamination at one of its office buildings. facilitiesmanagement personneladvised thatthebuilding',
23838:'beclosed duetohealthand safety concerns. shortly afterwards, the office building was vacated and closed. the mold remediation involves removing and rebuilding',
23839:'the interior walls and improving site drainage at a total cost of $4 million. management develops specific plans to begin',
23840:'remediation efforts as soon as possible and replace the lost service utility. in addition, funding has been identified and setaside.',
23841:'evaluation of potential estimated impairment loss the mold contamination is evidence of physical damage – an impairment indicator. also, the',
23842:'magnitude of the event i.e., closure of the building is a significant decline in service utility. however, because management has',
23843:'specific plans to replace the lost service utility of the building and has identified and setaside funding, there is reasonable',
23844:'expectation that the damage is temporary and no potential estimated impairment loss is recognized. 18 illustrations 1a through 1d have',
23845:'been adapted from gasb 42, illustration 1, physical damage – school with mold contamination. page 30 sffas 44 fasab handbook,',
23846:'version 20 06/21 sffas 44 illustration 1b complete removal from service: physical damage to an office building with mold contamination',
23847:'assumptions in 2012, entity officials became aware of extensive mold contamination at one of its office buildings. facilitiesmanagement personneladvised thatthebuilding',
23848:'beclosed duetohealthand safety concerns. shortly afterwards, the office building was vacated and closed. due to the extent of the damage,',
23849:'management does not believe that remediation efforts will begin and that the lost service utility of the building is not',
23850:'temporary. as a result, management has decided to remove this building from service and prepare it for disposal. evaluation of',
23851:'potential estimated impairment loss the mold contamination is evidence of physical damage – an impairment indicator. also, the magnitude of',
23852:'the event i.e., closure of the building is a significant decline in service utility. because management does not believe that',
23853:'remediation efforts will begin, the lost service utility of the building is permanent. however, because the entire office building will',
23854:'be taken out of service and prepared for disposal purposes, no potential estimated impairment loss is recognized. instead, the provisions',
23855:'of sffas 6, accounting for property, plant, and equipment, paragraphs 38 and 39 are applicable. illustration 1c replacementapproach permanent declines',
23856:'in service utility: physical damage to an office building due to an earthquake assumptions in 2012, entityofficialsbecameawareofextensivemasonrywallandbuildingfoundationdamage at one of',
23857:'its office buildingsasa result of a recent earthquake. the damage to the masonrywalls was spread throughout the fivestory building and',
23858:'the building foundation was damaged at noncriticalvertical loadpoints. facilitiesmanagementpersonnelandengineersadvisedthatdespite adeclineinserviceutility,thedamagedbuildingwouldstillbecapableof meetingreasonable,but reducedperformanceobjectivesin itsdamagedstate, makingmajor repairsand costlyupgrading unnecessary. limited and minor',
23859:'repairs, both cosmetic and structural, could be made to improve visual appearance and component damage at nominal cost. facilities managers',
23860:'and engineers page 31 sffas 44 fasab handbook, version 20 06/21 sffas 44 have estimated that the major repairs and',
23861:'upgrades involving removal and rebuilding of the interior walls and improving site drainage would cost $2 million. after a detailed',
23862:'review, management decided to accept the reduced performance objectives of the building and not make the major repairs and costly',
23863:'upgrades. the office building was constructed in 1982 at a cost of $1.3 million, including $100,000 for acquisition of the',
23864:'building site. the building had an expected useful life of sixty years. during its life, the entity made improvements to',
23865:'the building totaling $1.235 million. accumulated depreciation related to the building and to the improvements were $600,000 and $320,000, respectively.',
23866:'evaluation of potential estimated impairment loss the masonry wall and building foundation damage is evidence of physical damage – an',
23867:'impairment indicator. also, the magnitude of the decline in the lost service utility is significant because itsremediationwould involvemajorrepairsandcostlyupgrades. because management',
23868:'decides to accept the reduced performance objectives of the building and not make the major repairs and costly upgrades, the',
23869:'lost service utility of the building is permanent. because the loss of service utility is permanent, any potential estimated impairment',
23870:'loss may need to be recognized. measurement of potential estimated impairment loss facilities managers and engineers estimated that the major',
23871:'repairs and upgrades would have cost ifincurred,$2million. in accordancewiththe entity’scapitalization policies, 10 percentofthe remediation cost would be allocable to site',
23872:'cleanup and treated as a period expense, and 90 percent would be allocable to remediating the masonry wall and building',
23873:'foundation damage. as recorded in the entity’sasset management system, the estimatedplant replacement value prv of the office building is $8.5',
23874:'million. page 32 sffas 44 fasab handbook, version 20 06/21 sffas 44 calculate net book value land historical cost $100,000',
23875:'accumulated depreciation, 2012 net book value, 2012 $100,000 building acquisition, 1982 improvements $1,200,000 1,235,000 $600,000 320,000 $600,000 915,000 total building',
23876:'& improvements $2,435,000 $920,000 $1,515,000 calculate estimated cost to replace lost service utility: total remediation cost percentage wall & foundation',
23877:'cost $2,000,000 90% calculate percentage of lost service utility in current dollars: wall & foundation remediation estimate of lost service',
23878:'utility in current dollars plant replacement value estimate to replace building in current dollars $1,800,000 $8,500,000 calculate potential estimated impairment',
23879:'loss: net book value historical cost multiplied by: wall & foundation remediation cost percentage potential estimated impairment loss $1,515,000 21.18%',
23880:'$320,877 wall & foundation remediation cost $1,800,000 wall & foundation remediation cost 21.18% percentage reporting considerations the potential estimated impairment',
23881:'loss and corresponding reduction of the book value of the building is $320,877. page 33 sffas 44 fasab handbook, version',
23882:'20 06/21 sffas 44 illustration 1d choiceamong methods permanent declines in lost service utility: physical damage to an office building',
23883:'with mold contamination assumptions in 2012, entity officials became aware of extensive mold contamination at one of its office buildings.',
23884:'the mold contamination in the walls of the building was limited to the top two floors of the fivestory building',
23885:'and could be safely contained and encapsulated. facilities management personnel advised that the first three floors of the building could',
23886:'continue to be safely used. management does not believe that the loss of service utility will impede their operations and',
23887:'consequently, do not plan to remediate the mold contamination. management has decided to discontinue the use of the top two',
23888:'floors and commence containment and encapsulation efforts. the remainder of the building will be kept in service. the office building',
23889:'was constructed in 1982 at a cost of $1.3 million, including $100,000 for acquisition of the building site. the building',
23890:'had an expected useful life of sixty years. during its life, the entity made improvements to the building totaling $1.235',
23891:'million. evaluation of potential estimated impairment loss the mold contamination is evidence of physical damage – an impairment indicator. also,',
23892:'the magnitude of the event i.e., contamination of two of the five floors of the building is a significant decline',
23893:'in service utility. because management does not plan to replace the lost service utility of these floors, the lost service',
23894:'utility of the building is permanent. because the loss of service utility is permanent, any potential estimated impairment loss may',
23895:'need to be recognized. measurement of potential estimated impairment loss facilities management personnel in consultation with the comptroller’s office advise',
23896:'management to use the service units approach instead of the replacement cost approach because usingconstructioncost estimatesare not likelytoresultinamateriallydifferent potential estimated',
23897:'impairment loss amount. management agrees to select the service units approach because it reasonably represents diminished service utility and given',
23898:'the circumstances, it is the most efficient and practicable method to use. page 34 sffas 44 fasab handbook, version 20',
23899:'06/21 sffas 44 calculate percentage of lost service utility in terms of units: lost service utility in terms of floor',
23900:'units 2 floors total service utility prior to damage in 5 floors terms of floor units calculate potential estimated impairment',
23901:'loss: net book value historical cost $1,515,000 multiplied by: percentage of lost service utility units 40.00% potential estimated impairment loss',
23902:'$606,000 percentage of lost service utility in terms of units 40.00% reporting considerations the potential estimated impairment loss and corresponding',
23903:'reduction of the book value of the building is $606,000. illustration 2a normal and ordinary lost service utility: physical damage',
23904:'to a multiuse heritage asset 19,20 assumptions recent media reports have noted that acid precipitation often called acid rain is',
23905:'of increasing concern in the metropolitan area and, in particular to many of the area’s historic and national landmarks including',
23906:'multiuse heritage assets. the entity’s conservation scientists confirm the media reportsand note that although normallyrainisslightly acid,current rainfallhasanaverage ph of more',
23907:'than 10 times normal levels. 19 illustration 2a adapted from: department of the interior, acid rain in washington, http://pubs.usgs.gov/gip/stones/acidrain.html. 20',
23908:'heritageassets arepp&e that areuniquefor one or moreof the following reasons: historical or natural significance; cultural, educational or artistic e.g., aesthetic',
23909:'importance; or, significant architectural characteristics. multiuse heritageassets are heritage assets whose predominant use is general government operations. fasab appendix e:',
23910:'consolidated glossary, page 35 sffas 44 fasab handbook, version 20 06/21 sffas 44 limestone and marble, the stones that form',
23911:'many of the buildings and monuments in the metropolitan area are especially vulnerable to acid precipitation because they are predominantly',
23912:'made of the mineral calcite calcium carbonate, which dissolves i.e., erosion easily in acid. capitalized alterations made over the years',
23913:'to accommodate the heavy traffic brought about by administrative and visitor use of one of the more prominent multiuse heritage',
23914:'assets has drawn management’s attention. the entity’s inspector general ig has begun a review and in an interim draft report',
23915:'has noted the following, “the marble balustrade on the south side, main entrance of the administrative building shows damage from',
23916:'acid rain posing a serious threat to the hundreds of visitors and employees who walk by this concourse daily. management',
23917:'must take immediate corrective action in order to avoid potential bodily harm and liability.” management in consultation with the conservation',
23918:'scientists and facilities managers determines that 1 erosion deterioration caused by exposure to the environment is a natural part of',
23919:'the normal geologic cycle and was reasonably expected to occur, and 2 temporary braces and steel undergirding currently inplace are',
23920:'sufficient for the current year. management plans to restore the balustrade during the next fiscal year. evaluation of potential estimated',
23921:'impairment loss the erosion is evidence of physical damage – an impairment indicator. also, the prominence of the event i.e.,',
23922:'coverage by the media and the ig’s recommendation would be evaluated as a potentialimpairment indicatorof significant lossin serviceutility. however, no',
23923:'potentialestimated impairment loss is recognized because 1 the decline in lost service utility is “normal and ordinary” as it arises',
23924:'from a cyclical act of nature and 2 restoration efforts to cure the damage are planned to begin next fiscal',
23925:'year. management should consider evaluating its depreciation policies and methods to reflect the adverse effect of the acid rain on',
23926:'buildings and monuments made of limestone and marble. page 36 sffas 44 fasab handbook, version 20 06/21 sffas 44 illustration',
23927:'2b restorationapproach permanent declines in service utility: physical damage to a multiuse heritage asset assumptions afire recently destroyed most of',
23928:'a threestory wing addition of an historic building. the building addition housed senior administrative offices. the foundation and portions of',
23929:'the first level were not seriously damaged and considered salvageable. thesecretary’sproposaltotheboard of regentsregentsrequestedaminimumof $4.5million to restore the threestory administrative wing.',
23930:'the regents questioned the reasonableness of the cost estimate noting that typical office building construction in the metropolitan area costs',
23931:'about $160.00 per square foot psf. the secretary advised that the $160.00 psf estimate was not appropriate to use because',
23932:'it represented a “replacement” estimate using today’s current labor, materials, standards and methods and not a “restoration” estimate that required',
23933:'using historically accurate materials and methods, as well as historic preservation and conservation methods asappropriate topreservethehistoricnatureand value of the multiuse',
23934:'heritageasset. as an example, the secretary noted the limited supply of the red seneca sandstone used to construct the building',
23935:'in the 19th century and the added wing in the 20th century. the local quarry could only supply sufficient quantities',
23936:'to restore one level. as a result, complete restoration could not begin until a second quarry could be located to',
23937:'supply the additional quantities. furthermore, experienced masons would have to be used for the restoration effort. as a result of',
23938:'this information, the regents modified the secretary’s request to restore one level of the wing noting that subsequent levels should',
23939:'not be restored in the future and that no such plans should be undertaken nor should any monies be committed.',
23940:'displaced staff was moved to nearby vacant office space. evaluation of potential estimated impairment loss thedestructiontothethreestorywingisevidence of physicaldamage –animpairment indicator.',
23941:'also, the magnitude of the event i.e., loss of senior administrative office space would be evaluated as a significant decline',
23942:'in service utility. because the regents provided for partial restoration one level of the multiuse heritage asset, the lost service',
23943:'utility of the other two levels of the administrative wing is deemed permanent. as a result, because the lost service',
23944:'utility from these two levels is not reasonably expected to be restored, the potential estimated page 37 sffas 44 fasab',
23945:'handbook, version 20 06/21 sffas 44 impairment loss is considered permanent and any resultant potential estimated impairment loss may need',
23946:'to be recognized. measurement of potential estimated impairment loss facilities managers and reconstruction specialists have estimated that 1 the total',
23947:'remediation of the threestory wing would cost $4.5 million and 2 restoring the first level would cost $2.0 million. the',
23948:'net book value of the administrative portion of the building prior to the fire damage was $1.75 million. in accordance',
23949:'with the restorationapproach, the following estimates and calculations were presented to management: calculate estimated cost to restore lost service utility:',
23950:'total restoration cost all 3 levels $4,500,000 less: portion to be restored first level $2,000,000 cost to restore lost service',
23951:'utility 2nd and $2,500,000 3rd levels calculate percentage of restored lost service utility in current dollars: cost to restore lost',
23952:'service utility of the $2,500,000 2ndand3rdlevelsof thewingestimate of lost service utility in current dollars total restoration cost all 3 levels',
23953:'$4,500,000 restoration cost percentage 55.5% calculate potential estimated impairment loss net book value historical cost of wing $1,750,000 multiplied by:',
23954:'restoration cost percentage 55.5% potential estimated impairment loss $971,250 reporting considerations the potential estimated impairment loss and corresponding reduction of',
23955:'the book value of the building is $971,250. page 38 sffas 44 fasab handbook, version 20 06/21 sffas 44 illustration',
23956:'3a service units approach recoverable service utility: technological development or evidence of obsolescence underutilized magnetic resonance imaging machine 21 assumptions',
23957:'in 2010, a hospital purchased a magnetic resonance imaging mri system at a cost of $2.25 million. the hospital estimated',
23958:'that the system would have an estimated useful life of seven yearsand that on average the system would be used',
23959:'for ten testsper dayfor five daysper week. after installation, the utilization of the system was approximately at the levels estimated.',
23960:'in 2013, an affiliated entitytransferred an “open” mri systemto thehospital. thetransferred mri system began to be used more frequently than',
23961:'the original “closed” mri system because the “open” mri was more comfortable for patients and provided a superior image. instead',
23962:'of providing ten images a day, the original mri system was being used only on an overflow basis and averaged',
23963:'six images per day; a decrease to 60 percent of prior levels. furthermore, the expenses associated with the continued operation',
23964:'and maintenance o&m of the “closed” mri system continues to be incurred and management is evaluating the asset’s continued service',
23965:'use and whether or not to book an impairment loss. upon inspection of the “closed” mri system and closer examination',
23966:'of the related o&m costs, hospital administrators have determined that it is costbeneficial to keep the system operational and that',
23967:'there is no impairment loss. they estimate that the system can be expected to last at least three years longer',
23968:'than originally estimated and achieve its expected service output. furthermore, hospital administrators contend that a significant portion of the costs',
23969:'are 1 considered “sunk” due to the fixedprice nature of the longterm maintenance contracts and 2 fixed inasmuch as they',
23970:'will be incurred regardless of the closed mri system’s operating levels. evaluation of potential estimated impairment loss management initially identified',
23971:'that the change in technology was an indicator of potential impairment because it had resulted in a permanent reduction in',
23972:'the usage of the “closed” mri system. also, they believed that the magnitude test i.e., decline in service utility relative',
23973:'to operating costs had also been met due to the fact that the cost of operating the “closed” mri system',
23974:'has remained the same while the service provided has decreased to 60 percent of prior levels. however, management has concluded',
23975:'that there is no potential estimated impairment 21 illustrations 3a and 3b adapted from: gasbs 42, illustration 4, technological development',
23976:'or evidence of obsolescence underutilized magnetic resonance imaging machine. page 39 sffas 44 fasab handbook, version 20 06/21 sffas 44',
23977:'loss i.e., the mri system did not meet step 2 – impairment test because the asset can achieve its expected',
23978:'service output by being kept in service three years longer than originally planned. using the service units approach, management determines',
23979:'the followings: measurement of potential estimated impairment loss calculate net book value: a acquisition cost, 2010 $2,250,000 accumulated depreciation, 2013',
23980:'3 / 7 years 964,286 bnetbookvalue,2013$1,285,714 calculate acquisition cost per service unit a acquisition cost, 2010 $2,250,000 c originallyexpectedservice units',
23981:'7 years × 52 weeksper year × 5 days per week × 10 uses per day 18,200 d acquisition cost',
23982:'per service unit a divided by c rounded $124.00 calculate remaining number of service units & related costs to be',
23983:'recovered: d acquisition cost per service unit a divided by c $124.00 e remaining number of service units= 4 years',
23984:'plus 3 extended years × 52 weeks per year × 5 days per week × 6 uses per day 10,920',
23985:'f remaining service costs to be recovered d multiplied by e $1,354,080 calculate potential estimated impairment loss: net book value,',
23986:'2013 b $1,285,714 remaining service costs to be recovered f $1,354,080 potential estimated impairment loss b minus f n/a reporting',
23987:'considerations although there is no potential estimated impairment loss to consider or recognize because the remaining service coststoberecovered isgreaterthanthe pp&e’snet',
23988:'bookvalue, management should consider reevaluating its depreciation policies and methods to reflect the additional 3 years of extended service. page',
23989:'40 sffas 44 fasab handbook, version 20 06/21 sffas 44 illustration 3b service units approach nonrecoverable service utility:technological development orevidence',
23990:'of obsolescence underutilized magnetic resonance imaging machine assumptions in 2010, a hospital purchased a magnetic resonance imaging mri system at',
23991:'a cost of $2.25 million. the hospital estimated that the system would have an estimated useful life of seven yearsand',
23992:'that on average the system would be used for ten testsper dayfor five daysper week. after installation, the utilization of',
23993:'the system was approximately at the levels estimated. in 2013, an affiliated entitytransferred an “open” mri systemto thehospital. thetransferred mri',
23994:'system began to be used more frequently than the original “closed” mri system because the “open” mri was more comfortable',
23995:'for patients and provided a superior image. instead of providing ten images a day, the original mri system was being',
23996:'used only on an overflow basis and averaged one image per day; a decrease to 10 percent of prior levels.',
23997:'furthermore, the expenses associated with the continued operation and maintenance of the “closed” mri system continue tobeincurred andhasdrawnmanagement’sattentionto evaluate the',
23998:'asset’scontinued service use. evaluation of potential estimated impairment loss the indicator of potential impairment is the change in technology, which',
23999:'has resulted in a permanent reductionin theusageof the “closed” mri system. themagnitude test i.e., declinein service utility relative to operating',
24000:'costs has also been met due to the fact that the cost of operating the “closed” mri system has remained',
24001:'the same while the service provided has decreased to 10 percent of prior levels. potential estimated impairment loss using the',
24002:'service units approach would be determined as follows: page 41 sffas 44 fasab handbook, version 20 06/21 sffas 44 measurement',
24003:'of potential estimated impairment loss calculate net book value: a acquisition cost, 2010 $2,250,000 accumulated depreciation, 2013 3 / 7',
24004:'years 964,286 b net book value, 2013 $1,285,714 calculate acquisition cost per service unit a acquisition cost, 2010 $2,250,000 c',
24005:'originally expected service units 7 years × 52 18,200 weeks per year × 5 days per week × 10 uses',
24006:'per day d acquisition cost per service unit a divided by c $124.00 rounded calculate remaining number of service units',
24007:'& related costs to be recovered: d acquisition cost per service unit a divided by c $124.00 e remaining service',
24008:'number of units = 4 years × 52 1,040 weeks per year × 5 days per week × 1 use',
24009:'per day f remaining service costs to be recovered d multiplied by e $128,960 calculate potential estimated impairment loss: net',
24010:'book value, 2013 b $1,285,714 remaining service costs to be recovered f $128,960 potential estimated impairment loss b minus f',
24011:'$1,156,754 reporting considerations the potential estimated impairment loss and corresponding reduction of the book value of the equipment is $1,156,754.',
24012:'page 42 sffas 44 fasab handbook, version 20 06/21 sffas 44 illustration 4 deflated depreciated current costapproach: change in manner',
24013:'or duration of use – training facility used for storage22 assumptions in 2013, management decided to close a training facility',
24014:'because enrollments declined due to outsourcing initiatives brought about as a result of office of management and budget omb circular',
24015:'no.a–76, ‘‘performance of commercial activities.’’ the closed training facility has been converted for use as a storage warehouse. this training',
24016:'facility was constructed in 2001 at a cost of $10 million. the estimated useful life of the facility is fifty',
24017:'years. entity management has 1 no evidence that enrollments will increase in the future such that the building would be',
24018:'reopened for use asa training facility and 2 concerns with the significantly high operating costs – maintenance and repair, depreciation,',
24019:'insurance, utilities, security, etc. because no physical damage occurred that would require detailed cost repair estimates, management decides to use',
24020:'the deflateddepreciated current cost approach to measure the potential estimated impairment loss. facilities managers have been able to readily identify',
24021:'current plant replacement value prv for a comparable warehouse of the same size as $4.2 million and commercial construction indices',
24022:'of 100 and 150 for years 2001 and 2013, respectively. evaluation of potential estimated impairment loss impairment is indicated because',
24023:'the manner of use of the training facility has changed from training students to storage. the situation passes the magnitude',
24024:'test i.e., decline in service utility relative to operating costs because the ongoing costs of the training facility would likely',
24025:'be considered high in relation to the benefit it is providing storage. potential estimated impairment loss using the deflated depreciated',
24026:'current cost approach would be determined as follows: 22 illustration 4a adapted from: gasb 42, illustration 5, change in manner',
24027:'or duration of use – school used for storage. page 43 sffas 44 fasab handbook, version 20 06/21 sffas 44',
24028:'measurement of potential estimated impairment loss calculate net book value: historical cost, 2001 $10,000,000 accumulated depreciation 12 / 50 years',
24029:'2,400,000 calculate depreciated current cost current dollars replacement cost of warehouse, 2013 $4,200,000 accumulated depreciation 12 / 50 years 1,008,000',
24030:'a net book value, 2013 $7,600,000 bdepreciatedcurrentcost$3,192,000 calculate deflation factor: c commercial construction index, 2001 d commercial construction index, 2013',
24031:'100 150 apply deflation factor to depreciated current cost b depreciated current cost e deflation factor c divided by d',
24032:'$3,192,000 0.67 calculate potential estimated impairment loss: a net book value, 2013 f deflated depreciated current cost b × e',
24033:'$7,600,000 2,138,640 e deflation factor c divided by d 0.67 f deflated depreciated current cost b × e $2,138,640 potential',
24034:'estimated impairment loss a f $5,461,360 reporting considerations the potential estimated impairment loss and corresponding reduction of the book value',
24035:'of the facility is $5,461,360. page 44 sffas 44 fasab handbook, version 20 06/21 sffas 44 illustration 5 construction stoppage—special',
24036:'purpose test equipment 23 assumptions in 2012, in response to a congressional order canceling a major program, management stopped all',
24037:'construction activities related to the fabrication of programrelated special purpose test equipment. the entity conducts numerous design and build projects',
24038:'for military and scientific purposes all of which have potential commercial application. the entity’s program manager advised management that the',
24039:'special purpose test equipment was substantially complete at the time of stoppage and could be considered available for commercial use.',
24040:'the entity had accumulated costs totaling $10 million and was approximately 75 percent complete with the project. upon further inquiry,',
24041:'management determined that despite initial interest from two commercial firms, early in 2012, one of them filed forbankruptcy and the',
24042:'other withdrew itsinterest citing that the coststocomplete are too high. there is no evidence to demonstrate that the construction stoppage',
24043:'is temporary or that other potential commercial interests can be found. also, the program manager advises that there is no',
24044:'potential government use for this asset and that it should be disposed. evaluation of potential estimated impairment loss the indicator',
24045:'of impairment is the construction stoppage. it appears to meet the test of impairment in that management would not have',
24046:'initiated the project if it had expected either program cancellation or lack of any potential commercial use. the situation passes',
24047:'the magnitude test because the coststodate 75% or $10 million are significant in both percentage and monetary terms. however, there',
24048:'is no potential estimated impairment loss to report in accordance with this standard because the asset is totally impaired as',
24049:'it has no commercial or government use and cannot provide service. as such, the requirements in sffas 6, paragraph 3824',
24050:'should be followed. specifically, in the period of disposal accumulated costs should be 23 illustration 5 adapted from: gasb 42,',
24051:'illustration 9, construction stoppage—airport pavements. 24 refer to technical release 14, implementation guidance on the accounting for the disposal of',
24052:'general property, plant, & equipment, which provides implementation guidance that clarifies existing sffas 6 requirements and is intended to help',
24053:'differentiate between permanent and other than permanent removal from service of gpp&e. the implementation guidance also recognizes the many complexities',
24054:'involved in the disposal of gpp&e, as well as delineates events that trigger discontinuation of depreciation and removal of gpp&e',
24055:'from accounting records. page 45 sffas 44 fasab handbook, version 20 06/21 sffas 44 removed from the asset accounts and',
24056:'any difference between the book value of the equipment and amounts realized shall be recognized as a gain or a',
24057:'loss. illustration 6a contract termination transferable equipment technology assumptions in 2012, the entity’s chief contracting officer terminated a contract pursuant',
24058:'to the federal acquisition regulations because the entity experienced substantial cost increases, schedule delays, and performance shortfalls. the terminated contract',
24059:'was to build the entitys next generation surveillance equipment capable of covertly operating in adverse weather conditions. despite several cure',
24060:'notices, the entity terminated the contract for default. the contractor has stated that it will not protest the termination. at',
24061:'the time of termination, the entity had incurred $150 million in contract costs. in the meantime, the program manager determined',
24062:'that the operating environment had changed and that remaining funds would be better spent on other priorities and was able',
24063:'to transfer the system technology to other entityprojects. the manner and use of the systems are not expected to change.',
24064:'evaluation of potential estimated impairment loss the indicator of impairment is the contract termination. it appears to meet the test',
24065:'of potential impairment because the event is significant and the termination decision will not be protested; i.e.,permanent. however,becausetheentitywasabletotransferthesystemtechnologytoother entity projects,',
24066:'no potential estimated impairment loss exists. illustration 6b contract termination partiallytransferable equipment technology assumptions same assumptions used in illustration 6a',
24067:'except that the program manager was unable to transferthe entire systemtechnologyto otherentityprojects.after an inspection andengineering review, it was determined that',
24068:'70 percent of hardware and software could be transferred to page 46 sffas 44 fasab handbook, version 20 06/21 sffas',
24069:'44 existing projects. there is no potential use or application for the remaining 30 percent of equipment technology. evaluation of',
24070:'potential estimated impairment loss the indicator of impairment is the contract termination. it appears to meet the test of potential',
24071:'impairment because the termination decision is a significant event and is considered permanent because the decision will not be protested.',
24072:'as a result of the entity being unable to transfer the entire system technology to other entity projects, an impairment',
24073:'exists. measurement of potential estimated impairment loss because 30 percent of the system technology cannot be transferred to other entity',
24074:'projects, a potential estimated impairment loss of $45 million exists 30.0% x $150 million. reporting considerations the potential estimated impairment',
24075:'loss and corresponding reduction of the book value of the equipment is $45 million. illustration 7a cash flow approach –',
24076:'grouped assets assumptions an entity manages and operates a sharedservices center on a postwide basis that provides administrative and information',
24077:'technology support. the entity groups the individual services separatelyintotwo distinct categoriesrather than on anindividualbasis. the net bookvaluesare $12 million and',
24078:'$11 million for the administrative and information technology it groups, respectively. in december 2012 the entity’s management decided to implement',
24079:'a publicprivate strategic initiative that could eventually over several years transition these sharedservices operations to private ownership. both national and',
24080:'local private interests have asked their respective political representatives to accelerate the entity’s implementation timetable and influence a favorable outcome.',
24081:'management was directed to 1 immediately estimate the amount that could be recovered from selling the operations and 2 identify',
24082:'to the lowest level identifiable, operating information to include cash flows for each category. an appraisal was conducted to ascertain',
24083:'the amount that could be recovered from selling each of the groups. the appraisal report noted 1 that net realizable',
24084:'value nrv amounts were greater than valueinuse estimates and 2 the page 47 sffas 44 fasab handbook, version 20 06/21',
24085:'sffas 44 nrv amountsof $13 million and$8millionforthe administrative and itgroups, respectively. the chief financial officer identified the following cash flow',
24086:'information: a cash from continuing operations of $12 million and $9 million for the administrative and itgroups, respectively and b',
24087:'cash flows from disposal activities of $2 million and $1 million for the administrative and it groups, respectively. as a',
24088:'result of complying with this directive and evaluating the resultant financial information and appraisal analysis, management became concerned that its',
24089:'assets might be impaired and adversely impact its publicprivate strategic initiative. evaluation of potential estimated impairment loss if an impairment',
24090:'indicator exists, an impairment analysis should be considered. in this case, the entity’s publicprivate initiative includes a significant change in',
24091:'the manner or duration in which the assets will be used. this represents an impairment indicatorthat would trigger an impairment',
24092:'analysis. furthermore, management’s concern that its assets might be impaired passes the magnitude test. management is concerned that the presence',
24093:'of an impairment indicator might affect its plan regarding the future use of the sharedservices if the analysis indicates that',
24094:'the net bookvalue of the assets are not recoverable. to apply the cash flow approach, the entity will need to',
24095:'estimate the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. the',
24096:'future cash flows are the expected cash inflowsto be generated by the asset net of any expected future cash outflows',
24097:'that are needed to produce the inflows. measurement of potential estimated impairment loss this approach requires that an entity recognize',
24098:'a potential estimated impairment loss if 1 the undiscounted cash flowsare less than the net bookvalue of the assets the',
24099:'net book value is not recoverable and 2 the net book value exceeds the higher of the assets nrv 25',
24100:'or valueinuse estimate.26 apotentialestimatedimpairmentloss wouldbemeasuredastheamountby which the net book value of the grouped assets exceed the higher of their net',
24101:'nrv or valueinuse estimates. 25 net realizable value is the estimated amount that can be recovered from selling, or any',
24102:'other method of disposing of anitem less estimated costs of completion,holding anddisposal. source:fasab glossary,appendix e. 26 statement of federal financialaccounting',
24103:'concepts sffac 7, measurement of the elements of accrualbasis financial statements in periods after initial recording, at paragraph 50, defines',
24104:'valueinuse as “…the benefit to be obtained by an entity from the continuing use of an asset and from its',
24105:'disposal at the end of its useful life.” paragraph 51further states that “valueinuseis a remeasured amount for assets used to',
24106:'provide services. it can be measured at the present value of future cashflows that the entity expects to derive from',
24107:'the asset, including cash flows from use of theasset andeventual disposition. value in use is entity specific and differs from',
24108:'fair value. fair value is intended to be an objective, marketbased estimate of the exchange price of an asset between',
24109:'willing parties. value in use is an entity’s own estimation of the service potential of an asset that it holds',
24110:'to provide a specific service.” underscoring added for emphasis page 48 sffas 44 fasab handbook, version 20 06/21 sffas 44',
24111:'when identifying cash flows, assets should be grouped at the lowest level for which there are identifiable cash flows that',
24112:'are largely independent of the cash flows of other groups of assets . calculate net book value: net book value:',
24113:'asset group: administrative asset group: it assets’ net book values at 12/31/2012 a $12,000,000 a $11,000,000 a calculate undiscounted cash',
24114:'flows undiscounted cash flows from future operations $12,000,000 $9,000,000 undiscounted cash flows from future disposal of assets 2,000,000 1,000,000 total',
24115:'undiscounted cash flows b $14,000,000 b $10,000,000 b calculate recoverability: recoverability: b minus a asset group: administrative asset group: it',
24116:'total undiscounted cash flows b $14,000,000 $10,000,000 assets’ net book values at 12/31/2012 a 12,000,000 11,000,000 recoverability b minus a',
24117:'$2,000,000 $1,000,000 is net book value recoverable? yes no is asset subject to potential impairment? no yes page 49 sffas',
24118:'44 fasab handbook, version 20 06/21 sffas 44 calculate potential estimated impairment loss: apotential estimated impairment loss should be recognized',
24119:'only if the net book value of the gpp& e 1 isnot recoverable and 2 exceedsthe higher ofits netrealizable value',
24120:'or valueinuse estimate. because the administrative group has undiscounted cash flows greater than related net book values, recoverability is met',
24121:'and there is no potential impairment. however, because the it group has undiscounted cash flows lower than related net book',
24122:'values, recoverability is not met and the potential for impairment exists. the calculation below shows that a $3 million potential',
24123:'estimated impairment loss exists because the $11 million net book value of the it group’s gpp&e exceeds the higher of',
24124:'its net realizable value or valueinuse estimate in this case we are told that the $8 million nrv amount is',
24125:'higher than the valueinuse estimate. potential estimated impairment loss: net realizable value of assetsat 12/31/2012 asset group: administrative n/a asset',
24126:'group: information technology $ 8,000,000 less: assets’ net book values at 12/31/2012 n/a $11,000,000 excess of net book value over',
24127:'net realizable value n/a $3,000,000 potential estimated impairment loss n/a $3,000,000 reporting considerations the potential estimated impairment loss and corresponding',
24128:'reduction of the book value of the it asset group is $3.0 million. illustration 7b cash flow approach – equipment:',
24129:'technological development or evidence of obsolescence underutilized magnetic resonance imaging machine27 assumptions in 2009, a hospital operating in a major',
24130:'metropolitan area purchased a “closed” magnetic resonance imaging mri system at a cost of $2.25 million to be used exclusivelyfor',
24131:'nonservice 27 illustration 7b adapted from: gasb 42, illustration 4, technological development or evidence of obsolescence underutilized magnetic resonance imaging',
24132:'machine. page 50 sffas 44 fasab handbook, version 20 06/21 sffas 44 connected procedures. the hospital, which charges fees for',
24133:'nonservice connected care estimated that the system would have an estimated useful life of seven years and that on average',
24134:'the system would be used for twenty tests per day for five days per week. the average user fee for',
24135:'mri services is $20.00 per use. shortlyafter installation, utilization levels dropped to ten tests per day because of reduced demand',
24136:'for the services attributable to the “closed” nature of the mri system. in 2012, the manufacturer introduced an “open” mri',
24137:'system that was advertised as being more comfortable for patients and provided a superior image. furthermore, the expenses associated with',
24138:'the continued operation and maintenance of the “closed” mri system continue to be incurred and has drawn management’s attention to',
24139:'evaluate the asset’s continued service use. because similarly used mri machines in the open market can be purchased from authorized',
24140:'dealers for $750,000 their markup percentages are unknown, management is considering the possibility of selling the old machine and using',
24141:'its proceeds to help purchase the “open” mri system. hospitaladministratorsandtechniciansbelievethatthe “closed” systemcancontinuebeing used at the current utilization level for at',
24142:'least 3 years beyond the originally estimated service life. also, they believe that the “open” system provides for only marginal',
24143:'benefits that do not exceed their cost. in light of this information, management decides not to sell the “closed” system.',
24144:'however, because the service utility expected at acquisition 20 tests per day can no longer be achieved and is accompanied',
24145:'by an underlying cause; reduced demand arising from the less comfortable “closed” system, a potential impairment loss exists.28 evaluation of',
24146:'potential estimated impairment loss the indicators of potential impairment are 1 the change in technology and 2 reduced demand accompanied',
24147:'by an underlying cause; the less comfortable “closed” system. the magnitude test has also been met due to the fact',
24148:'that the cost of operating the “closed” mri system has drawn management’s attention to evaluate the asset’s continued service use.',
24149:'potential estimated impairment loss using the cash flow approach would be determined as follows: 28 it is important to note',
24150:'that 1 the reduced demand alone is not a discrete or sole indicator of impairment and 2 technological changes or',
24151:'obsolescence should be considered along with other factors when assessing impairment. regarding the former, had there been no underlying potential',
24152:'impairment refer to the paragraph 12 indicators, no impairment test would have been required. concerning the latter, had the utilization',
24153:'level 20 tests per day and remaining service life 3 years of the equipment stayed the same, no impairment test',
24154:'would have been required because the equipment’s service utility that was expected at acquisition would be deemed recoverable. page 51',
24155:'sffas 44 fasab handbook, version 20 06/21 sffas 44 measurement of potential estimated impairment loss calculate net book value: a',
24156:'acquisition cost, 2009 accumulated depreciation, 2012 3 / 7 years $2,250,000 964,286 b net book value, 2012 $1,285,714 calculate undiscounted',
24157:'cash flows: c average service fee per use $20.00 d remaining service units 4 years plus 3 extra years ×',
24158:'52 weeksper year × 5daysper week × 10 use per day 18,200 e undiscounted cash flows c multiplied by d',
24159:'$364,000 calculate recoverability: b minus a mri $364,000 total undiscounted cash flows e $1,285,714 asset’s net book values at 9/30/12',
24160:'b recoverability e minus b $921,714 is net book value recoverable? no is asset subject to potential impairment? yes calculate',
24161:'potential estimated impairment loss: apotential estimated impairment loss should be recognized only if the net book value of the gpp&',
24162:'e1isnotrecoverableand2exceedsthehigherofitsnetrealizablevalue orvalueinuse estimate. because management believes that the open market price of $750,000 is a reasonable estimate of the asset’s',
24163:'net realizable value, it is comparedto the asset’svalueinuse estimate to determine which amount is higher. however, because the $364,000 undiscounted',
24164:'cash flows amount prior to calculating the net present value to determine a valueinuse estimate is lower than net realizable',
24165:'value amount of $750,000, there is no need to present value the cash flows to calculate a valueinuse estimate. page',
24166:'52 sffas 44 fasab handbook, version 20 06/21 sffas 44 because management believesthat the open market priceof$750,000 isareasonable estimate, it',
24167:'is used as the “recoverable basis”. had the net realizable value estimate been unavailable to management, a valueinuse estimate net',
24168:'present value of the future cash flows could have been used as the “recoverable basis”. mri net realizable value of',
24169:'asset $750,000 less: asset’s net book value $1,285,714 excess of net book value over fair value $ 535,714 potential estimated',
24170:'impairment loss $ 535,714 reporting considerations the potential estimated impairment loss and corresponding reduction of the book value of the',
24171:'equipment is $535,714. illustration 7c cash flow approach – facility: changes in manner or duration of use government ownedcontractor operated',
24172:'goco manufacturing facility29 assumptions an entityoperatesagovernment ownedcontractor operatedgocomanufacturingfacilityinan economically depressed area fabricating various commodities with commercial applicability. the facility’s current',
24173:'net book value is $22,500,000 with an estimated salvage value of $5,000,000 and has a 25 year estimated remaining useful',
24174:'life. under the terms of the contract, the government provides the contractor with exclusive use of the facility in exchange',
24175:'for negotiatedleasepaymentsintheamountof$150,000peryear. thecontractorisresponsiblefor all maintenance and operating costs. recently this unique partnership has come under federal and state scrutiny as',
24176:'many legislators and environmentalists have expressed concerns that the contractor whose operations have caused contamination found in and around the',
24177:'facility is not being held financiallyresponsible for the cleanup costs. 29illustration 7c adapted from: military law review, volume 131 winter',
24178:'1991; government owned – contractor operated munitions facilities: are they appropriate in the age of strict environmental compliance and liability?',
24179:'; major mark j. connor. page 53 sffas 44 fasab handbook, version 20 06/21 sffas 44 outrage which has surfaced',
24180:'during congressional hearings on environmental cleanups has become the focus of print and cablenews outlets. further complicating management’s “crisis response”',
24181:'is that 1 the contract effectively prohibits modifying the facility to achieve greater environmental compliance without legislative relief and 2',
24182:'the contracting officer has initiated debarment procedures that effectively would shut down the facility in 90days for an indeterminable amount',
24183:'of time. facilities managers and engineers believe that a prospective buyer can be found but that it will take significant',
24184:'time to pass all necessary sale requirements. until then, they advise that the facility can be quickly reconfigured and partitioned',
24185:'into commercially viable longterm storage space. the required modifications would cost $500,000 and lease agreements are estimated to generateapproximately$35,000 inannualrevenues.afairlyrecent',
24186:'analysiscompleted9 months ago reveals that the property’s net realizable value nrv was at that time, $30,000,000; 20 percent of which',
24187:'is attributable to land. management has approved the reconfiguration and partition plan and believes that it will take a minimum',
24188:'of 5 years before all approvals are in place and disposal efforts can begin and an additional2yearstoultimatelydisposeoftheproperty. becausemanagementisconcernedwith the proper',
24189:'financial reporting of this event, it has asked its comptroller for advice. evaluation of potential estimated impairment loss the indicator',
24190:'of potential impairment is the change in manner of use. the magnitude test has also been met due to 1',
24191:'federal and state scrutiny, 2 media coverage, and 3 the fact that the cost of operatingthe facilityhasdrawn management’sattentionto evaluate the',
24192:'asset’scontinued service use and seek the comptroller’s advice. because the entity is seeking appropriate approvals to commence disposal efforts and',
24193:'does not know when such permission will be granted, management intends to convert a portion of the facility for public',
24194:'storage; a change in the manner of use. page 54 sffas 44 fasab handbook, version 20 06/21 sffas 44 measurement',
24195:'of potential estimated impairment loss calculate net book value: facility assets’ net book value at 12/31/x1 a excluding land $22,500,000',
24196:'a calculate undiscounted cash flows required modifications outflow $500,000 undiscounted cash inflows from future rental $245,000 lease payments 7 x',
24197:'$35k undiscounted cash inflows from disposal of assets 1.0 0.2 x $30mil total undiscounted cash flows b 24,000,000 $23,745,000 b',
24198:'calculate recoverability: b minus a facility total undiscounted cash flows b $23,745,000 assets’ net book values at 12/31/x1 a 22,500,000',
24199:'recoverability b minus a $1,245,000 is net book value recoverable? yes is asset subject to potential impairment? no reporting considerations',
24200:'there is no potential estimated impairment loss to consider or recognize because the undiscounted cash flows to be recovered are',
24201:'greater than the gpp&e’s net book value. illustration 7d cash flowapproach calculating valueinuse using discounted cash flows – facility: changes',
24202:'in manner or duration of use government ownedcontractor operated goco manufacturing facility30 assumptions same facts as illustration 7c above except',
24203:'that 1 management has decided to reconfigure the facilityandlease available storagespaceforthe remaining lifeofthefacility, 2 thenet realizable 30 adaptedfrom:militarylaw review,volume 131winter',
24204:'1991 governmentowned –contractor operated munitions facilities:are they appropriate inthe ageof strict environmental compliance andliability? major markj. connor page 55 sffas',
24205:'44 fasab handbook, version 20 06/21 sffas 44 value estimate is $2 million, and 3 the salvage value is $500,000.',
24206:'furthermore, because management does not believe that a prospective buyer can be found it decides not to seek disposal authority.',
24207:'the entity’s comptroller advises management that to assess whether or not a potential impairment exists a valueinuse estimate would be',
24208:'appropriate to use because it is higher than the net realizable value estimate. ariskfree discount rate of 3 percent is',
24209:'used. evaluation of potential estimated impairment loss in this case the entity should 1 use the undiscounted cash flows to',
24210:'calculate recoverability and 2 present value i.e., discount the undiscounted cash flows to calculate the valueinuse estimate. in so doing,',
24211:'a potential estimated impairment loss is realized. calculations follow: calculate cash flows: undiscounted pv factor discounted required modifications outflow $500,000',
24212:'1.00 $500,000 undiscounted cash inflows from future rental lease payments 25 x $35k undiscounted cash inflows from disposal of assets',
24213:'total cash flows b $875,000 $500,000 $875,000 17.41315 0.47761 $609,460 $238,805 $348,265 calculate recoverability: b minus a recoverability: b minus',
24214:'a facility total undiscounted cash flows b $875,000 assets’ netbookvaluesat12/31/x1 a 22,500,000 recoverability b minus a $21,625,000 is net book',
24215:'value recoverable? no is asset subject to potential impairment? yes calculate potential estimated impairment loss: potential impairment: facility higher of',
24216:'nrv orvalueinuse: nrv = $2,000,000 given valueinuse = $348,265 discounted cash flows use the higher net realizable value $2,000,000 less:assets’netbookvalueat12/31/x1',
24217:'$22,500,000 excessofnetbookvalueoverrecoverablevalue $20,500,000 in use potential estimated impairment loss $20,500,000 page 56 sffas 44 fasab handbook, version 20 06/21 sffas',
24218:'44 reporting considerations the potential estimated impairment loss and corresponding reduction of the book value of the facility is $20,500,000.',
24219:'page 57 sffas 44 fasab handbook, version 20 06/21 sffas 44 appendix c:abbreviations asc accounting standards codification fasb cfr consolidated',
24220:'financial report of the u.s. government dmai deferredmaintenanceandassetimpairmenttaskforce fasab federalaccountingstandardsadvisoryboard gaap generallyacceptedaccountingprinciples gasb governmentalaccountingstandards board gasbs governmentalaccountingstandards boardstatement gpp&e general',
24221:'property, plant, and equipment ig inspector general ipsasb internationalpublicsectoraccountingstandardsboard ipsas internationalpublicsectoraccountingstandards it information technology mri magnetic resonance imaging nrv net',
24222:'realizable value o&m operation and maintenance omb office of management and budget pp&e property, plant and equipment prv plant replacement',
24223:'value psf per square foot sfas statement offinancialaccountingstandards fasb sffac statement offederalfinancialaccountingconcepts sffas statement offederalfinancialaccountingstandards page 58 sffas 44 fasab',
24224:'handbook, version 20 06/21 statement of federal financialaccounting standards 45: deferral of the transition to basic information for long term',
24225:'projections rescinded status issued effective date affects july 8, 2013 effective upon issuance. sffas 36, par. 45 affected by sffas',
24226:'46 rescinded sffas 45. sffas 46, deferral of the transition to basic information for longterm projections amending sffass 36 and',
24227:'45 rescinded sffas 45. page 1 sffas 45 fasab handbook, version 20 06/21 statementoffederalfinancialaccountingstandards46: deferral of the transition to basic',
24228:'information for long term projections amending sffass 36 and 45 status issued effective date affects affected by october 17, 2014',
24229:'effective upon issuance sffas 36, par. 45 sffas 45 is rescinded none. summary this statement provides a second oneyear deferral',
24230:'of the transition of the statement presenting longterm fiscal projections for the u.s. government and related disclosures from required supplementary',
24231:'information rsi to basic information. basic information is the information that is deemed essential for the financial statements and notes',
24232:'to be presented in conformity with generallyaccepted accounting principles gaap. rsi isinformation that a bodythat establishes gaap requires to accompany',
24233:'basic information. while both categories of information are required, the auditor subjects the two categories of information to different procedures',
24234:'and complies with different reporting requirements under generally accepted government auditing standards gagas. this second deferral permits: the audit community',
24235:'to complete its consideration of the need for revised guidance, and the preparer time to plan for the audit. during',
24236:'the deferral period, the consolidated financial report of the u. s. government will continue to report as rsi the information',
24237:'necessary for the reader to assess whether future budgetary resources will likely be sufficient to sustain public services and to',
24238:'meet obligations as they come due. deferral of the transition to basic information provides an additional year for theamerican institute',
24239:'of cpas aicpa to develop guidance for audit reports on longterm fiscal projections. page 1 sffas 46 fasab handbook, version',
24240:'20 06/21 sffas 46 table of contents summary 1 introduction 3 purpose 3 materiality 4 standards 4 scope 4 amendments',
24241:'4 effective date 5 appendixa: basis for conclusions 6 appendix b:audit considerations regarding basic information and rsi 8 appendix c:abbreviations',
24242:'13 page 2 sffas 46 fasab handbook, version 20 06/21 sffas 46 introduction purpose 1. this statement amends the effective',
24243:'date of the phased implementation first established in statement of federal financialaccounting standards sffas 36, comprehensive long term projections for',
24244:'the u.s. government and later amended by sffas 45, deferral of the transition to basic information for longterm projections. when',
24245:'fully implemented, sffas 36 requires a basic financial statement in the consolidated financial report of the u.s. government cfr, disclosures,',
24246:'and related required supplementary information rsi. to allow a phased implementation, a threeyear transition period was provided during which all',
24247:'information was rsi. the transition period was deferred oneyear from the originally planned effective date of fiscal year fy 2013',
24248:'to fy 2014. 2. sffas 36, as amended, requires information to be presented as follows in fy 2014: a. the',
24249:'basic financial statement would present for all activities: i. the present value of projected receipts and noninterest spending under current',
24250:'policy without change, ii. the relationship of these amounts to projected gross domestic product gdp, and iii. changes in the',
24251:'present value of projected receipts and noninterest spending from the prior year. b. disclosures would explain and illustrate: i. the',
24252:'assumptions underlying the projections, ii. factors influencing trends, and iii. significant changes in the projections from period to period. c.',
24253:'rsi would explain and illustrate the projected trends in: i. the relationship between receipts and spending, ii. deficits or surpluses,',
24254:'iii. treasury debt held by the public as a share of gdp, iv. possible results using alternative scenarios, and page',
24255:'3 sffas 46 fasab handbook, version 20 06/21 sffas 46 v. the likely impact of delaying corrective action when a',
24256:'fiscal gap exists. 3. this statement amends the transition period provided in sffas 36, as amended, to allow one additional',
24257:'year – fy 2014 – during which all of the above information would be reported as rsi. materiality 4. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems.',
24258:'thedetermination of whether an item is material depends on the degree to which omitting or misstating information about the item',
24259:'makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced',
24260:'by the omission or the misstatement. standards scope 5. this statement applies to the consolidated financial report of the u.s.',
24261:'government cfr. 6. thisstatementamendsstatementoffederalfinancialaccountingstandardssffas36, comprehensive longterm projections for the u.s. government, and sffas 45, deferral of the transition to basic',
24262:'information for longterm projections, todeferfullimplementation of its requirements by one year. amendments 7. sffas 45 is rescinded. 8. par. 45',
24263:'of sffas 36 is replaced by the following: 45 thefollowingphaseinofreportingrequirementsasbasicinformationprovidesfor full implementation for reporting periods beginning after september 30, 2014.',
24264:'a. thesestandardsareeffectiveforperiodsbeginningafterseptember30,2009. b. informationshouldbereportedasrsiforthefirstfiveyearsofimplementation fiscal years 2010, 2011, 2012, 2013, and 2014. page 4 sffas 46 fasab handbook, version 20',
24265:'06/21 sffas 46 c. beginninginfiscalyear2015,therequiredinformationshouldbepresentedas specified in paragraphs 12 42. d. earlier implementation is encouraged. effective date 9. the requirements',
24266:'of this statement are effective upon issuance. the provisions of this statement need not be applied to immaterial items. page',
24267:'5 sffas 46 fasab handbook, version 20 06/21 sffas 46 appendixa: basis for conclusions this appendix discusses some factors considered',
24268:'significant by board members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and',
24269:'rejecting others. individual members gave greater weight to some factors than to others. the standards enunciated in this statement–not the',
24270:'material in this appendix–should govern the accounting for specific transactions, events, or conditions. this statement may be affected by later',
24271:'statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend',
24272:'this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not',
24273:'be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the',
24274:'rationale for each amendment. project history a1. inclusionofauditedlongtermfiscalprojectionsinu. s. federalgovernmentfinancialreports began in fiscal year 2006 with the statement of social',
24275:'insurance. a number of individual programsprovideastatement of socialinsuranceincludingsocialsecurityandmedicare. in 2009, the board issued sffas 36 and broadened requirements for longterm',
24276:'fiscal projections beyond these discrete social insurance programs. sffas 36 requires comprehensive projections for all government receipts and expenditures and',
24277:'the omb prepares these projections. a2. the board recognized the uncertainty inherent in making the policy, economic, and demographic assumptions',
24278:'necessary for comprehensive projections. the standards, therefore, provide for the exercise of judgment in selecting assumptions and require information to',
24279:'aid the reader in understanding and considering uncertainty and alternative outcomes. the audit community has been considering the need to',
24280:'revise the audit guidance, including initial guidance developed for the statement of social insurance, to address such comprehensive projections. a3.',
24281:'in2012,theamericaninstituteofcpasaicpaauditingstandardsboardasborganized the prospective information task force to consider the auditor’s responsibility for prospective financial information. the board provided a oneyear',
24282:'deferral to allow time for the task force to develop guidance. the task force has been considering guidance for auditors',
24283:'and appropriate audit report language regarding the statement of longterm projections, the statement of social insurance, and the statement of',
24284:'changes in social insurance amounts. final guidance is expected to be issued in 2014 or early 2015. page 6 sffas',
24285:'46 fasab handbook, version 20 06/21 sffas 46 additional time will be needed for the preparer and the auditor to',
24286:'plan for the audit based upon the final guidance. a4. therefore, the board proposed an additional oneyear deferral of the',
24287:'transition of longterm fiscal projections from rsi to basic information is warranted. the board released an exposure draft ed, entitled',
24288:'deferral of transition to basic information for longterm projections: amending sffass 36 and 45, on april 30, 2014, with comments',
24289:'requested by june 2, 2014. responses to the proposal a5. the board received 12 responses to the exposure draft. of',
24290:'these responses, five were from nonfederal organizations or individuals, five from federal chief financial officer organizations, and two from federal',
24291:'offices of inspectors general. one respondent indicated the organization had no comment on the proposal. three nonfederal respondents objected to',
24292:'the proposal and the remaining respondents supported the proposal. a6. the board considered responses to the exposure draft at its',
24293:'june 25, 2014, public meeting. the board did not rely on the number in favor of or opposed to a',
24294:'given position. information about the respondents’ views is provided only as a means of summarizing the comments. the board consideredthe',
24295:'argumentsineach response andweighedthe meritsofthepoints raised. a7. respondents opposed to deferring the transition to basic information noted the importance of the',
24296:'information to citizens as well as the time already provided for development of audit guidance. the board considered the importance',
24297:'of the information when developing the proposal. in making itsdecision, the board weighed the need forappropriateaudit guidance and for time',
24298:'to plan for an audit under that guidance against the effect of a oneyear delay. because the information has been',
24299:'and will continue to be provided as rsi, the board decided to provide the deferral. thus, even with the deferral,',
24300:'the information will continue to be available and subject to the existing auditing standards related to rsi see appendix b',
24301:'for more information about audit considerations. board approval a8. this statement was approved unanimously. written ballots are available for public',
24302:'inspection at the fasab’s offices. page 7 sffas 46 fasab handbook, version 20 06/21 sffas 46 appendix b:audit considerations regarding',
24303:'basic informationand rsi this summary table serves as an aid to the reader in understanding the implications of the proposed',
24304:'deferral. it is not complete as it does not present in detail the auditing standards established by the american institute',
24305:'of cpas. is the information required to be in yes yes the federal financial report? source: fasab, statement of federal',
24306:'financialaccounting concepts sffac 2, entity and display, par. 73c andaicpa auditing standards as clarified auc 730.04 is the information deemed',
24307:'yes no essential if the financial statements are to “present fairly” in conformity with gaap? source: fasab sffac 2, par.',
24308:'73b and 73c, andaicpaauc 730.04 basic information rsi page 8 sffas 46 fasab handbook, version 20 06/21 sffas 46 basic',
24309:'information rsi what are the objectives of the auditor regarding basic information and rsi? the purpose of an audit is',
24310:'to provide financial statement users with an opinion by the auditoron whether the financial statements are presented fairly, in all',
24311:'material respects, in accordance with an applicable financial reporting framework, which enhances the degree of confidence that intended users can',
24312:'place in the financial statements. …as the basis for the auditors opinion, gaas require the auditor to obtain reasonable assurance',
24313:'about whether thefinancialstatementsasa whole are free from material misstatement, whether due to fraud or error. reasonable assurance is a high,',
24314:'but not absolute, level of assurance. it is obtained when the auditor has obtained sufficient appropriate audit evidence to reduce',
24315:'audit risk that is, the risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated',
24316:'to an acceptably low level. reasonable assurance is not an absolute level of assurance because there are inherent limitations of',
24317:'an audit that result in most of the audit evidence,on whichthe auditordraws conclusions and bases the auditors opinion, being persuasive',
24318:'ratherthan conclusive. aicpa,auc 200 .04 and 200.06 the objectives of the auditor when a designated accounting standard setter requires information',
24319:'to accompany an entitys basic financial statements are to perform specified procedures in order to a. describe, in the auditors',
24320:'report, whether required supplementary information is presented and b. communicate therein when some or all of the required supplementary information',
24321:'has not been presented in accordance with guidelines established by a designated accounting standard setter or when the auditor has',
24322:'identified material modifications that should be made to the required supplementary information for it to be in accordance with guidelines',
24323:'established by the designated accounting standard setter. aicpa,auc 730.03 what auditfieldworkis required? auditprocedures in accordance with limitedprocedurespursuanttoauc applicable auditing standards',
24324:'and 730.05.06. requirements.a page 9 sffas 46 fasab handbook, version 20 06/21 sffas 46 basic information rsi what is to',
24325:'be provided in the auditor’s report? when expressing an unmodified opinion on financial statements, the auditors opinion should statethatthe financial',
24326:'statements present fairly, in all material respects, the financial position of the entity as of the balance sheetdateandtheresultsof its operations',
24327:'and its cash flows for theperiodthen ended,in accordance with the applicable financialreporting framework. also, the auditors opinion should identify the',
24328:'applicable financial reporting framework and its origin. aicpaau–c section 700.35 and .36 statement that the auditor has applied certain limited',
24329:'procedures and a statement that the auditor does not expressanopinionorprovideassurance on the information. aicpa,auc 730.08.09 page 10 sffas 46 fasab',
24330:'handbook, version 20 06/21 sffas 46 basic information rsi what audit report mention is required if the information is missing',
24331:'or not prepared in conformity with guidelines? include a basis for modification paragraph in the report: if there is a',
24332:'material misstatement of the financial statements that relates to specific amounts in the financial statements including quantitative disclosures, the auditor',
24333:'should include in the basis for modification paragraph a description and quantification of the financial effects of the misstatement, unless',
24334:'impracticable. ifitisnotpracticableto quantify the financial effects, the auditor should so state in the basis for modification paragraph. aicpaauc 705.18 if',
24335:'there is a material misstatement of the financial statements that relates to narrative disclosures, the auditor should include in the',
24336:'basis for modification paragraph an explanation of how the disclosures are misstated. aicpaauc 705.19 if there is a material misstatement',
24337:'of the financial statements that relates to the omission of information required to be presented or disclosed, the auditor should',
24338:'describe in the basis for modification paragraph the nature of the omitted information; and include the omitted information, provided that',
24339:'it is practicable to do so and the auditor has obtained sufficient appropriate audit evidence about the omitted information. aicpaauc',
24340:'705.20 modify theauditor’s opinion: aqualified opinion states that except for the effects of the matters described in the basis for',
24341:'qualified opinion paragraph, the financial statements are presented fairly, in all include a statement that management has omitted the information',
24342:'and the information is required and is an essentialpartoffinancialreporting.also, the auditor would state that the opinion on the basic financial',
24343:'statements is not affected by the missing information. aicpaauc 730.08e in addition, if the measurement or presentation of the information',
24344:'departs materially from the prescribed guidelines, the auditor would state that although the opinion on the basic financial statements is',
24345:'not affected, material departures from the prescribed guidelines exist and the auditor would describe the departures. aicpaauc 730.08f page 11',
24346:'sffas 46 fasab handbook, version 20 06/21 sffas 46 basic information rsi materialrespects,inaccordance with the applicable financial reporting framework. aicpaauc',
24347:'705.24 an adverse opinion states that the financial statements are not presented fairly in accordance with the applicable financial reporting',
24348:'framework. aicpaauc 705.25 source: the federalaccounting standardsadvisory board developed this summary but does not establish audit standards. for guidance regarding',
24349:'auditing standards, please refer to the source documents identified in the summary. athe phrase “applicable auditing standards and requirements” is',
24350:'used to refer to auditing standards generally accepted in the united states ofamerica; the standards applicable to financial audits contained',
24351:'in government auditing standards, issued by the comptroller general of the united states; and office of management and budget omb',
24352:'bulletin no. 0704, audit requirements for federal financial statements, as amended. page 12 sffas 46 fasab handbook, version 20 06/21',
24353:'sffas 46 appendix c:abbreviations aicpa american institute of certified publicaccountants asb auditing standards board auc auditing standards clarified cfr consolidated',
24354:'financial report of the u.s. government ed exposure draft fasab federalaccounting standardsadvisory board fy fiscal year gaap generallyaccepted accounting principles',
24355:'gagas generallyaccepted government auditing standards gao governmentalaccountability office gdp gross domestic product omb office of management and budget rsi required',
24356:'supplementary information sffac statement of federal financialaccounting concepts sffas statement of federal financialaccounting standards u.s. united states page 13 sffas',
24357:'46 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 47: reporting entity status issued december 23, 2014 effective',
24358:'date for periods beginning after september 30, 2017. earlier implementation is not permitted. affects sffac 2, par. 27, 10, 18,',
24359:'29, 3853, and 78. affected by none. summary this statement establishes principles to include organizations for which elected officials are',
24360:'accountable in general purpose federal financial reports gpffrs. the principlesguide financial reporting to recognize the complex diverse organizations possessing varying',
24361:'legal designations for example, government agencies, notforprofit organizations, corporations that are used to address public policy challenges. the principles herein',
24362:'are not intended to establish whether an organization is or should be considered a federal agency for legal or political',
24363:'purposes. rather, the principles guide preparers of financial statements at the government wide and component reporting entity levels in determining',
24364:'what organizations should be included in the reporting entity’s gpffr for financial accountability purposes. the governmentwide gpffr should include all',
24365:'organizations 1 budgeted for by elected officials of the federal government, 2 owned by the federal government, or 3 controlled',
24366:'by the federal government with riskof loss or expectationof benefits. in addition, thisstatement establishes that an organization be included in',
24367:'the governmentwide gpffr if it would be misleading to exclude it even though it does not meet one of the',
24368:'three inclusion principles. when any of these conditions exists, information regarding the organization is necessary to provide accountability. this statement',
24369:'provides for determining the most appropriate means—consolidated financial statements or disclosures—to include information about these organizationsin gpffrs. determining the most',
24370:'appropriate meansrequiresanassessmentofthedegreetowhichthefollowingcharacteristicsaremet: theorganization is financed by taxes or other nonexchange revenue, is governed by the congress and/or the president, imposes',
24371:'or may impose risks and rewards on the federal government, and/or provides goods and services on a nonmarket basis. note,',
24372:'however, not all characteristics are required to be met to the same degree; classification is based on the assessment as',
24373:'a whole. generally, consolidated financial statements presenting the financial position and results of operations are appropriate for those organizations that',
24374:'are to a large degree financed by taxes and other nonexchange revenue, governed by elected officials, imposing risks and rewardson',
24375:'the federal government, and providing goods and services on a nonmarket basis. consolidated financial statements present the financial information as',
24376:'if the organizations were a single economic entity. such a presentation is needed to show–in page 1 sffas 47 fasab',
24377:'handbook, version 20 06/21 sffas 47 the aggregate—the net cost financed by taxes and other nonexchange revenue, the assets available',
24378:'for use, and the liabilities to be settled in the future. organizationsto be consolidated in the consolidated financial statements within',
24379:'the gpffr are referred to as “consolidation entities.” consolidation entities should apply statement of federal financialaccounting standards 34, the hierarchy',
24380:'of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board. some organizations that',
24381:'meet the principles for inclusion are to a large degree insulated from political influence and not intended to be funded',
24382:'primarily by taxes and other nonexchange revenue. presenting information about these discrete organizations in consolidated financial statements would obscure the',
24383:'operating results and financial position of the reporting entity. instead, information about these types of discrete organizations should be disclosed',
24384:'in notes to the consolidated financial statements of reporting entities applying federal financial accounting standards. the disclosures should reveal the',
24385:'nature of the relationship to the reporting entity, relevant activity during the reporting period, and the reporting entity’s future exposures',
24386:'to risks and rewards resulting from the relationship. organizations to be disclosed in the gpffr are referred to as “disclosure',
24387:'entities.” while the hierarchy of generally accepted accounting principles gaap established for federal reporting entities may not necessarily apply to',
24388:'disclosure entities; information about such organizations is still needed for accountability purposes and to meet federal financial reporting objectives. this',
24389:'statement establishes that each component reporting entity’s gpffr include all organizations for which it is accountable. this includes all consolidation',
24390:'entities and disclosure entities administratively assigned to it. the gpffr for the governmentwide reporting entity would be the consolidation of',
24391:'component reporting entity gpffrs including information regarding disclosure entities. in addition to the relationships that lead to organizations being included',
24392:'in the gpffr based on the principles described above, the federal government may have significant relationships with other parties. this',
24393:'statement requires disclosures if one party to an established relationship has theabilitytoexercisesignificantinfluenceovertheotherpartyinmakingpolicydecisions,andthe relationship is of such significance that it would',
24394:'be misleading to exclude information about it. the parties engaged in these relationships are “related parties.” with respect to related',
24395:'parties, the disclosures would provide information about the nature of the government’s relationship with the related party and other information',
24396:'to aid in understanding the relationship, including exposures to risk of loss or potential gain as a result of the',
24397:'relationship. this statement is effective for periods beginning after september 30, 2017. earlier implementation is not permitted. page 2 sffas',
24398:'47 fasab handbook, version 20 06/21 sffas 47 table of contents page summary 1 introduction 4 purpose 4 materiality 5',
24399:'standards 5 scopeandapplicability 5 definitions 6 organizationalapproachtodefiningboundaries 7 principles for inclusion in the governmentwide gpffr 9 reporting on organizations—consolidation entities',
24400:'or disclosure entities 14 identifyingorganizationsforwhichcomponentreportingentitiesareaccountable 19 gpffr consolidation and disclosure 24 minimum disclosures regarding the central banking system 29 related',
24401:'parties 31 effect on existing concepts—amendments to sffac 2, entity and display 33 effective date 37 appendixa:basisforconclusions 38 appendix b:',
24402:'flowchart 67 appendix c: illustrations 68 appendix d: abbreviations 99 appendix e: task force members 100 page 3 sffas 47',
24403:'fasab handbook, version 20 06/21 sffas 47 introduction purpose 1. the federal government and its relationships with organizations have become',
24404:'increasingly complex. notwithstanding these complexities, general purpose federal financial reports1 gpffr for the governmentwide reporting entity should be broad enough',
24405:'to reflect the congress and/or the president’s accountability for those organizations. in addition, component reporting entity gpffrs should allow the',
24406:'congress and /or the president to hold management accountable. although statement of federal financialaccounting concepts 2, entity and display, addresses',
24407:'identifying reporting entities and criteria for including components in a reporting entity, questions have continued in this area indicating the',
24408:'need for standards.2 standards that can be used to identify organizations to include in the gpffr of the governmentwide reporting',
24409:'entity and each component reporting entity are important to meet federal financial reporting objectives. 2. this statement guides preparers of',
24410:'gpffrs in determining what organizations to report upon, whether such organizations are considered “consolidation entities” or “disclosure entities”3 and what',
24411:'information should be presented. this guidance, together with existing guidance, will ensure that users of gpffrs are provided with comprehensive',
24412:'financial information about federal reporting entities and their relationships so that federal financial reporting objectives4 are met. this statement requires',
24413:'reporting entities to disclose certain information about disclosure entities administratively assigned to them. it does not require new disclosures regarding',
24414:'consolidation entities administratively assigned to reporting entities. any existing required disclosures for the consolidated financial statements of the reporting entity,',
24415:'which include the consolidation entities, would continue to apply. while not specifying the inclusion of classification of the components of',
24416:'the central banking system, 1terms defined in the glossary are shown in boldface the first time they appear. 2 statement',
24417:'of federal financialaccounting concepts 2 is considered otheraccounting literature. see statement of federal financialaccounting standards 34, the hierarchy of generally',
24418:'accepted accounting principles gaap, including the application of standards issued by the financial accounting standards board, for more information regarding',
24419:'the hierarchy. 3 “consolidation entities” and “disclosureentities” are terms used to distinguish between entities based on the degrees to which',
24420:'the entity is 1 financed by taxes or other nonexchange revenue, 2 governed by the congress and/ or the president,',
24421:'3 imposing or may impose risks and rewards to the federal government and 4 providing goods and services on a',
24422:'market or nonmarket basis. see paragraphs 38 55 for more information. 4 statement of federal financialaccounting concepts 1, objectives of',
24423:'federal financial reporting. page 4 sffas 47 fasab handbook, version 20 06/21 sffas 47 this statement does establish certain minimum',
24424:'disclosures regarding the central banking system. 3. this statement also guides preparers of gpffrs in identifying related parties and in',
24425:'determining what information to provide about related party relationships of such significance that it would be misleading to exclude information.',
24426:'there are disclosures required regarding the nature of the relationship and financialrelated exposures to risk of loss or potential gain',
24427:'resulting from relationships with such related parties. 4. the guidance recognizes that an organization’s legal form may not reflect the',
24428:'substance of the relationship between the federal government and the organization. as such, the legal form or designation of an',
24429:'organization does not always determine whether it should be included in the governmentwide gpffr. even in cases where legislation indicates',
24430:'an organization is “not an agency or instrumentality” of the federal government, the organization should be assessed against the guidance',
24431:'contained in this statement to determine whether it should be included in the reporting entity’s gpffr. inclusion results from a',
24432:'need for accountability given the nature of the relationship between the federal government and the organization but inclusion does not',
24433:'change the legal form of the organization. materiality 5. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an item is material depends on the',
24434:'degree to which omitting or misstating information about the item makes it probable that the judgment of a reasonable person',
24435:'relying on the information would have been changed or influenced by the omission or the misstatement. standards scope andapplicability 6.',
24436:'this statement applies to federal reporting entities that prepare general purpose federal financial reports gpffrs in conformance with generally accepted',
24437:'accounting principles gaap as defined byparagraphs5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy of generally',
24438:'accepted accounting principles, including the application of standards issued by the financial accounting standards page 5 sffas 47 fasab handbook,',
24439:'version 20 06/21 sffas 47 board fasb. paragraph 66 of this statement also applies to federal reporting entities that prepare',
24440:'gpffrs in conformance with gaap as provided by paragraphs 9 through 12 of sffas 34.5 7. this statement does not',
24441:'require any entity to prepare and issue gpffrs. the purpose of this statement is to enable federal reporting entities preparing',
24442:'and issuing gpffrs to determine: a. whether sffas 34 is applicable to an organization, b. what organizations should be included',
24443:'in the gpffr of federal reporting entities applying sffas 34, c. themannerinwhichinformationshouldbepresentedfororganizationsincludedinthe gpffr, and d. what disclosures, if any, are',
24444:'needed regarding related parties. definitions 8. reporting entity—reporting entitiesare organizations that issue a gpffr because either there is a statutory',
24445:'or administrative requirement to prepare a gpffr or they choose to prepare one. the term “reporting entity” may refer to',
24446:'either the governmentwide reporting entity or a component reporting entity see definitions below. statement of federal financial accounting concepts sffac',
24447:'2 provides criteria for an entity to be a reporting entity.6the criteria focus on whether: a. an entity’s management is',
24448:'responsible for controlling and deploying resources, producing outputs and outcomes, and executing the budget or a portion thereof assuming that',
24449:'the entity is included in the budget, and is held accountable for the entity’s performance. 5 sffas 34, footnote 4,',
24450:'indicates federalaccounting standardsadvisory board fasab gaap would be the appropriateaccountingstandards for federal reportingentities within the executive,legislative,and judicialbranchesto adopt. 6 sffac',
24451:'2, paragraphs 2938, provides a discussion titled “identifying the reporting entities for general purpose financial reporting.” page 6 sffas 47',
24452:'fasab handbook, version 20 06/21 sffas 47 b. an entity’s financial statements would provide a meaningful representation of operations and',
24453:'financial condition. c. an entity’s financial information could be used by interested parties to help them make resource allocation and',
24454:'other decisions and hold the entity accountable. 9. governmentwide reporting entity—the governmentwide reporting entity’s gpffr includes all organizations for which',
24455:'the congress and/or the president are accountable based on principles established in this statement. 10. component reporting entity—“component reporting entity”',
24456:'is used broadly to refer to a reporting entity within a larger reporting entity.7 examples of component reporting entities include',
24457:'organizations such as executive departments, independent agencies, government corporations, legislative agencies, and federal courts. component reporting entities would also include',
24458:'subcomponents those components included in the gpffr of a larger component reporting entity that may themselves prepare gpffrs. one example',
24459:'is a bureau that is within a larger department that prepares its own standalone gpffr. 11. control with risk of',
24460:'loss or expectation of benefit—“control with risk of loss or expectation of benefit” is the power to impose will on',
24461:'and/or govern the financial and/or operating policies of another organization with the potential to be obligated to provide financial support',
24462:'or assume financial obligations or to obtain financial resources or non financial benefits.8 see paragraphs 26 35 for further discussion',
24463:'of control. 12. related parties—organizations are considered to be related parties in the gpffr if the existing relationship9 or one',
24464:'party to the existing relationship has the ability to exercise significant influence over the other party’s policy decisions. organizationalapproach to',
24465:'defining boundaries 13. the federal government is unique because its constitutionally established powers, motivations, and functions are different from those',
24466:'of all other organizations. it is an extremelycomplexorganizationresponsible forthecommondefense and generalwelfareof 7 the larger reporting entity could be the governmentwide',
24467:'reporting entity or another component reporting entity. 8 for example, a nonfinancial benefit would be one in which the federal',
24468:'government benefits from a service being provided to it or on its behalf. 9 relationship, as used in this context,',
24469:'refers to material transactions or events involving both parties. page 7 sffas 47 fasab handbook, version 20 06/21 sffas 47',
24470:'the nation.although there are various perspectives10 for viewing the federalgovernment,an organizational approach was established in sffac 211 as the most',
24471:'appropriate perspective for understanding the composition of the federal government. sffac 2 established that gpffrs should include the aggregation of',
24472:'organizations for which the federal government is financially accountable as well as other organizations for which the nature and significance',
24473:'of their relationship with the government are such that their exclusion would cause the federal government’s financial statements to be',
24474:'misleading or incomplete. 14. accountability demands comprehensive reporting. to provide comprehensive reporting, the federal government must report on organizations that',
24475:'serve varied purposes and have complex governance structures and finances. in some cases, disclosing financial and other information in the',
24476:'notes about an organization rather than consolidating financial and other information about all organizations may better meet federal financial reporting',
24477:'objectives. 15. this statement first establishes the principles for identifying organizations to include in the governmentwide gpffr see principles for',
24478:'inclusion in the governmentwide gpffr beginning with paragraph 20 and then distinguishes between consolidation entities and disclosure entities see reporting',
24479:'on organizationsconsolidation entities or disclosure entities beginning with paragraph 38. in applying these principles and meeting the reporting requirements, organization',
24480:'refers to the organization in its entirety including all funding sources for example, appropriations or donations. the term organization is',
24481:'used broadly and may include, among others, departments, agencies, bureaus, divisions, commissions, corporations, and components. 16. thisstatementalsoestablishesthatcomponentreportingentities’gpffrsmustincludeall consolidation entitiesand disclosure',
24482:'entities for which they are accountable so that both the component reporting entity and governmentwide gpffrs are complete see identifying',
24483:'organizations for which component reporting entitiesareaccountable beginning with paragraph 56. 17. this statement provides guidance for how to report on',
24484:'consolidation entities and disclosure entities see gpffr consolidation and disclosure beginning with paragraph 66. 18. thisstatementestablishesminimumdisclosurerequirementsregardingthecentralbanking system see paragraph 79.',
24485:'10 sffac 2, paragraphs 1328, discusses the organizational, budget and program perspectives of the federal government, as well as the',
24486:'intertwining of the perspectives. 11 sffac 2, paragraphs 2938. page 8 sffas 47 fasab handbook, version 20 06/21 sffas 47',
24487:'19. lastly, this statement provides for disclosure of related party relationships of such significance that it would be misleading to',
24488:'exclude information about them see related parties beginning with paragraph 80. principles for inclusion in the governmentwide gpffr 20. this',
24489:'statement provides three principles for determining which organizations should be included12 in the governmentwide gpffr see paragraph 2135. this statement',
24490:'also provides an additional principle requiring inclusion of organizations if excluding them would be misleading see paragraph 3637. the three',
24491:'principles are to be applied without considering whether the relationship is temporary or permanent. however, whether the relationship is temporary',
24492:'or permanent would influence the likelihood that the entity exhibits the characteristics of a consolidation entity or of a disclosure',
24493:'entity. 21. an organization meeting any one of the three principles below is included in the governmentwide gpffr: a. in',
24494:'the budget b. majority ownership interest c. control with risk of loss or expectation of benefit in the budget 22.',
24495:'an organization with an account or accounts listed in the budget of the united states government: analytical perspectives—supplemental materials schedule',
24496:'that provides budget account level information13 should be included in the governmentwide gpffr unless it is a 12 ”included” means',
24497:'the information is either consolidated or disclosed. 13 the budget presents information in various forms for different purposes. only the',
24498:'budget of the united states government: analytical perspectives—supplemental materials schedule that provides budget account level information should be used for',
24499:'determining whether information about an entity should be included in the government wide gpffr. in the fiscal year 2015 budget',
24500:'of the united states government the budget, the schedule was entitled “federal budget byagency andaccount.” page 9 sffas 47 fasab',
24501:'handbook, version 20 06/21 sffas 47 nonfederal organization receiving federal financial assistance.14 an organization listed in the budget is a',
24502:'nonfederal organization receiving federal financial assistance if it is: a. a state, local or territorial government, or component thereof, or',
24503:'b. a notforprofit organization. 23. notwithstanding the above provision regarding nonfederal organizations listed in the budget, anyentitymeeting eitherof the next',
24504:'two principles majority ownership interest and control with risk of loss or expectation of benefit should be included in the',
24505:'government wide gpffr. majority ownership interest 24. the federal government directly or through its components may have an ownership interest15',
24506:'inan organization.an ownershipinterestisa legalclaimonthe netresidual assets of an organization such asholding sharesor other formalequityinstruments. the holding of an ownership interest',
24507:'usuallybut not always entitlesthe holderto an interest in voting rights. 25. majority ownership interest exists with over 50 percent of',
24508:'the voting rights or net residual assets16 of an organization. when the federal government directly or through its componentsholdsa majorityownership',
24509:'interest in an organization, it should be includedas either a consolidation entity or a disclosure entity in the governmentwide gpffr.17',
24510:'14 thisstatementadoptsthe definitionof “federal financialassistance” establishedinthesingleauditactamendments of1996. however, anorganization neednot besubject to therequirements of the singleauditact in order toqualify as',
24511:'a nonfederal organization receiving federal financial assistance. as defined by the singleauditactamendments of 1996, federal financial assistance is assistance that',
24512:'nonfederal organizations receive or administer in the form of grants, loans, loan guarantees, property, cooperative agreements, interest subsidies, insurance, food',
24513:'commodities, direct appropriations, or other assistance. for the purposes of these standards, federallyauthorized support fees and other charges would be',
24514:'considered other assistanceeven if legislation granting authority to collect them indicates that the fees or other charges are not considered',
24515:'public monies of the united states. 15 “ownership interest” is the possession of substantially all of the benefits and risks',
24516:'incident to ownership. fasab handbook as of june 30, 2014glossary. 16 for example, the federal government may hold more equity',
24517:'in preferred stock than all other stockholders but the preferred stock may be nonvoting. 17 ownership interests 50% or less',
24518:'should be accounted for in accordance with the appropriate accounting standards per the gaaphierarchy. however, the organization shouldstill be assessed',
24519:'against the control inclusion principle and the misleading to exclude principle. page 10 sffas 47 fasab handbook, version 20 06/21',
24520:'sffas 47 control with risk of loss or expectation of benefit 26. an organization that is controlled by the federal',
24521:'government with risk of loss or expectation of benefit should be included as either a consolidation entity or disclosure entity',
24522:'in the governmentwide gpffr. for these purposes, control with risk of loss or expectation of benefit is defined as follows:',
24523:'control with risk of loss or expectation of benefit is the power to impose will on and/or govern the financial',
24524:'and/oroperatingpoliciesofanother organizationwith thepotential to be obligated to provide financial support or assume financial obligations or obtain financial resources or nonfinancial',
24525:'benefits.18 both the power and either the risk of loss or expectation of benefits aspects of the definition should be',
24526:'met to justify inclusion of an organization. hereafter, control with risk of loss or expectation of benefit is referred to',
24527:'as “control.” 27. control refers to the ability to control, whether or not that ability is actively exercised, and should',
24528:'be assessed at the reporting date regardless of the federal government’s ability to change it in the future. in determining',
24529:'whether control exists, it is necessary to determine the substance of the relationship between the federal government and the organization',
24530:'asit may not be completely reflected by the legal form of the relationship. 28. control does not necessarily mean the',
24531:'federal government has responsibility for the management of the daytoday operations of an organization. rather, it is the federal government’s',
24532:'authority to determine or influence the policies governing those activities that indicates control. 29. determining whether control exists requires the',
24533:'application of professional judgment. the federal government achieves its objectives through a wide range of organizations which individually will fall',
24534:'on a continuum. at one end of the continuum, it is clear that an organization does not have the power',
24535:'to act independently and is controlled by the federal government—such as an executive department. at the other end, the organization',
24536:'has the powertoactindependentlyand,whilethe federalgovernmentmayhave alevelof influence, it is clear that the federal government does not have control—such as a state',
24537:'or foreign government. 18 for example, a nonfinancial benefit would arise when the federal government receives a service or a',
24538:'service is provided to others on its behalf. page 11 sffas 47 fasab handbook, version 20 06/21 sffas 47 indicators',
24539:'of control 30. as discussed in the following paragraphs, there are indicators that should be considered in determining whether the',
24540:'federal government controls an organization. as noted above, consideration needs to be given to the nature of the relationship between',
24541:'the federal government and the organization and judgment applied to determine whether control exists. 31. certain individual indicators provide persuasive',
24542:'evidence that control exists. because each indicator provides strong evidence of control, meeting any one indicator would generally mean control',
24543:'is present. these indicators are when the federal government has the unilateral authority to: a. establishoramendthefundamentalpurposeandmissionoftheorganization,19 which may include authorizing',
24544:'the organization to exercise sovereign powers of the federal government and requiring the organization to carry out federal missions and',
24545:'objectives; b. appoint or remove a majority of the governing board members; c. direct the governing body regarding the establishment',
24546:'and subsequent revision of financial and operating policies of the organization; or d. dissolve the organization thereby having access to',
24547:'the assets and responsibility for the obligations. 32. other indicators provide evidence that control may exist, but must be considered',
24548:'in the aggregate and often require the application of professional judgment in assessing. these indicators are when the federal government',
24549:'has the ability to or is obligated to: a. providesignificantinputintotheappointmentofmembersofthegoverningbodyofthe organization or being involved in the appointment or removal of',
24550:'a significant number of members; b. direct the ongoing use of the organization’s assets; 19 congressionally chartered notforprofit organizations identified',
24551:'under united states code u.s.c. title 36, subtitle ii and iii, should not be considered controlled solely because amendments to',
24552:'their federal charter must be enacted through legislation. instead, consideration of control over such organizations should be based on paragraphs',
24553:'31 and 32. page 12 sffas 47 fasab handbook, version 20 06/21 sffas 47 c. direct investment decisions including the',
24554:'liquidation of investments; d. appoint or remove key executives or personnel; e. approve the budgets or business plans for the',
24555:'organization; f. require audits; g. veto, overrule, or modify governing board decisions or otherwise significantly influence normal operations; h. finance',
24556:'the deficits of, provide financial support to, or settle liabilities of the organization; i. direct the organization to work with',
24557:'the government to provide services to taxpayers which may include determining the outcome or disposition of matters affecting the recipients',
24558:'of services; j. establish, rescind, or amend the organization’s governance framework; k. establish limits or restrictions on borrowing and investments',
24559:'of the organization; or l. restrictthecapacitytogeneraterevenueoftheorganization,especiallythesourcesof revenue. situations where control does not exist 33. because of the federal government’s broad',
24560:'powers and economic influence, control should not be inferred from either: a. authority to exercise regulatory powers over an organization;',
24561:'or b. economic dependency of the organization on the federal government. 34. the federal government has the power to regulate',
24562:'many organizations by use of its sovereign and legislative powers. for example, the federal government has the power to regulate',
24563:'the behavior of organizations by imposing conditions or sanctions on their operations. however, the governing bodies of the regulated organizations',
24564:'make decisions within theregulatoryframework. regulatorypowersdonot constitute controlforpurposesof this statement because the federal government’s interest in these organizations extends only to',
24565:'the regulatory aspects of the operations. page 13 sffas 47 fasab handbook, version 20 06/21 sffas 47 35. certain organizations',
24566:'may be economically dependent on the federal government but ultimately retain discretion as to whether to accept funding or do',
24567:'business with the federal government. for example, many notforprofit organizations rely on federal government funding but that does not mean',
24568:'they are controlled by the federal government.although the federalgovernment maybe able to influence organizations dependent on federalfunding or business through',
24569:'purchasing power, the federal government typically does not govern their financial and operating policies. misleading to exclude 36. there may',
24570:'be instances when an organization does not meet any one of the three inclusion principles in paragraphs 22 through 35',
24571:'yet the governmentwide gpffr would be misleading or incomplete if the organization were excluded.20 37. organizations should be included in',
24572:'the governmentwide gpffr if it would be misleading to exclude them. reporting on organizations—consolidation entities or disclosure entities 38. theprinciplesaboveshouldbeusedtoassesswhatorganizationstoincludeinthegpffr.',
24573:'next, a distinction should be made between “consolidation entities” and “disclosure entities” as that distinction determines how the organizations will',
24574:'be reported. this distinction, which should be consistent at the governmentwide and component reporting entity levels, is based on an',
24575:'assessment of the degree to which the following characteristics are met: the organization is financed by taxes and other nonexchange',
24576:'revenue, is governed by the congress and/or the president, imposes or may impose risks and rewards to the federal government,',
24577:'and/or provides goods and services on a nonmarket basis.21 note, however, not all characteristics are required to be met or',
24578:'to be met to the same degree; classification is based on the assessment as a whole. consolidation entities 39. the',
24579:'organizations that should be consolidated in the financial statements in the gpffr are referred to as “consolidation entities.” generally, an',
24580:'organization is considered a consolidation entityif, based on an assessment22 ofthe following characteristicsas awhole, the organization: 20 although such situations',
24581:'would be rare, this statement provides for situations that may arise. 21 goods and services are provided on a nonmarket',
24582:'basis when they are provided free of charge or at charges that bear little relationship to the cost of providing',
24583:'such goods or services. 22as discussed in paragraph 38, not all characteristics are required to be met or to be',
24584:'met to the same degree; classification is based on the assessment as a whole. page 14 sffas 47 fasab handbook,',
24585:'version 20 06/21 sffas 47 a. is financed through taxes and other nonexchange revenues. b. is governed by the congress',
24586:'and/or the president. c. imposes or may impose risks and rewards to the federal government. d. provides goods and services',
24587:'on a nonmarket basis. 40. whilegreaterjudgmentwillbeneededtoclassifyotherorganizations,organizationslistedin the budget, except for nonfederal organizations receiving federal assistance see paragraph 22, generally would',
24588:'qualify as consolidation entities. 41. for consolidation entities, the governance structure is vertically integrated, such that the chainof command and',
24589:'mannerof decisionmaking leadsdirectlyto elected officials. vertical integration may include the establishment of organizational authorities, development and/or approval of budgets, and',
24590:'the appointment of organizational leaders by elected officials. 42. entities for which the relationship with the federal government is not',
24591:'expected to be permanent, such as receiverships, conservatorships, and other intervention actions, would be less likely to meet these characteristics',
24592:'as a whole. such entities generally would not be classified as consolidation entities. disclosure entities 43. the federal government has',
24593:'relationships with organizations afforded a greater degree of autonomy than consolidation entities. some organizations may exercise powers that are reserved',
24594:'to the federal government as sovereign. other organizations may not themselves carry out missions of the federal government but, instead,',
24595:'are owned or controlled by the federal government as a result of a regulatory actions such as organizations in receivership',
24596:'or conservatorship or b other federal government intervention actions. under such regulatory or other intervention actions, the relationship with the',
24597:'federal government isnotexpectedto be permanent and such entitiesgenerallywouldbeclassified as disclosure entities when considering the characteristics taken as a whole. to',
24598:'avoid obscuring information about these more autonomous organizations while still providing accountability, such organizations are to be disclosed rather than',
24599:'consolidated in gpffrs. hereafter; these organizations are referred to as “disclosure entities.” 44. disclosure entities may maintain a separate legal',
24600:'identity, have a governance structure that vestsmostdecisionmakingauthoritiesina governingbodytoinsulatetheorganizationfrom political influence, and/or have relative financial independence. page 15 sffas 47 fasab',
24601:'handbook, version 20 06/21 sffas 47 45. disclosure entities may receive limited or no funding from general tax revenues. the',
24602:'congress and/or the president have less direct involvement in decisionmaking governance than in consolidation entities. limited risks and rewards fall',
24603:'to the federal government. disclosure entities may provide the same or similar goods and services that consolidation entities do, but',
24604:'are more likely to provide them on a market basis.23 46. disclosure entities may include but are not limited to:',
24605:'quasigovernmental and/or financially independent entities, organizations in receiverships and conservatorships, and organizations owned or controlled through federal government intervention actions.',
24606:'as noted above, in some cases, the relationship with the federal government is not expected to be permanent. the following',
24607:'disclosure entity types, while not inclusive of all the types, are presented to assist in identifying organizations that are disclosure',
24608:'entities. the accompanyingappendixc—illustrationsoffersnonauthoritativehypotheticalexamplesthat may be useful in understanding the application of the standards. quasigovernmental and/or financially independent entities 47. quasigovernmental',
24609:'and/or financially independent entities have relationships with the federal government that are not temporary. such relationships may be considered longterm,',
24610:'or even permanent in some cases, when compared to other types of disclosure entities. quasigovernmental and financially independent entities have',
24611:'different governance and financial arrangements. their classification takes into consideration such factors as: a. whether the governance of the entity',
24612:'is through officials appointed for terms aligning with the appointing official versus longerterm appointments or other governance structures intended to',
24613:'insulate the entity from political influence; b. whether the entity is financed primarily through taxes and other nonexchange revenues versus',
24614:'limited or no such financing; and c. whether the entity provides goods and services on a nonmarket basis versus provides',
24615:'goods and services on a market basis. 48. governancedifferencestypicallyleadtogreaterindependence. characteristicsmay include the following: 23 goods and services are provided on',
24616:'a market basis when prices are based on the prices charged in a competitive marketplace between willing buyers and sellers.',
24617:'page 16 sffas 47 fasab handbook, version 20 06/21 sffas 47 a. longer appointments of key executives or governing boards',
24618:'to allow these appointees a degree of independence from the congress and/or the president b. delegated operational authority to provide',
24619:'a service or execute a program in a manner similar to private business enterprises c. private sector legal characteristics, such',
24620:'as notforprofit status under the internal revenue code d. exemption by statute from laws or regulations dealing with the federal',
24621:'budget, funds, personnel, ethics, acquisition, property, or works e. voluntaryassociationwiththefederalgovernmentandsharedpurposestoimplement government policies 49. financial differences typically lead to greater fiscal',
24622:'autonomy. characteristics may include the following: a. primarily funded from a source other than appropriations b. delegated financial authority to',
24623:'provide a service or execute a program in a manner similar to private business enterprises c. principally engaged in selling',
24624:'goods and/or services to organizations outside of the federal government d. intended, in the normal course of its operations, to',
24625:'maintain its operations and meet its liabilities from revenues received from sources outside of the federal government 50. not all',
24626:'entities of a given type will meet the factors above. these factors are provided to assist in identifying entities that',
24627:'are quasigovernmental and/or financially independent. examples of the types of entities that could be considered quasigovernmental and/or financially independent entities',
24628:'are federally funded research and development centers, museums, performing arts organizations, universities, and venture capital funds. each entity should be',
24629:'assessed objectively since there are likely to be differences among the entitieswithin these example typessuchthat some should be classifiedasconsolidation entities',
24630:'and others as disclosure entities. page 17 sffas 47 fasab handbook, version 20 06/21 sffas 47 receiverships and conservatorships 51.',
24631:'the federal government may take control or ownership of failed financial institutions, such as banks, with no goal to maintain',
24632:'control or ownership. receiverships or conservatorships are established to liquidate failing financial institutions or to guide such institutions back to',
24633:'safe and sound conditions.24 entities controlled or owned through receiverships or conservatorships are generally disclosure entities. federal government intervention actions',
24634:'resulting in control or ownership 52. in exceptional circumstances such as economic instability or a national security crisis, the federal',
24635:'government may intervene in organizations not previously meeting the inclusion principles. interventions arise because of the federal government’s broad responsibility',
24636:'for the wellbeing of the country. some, but not all, interventions establish ownership or control such that the organization then',
24637:'meets the inclusion principles.although intervention actions are not expected to be permanent, they may not be subject to a defined',
24638:'time limit. 53. typically federal government intervention actions are not routine activities. strategic planning documents are unlikely to include objectives',
24639:'to routinely initiate such interventions or to permanently operate organizations acquired through interventions. 54. examples of intervention actions resulting in',
24640:'control or ownership include: a. thefederalgovernmentprovidesfinancialsupportand,indoingso,obtainscontrolof an established organization but expects to relinquish or cede control. b. the federal government',
24641:'acquires an ownership interest in an organization but expects to end its interest as soon as practicable. 55. these relationships',
24642:'with the federal government are not expected to be permanent and such entities generally would be classified as disclosure entities',
24643:'when considering the characteristics taken as a whole. nonetheless, entities controlled or owned as a result of intervention actions at',
24644:'the fiscal yearend must be assessed to confirm the classification. 24 for example, the federal deposit insurance corporation fdic is',
24645:'an independent agency created by the congress with the mission “to maintain stability and public confidence in the nation’s financial',
24646:'system by: insuring deposits; examining and supervising financial institutions for safety and soundness and consumer protection; and, managing receiverships.” page',
24647:'18 sffas 47 fasab handbook, version 20 06/21 sffas 47 identifying organizations for which component reporting entities are accountable 56.',
24648:'the governmentwide reporting entity is the only federal reporting entity that is an independent economic entity25 and the inclusion principles',
24649:'are expressed from the perspective of the federal government. however, gpffrs for the governmentwide reportingentityrepresenta consolidationofcomponent reportingentitygpffrs. therefore, component reporting',
24650:'entities must identify and include in their gpffrs all consolidation entities and disclosure entities for which they are accountable so',
24651:'that both the component reporting entity gpffrs and governmentwide gpffr are complete. 57. acomponentreportingentity’sgpffrshouldincludeallorganizationsthatwouldallowthe users to hold the component reporting',
24652:'entity’s management such as appointed officials or other agency heads accountable for implementation of public policy decisions. inclusion would also',
24653:'reveal the risks inherent in component reporting entity operations, and thereby enhance accountability to the public. each component reporting entity',
24654:'is accountable for all consolidation entities26 and disclosure entities administratively assigned to it. 58. administrative assignments to component reporting entities',
24655:'are typically made in laws and policy documents such as statutes, budget documents, regulations, or strategic plans. administrative assignments can',
24656:'be identified by evaluating:27 a. scope of the budget process b. accountability established within a component reporting entity c. misleading',
24657:'to exclude and/or misleading to include 25 sffac 2, paragraph 38. 26 aconsolidation entity comprises all consolidation entities administratively assigned',
24658:'to it and should present information about disclosure entities assigned to it. 27 component reporting entities should develop processes to',
24659:'ensure they identify and assess any organizations 1 within the scope of their budget process, 2 for which accountability is',
24660:'established within their component reporting entity, or 3 which are misleading to exclude. it is anticipated that central agencies will',
24661:'determine if there is a need for coordinated guidance to ensure governmentwide consistency. page 19 sffas 47 fasab handbook, version',
24662:'20 06/21 sffas 47 scope of the budget process 59. consolidation entities and disclosure entities subject to the budget approval',
24663:'and oversight process of the component reporting entity head should be included in the component reporting entity gpffr. each component',
24664:'reporting entity should include: a. all consolidation entities listed within its section of the budget of the united states government:',
24665:'analytical perspectivessupplemental materials schedulethatprovides budget account level information,28 and b. all disclosure entities included within its congressional budget justification.29 accountability',
24666:'established within a component reporting entity 60. consolidation entities and disclosure entities for which a component reporting entity has been',
24667:'assigned accountabilityresponsibilitiesshouldbeincluded in thegpffrof that entity. determining whether accountability was established or assigned to a component reporting entity requires the',
24668:'consideration of certain indicators and the application of professional judgment. indicators30 that accountability has been established in the component reporting',
24669:'entity include: a. statutes or regulations establishing an organization state that it is assigned to or part of a larger',
24670:'federal organization. b. anorganizationisincludedinthecomponentreportingentity’spublishedorganization chart. 28 the budget presents information in various forms for different purposes. only the budget of',
24671:'the united states government: analytical perspectives—supplemental materials schedule that provides budget account level information should be used for determining whether',
24672:'information about an entity should be included in the government wide gpffr. in the fiscal year 2015 budget of the',
24673:'united states government the budget, the schedule was entitled “federal budget by agency and account.” 29 acongressionalbudget justification is a',
24674:'documentsubmitted annually to congress to justify an organization’sbudget request. 30 these indicators provide evidence that accountability was established or assigned',
24675:'to a component reporting entity. meeting any one would typically mean accountability was established. page 20 sffas 47 fasab handbook,',
24676:'version 20 06/21 sffas 47 c. the component reporting entity acquires and/or monitors31 ownership interests in organizations where there are',
24677:'ongoing responsibilities32 such as: i. coordinating and/or conveying input on strategic plans, ii. providing appropriated funds to the organization and',
24678:'receiving requests for funding in the current and/or future years, iii. administering any federal grants or contracts awarded to the',
24679:'organization, iv. monitoring activities and/or reporting on outcomes, or v. monitoring the value of the ownership interest. d. a controlled',
24680:'organization33 was established by statute or by action of the component reporting entity to support the mission of the component',
24681:'reporting entity, and a continuing relationship exists. examples of continuing relationships include those in which the component reporting entity: i.',
24682:'approves bylaws including any amendments; ii. is represented on the governing board for example, as an exofficio member; iii. appoints',
24683:'members of the governing board; iv. coordinates and/or conveys input on strategic plans; v. monitors organizational performance; vi. approves budgets,',
24684:'operating plans, or contracts with others; vii. establishes and executes cooperative agreements with the organization; 31 such responsibilities may be',
24685:'assigned to a program office. 32 these responsibilities are examples of actions or activities performed by the component reporting entity',
24686:'that are indicative of monitoring an ownership interest in an organization, which is an indicator of accountability. 33 where control',
24687:'exists at the governmentwide level based on paragraphs 2635. page 21 sffas 47 fasab handbook, version 20 06/21 sffas 47',
24688:'viii. administers federal grants to or contracts with the organization; ix. testifies before congress regarding organization performance and objectives; or',
24689:'x. has significant financial transactions or balances that indicate ongoing managerial involvement. 61. ifmorethanonecomponentreportingentityisassignedresponsibilitiesasdescribedabove, the following guidance applies: a. disclosureentities',
24690:'shouldbeincludedinthegpffrofeachcomponentreportingentity assigned such responsibilities. b. consolidation entities should be administratively assigned to only one component reporting entity.34the component reporting entity',
24691:'assigned the largest share35 of responsibilities described in paragraph 60 generally should include the consolidation entity. 62. if a disclosure',
24692:'entity has not been administratively assigned to a consolidation entity, the disclosure entity should be reported by a component reporting',
24693:'entity a assigned responsibilityfortransferringfundsto orreceiving fundsfromthedisclosureentityorbwith which its mission most closely aligns. misleading to exclude and / or misleading to',
24694:'include 63. there may be instances where an organization is not administratively assigned to the component reporting entity based on',
24695:'the principles in paragraphs 5962 yet the component reporting entity gpffr would be misleading or incomplete if the organization were',
24696:'excluded. if so, such organizations should be included in the component reporting entity’s gpffr.36 64. there may be instances where',
24697:'the principles in paragraphs 5962 are met in form but not substance so that consolidation at the component reporting entity',
24698:'level would result in 34 note that the component reporting entity to which a consolidation entity is administratively assigned may',
24699:'also be administratively assigned to a higherlevel component reporting entity. 35 largest share as used here is based on the',
24700:'most significant administrative role. 36 although such situations would be rare, this statement provides for situations that may arise. page',
24701:'22 sffas 47 fasab handbook, version 20 06/21 sffas 47 misleading presentation for the component reporting entity. while such conditions',
24702:'are expected to be rare, if it would be misleading to consolidate the organization in the component reporting entity gpffr,',
24703:'the organization may be excluded so long as it is consolidated in another component reporting entity or directly in the',
24704:'governmentwide reporting entity. 65. determiningwhetheritwouldbemisleadingtoincludeaconsolidationentityadministratively assigned to a component reporting entity requires the application of professional judgment. examples37 of indicators',
24705:'that it may be misleading to include an organization are: a. thebudgetsubmissioniscombinedpriortosubmissionbutisnotjointlydevelopedor executed, as indicated by: i. the budget request',
24706:'not being directly approved by component reporting entity management, or ii. the absence of significant involvement by component reporting entity',
24707:'management regarding budget execution, investments, or strategic planning. b. the component reporting entity provides little or no direct oversight of',
24708:'the organization. c. the organization’s funding is separate from the component reporting entity’s funding. d. the consolidated cost information would',
24709:'be misleading. e. the organization operates itself as a standalone organization either since its inception or for a long history,',
24710:'has routinely prepared annual audited financial statements, and has submitted financial data directly to the department of the treasury for',
24711:'the governmentwide gpffr. 37 the indicators listed in paragraph 65 a. – e. are examples and there may be other',
24712:'indicators not included on this list. further, nospecific number ofindicatorsneed be present to determine an organization wouldbe misleading to include.',
24713:'this determination is based on the assessment as a whole after considering all facts and often requires professional judgment in',
24714:'making such decisions. page 23 sffas 47 fasab handbook, version 20 06/21 sffas 47 gpffr consolidation and disclosure consolidation entities',
24715:'66. consolidationentities’ financial statementsshouldbeconsolidatedfor thegovernment as a whole to facilitate an assessment of the financial position38 of the federal government',
24716:'and the cost of operations financed by taxes and other nonexchange revenue. component reporting entities should consolidate the financial information',
24717:'for all consolidation entities administratively assigned to them. consolidation39 aggregates the individual financial amounts of organizations that constitute a reporting',
24718:'entity and results in presentation of information for a single economic entity representing taxpayersupported activities, resources, and obligations. 67. consolidationentitiesasdefinedhereinareconsideredfederalreportingentitiesandshould',
24719:'apply gaap as defined in sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards issued',
24720:'by the financial accounting standardsboard. thisstatement doesnotestablishnewdisclosurerequirementsregarding consolidation entities but acknowledges existing standards require disclosures. 68. sffas 34 recognizes that',
24721:'some federal reporting entities prepare and publish financial reports pursuant to the accounting and reporting standards issued by the fasb.',
24722:'sffas 34 provides that gpffrs prepared in conformity with accounting standards issued by the fasb also may be regarded as',
24723:'in conformity with gaap. consolidation entities that is, the consolidated governmentwide reporting entity or a consolidated component reporting entity may',
24724:'consolidate component or subcomponent reporting entity financial statements preparedin accordancewith sffas 34 without conversionfor anydifferencesinaccounting policies among the organizations. reporting',
24725:'on disclosure entities 69. maintaining a distinction between the finances of consolidation entities and disclosure entities will more effectively meet',
24726:'federal financial reporting objectives. such a distinction 38 the consolidated financial statements should include amounts and balances, consistent with applicable',
24727:'accounting standards, even if the amounts and balances arise from or are supported by different funding sources for example, appropriations',
24728:'or donations. 39 consolidation is a method of accounting that combines the accounts of those entities line by line on',
24729:'a uniform basis of accounting and eliminates balances and transactions among the entities. for selected financial statements such as the',
24730:'statement of budgetary resources, a combined financial statement which does not eliminate balances and transactions among the entities is acceptable.',
24731:'page 24 sffas 47 fasab handbook, version 20 06/21 sffas 47 allows for separate presentation of financial information for organizations',
24732:'where there is a difference in purpose, governance structure, and financial relationships. disclosing financial and other information in the notes',
24733:'about disclosure entities rather than consolidating financialand otherinformationaboutallorganizationsincludedinagpffrmaybettermeet federal financial reporting objectives. while the hierarchy of gaap established for federal',
24734:'reporting entities may not necessarily apply to disclosure entities, information about such organizations is still needed for accountability purposes and',
24735:'to meet federal financial reporting objectives. 70. for those organizations classified as disclosure entities, the preparer should exercise judgment in',
24736:'determining the appropriate disclosures based on the factors and principles provided herein. information regarding disclosure entities should be disclosed in',
24737:'accordance with disclosure requirements as detailed in paragraphs 72 to 75 below after considering the factors listed in paragraph 71.',
24738:'factors in determining disclosures 71. materiality is an overarching consideration in financial reporting. preparers should consider both qualitative and quantitative',
24739:'materiality in determining the information that should be presentedregarding disclosure entities. beyond materiality, thefollowingfactors40 shouldbe considered in making judgments about',
24740:'the extent of appropriate disclosures: a. relevance to reporting objectives—significance of the disclosure entity’s information to meeting the reporting objectivesestablished',
24741:'in sffac 1, objectives of federal financial reporting, with regard to the reporting entity. in particular, this would include the',
24742:'significance of the information regarding results of operations and financial position to meeting the operating performance and stewardship reporting objectives.',
24743:'b. nature and magnitude of the potential risks/exposures or benefits associated with the relationship—information is needed to provide an understanding',
24744:'of the potential operational or financial impact, including financialrelated exposures to risk of loss and potential gain, to the consolidation',
24745:'entity resulting from the disclosure entity’s operations. 40the factors are presented in a list for consideration in the aggregate; no',
24746:'individual weights should be assigned or interpreted. page 25 sffas 47 fasab handbook, version 20 06/21 sffas 47 c. complexity',
24747:'of the relationship—more complex relationships would involve additional detailed disclosures to ensure the relationship is understood by the readers. d.',
24748:'extentto which theinformation interests,ormaybeexpected to interest,awide audience—there may be a wide interest in the information due to the sensitivity of',
24749:'the relationship, materiality of the transactions, media attention, or other reasons. interested parties may expect more extensive information regarding the',
24750:'disclosure entity or its relationship with the federal government. e. extent to which there are no alternative sources of reliable',
24751:'information—an objective of gpffrs is to meet the needs of users who may have limited access to information or statements',
24752:'and lack the ability to demand the desired information. disclosure requirements 72. in addition to the factors presented in paragraph',
24753:'71 regarding the extent of disclosures, other qualitative and quantitative factors should be considered in determining whether information regarding a',
24754:'disclosure entity should be presented separately due to its significance or aggregated with the information regarding other disclosure entities. if',
24755:'information is aggregated, aggregation may be based on disclosure entity type, class, investment type, or a particular event deemed significant',
24756:'to the reporting entity. 73. disclosuresshouldbeintegratedsothatconcise,meaningful,andtransparentinformationis provided. integration is accomplished by providing a single comprehensive note regarding the disclosure entity',
24757:'or entities and related balances, or by incorporating references to relevant notes elsewhere in the gpffr but relating to the',
24758:'disclosure entity or entities. for example, a reference may be made to a note regarding investments in the disclosure entity.',
24759:'74. for each significant disclosure entity and aggregation of disclosure entities, information should be disclosed to meet the following objectives:41',
24760:'a. relationshipand organization: the nature of the federal government’srelationship with the disclosure entity or entities. b. relevant activity: nature and',
24761:'magnitude of relevant activity during the period and balances at the end of the period. 41the objectives are not listed',
24762:'in any order of preference. page 26 sffas 47 fasab handbook, version 20 06/21 sffas 47 c. future exposures: a',
24763:'description of financial and nonfinancial risks, potential benefits and, if possible, the amount of the federal government’s exposure to gains',
24764:'and losses from the past or future operations of the disclosure entity or entities. 75. examples of information that may',
24765:'meet the above objectives and provide the necessary understanding of the disclosure entity’s relationship and organization, relevant activities, and future',
24766:'exposures specific to the federal government are provided below. the examples are provided to assist in determining the typesof information',
24767:'that would meet the objectives in paragraph 74. no individual example is itself a required disclosure and the examples are',
24768:'not required in the aggregate. the examples are listed individually and should not be considered alternatives or substitutes for one',
24769:'another. the list of examples below is not exhaustive and additional items of information necessary to meet the objectives should',
24770:'be disclosed even if not specifically identified in the list below. disclosures that meet the objectivesin paragraph74shouldbe provided. indeterminingwhat informationisneeded',
24771:'to meet the objectives in paragraph 74, the factors in paragraph 71, including the complexity, nature, and magnitude of the',
24772:'relationship, should be considered. a. the name and description of the disclosure entity,42 including information about how its mission relates',
24773:'to federal policy objectives, actions taken on behalf of the federal government, its organization, and any significant involvements with outside',
24774:'parties. b. the nature of the relationship between the federal government and the disclosure entity including relevant information regarding: i.',
24775:'how any control or influence over the disclosure entity is exercised; ii. keytermsofcontractualagreements,statutes,orotherlegalauthorities;and iii. the percentage of ownership interest and/or',
24776:'voting rights. c. for intervention actions, the primary reasons for the intervention and a brief description of the federal government’s',
24777:'plan relative to monitoring, operating and/or disposing of the disclosure entity and/or a statement that the intervention is not expected',
24778:'to be permanent. d. a description and summary of assets, liabilities, revenues, expenses, gains, and lossesrecognizedin thefinancialstatementsofthereporting entityasa consequence 42for',
24779:'simplicity, information is described in relation to a single disclosure entity. nonetheless, the information may be presented for an aggregation',
24780:'of disclosure entities. page 27 sffas 47 fasab handbook, version 20 06/21 sffas 47 of transactions with or interests in',
24781:'the disclosure entity and the basis for determining the amounts reported or a reference to other disclosures where such information',
24782:'is provided. e. a discussion of the disclosure entity’s key financial indicators and changes in key financial indicators. f. information',
24783:'regarding the availability of the disclosure entity’s annual financial report and how it can be obtained. g. in the event',
24784:'that contractual agreements, statues, or other legal authorities obligate the reporting entity to provide financial support to the disclosure entity',
24785:'in the future, information regarding potential financial impacts including those terms of the arrangements to provide financial support and liquidity,',
24786:'including events or circumstances that could expose the federal government to a loss. h. thenatureof,andchangesin,therisksandbenefitsassociatedwiththecontrolof,or other involvement with, the organization',
24787:'during the period. i. the amount that best represents the federal government’s maximum exposure to gain or loss from its',
24788:'involvement with the disclosure entity, including how the maximum exposure to gain or loss is determined. if this cannot be',
24789:'quantified, a narrative discussion could be offered. j. other information that would provide an understanding of the potential financial impact,',
24790:'including financialrelated exposures to risk of loss or potential gain to the reporting entity, resulting from the disclosure entity’s operations',
24791:'including important existing, currentlyknown demands, risks, uncertainties, events, conditions, and trends—both favorable and unfavorable. 76. any disclosure entity’s financial information',
24792:'presented in the reporting entity’s gpffr should be based on accrualbasis standards provided in gaap or an other comprehensive basis',
24793:'of accounting developed for its specific type of entity.43 this includes gaap for the relevant domain fasab, governmentalaccounting standards board,',
24794:'or fasb. 43 consolidation entities should apply the gaaphierarchy established in sffas 34, the hierarchy of generally accepted accounting principles,',
24795:'including the application of standards issued by the financial accounting standards board. page 28 sffas 47 fasab handbook, version 20',
24796:'06/21 sffas 47 77. when information is derived from the disclosure entity’s financial report, it is preferable but not mandatory',
24797:'that the report be for the same reporting period as the governmentwide reporting entity. if a disclosure entity’s reporting period',
24798:'differs from the governmentwide reporting entity’s and it is not costbeneficial to align the reporting periods, any financial information disclosed',
24799:'from the disclosure entity’s financial report should be for a reporting period ending within the governmentwide reporting entity’s reporting period.',
24800:'78. significantchangesininformationoccurringfromtheendofthedisclosureentity’sreporting period should be reported consistent with the requirements of sffas 39, subsequent events: codification of accounting and financial',
24801:'reporting standards contained in the american institute of cpas statements on auditing standards. minimum disclosures regarding the central banking system44',
24802:'79. the following information regarding the central banking system should be disclosed45 in the governmentwide gpffr: a. descriptionofthecentralbankingsystem,includinginformationabouthowitsmission relatesto federalpolicy',
24803:'objectives, actions taken on behalf of the federalgovernment, its organization, and any significant involvements with outside parties. b. the nature',
24804:'of the relationship between the federal government and the central banking system including relevant information regarding governance structure with particularemphasisonmattersaffectingitsindependenceandinsulationfrompolitical',
24805:'influence. c. a discussion of the significance and magnitude of financial actions reported during the year by the central banking',
24806:'system to achieve monetary and fiscal policy objectives. 44central banking system functions are currently carried out by the federal reserve',
24807:'system frs. the frs comprisestheboardof governors,thefederalopenmarketcommittee, the regionalfederalreserve banks,and the bureau of consumer financial protection. the bureau was established in',
24808:'2010 as an independent bureau within the frs pursuant tothedoddfrank wallstreetreformandconsumer protectionact. thelaw provides that thebureau’s financial statements should not',
24809:'be consolidated with the financial statements of either the board of governors or the federal reserve system. 45depending on the',
24810:'circumstances, some of the listed information may be disclosed due to other requirements. the resulting disclosures should be integrated so',
24811:'that concise, meaningful and transparent information is provided and information is not repetitive. page 29 sffas 47 fasab handbook, version',
24812:'20 06/21 sffas 47 d. a description and summary of assets, liabilities, revenues, expenses, gains, and lossesrecognizedin thefinancialstatementsofthereporting entityasa consequence',
24813:'of transactions with or interests in the central banking system and the basis for determining the amounts reported or a',
24814:'reference to other disclosures where such information is provided. e. the amount that best represents the federal government’s maximum exposure',
24815:'to gain or loss from its involvement with the central banking system, including how the maximum exposure to gain or',
24816:'loss is determined if this cannot be quantified, a narrative discussion could be offered.. f. information regarding the availability of',
24817:'the central banking system annual financial reports and how they can be obtained. page 30 sffas 47 fasab handbook, version',
24818:'20 06/21 sffas 47 related parties 80. in addition to organizations for which the congress and/or the president are accountable,46',
24819:'thefederalgovernmentmayhaverelationshipswith otherparties. onlyrelationshipsofsuch significance that it would be misleading to exclude information about such relationships warrant disclosure.47 guidance is provided',
24820:'below but judgment will also be required to identify relationships that warrant disclosure as related parties. 81. related parties: organizations',
24821:'are considered to be related parties in the gpffr if the existing relationship48 or one party to the existing relationship',
24822:'has the ability to exercise significant influence over the other party’s policy decisions. 82. significant influence for the purpose of',
24823:'this statement is the power to participate in the policy decisions of an entity, but not control those policies. significant',
24824:'influence may be exercised in several ways, sometimes by representation on the board of directors or equivalent governing body but',
24825:'also by, for example, participation in the policymaking process, interchange of managerial personnel, or dependence on technical information. significant influence',
24826:'may be gained by a minority ownership interest, statute, or agreement. 83. significant influence does not arise from regulatory actions',
24827:'or economic dependency alone. however, regulation or economic dependency, together with other factors, may give rise to significant influence and',
24828:'therefore a related party relationship. judgment is required in assessing the impact of regulation and economic dependence on a relationship.',
24829:'84. althoughcomponentreportingentitiesofthefederalgovernmentmaysignificantlyinfluence each other, component reporting entities are subject to the overall control of the federal government and operate together',
24830:'to achieve the policies of the federal government and are not considered related parties. therefore, component reporting entities need not',
24831:'be disclosed as related parties by other component reporting entities. 85. related parties generally would include see paragraph 86 for',
24832:'organizations generally not included but are not limited to: 46entities for whichthecongress and/or the presidentare accountable are in the budget,',
24833:'majority owned, or controlled and would meet the inclusionprinciples and be reported as either a consolidation entity or disclosure entity',
24834:'and not be subject to related party reporting. 47 significance is assessed at the reporting entity and may differ among',
24835:'component reporting entities and the governmentwide reporting entity. 48relationship, as used in this context, refers to material transactions or events',
24836:'involving both parties. page 31 sffas 47 fasab handbook, version 20 06/21 sffas 47 a. government sponsored enterprises not meeting',
24837:'the inclusion principles b. organizations governed by representatives from each of the governments that created theorganization,includingthe unitedstates, whereinthe federalgovernment has',
24838:'agreed to ongoing or contingent financial support to accomplish shared objectives for example, certain multilateral development banks 86. in the',
24839:'context of this statement, the following generally would not be considered related parties:49 a. organizations meeting the inclusion principles b.',
24840:'organizations with which the federal government transacts a significant volume of business resulting in economic dependence such as government contractors,',
24841:'state and local governments, and notforprofit organizations50 c. organizations owned or managed by fulltime employees of the federal government or',
24842:'members of their immediate families d. fulltime employees of the federal government e. foreign governments f. organizations created through treaties',
24843:'or trade agreements that define common goals and means for joint action where the u.s. role in governing and financing',
24844:'the organizations is not significant g. special interest groups51 87. although paragraph 86 discusses the potential exclusion of certain organizations',
24845:'as related parties, other factorsmaycreate a need forrelated party disclosuresfor such organizations. the use of judgment will be necessary in',
24846:'identifying those factors consistent with the information needs described in paragraph 88. 49 as described in paragraph 87 below, paragraphs',
24847:'86a. – 86g. identify potential exclusions but judgment will be required to determine whether some pose risks that warrant disclosures.',
24848:'50 however, economic dependency, together with other factors, may give rise to significant influence and, therefore, a related party relationship.',
24849:'51 specialinterest groupsrefersbroadlytoorganizationswhosememberssharecommonconcernsandtrytoinfluence government policies. examples include but are not limited to labor unions, trade associations, religious organizations, membership organizations,',
24850:'and lobbying organizations. page 32 sffas 47 fasab handbook, version 20 06/21 sffas 47 88. certain information regarding significant related',
24851:'party relationships may enable users to better understand the financial statements of the reporting entity because: a. related party relationships',
24852:'might expose the federal government to risks or provide opportunities that would not have existed in the absence of the',
24853:'relationship; b. related party relationships can influence the way in which the federal government operates with other entities in achieving',
24854:'its individual objectives; and c. related parties may enter into transactions that unrelated parties would not enter into, or may',
24855:'agree to transactions on different terms and conditions than those that would normally be available to unrelated parties. 89. for',
24856:'related party relationships of such significance to the reporting entity that it would be misleading to exclude information about such',
24857:'relationships, the following should be disclosed: a. nature of the federal government’s relationship with the party, including the name of',
24858:'the party or if aggregated, a description of the related parties. such information also would include, as appropriate, the percentage',
24859:'of ownership interest. b. other information that would provide an understanding of the relationship and potential financial reporting impact, including',
24860:'financialrelated exposures to risk of loss or potential gain to the reporting entity resulting from the relationship. effect on existing',
24861:'concepts—amendments to sffac 2, entity and display 90. this section establishes conforming amendments to the statement of federal financial accounting',
24862:'concepts sffac 2, entity and display, as described in the following paragraphs. 91. paragraph2isreplacedwiththefollowingparagraphwhichdescribestheamendedpurpose and contents of sffac 2. the',
24863:'purpose of this statement is to establish concepts regarding what would be encompassed by a federal government entity’s financial report.',
24864:'the statement specifies the types of entities for which there should be financial reports hereinafter called “reporting entities”, establishes an',
24865:'organizational perspective for considering the makeup of each type of reporting entity, identifies types of financial reports for communicating the',
24866:'information for each type of reporting entity, suggests the types of information each type of report would page 33 sffas',
24867:'47 fasab handbook, version 20 06/21 sffas 47 convey, and identifies the process and factors the board may consider in',
24868:'determining whether information should be basic information, required supplementary information rsi, or other accompanying information oai. 92. paragraphs 3 5',
24869:'are rescinded because the preamble applicable to all concepts statements, which was adopted at the time sffac 5, definitions of',
24870:'elements and basic recognition criteria for accrualbasis financial statements was issued, addresses the topics covered. 93. paragraph 6a below is',
24871:'inserted following paragraph 6 to recognize the importance of accountability in determining organizations to be included in the reporting entity',
24872:'gpffr: 6a. sffac 1 also discusses accountability and users’ information needs as the foundation for the objectives of federal financial',
24873:'reporting. specifically, paragraphs 7172 state “it may be said that ‘accountability’ and its corollary, ’decision usefulness,’ comprise the two fundamental',
24874:'values of governmental accounting and financial reporting. they provide the foundation for the objectives of federal financial reporting. …the assertion',
24875:'of accountability therefore leads to identifying, first, those to whom government is accountable and, second, the information needed to maintain',
24876:'and demonstrate that accountability.” based on the concepts established in sffac 1, it is clear that accountability is a fundamental',
24877:'goal of financial reporting to be considered in establishing the boundaries of general purpose federal financial reports. 94. paragraph 7',
24878:'is rescinded because the preamble applicable to all concepts statements addresses the topics covered. 95. paragraph 10, first bulleted item',
24879:'is amended by replacing it with the following bulleted item addressing an understanding of what the reporting entity entails: ensure',
24880:'each reporting entity includes information to support accountability by including all relevant organizations—those that are in the budget, owned by',
24881:'the federal government, or controlled by the federal government with risk of loss or expectation of benefit; 96. paragraph18, thelast',
24882:'sentenceisamendedby changing ‘earmarkedcollections’ to ‘dedicated collections.’ 97. paragraph 29 is amended by adding the following footnote after the first sentence:',
24883:'the office of management and budget specifies the form and content of agency financial statements, pursuant to its authority under',
24884:'the chief financial officersact of 1990, as amended title 31, u.s. code, section 3515d through issuance of bulletins and circulars.',
24885:'page 34 sffas 47 fasab handbook, version 20 06/21 sffas 47 omb intends to base form and content on the',
24886:'concepts contained in this statement. any uncertainty as to what to consider as a reporting entity would be resolved by',
24887:'omb in consultation with the appropriate congressional committees. 98. paragraph 38 is amended to exclude references to other paragraphs amended',
24888:'by this statement. paragraph 38 is replaced with the following: theultimate aggregationoforganizationsisinto thefederalgovernment which,in reality, is the only independent economic',
24889:'entity. the federal government encompasses all of the resources and responsibilities existing within the component reporting entities. the aggregation includes',
24890:'organizations for which the federal government is accountable as wellasotherorganizationsforwhichthe natureandsignificanceof theirrelationshipwiththe federal government are such that their exclusion would',
24891:'cause the federal governments financial statements to be misleading or incomplete. 99. paragraphs 39 50 are rescinded because the standards',
24892:'herein provide guidance on the same matters. it is not necessary or appropriate to retain the guidance in sffac 2.',
24893:'100. the subheading before paragraph 51 “otheraspects concerning completeness of the entity” is revised to read “otheraspects concerning completeness of',
24894:'the component reporting entity.” 101. paragraph 51 is replaced with the following: identifying the organizations to include in the reporting',
24895:'entity is one aspect of ensuring that the users of a reporting entity’s financial reports are provided with all the',
24896:'information relevant to the reporting entity. however, because the only independent economic entity is the entire federal government, financial resources',
24897:'or free services are often provided from one component in the government to another component without a quid pro quo.',
24898:'for example, a portion of the retirement costs of federal employees is reported by the office of personnel management rather',
24899:'than the organizational entities employing the persons. thus, within parameters more appropriately established in accounting standards, it is important to',
24900:'ensure that the reporting entity’s financial reports include amounts that are attributable to the reporting entity’s activities, even though they',
24901:'are recorded elsewhere. this is particularly important for costs associated with the use of human resources; personnel services are such',
24902:'a major part of most government activities. it is also important for the costs of services provided by other reporting',
24903:'entities, such as computer services provided by another unit. 102. paragraphs 52 – 53 are rescinded because these paragraphs relate',
24904:'to issues covered in standards and are not necessary for understanding the notion of the reporting entity. page 35 sffas',
24905:'47 fasab handbook, version 20 06/21 sffas 47 103. anew subheading “need to distinguish between consolidation entities and disclosure entities”',
24906:'is inserted at paragraph 53a. 104. insert paragraphs 53a – 53 e under the subheading: “need to distinguish between consolidation',
24907:'entities and disclosure entities” the language provides a high level explanation of consolidation entities and disclosure entities. these are new',
24908:'terms introduced in this statement critical to understanding the reporting entity concept in the federal government. more importantly, the language',
24909:'describes the need to distinguish them and the reason for this distinction in terms of financial statement presentation. 53a. the',
24910:'federal government is a large and complex organization. in order to fulfill public policy objectives, the federal government may use',
24911:'both consolidation entities such as departments and agencies and organizations that are distinct from consolidation entities to fulfill public policy',
24912:'objectives such as financially independent organizations. these distinct organizations are referred to collectively as “disclosure entities.” 53b. disclosureentitiesmaymaintaina separate legalidentity,have',
24913:'agovernancestructure designed to insulate the organization from political influence, and/or be granted relative financial independence. despite disclosure entities’ relative operational',
24914:'and financial independence, accountability for all organizations owned or controlled by the federal government rests with the congress and/or the',
24915:'president. so, both consolidation entities and disclosure entities should be included in financial reports to provide accountability. 53c. it may',
24916:'be difficult to provide accountability, by meeting financial reporting objectives, through consolidated financial statements because they blur the distinction between',
24917:'consolidation entities and disclosure entities. consolidated financial statements may obscure the fact that resources and resource allocation decisions for disclosure',
24918:'entities are more independent than similar decisions for consolidation entities. while consolidation entities are financed by taxes and other nonexchange',
24919:'revenue and governed by elected officials, disclosure entities often do not rely on taxes and other nonexchange revenue for financing',
24920:'or elected officials for spending authority. for example, a singlecolumn presentation of information for all organizations likely would create a',
24921:'risk of incorrect inferences. such inferences may include the amount of assets and revenues available for consolidation entities to use',
24922:'in general government activities, and the extent to which taxpayers stand ready to liquidate liabilities and meet expenses of disclosure',
24923:'entities. 53d. maintaining a distinction between consolidation entities and disclosure entities may more effectively meet federal financial reporting objectives. such',
24924:'a distinction may be maintained through discrete presentation of information regarding disclosure entities. nonetheless, disclosures are not a substitute for',
24925:'consolidation entities recognizing the financial effects of transactions with disclosure entities. page 36 sffas 47 fasab handbook, version 20 06/21',
24926:'sffas 47 53e. consolidated financial statements for only consolidation entities will facilitate an assessment of the financial position of the',
24927:'federal government and the cost of operations financed by taxes and other nonexchange revenue. consolidation aggregates the individual financial statements',
24928:'of organizations that constitute a reporting entity and results in presentation of information for a single economic entity representing consolidated',
24929:'activities supported by taxes and other nonexchange revenue, resources, and obligations. consolidation entities are considered federal entities and should apply',
24930:'gaap as defined in sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards issued by',
24931:'the financial accounting standards board. thefollowing sections discuss display of information in consolidation entity financial reports. 105. paragraph78isrescindedbecause itisnotconceptualguidance. itidentifiesanexpectation',
24932:'that materialdifferencesbetween the recognition andmeasurement requirementsunderthe fasb and the fasab standards will be adjusted before consolidation. effective date 106. this',
24933:'statement is effective for period periods beginning after september 30, 2017. earlier implementation is not permitted. the provisionof this statement',
24934:'need notbe applied to immaterial items. page 37 sffas 47 fasab handbook, version 20 06/21 sffas 47 appendixa: basis for',
24935:'conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in this statement. it includes',
24936:'the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others.',
24937:'the standards enunciated in this statement–not the material in this appendix–should govern the accounting for specific transactions, events, or conditions.',
24938:'this statement may be affected by later statements. the fasab handbook is updated annually and includes a status section directing',
24939:'the reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are updated',
24940:'for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for',
24941:'conclusions of the amending statement for the rationale for each amendment. introduction a1. the federal government and its relationships with',
24942:'other organizations have become increasingly complex. these complex relationships make it difficult to identify federal entities for financial accountability purposes.',
24943:'in addition, some organizations may be viewed as nonfederal and yet be owned or controlled by the federal government. identifying',
24944:'the organizations to be included in the governmentwide and component reporting entitygeneral purpose federal financial reportsgpffrs is necessary to ensure',
24945:'the completeness of gpffrs. a2. gpffrs should include the varied organizations for which the congress and/or the president are accountable',
24946:'regardless of their form. therefore, the primary reason for developing standards for the governmentwide and component reporting entity gpffrs is',
24947:'to ensure that users will be provided with complete financial information about the federal government. while sffac 2, entity and',
24948:'display, provides criteria for determining if an organization should be included, questions have continued in this area that resulted in',
24949:'the need for standards. project history /task force a3. in 2008, the board formed a task force to support the',
24950:'project. the objective of the task force was “to assist in developing the proposed standards on the boundaries of the',
24951:'reporting entity and specific criteria for determining whether an organization should be included.” page 38 sffas 47 fasab handbook, version',
24952:'20 06/21 sffas 47 a4. the task force met several times over the course of the project and also exchanged',
24953:'numerous ideas and recommendations electronically. the task force views and recommendations were presented to the board for its consideration during',
24954:'the development of these standards. the task force’s assistance was essential and its views carefully considered by members during deliberations.',
24955:'the task force played an important role in the research and survey work that led to the release of the',
24956:'reporting entity exposure draft. seeappendix e for a list of task force members. summary of outreach efforts a5. the exposure',
24957:'draft ed, reporting entity, was issued onapril 3, 2013 with comments requested by july 3, 2013. a6. upon release of',
24958:'the ed, notices and press releases were provided to the fasab email listserv, the federal register, the journal ofaccountancy,agatoday, the',
24959:'cpajournal, government executive, the cfo council, the council of the inspectors general on integrity and efficiency, and the financial statementaudit',
24960:'network, and committees of professional associations generally commenting on exposure drafts in the past for example, greater washington society of',
24961:'cpas,agafinancial management standards board. a7. this broad announcement was followed by direct mailings of the exposure draft to the following',
24962:'relevant congressional committees: a. senate committee on homeland security and governmental affairs b. senate committee on banking, housing, and urban',
24963:'affairs c. senate committee on rules and administration d. house committee on science, space, and technology e. house committee on',
24964:'oversight and government reform f. house committee on financial services a8. additional types of relevant organizations were contacted with direct',
24965:'mailings such as museums and performing art organizations, organizations that apply fasb gaap, and intelligence agency organizations. page 39 sffas',
24966:'47 fasab handbook, version 20 06/21 sffas 47 a9. thirtynine responses were received from preparers, auditors, professional associations, and citizens.',
24967:'in addition, over ten participants provided testimony on the issues surrounding the project to the board at a public hearing.',
24968:'a10. the board did not rely on the number in favor of or opposed to a given position. information about',
24969:'the respondents’ majority view is provided only as a means of summarizing the comments. the board considered the arguments in',
24970:'each response, as well as the testimony provided at the public hearing, and weighed the merits of the points raised.',
24971:'due to the complexity of the standard and the issues raised, it was deemed most efficient and appropriate to include',
24972:'the summary of the issues raised by respondents and disposition in the narrative relating to the board’s deliberation of the',
24973:'issue. organizationalapproach to defining boundaries underlying concepts a11. the federal government is complex and therefore defining the boundary of gpffrs',
24974:'may be difficult. its constitutionally established powers and often its motivations and functions are different from other organizations. despite these',
24975:'complexities, difficulties, and differences, accountability is a fundamental goal of financial reporting. as noted in sffac 1: the federal government',
24976:'derives its just powers from the consent of the governed. it therefore has a special responsibility to report on its',
24977:'actions and the results of those actions. these reports must accurately reflect the distinctive nature of the federal government and',
24978:'must provide information useful to the citizens, their elected representatives, federalexecutives, and program managers. providing this information to the public,',
24979:'the newsmedia, and elected officials isan essential part of accountability in government.52 a12. sffac1discusses accountability andusers’ informationneeds as thefoundation of',
24980:'governmental financial reporting. specifically, paragraphs 71 and 72 state “it may be said that ‘accountability’ and its corollary, ‘decision usefulness,’',
24981:'comprise the two fundamental values ofgovernmental accountingand financialreporting. they provide the foundation for the objectives of federal financial reporting. …the',
24982:'assertion of accountability therefore leads to identifying, first, those to whom government is accountable and, second, the information needed to',
24983:'maintain and demonstrate that accountability.” 52 sffac 1, paragraph 8. page 40 sffas 47 fasab handbook, version 20 06/21 sffas',
24984:'47 a13. sffac 1 explains that the federal government has a special responsibility to report on its actions and the',
24985:'results of those actions. sffac 1 discusses the information needs of both internal and external users including the citizens, their',
24986:'elected representatives, federal executives, and program managers because meeting user information needs is an essential part of accountability in government.',
24987:'a14. an organizationally based approach to defining boundaries supports accountability to all usersbutparticularlyto externaluserswhomaybeunaware of thenatureof organizational relationships. focusing on',
24988:'organizations helps to identifywho isaccountable and for what. in addition, an organizational approach provides meaningful financial statements by aligning boundaries',
24989:'with defined organizations for which there would likely be users of gpffrs.53 identifying and classifying organizations a15. theboardconsideredseveralalternativeapproachestoidentifyingorganizationsforwhich elected officials—the',
24990:'congress and/or the president–are accountable. this statement providesthatreportingentitiesshouldfirstidentifywhat organizations54 aretobeincluded55 in the reports. the three principles for including organizations in',
24991:'the governmentwide gpffr are: in the budget, majority ownership interest, and control with risk of loss or expectation of benefit.',
24992:'this statement also includes a provision requiring inclusion of an organization if it would be misleading to exclude it. a16.',
24993:'next, for those organizations to be included, a distinction is made between consolidation entities and disclosure entities. this distinction determines',
24994:'how financial information is to be presented inthe gpffr. consolidation entity financial information is to be presented in consolidated financial',
24995:'statements and related notes. disclosure entity financial information is to be disclosed in notes to the financial statements. a17. professionaljudgmentisrequiredintheapplicationofthestandardsinthisstatement.',
24996:'this statement presents a principlesbased approach to determining which organizations should be included56 in the governmentwide gpffr because of the',
24997:'wide and varying relationships of the federal government. general purpose federal financial reports for the governmentwide reporting entity should be',
24998:'broad enough to report the congress’ and the president’s accountability for organizations. this ensures that the financial reports contain 53',
24999:'see sffac 2, paragraphs 2938, for a discussion of the organizational approach. 54 “organization” refers to the organization in its',
25000:'entirety including all funding sources for example, appropriations or donations for which the entity is accountable. it is used broadly',
25001:'and may include among others departments, agencies, bureaus, divisions, commissions, corporations, and components. 55 “included” means an organization’s information is',
25002:'either consolidated or disclosed. 56 note that this statement does not specify which organizations must prepare and issue financial statements.',
25003:'page 41 sffas 47 fasab handbook, version 20 06/21 sffas 47 all the information essential for fair presentation of the',
25004:'government’s financial position and results of operations. a18. one controversial matter addressed in this statement was the inclusion of organizations',
25005:'where the ownership or control is intended to be temporary; such as receiverships, conservatorships, and entities owned or controlled due',
25006:'to intervention actions. the board considered many options in developing the exposure draft and concluded that preparers and auditors would',
25007:'find it difficult to apply the notion of “temporary” absent clear guidance in the standards. in some circumstances, temporary relationships',
25008:'evolve into permanent relationships.also,somefederal governmentcomponentsaresubject to sunset provisions andare also temporary. because itwasunlikely theboard couldanticipate thefullrangeof circumstancespreparers and auditorsmay face,',
25009:'the board proposed in the exposure draft that the same principles be applied to all organizations. a19. afew respondentsaskedtheboardtoprovidethatrelationshipsintendedtobetemporary be',
25010:'excluded but most agreed with the proposal. some respondents also asked that the board explain how the temporary status of',
25011:'the relationship should be considered in applying the principles. the board revised the proposal to explicitly state that whether relationshipsaretemporaryorpermanentshouldnotbeconsideredindeterminingwhether',
25012:'an organization is included in the gpffr. instead, the revised standards explain that whether a relationship is temporary or permanent',
25013:'is likely to influence whether the entity exhibits the characteristics established for a consolidation entity or for a disclosure entity.',
25014:'the standards also acknowledge that receiverships, conservatorships, and intervention entities would generally be disclosure entities but also state that entities',
25015:'controlled or owned as a result of intervention actions at the fiscal yearend must be assessed to confirm the classification.',
25016:'a20. members discussed the potential that inclusion of such entities in gpffrs might lead userstoconcludethatentitiesreceivingtemporaryfederalgovernmentfinancialassistance have become part of the',
25017:'federal government. the summary alerts readers that the “principles herein are not intended to establish whether an organization is or',
25018:'should be considered a federal agency for legal or political purposes.” the board recognizes that its responsibility is to ensure',
25019:'gpffrs meet federal financial reporting objectives and that is the focus of this statement. by avoiding subjective provisions such as',
25020:'“temporary” and instead establishing principles that can be applied to all relationships, this statement supports meeting federal financial reporting objectives.',
25021:'page 42 sffas 47 fasab handbook, version 20 06/21 sffas 47 principles for inclusion in the governmentwide gpffr in the',
25022:'budget a21. identification of an organization in the president’s budget is the clearest evidence that an organization should be included',
25023:'in the governmentwide report. absent budgetary actions – originating with the president’s budget and leading to appropriations – federal organizations',
25024:'would be unable to conduct operations. financial reporting objectives – budgetaryintegrity,operatingperformance, stewardship,and systemsandcontrols– could not be met if organizations identified',
25025:'in the budget were not included in the financial reports. therefore, the most efficient means to identify organizations for inclusion',
25026:'in the gpffr is by their participation in the budget process as evidenced by being listed in the schedule of',
25027:'the budget of the united states government: analytical perspectives— supplemental materials that provides budget account level information. application to legislative',
25028:'and judicial branches a22. although the legislative and judicial branches and most organizations within those branches may not be required',
25029:'to prepare financial statements, based on the ‘in the budget’ principle, those organizations would be reported upon in the governmentwide',
25030:'report. fasab gaap would be the appropriate accounting standards for those entities within the judicial and legislative branches that prepare',
25031:'gaapbased financial statements. while this statement does not require any entity to prepare and issue a gppfr, it does enable',
25032:'federal reporting entities preparing and issuing gppfrs in conformance with gaap as defined by sffas 34, the hierarchy of generally',
25033:'accepted accounting principles, including the application of standards issued by the financial accounting standards board, to determine what organizations should',
25034:'be included in gpffrs. organizations receiving federal financialassistance a23. the schedule of the budget of the united states government: analytical',
25035:'perspectives— supplemental materials that provides budget account level information also sometimes identifies specific recipients of federal financial assistance. sffac 2',
25036:'prior to the amendments set forth in this statement acknowledged that the schedule sometimes names an organization to receive a',
25037:'“subsidy” and stated “this does not mean, however, that an appropriation that finances a subsidy to a nonfederal entity would,',
25038:'by itself, require the recipient to be included in the financial statements of the organization or program that expends the',
25039:'appropriation.” thus, “subsidy” is the term used in sffac 2 before amendments set forth in this statement to distinguish such',
25040:'“nonfederal” organizations from the organizations intended to be included in the gpffr. page 43 sffas 47 fasab handbook, version 20',
25041:'06/21 sffas 47 a24. while the provision in sffac 2 was correct, this statement establishes standards and terms used in',
25042:'standards should be defined. the board considered ways to define “subsidy” butconcluded it wasmore appropriate to relyonthe existing definition of',
25043:'“federal financial assistance.” a25. as exposed, the proposed language attempted to ensure organizations that receive federal financial assistance57 as defined',
25044:'by the singleauditactamendments of 1996 but listed under an appropriation in the schedule of the budget of the united states',
25045:'government: analytical perspectives—supplemental materials that provides budget account level information are not automatically included in the gpffr. most grants are',
25046:'provided through programs and the recipient organizationsare notnecessarily listed in the budget. however, in some cases an organization is listed.',
25047:'the board believes a means to confirm whether specifically identified recipient organizations are “nonfederal organizations receiving federal financial assistance” is',
25048:'needed. when such organizations are listed in the budget, they should be assessed against the “majority ownership interest” and “control',
25049:'with risk of loss or expectation of benefit” principles before being excluded from the governmentwide gpffr. a26. although few organizations',
25050:'are listed in the budget as receiving subsidies, respondents questioned 1 whether such organizations had to be subject to the',
25051:'requirements of the singleauditact to be considered, 2 whether federally authorized “support fees” would meet the definition of assistance, and',
25052:'3 whether listing within the budget should be an inclusion principle given this practice. because of these questions, the wording',
25053:'was clarifed to provide that such nonfederal organizations would be state, local, or territorial governments or components thereof or notfor',
25054:'profit organizations. in addition, the footnotes clarify thatthe exclusionisnotlimited to organizations subject to the singleaudit actorto specificformsoffinancial assistance. lastly,ifanorganization listed',
25055:'in the budget is to be excluded it is because it is neither owned nor controlled as defined in these',
25056:'standards. 57thisstatement adoptsthedefinitionof “federal financialassistance” establishedinthesingleauditactamendments of1996. however, anorganization neednot besubject to the requirements of the singleauditact in order toqualify',
25057:'as a nonfederal organization receiving federal financial assistance. as defined by the singleauditactamendments of 1996, federal financial assistance is assistance',
25058:'that nonfederal entities receive or administer in the form of grants, loans, loan guarantees, property, cooperative agreements, interest subsidies, insurance,',
25059:'food commodities, direct appropriations, or other assistance. for the purposes of these standards, federallyauthorized support fees and other charges would',
25060:'be considered other assistance even if legislation granting authority to collect them indicates that the fees or other charges are',
25061:'not considered public monies of the united states. page 44 sffas 47 fasab handbook, version 20 06/21 sffas 47 organizations',
25062:'partially in the budget a27. the board deliberated the issue of certain organizations being partially in the budget for example,',
25063:'some of their operations or accounts are not in the president’s budget, such as a museum receiving substantial donor support.',
25064:'the board determined organizations should be included in the governmentwide gpffr based on the “in the budget” principle. the board',
25065:'further decided that such organizations should be presented in the same manner as other consolidation entities or disclosure entities, as',
25066:'discussed later in this statement. therefore, the language in the principle “in the budget” does not provide separate and distinct',
25067:'guidance for organizations partially funded by nonbudgetary sources. this means the organization is either a consolidation entity or a disclosure',
25068:'entity and should be reported as one or the other, in its entirety. a28. certain respondents expressed concern because donated',
25069:'funds are for specific purposes and are not available for general government use. they believed full consolidation may be misleading.',
25070:'however,entities receiving donations administer and are accountable for both appropriations and donated funds. presently, the financial statements for museums receiving',
25071:'donations display consolidated totals along with separate columns for federal and donor funds. this presentation provides accountability for all funds',
25072:'under the entity’s management while alerting the reader to restrictions. similar presentation at the governmentwide level may be accomplished by',
25073:'presenting donated funds as dedicated collectionsto theextent theymeet thisdefinition. forexample,suchreporting wouldreveal that donor funds are unavailable for general use by',
25074:'the government. need foradditional principles a29. while the principle “in the budget” is the most efficient means to identify organizations',
25075:'for inclusion, there are additional principles to be considered to identify other organizations thatshouldbeincluded inthegovernmentwidegpffr. thebudgetprinciple representsa starting point in',
25076:'analysis but accountability goals could not be met solely through that principle. because the budget’s purposes differ from financial reporting',
25077:'objectives in many respects such as the focus on the allocation of budgetary resource flows versus costs of operations,itispossiblethat organizationsoractivitiesmight',
25078:'be excluded fromthe budget for reasons that do not justify exclusion from financial reports. for example, some organizations may be',
25079:'established to operate in a manner similar to businesses and are excluded from the budgetary process. therefore, additional inclusion principles',
25080:'are necessary to ensure completeness in the context of the federal financial reporting objectives. page 45 sffas 47 fasab handbook,',
25081:'version 20 06/21 sffas 47 majority ownership interest a30. ownership interests typically provide owners access to resources and exposure to',
25082:'risks while supporting their desired goals. federal financial reporting objectives require that information about service efforts, costs, and accomplishments be',
25083:'made available. to ensure such information is included, when the federal government holds a majority ownership in an organization, the',
25084:'organization should be included in the gpffr. as described in this statement, majority ownership interest exists with over 50 percent',
25085:'of the voting rights or the net residual assets of an organization. a31. the board noted that some may question',
25086:'how to account for minority ownership interests lessthan 50 percent. the board agreed addressing minority interests through the project is',
25087:'likely to be less effective than allowing the gaap hierarchy to fill any void. to address the potential question, the',
25088:'board included within this statement a footnote stating ownership interests 50 percent or less should be accounted for in accordance',
25089:'with the appropriate accounting standards per the gaap hierarchy. control with risk of loss or expectation of benefit a32. when',
25090:'the federal government controls an organization with risk of loss or expectation of benefit, the organization should be included in',
25091:'the governmentwide gpffr to provide accountability.as detailed in this statement, control involves the power to impose will on and/or govern',
25092:'the financial and/or operating policies of another organization with the potential to obtain financial resources or nonfinancial benefits or be',
25093:'obligated to provide financial support or assume financial obligations as a result of those actions. both the power and the',
25094:'risk of loss or expectation of benefit aspects of the control definition should be present to justify inclusion of the',
25095:'organization in the gpffr. a33. forexample,thisstatementprovidesforsituationswheretheriskoflossorexpectationof benefit does not exist—in the instance of the federal government exercising regulatory powersover an',
25096:'organization. in these cases, the federal government is unable to exercise thatpowerforitsownbenefitandrarelyexplicitlyassumesriskofloss.therefore,including suchanorganizationin thegpffrwouldmisrepresent thefinancialpositionandresultsof operation of the government. this',
25097:'would not support achievement of the objectives of financial reporting. a34. for financial reporting purposes, assessment of control is made',
25098:'at the reporting date and based on current legislation, rather than legislation that may or may not be enacted in',
25099:'the future. a35. determining control requires judgment, and this statement provides indicators to assist in makingdeterminations. the firstset of indicatorsis',
25100:'“persuasive”asthefederalgovernment has the authorityto control and any one of the listed itemswould generallymean control is page 46 sffas 47 fasab',
25101:'handbook, version 20 06/21 sffas 47 present. the second set of indicators requires more judgment because the set of indicators',
25102:'is considered in the aggregate to assess whether the federal government has the ability to control the organization. a36. because',
25103:'the federal government does not usually seek only financial benefits, the expected benefit associated with control does not have to',
25104:'be a financial benefit. instead, it may be nonfinancial. for example, it may be in the form of a service',
25105:'provided on the federal government’s behalf or the ability to direct the work of the other organization to deliver goods',
25106:'and services. misleading to exclude a37. this statement includes a general provision requiring inclusion of an organization if it would',
25107:'be misleading to exclude it. in developing the proposal, some board members and respondents to the proposal believed this may',
25108:'be problematic because no criteria are offered. however, the board ultimately agreed the general provision could accommodate unique situationsthatmayarise in',
25109:'the future.this isconsistent with provisionsof sffac2 and the governmentalaccounting standards board statement 14, the financial reporting entity. a38. requiring inclusion',
25110:'of an organization that would be misleading to exclude allows for judgment in unique situations not anticipated when the standards',
25111:'were developed. if it were feasible to anticipate such situations and develop criteria, then there would be no need for',
25112:'the misleading to exclude provision. while there are concerns regarding possible unanticipated consequences, the board believes the provision will be',
25113:'of benefit during the implementation period. if adjustmentsare needed, agencies may seekamendmentsto the standards or additional guidance as appropriate. further,',
25114:'the board also may consider whether the provision is necessary after implementation. reporting on organizations—consolidation or disclosure a39. differences in',
25115:'purposes and governance structures by organizations may require different presentation of related financial information. this statement provides that the reporting',
25116:'entity should first determine which organizations are to be included in its gpffrs. next thereporting entityshouldclassifyeachincluded organization asaconsolidationentityora disclosure entity.',
25117:'different means of presenting relevant information are provided for consolidation entities and disclosure entities. consolidation entities58 should apply the 58',
25118:'consolidated financial statements provided for “consolidation entities” will include all disclosures and required supplementary information required by existing standards. existing',
25119:'standards will ensure that adequate information is provided regarding the nature and organizational structure of consolidation entities as well as',
25120:'the activities and future exposures. page 47 sffas 47 fasab handbook, version 20 06/21 sffas 47 hierarchy of gaap established',
25121:'for “federal reporting entities” in statement of federal financialaccounting standards sffas 34. while the hierarchy of gaap established for federalreportingentitiesmaynotnecessarilyapplytodisclosureentities;',
25122:'informationabout such organizations is still needed for accountability purposes and to meet federal financial reporting objectives. a40. the distinction between',
25123:'consolidation entities and disclosure entities is based on the degreetowhichthefollowingcharacteristicsaremet: theorganizationisfinancedbytaxes and other nonexchange revenue, is governed by the congress',
25124:'and/or the president, imposes or may impose risks and rewards to the federal government, and/or provides goodsandservicesonanonmarketbasis.maintainingadistinctionbetweenconsolidation entities where financial',
25125:'and operational decisions are more directly governed by the congress and/or the president, and disclosure entities that are more financially',
25126:'or operationally independent will provide information to users that is more understandable and relevant. in some cases,disclosure of information regarding',
25127:'an individualorganization ismoreusefulthanconsolidation oftheindividualorganization’sfinancial statementsinthe governmentwide financial statements. in other instances, consolidation of individual organizations’ financial statements is needed to',
25128:'provide fair presentation of activities financed by taxes and other nonexchange revenue, and/or relying on the taxpayers to settle liabilities.',
25129:'a41. while principlebased standards do not explicitly classify specific organizations as consolidationentitiesordisclosureentities,theboardconsidered theneedtoillustratehow the inclusion principles and the criteria for',
25130:'classification as a consolidation entity or disclosure entity might be applied to certain significant individual organizations or classes of organizations.',
25131:'for many classes of organizations, illustrations are provided inappendix c. with respect to certain significant organizations with particularly unique characteristics,',
25132:'such as the central banking system federal reserve system frs,59 a majority of the board did not believe illustrations would',
25133:'be appropriate because the illustrations might become de facto requirements regarding that entity’s classification. a42. the role of preparers and',
25134:'auditors is to assess each organization against the principles in paragraphs 22 – 55 and reach their own conclusions. in',
25135:'contrast, the role of standards setters is to set accounting standards and consider the potential implications. in doing so, the',
25136:'board acknowledges some members believe the board should explicitly address 59the frs comprises the board of governors, the federal open',
25137:'market committee, the regional federal reserve banks, and the bureau of consumer financial protection. the bureau was established in 2010',
25138:'as an independent bureauwithinthefrs pursuant tothedoddfrank wallstreetreformandconsumer protectionact. thelawprovides that the bureau’s financial statements should not be consolidated with the',
25139:'financial statements of either the board of governors or thefederal reserve system. thebureauhas beenconsolidated directly in the governmentwide report to',
25140:'date. for simplicity, the basis for conclusions discusses the system as a whole rather than its individual components. page 48',
25141:'sffas 47 fasab handbook, version 20 06/21 sffas 47 inclusion and classification as a consolidation entity or disclosure entity of',
25142:'the frs in gpffrs because of the magnitude of its operations. while different individuals could reach different conclusions due to',
25143:'the unique and changing role of the central banking system, most members believe explicitly classifying the frs, or any entity,',
25144:'at a point in time would be inappropriate and result in this statement becoming outdated as circumstances change. a43. despite',
25145:'the decision not to explicitly classify the frs, the board considered each possible classification of the frs. this consideration did',
25146:'not take into account all the facts and circumstances that would be considered by the preparer and auditor. instead, like',
25147:'the illustrations inappendix c, highlevel facts were considered in sufficient detail to provide reasonable assurance to the board that preparers',
25148:'and auditors would consider the appropriate matters in making decisions. the majority of the board believes the principles are sufficient',
25149:'to aid preparers and auditors in assessing any organization, including the frs, and in making decisions regarding inclusion and classification',
25150:'as a consolidation entity or disclosure entity. a44. if the assessment of the frs resulted in its classification as a',
25151:'consolidation entity, the governmentwide consolidated financial statements and related notes would present information as if the frs and other consolidation',
25152:'entities operate together as a single economic entity.anybalancesand transactions among the consolidation entities would be eliminated. for example, all treasury',
25153:'securities held as investments by the frs and reported as liabilities by the department of the treasury would be eliminated.',
25154:'significant additionstothegovernmentwidebalancesheet asaresult of consolidatingthefrswould be liabilities for deposits of depository institutions and federal reserve notes outstanding as well as',
25155:'assets for investments in nonfederal organizations. consolidation would also affectthereportedoperatingresultsofthegovernment;interestexpensewouldbereduced by the amount paid bythe u.s. treasuryto the frs and',
25156:'revenue would be reduced bythe amount paid by the frs to the u.s. treasury. a45. iftheassessmentofthefrsresultedinitsclassificationasadisclosureentity,disclosures regarding the frs would',
25157:'aid users in understanding the frs, its relationship with the federal government, any significant activities, and any risks posed to',
25158:'the federal government. such disclosures would allow the reader to consider monetary policy and fiscal policy as distinct activities. the',
25159:'governmentwide consolidated financial statements would present the results of fiscal policy. consolidation of fiscal and monetary policy financial information, as',
25160:'described above, would result in elimination of some treasury securities. thus, the use of treasury securities to conduct monetary policy',
25161:'and their elimination uponconsolidationcouldobscurethetreasurysecuritiesdebtthat resultfrom the fiscal policies of the federal government. further, liabilities for federal reserve notes outstanding and',
25162:'depositsbydepository institutions differ in character from liabilitiesarising page 49 sffas 47 fasab handbook, version 20 06/21 sffas 47 from fiscalpolicy.',
25163:'incontrast,disclosuresmayprovide an understanding of therelationship between monetary and fiscal policy and support consideration of these distinct activities. a46. the board',
25164:'recognizes the frs performs a unique federal function—central banking—and there is only one organization of this type. the frs is',
25165:'unique not only in its mission, but also in its governance, structure, activities, and the need to maintain independence. its',
25166:'responsibilitiesare broad reaching and ofgreat interest because of the impact of monetary policy on the country. the magnitude of its',
25167:'role and transactions led the board to require certain minimum disclosures about the frs. the minimum disclosures recognize that there',
25168:'is special interest in the activity of the central banking system. the minimum disclosures for the governmentwide report are in',
25169:'addition to any other reporting requirements at the governmentwide or component reporting entity levels. the minimum disclosures focus on governance,',
25170:'significant roles and responsibilities, the significance and magnitude of financial actions reported by the frs to achieve monetary and fiscal',
25171:'policy objectives, transactions with the reporting entity, risks to the federal government, and future exposures to gains and losses. the',
25172:'disclosures should be integrated and, depending on the circumstances, also may be required by other provisions in this statement or',
25173:'other gaap requirements. consolidation entities a47. consolidation entities generally provide goods and services on a nonmarket basis. that is,pricesarenotestablishedsolelythroughmarkettransactionswheresupplyanddemand determine',
25174:'price. goods and services provided on a nonmarket basis may be free of charge or provided at prices that are',
25175:'either not economically significant or bear little relationship to the cost of the goods or services. a48. consolidation entities generally',
25176:'are financed through taxes and other nonexchange revenue as evidenced by inclusion in the budget. significant risks and rewards fall',
25177:'to the federal government for consolidation entities. inclusion in the budget is the clearest evidence an organization is relying on',
25178:'taxes and other nonexchange revenue and that elected officials are key decision makers. a49. the budget is a political document',
25179:'serving many purposes. the 1967 report of the president’s commission on budget concepts indicates that “the budget must serve simultaneously',
25180:'as an aid in decisions about both the efficient allocation of resources among competingclaimsandeconomicstabilizationand growth.” onthe topicofcoverage of the budget,',
25181:'the commission recommended that “the budget should, as a general rule, be comprehensive of the full range of federal activities.”',
25182:'because the budget includes “federal activities,” entities listed in the budget, except those receiving federal financial assistance, generally qualify as',
25183:'consolidation entities. page 50 sffas 47 fasab handbook, version 20 06/21 sffas 47 a50. the assessment of whether an organization',
25184:'meets the attributes for a consolidation entity is based on the assessment of all the attributes and the degree to',
25185:'which each is met. as such,notall attributesare required to be met; classification isbasedon the assessment as a whole. disclosure entities',
25186:'a51. disclosure entities receive limited or no funding from general tax revenues. disclosure entities, in contrast to consolidation entities, are',
25187:'often structured so there is a clear barrier or limit on taxpayer financing of the entity. disclosure entities have relative',
25188:'financial independence and often provide goods and services on a market basis. this may be an effort to shield the',
25189:'federal government from risk. a52. another contrast with consolidation entities is that with disclosure entities, the congress and/or the president',
25190:'have much less direct involvement in decisionmaking. decisionmakingmayrestwith agoverningboardinsulatedfrompoliticalinfluenceandtheremaybe situations where disclosure entities have a separate legal identity. in some',
25191:'cases, the relationship with the federal government is not expected to be permanent. a53. it is important to recognize the',
25192:'continuum that exists among disclosure entities. for example,despitea greaterdegree of autonomy, somedisclosureentitiesmaystillexercise powersthat are reserved to the federal government assovereign.',
25193:'other disclosureentities may not themselves carry out missions of the federal government but, instead, are owned or controlled by the',
25194:'federal government as a result of regulatory or intervention actions. a54. thisstatementprovidescategoriesofdisclosureentitiesprimarilyasawaytohelpidentify disclosure entities. however, this statement does not require',
25195:'presentation by any specific class or category and allows flexibility in presenting information about disclosure entities. the categories of potential',
25196:'disclosure entities include quasigovernmental and/or financially independent entities, receiverships and conservatorships, and federal government intervention actions. quasigovernmental and/or financially independent',
25197:'entities a55. this statement describes quasigovernmental and/or financially independent entities as those entities where governance and/or financial differences lead to',
25198:'greater independence.thisstatementidentifiesbothgovernanceand financialcharacteristicsthat would be found in this type of entity. a56. quasigovernmental and/or financially independent entities may include certain',
25199:'federally funded research and development centers ffrdcs, museums, performing arts organizations and universities, and venture capital funds. because details may',
25200:'differ page 51 sffas 47 fasab handbook, version 20 06/21 sffas 47 among organizations in each example type, an objective',
25201:'assessment may classify some individual organizations as consolidation entities rather than disclosure entities. appendix cillustrations offers examples that may be',
25202:'useful in application. receiverships and conservatorships a57. this statement describes receiverships and conservatorships as those failed financial institutions and banksthe',
25203:'federal governmenttakescontrolor ownership of with no goal to maintain the relationship.absent a decision to make control permanent, such controlled or',
25204:'owned organizations generally would be disclosure entities. federal government intervention actions a58. this statement describes federal government intervention actions as',
25205:'resulting from exceptional circumstances where the involvements are not expected to be permanent. sffac 1 acknowledges the unique nature of',
25206:'federal government activity and its broad responsibilities. paragraph 50 explains “the federal government is unique, when compared with any other',
25207:'entity in the country, because it is the vehicle through which the citizens of the united states exercise their sovereign',
25208:'power. the federal government has the power through law, regulation, and taxation to exercise ultimate control over many facets of',
25209:'the national economy and society…” sffac 1 describes the federal government’s responsibility for the general welfare of the nation in',
25210:'paragraph 5354 as “a broad responsibility that involves multiple goals.” a59. with these broad responsibilities, the federal government may decide',
25211:'to take certain actions or intervene in certain situations. examples may include actions to provide stability to the financial markets,',
25212:'key industries, states, cities, or counties. these types of federal government interventions are considered rare.60 historically the federal government has',
25213:'been involved in few commercial enterprises on an equity basis or shared ownership basis.61 although the federal government may not',
25214:'act to maximize profits, the federal government may intervene and act in capacities to protect citizens. this may ultimately lead',
25215:'to taking control of organizations or acquiring some form of ownership. a60. the federal government may also intervene by providing',
25216:'assistance through extending loans or debt guarantees that do not meet the inclusion principles established in this statement . such',
25217:'transactions should be accounted for in accordance with the appropriate 60 the financial crisis that began in 2007 is considered',
25218:'to be the most severe since the great depression. white paper on changes to financial regulations 61 congressional research service',
25219:'crs report for congress rl30533, the quasi government: hybrid organizations with both government and private sector legal characteristics. page 52',
25220:'sffas 47 fasab handbook, version 20 06/21 sffas 47 accounting standards per the gaap hierarchy. this statement does not require',
25221:'additional disclosures for intervention actions that do not meet the inclusion principles. a61. the initial sffac 2 provided an exception',
25222:'for situations where the criteria leading to consolidationaremettemporarily. specifically,paragraph 45 of sffac2 stated “theentity or any of the above criteria',
25223:'are likely to remain in existence for a time, i.e., the interest in the entity and its governmental characteristics are',
25224:'more than fleeting.” “fleeting” may implyperiodsof one year or less to some and the board considered howto clarifythe term “fleeting.”',
25225:'ultimately, the board decided terms such as “fleeting” and “temporary” imply a time limit. a62. however, there may be instances',
25226:'where an intervention is longer than one year due to the extreme factors of the national crisis. in most instances,',
25227:'it is difficult to establish and meet a timeline for ending an intervention. in these instances, the focus continues to',
25228:'be on governance and protection, rather than maximizing profits or establishing new federal government lines of business.although the actions may',
25229:'be longer than one year, the interventions are “not expected to be permanent.” the board notes that this “nonpermanent” expectation',
25230:'would generally lead to the entities exhibiting more of the characteristics of a disclosure entity than of a consolidation entity.',
25231:'this is preferable to relying on “temporary” or “fleeting” which implies that a time limit could be established. a63. afurtherimplicationtheboardwishestoavoidisthatorganizationsownedorcontrolledas',
25232:'a result of interventions are considered “federal government entities” when applying the code of professional conduct established by theamerican institute',
25233:'of cpas.62 this statement recognizes that such interventions create a need for accountability but they do not make the disclosure',
25234:'entities arising from intervention actions “federal government entities” or federal reporting entities. while the hierarchy of gaap established for federal',
25235:'reporting entities may not necessarily apply to disclosure entities, information about such organizations is still needed for accountability purposes and',
25236:'to meet federal financial reporting objectives. component reporting entities a64. the board believes there should be consistency in treatment of',
25237:'organizations at the governmentwide and the component reporting entity levels. the reasons for including organizationsatthecomponent reportingentitylevelshouldbe consistent with thereasons 62',
25238:'theamerican institute of cpas establishes ethics rules for its members through its code of professional conduct. rule 203,accounting principles, designates',
25239:'three bodies to establish accounting principles for three different domains—nongovernmental entities, state and local governmental entities, and “federal government entities.”',
25240:'et section 203, paragraph .01 page 53 sffas 47 fasab handbook, version 20 06/21 sffas 47 in the governmentwide entity',
25241:'gpffr. further, classification as consolidation entities or disclosure entities should be consistent in governmentwide and component reporting entitygpffrs.the board believesa',
25242:'singlesetofprinciplesforinclusionand classification presented from the governmentwide perspective provides for the desired consistency. this is appropriate and necessary because the governmentwide',
25243:'reporting entity is the only federal reporting entity that is an independent economic entity. a65. nonetheless, implementation of these principles',
25244:'involves the component reporting entities because the governmentwide report is, for the most part, a consolidation of the reports provided',
25245:'by component reporting entities. therefore, component reporting entities must identify and include in their gpffrs all consolidation entities and disclosure',
25246:'entities for which they are accountable so that both the component reporting entity gpffrs and governmentwide gpffr are complete. a66.',
25247:'the board believes that component reporting entities should identify consolidation entities and disclosure entities administratively assigned to the component reporting',
25248:'entity. standards that are based on organization and accountability provide a more realistic view of how component reporting entities become',
25249:'accountable for organizations and how component entity boundaries are likely to be determined. the result will be component reporting entity',
25250:'gpffrs that include all organizations for which the component reporting entity management for example, appointed officials are expected to be',
25251:'accountable. a67. administrative assignments to component entities are typically made in policy documents such as laws, budget documents, regulations, or',
25252:'strategic plans. ultimately, component reporting entities would identify and include in their gpffrs all consolidation entities and disclosure entities for',
25253:'which they are accountable so that both the component reporting entity and governmentwide gpffrs are complete. a68. administrative assignments can',
25254:'be identified by evaluating the following three areas: a. scope of the budget process b. accountability established within a component',
25255:'entity c. misleading to exclude and/or misleading to include a69. componentreportingentitiesshoulddevelopprocessestoensuretheyidentifyandinclude those consolidation entities and disclosure entities that are: 1',
25256:'within the scope of their budget process, 2forwhich accountabilityisestablishedwithintheircomponentreporting entity, or 3 which are misleading to exclude. in rare cases,',
25257:'a component reporting entity may find that it would be misleading to include a consolidation entity that appears to be',
25258:'within the scope of their budget process or to have accountability established within the page 54 sffas 47 fasab handbook,',
25259:'version 20 06/21 sffas 47 component reporting entity. while most respondents agreed with the proposal, several indicated a need for',
25260:'implementation guidance, especially regarding the misleading to include provision. in addition,therewassome confusionabout howthe inclusionprinciples applied from the governmentwide perspective relate',
25261:'to the administrative assignments at the component reporting entity level. a70. the board does not intend to provide detailed administrative',
25262:'assignment implementation guidance at this time. central agencies are anticipated to determine if there is a need for coordinated guidance',
25263:'to be developed to ensure governmentwide consistency. a coordinated effort from the central agencies could promote a process to ensure',
25264:'the component reporting entities are performing the necessary procedures to capture the material organizations from their perspectives and also for',
25265:'consideration at the governmentwide level. the effective date considered this and allowed sufficient time for a coordination of efforts as',
25266:'well as development of any needed implementation guidance. a71. regarding the “misleading to include provisions,” the board made editorial changes',
25267:'to clarifythattheyexpectthisto occuronlyin rarecaseswherethesubstanceof relationships between consolidation entities differs from their form. for example, the pension benefit guarantee corporation pbgc',
25268:'is legally established within the department of labor. nonetheless,pbgchasalwaysoperated asaseparatelegalentitywitha mandate tofund its operations from premiums and has provided separate',
25269:'audited financial statements since its inception. some believe that it would be misleading to consolidate pbgc and department of labor',
25270:'financial statements. in contrast, the misleading to include provision would not be an appropriate justification for excluding an office such',
25271:'as the office of the inspector general from the consolidated financialstatements of its associated department. a72. also, some respondents questioned',
25272:'whether the misleading to include provision would be applicable to disclosure entities. the board does not believe disclosure entities can',
25273:'be misleading to include because disclosures explain the relationship. such explanations would prevent misleading presentations about disclosure entities. a73. during',
25274:'due process, some respondents questioned the difference between the inclusion principles and administrative assignments. the inclusion principles are to be',
25275:'applied from a governmentwide perspective;whereasadministrative assignmentsaredetermined from the component reporting entity perspective. prior to implementation of this statement, based on',
25276:'initial provisions of sffac 2, component reporting entities apply the conclusive and indicative criteria from their perspective as individual government',
25277:'agencies. in some cases, no individual government agency has direct involvement in the operations of entities that nonetheless are controlled',
25278:'through legislation established by and/or officials appointed by elected officials.also, some ownership documents identify the federal government as owner rather',
25279:'than a particular government agency. to ensure that all page 55 sffas 47 fasab handbook, version 20 06/21 sffas 47',
25280:'owned or controlled entities are included, the inclusion principles must consider the relationship of an organization and the federal government',
25281:'as a whole. a74. another key difference is that administrative assignments are assessed from the component reporting entity perspective. therefore,',
25282:'component reporting entities will need toadapttoa multistepprocessinvolving varyingperspectivesinclusion principlesapplied from a governmentwide perspective and administrative assignments from the departmental perspective.accordingly,',
25283:'coordination with the central agencies during the implementation process will be important. gpffr consolidation and disclosure a75. as noted above,',
25284:'decisions about the governmentwide gpffr require determining what organizations are to be included in the reports and identifying appropriate means',
25285:'to present relevant information about organizations. the final determination of the presentation of financial information through consolidation or disclosure is',
25286:'based upon the results of two assessments—first, if the organization is included and second, if those included organizations are classified',
25287:'as consolidation entities or disclosure entities. a76. theflowchartatappendixbisa usefultoolinapplyingtheprinciples established. itis helpful in the assessment and applying the standards in',
25288:'order. it includes paragraph references to underlying principles and major decision points. consolidation entities a77. this statement provides that consolidation',
25289:'entities should apply sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the',
25290:'financial accounting standards board. in addition, it provides for the consolidation of the financial statements of consolidation entities so citizens',
25291:'may assess the financial position and the cost of operations of the federal government. consolidation of financial information regarding the',
25292:'activities financed by taxes and other nonexchange revenue, resources,and obligations where governance rests with the congress and/orthe president ensures that',
25293:'the reporting objectives of sffac 1 are met. a78. existing guidance may also require additional information—either through disclosures or required',
25294:'supplementary information—regarding consolidation entities. while the term “disclosure entities” is used to refer to organizations included in gpffrs through disclosures,readers',
25295:'should notinferthatdisclosureswouldnotalso be provided regarding consolidation entities and related activities and transactions consistent with existing standards. page 56 sffas 47',
25296:'fasab handbook, version 20 06/21 sffas 47 consolidation of fasbbased and fasabbased information a79. while fasab is the appropriate source',
25297:'of gaap for federal entities, the board has considered the potential ramifications when some federal entities follow gaap for nongovernmental',
25298:'entities promulgated by the financialaccounting standards board hereafter “fasb gaap” and their information is consolidated with information based on fasabstandards.',
25299:'forexample,federalgovernmentcorporations, theu.s. postalservice, certain component reporting entities of the u.s. department of the treasury and the department of housing and',
25300:'urban development, and some other organizations in the executive and legislative branches have historically applied fasb gaap and continue to',
25301:'do so. sffas34 recognizesthat “general purposefinancial reportsprepared in conformity with accounting standardsissued by the fasb also may be regarded as',
25302:'in conformity with gaapforthoseentitiesthat have inthe pastissuedsuchreports.” sffas34alsoprovides that a federal reporting entity preparing audited financial statements for the first',
25303:'time may adopt fasb standards in the rare case that the needs of its primary users would be best met',
25304:'through the application of fasb standards. the acceptance of these practices raises the question of whether the information prepared under',
25305:'fasb standards may be consolidated with information prepared under fasab standards in consolidated reports prepared by component reporting entities and',
25306:'in the consolidated governmentwide reporting entity. a80. the board has considered such issues on several occasions and provided concepts as',
25307:'follows: the reporting entities of which the components [preparing reports under fasb or regulatory accounting standards] are a part can',
25308:'issue consolidated, consolidating, or combining statements that include the components’ financial information prepared in accordance with the other accounting standards.',
25309:'they need to be sensitive, however, to differences resulting from applying different accounting standards that could be material to the',
25310:'users of the reporting entity’s financial statements. if these differences are material, the standards recommended by fasab and issued by',
25311:'omb and gao should be applied. the components would need to provide any additional disclosures recommended by fasab and included',
25312:'in the omb issued standards that would not be required bytheotherstandards.63 sffac2, entity and display,paragraph 78 excerpt from section on',
25313:'“financial reporting foran organizational entity” 63 in october 1999, fasab was recognized as the rule 203 standardssetting body for the',
25314:'federal government. as such, fasab now issues the standards, rather than issuing recommendations to omb and gao for issuance of',
25315:'the standards. page 57 sffas 47 fasab handbook, version 20 06/21 sffas 47 a81. theboarddeterminedinsffas34thatfasbbasedstatementsareacceptableincertain circumstances. while there may be',
25316:'significant differences between fasb and fasab standards, both standards result in accrualbasis information and disclosures that aid users in understanding',
25317:'the information. converting fasbbased information to fasab based information for consolidated financial reports of larger organizations may not be justifiable',
25318:'since conversion may not aid users. a82. users may be confused by the presentation of different amounts for a component',
25319:'in its own financial report and in the consolidated financial reports of larger organizations; particularly when both amounts would be',
25320:'in accordance with gaap for federal entities per sffas 34. in addition, conversion imposes a cost and it is not',
25321:'clear that the cost is justifiable based on benefits to the user. therefore, this statement establishes that amounts derived for',
25322:'component reporting entities in compliance with sffas 34 may be consolidated without adjustment and the aforementioned concepts from sffac 2',
25323:'paragraph 78 are rescinded. a83. however,ifthisleadstoconsolidationinasinglelineitemofamountsmeasureddifferently due to differences between fasb and fasab principles, then one would anticipate disclosuresofthedifferent accounting',
25324:'policiesand the related amounts to aidthereader in understanding the information provided. the board considered adopting requirements for such disclosures but',
25325:'believes that existing requirements and longstanding professional practices are sufficient. a84. theboardinitiallyproposedthatactivitiesmeasuredinaccordancewithfasabstandards and amounts related to intragovernmental were required to',
25326:'be disclosed in the notes of component reporting entities to facilitate eliminations at the governmentwide reporting level. however, after further',
25327:'consideration of the comments, the board determined this information may notbe relevant for the component reporting entity gpffrsand wasmore appropriately',
25328:'obtained in the treasury closing package. likewise, the budgetary reporting issues highlighted by respondents appeared to be a reconciliation and',
25329:'system issue that should be addressed in the treasury financial manual instead of an accounting standard. also during due process',
25330:'it was determined that certain component reporting entities reporting on a fasb basis convert their information to a fasab basis',
25331:'upon consolidation. thepreparers,auditors,andusersbelievetheinformationismeaningfulfortheirpurposes. as this may be the case in certain instances, but not all, the board did not want',
25332:'this statementtopreventthosewishingtoconvertfromdoingsoifitaidstheusersbyproviding this meaningful information. hence, while conversion may be appropriate in certain situations, it is not for all. page',
25333:'58 sffas 47 fasab handbook, version 20 06/21 sffas 47 disclosure entities a85. the board believes consolidation of disclosure entities',
25334:'would not result in information meeting the basic qualitative characteristics of information in financial reports because it would notprovide the',
25335:'most relevant, understandable, or consistent information. the board believes consolidation of disclosure entities may obscure the boundaries of the risks',
25336:'and rewards intended to be assumed or gained. further, assets that are not available for purposes other than the specific',
25337:'business operation of the nonconsolidated organization might be commingled with federal assets, and liabilities not fully guaranteed by the federal',
25338:'government might be added to federal liabilities. instead, financial balances and amounts for organizations having the characteristics of disclosure entities',
25339:'should be kept separate from balances and amounts for those organizations having the characteristics of consolidation entities to prevent distortions',
25340:'to the consolidated financial statements. a86. the board believes sffac 1 recognizes the challenges that may arise in applying traditional',
25341:'approaches to financial reporting. sffac 1 paragraph 49 states “…federal accounting and financial reporting are shaped by, and need to',
25342:'respond to, the unique characteristics and environment of the federal government.” sffac 1 paragraph 105 further explains “reports must accurately',
25343:'reflect the distinctive nature of the federal government and must provide information useful to the people, their elected representatives, and',
25344:'federal executives…” sffac 1 also provides the qualitative characteristicsofinformation in financial reports, by identifying these basic characteristics: understandability, reliability, relevance,',
25345:'timeliness, consistency, and comparability.64 a87. this statement provides flexibility in identifying needed information regarding disclosure entities because the range of',
25346:'disclosure entities is broad and different information may need to be disclosed to meet the reporting objectives. providing this flexibility',
25347:'allows the preparer to present information judged most necessary to meet reporting objectives while also providing an understanding of the',
25348:'potential effect of the relationship on the consolidation entity’s financial statements. factors in determining disclosures a88. because of the flexibility',
25349:'needed regarding disclosures, preparers are provided a list of factors to assist in determining what disclosures to include. materiality is',
25350:'an overarching consideration in financial reporting. preparers should consider both qualitative and quantitative materiality in determining disclosure entity presentation and',
25351:'disclosure. beyond materiality, the factors provided in this statement assist in determining the nature and extent of information regarding a',
25352:'disclosure entity to be provided. 64 sffac 1, paragraph 156. page 59 sffas 47 fasab handbook, version 20 06/21 sffas',
25353:'47 a89. thefactorsaretobeconsideredintheaggregate;noindividualweightshouldbeassigned or interpreted the assessment of the appropriate disclosures should be made after considering all the factors. during',
25354:'due process, several respondents disagreed with the factor “ disclosure entity views/perspective” that provided for consideration and judgment of about',
25355:'how the disclosure entity views its relationship with the federal government. most respondents did not believe this should influence the',
25356:'level of disclosures and noted that often the reporting entity would not be aware of the disclosure entity views. the',
25357:'board recognized that there may be situations where the disclosure entity’s view regarding its relationship with the federal government should',
25358:'influence the type and extent of information that is disclosed. however, it may be difficult to state operationally how this',
25359:'would affect disclosures in given situations. therefore, while the board agrees this factor may be relevant, the board nonetheless removed',
25360:'it from this statement. disclosure requirements a90. the board recognizes that although this statement provides flexibility in meeting the disclosure',
25361:'objectives, a wide variety of information is listed as examples to meet the intended objectives and there are not requirements',
25362:'for how information must be aggregated. qualitative and quantitative factors are considered in determining whether information regarding a disclosure entity',
25363:'is presented separately due to its significance or aggregated with the information regarding other disclosure entities. if information is aggregated,',
25364:'aggregation may be based on disclosure entity type, class, investment type, or a particular event deemed significant to the reporting',
25365:'entity. for example, one reporting entity may determine it appropriate to aggregate by investment types, such as equity or loan;',
25366:'another by disclosure entity type, such as receiverships; and yet another by class, such as museum. a91. further, disclosures should',
25367:'be integrated so that concise, meaningful and transparent information is provided. integration is accomplished by providing a single comprehensive note',
25368:'regarding the disclosure. care should be taken to ensure the objectives are met, without producing unintended consequences. preparers should keep',
25369:'in mind there are associated costs and potential audit implications with any information included in a gpffr. incorporating by reference',
25370:'or including other entities’ summary financial statements or summary financial information generally would result in an auditor being required to',
25371:'gain audit assurance on that information and thereby may result in additional audit costs. a92. the board believes any financial',
25372:'information about disclosure entities in the reporting entity’s gpffr should be based on accrual basis standards specific to the type',
25373:'of organization while minimizing additional costs on the disclosure entity. there will be instanceswhere informationaboutdisclosureentitiesisproduced forreporting periodsthat differ from the',
25374:'reporting entity’s reporting period. to minimize additional costs, the board page 60 sffas 47 fasab handbook, version 20 06/21 sffas',
25375:'47 agreed thatifdisclosure entities have a different reporting period than the reporting entity’s gpffr, disclosure of information from a reporting',
25376:'period ending within the reporting entity’s reporting period is acceptable. the board performed outreach on this issue to the auditcommunityandto',
25377:'thefederalentitytaskforce. generally,thefeedbacksupportedthis approach. a93. however, due to the fact there could be a large time lag, there should be a',
25378:'provision for disclosing significant changes in the information as a result of events occurring after the issuance ofthe disclosure entities’audited',
25379:'financial statements and before the issuance of the reporting entity’s audited financial statements for a later fiscal yearend. the board',
25380:'notes this would only be necessary if the disclosure entities’ summarized financial statements or summarized financial information were presented. otherwise',
25381:'normal transactions would be captured throughout the year so this would be a somewhat narrowed focus. related parties a94. the',
25382:'board determined it should define “related parties” and address them within this statementfor severalreasons. related partyreporting issuch a fundamental notion',
25383:'within gaap and the auditing standards that addressing how related party concepts apply in the federaldomainisimportant.absent clearrelatedpartystandardsinthefederaldomain,the boardbelievestheprivatesectorconceptswould beappliedbydefaultandthatapplication would',
25384:'be inappropriate. a95. because of the extent of the federal government’s relationships—whether already established or implied—“related parties” concepts may result',
25385:'in numerous relationships requiring disclosure. therefore, the board requiresdisclosure of related partyrelationships of such significance to the reporting entity that',
25386:'it would be misleading to exclude information about them. for clarity of intent, the standards rely heavily on listing parties',
25387:'to be included and excluded. a96. in addition, this statement provides room for judgment because one cannot anticipate all types',
25388:'of relationships the federal government may have or might have in the future that should be reported. while the standards',
25389:'identify potential exclusions that generally would not be related parties and those that may one should consider the many complex',
25390:'relationshipswhere significant influence isexerted. judgment willbe required todetermine which significant influences may pose risks that warrant disclosures and these standards',
25391:'do not preclude the reporting of a related party if factors deem it appropriate. the related parties category is needed',
25392:'to provide for disclosure of those organizations that are not included under the inclusion principles but where there is an',
25393:'existing relationship of such significance that it would be misleading to exclude. page 61 sffas 47 fasab handbook, version 20',
25394:'06/21 sffas 47 a97. component reporting entities of a single controlling entity are generally subject to related party reporting requirements',
25395:'in other standardsetting domains but will not be considered related parties under federal standards.65 in reaching this conclusion, the board',
25396:'discussed how jointly controlled component reporting entities present information about their relationships. presently, component reporting entities are required by omb',
25397:'guidance to state in the management’s discussion and analysis section that: “the statements should be read with the realization that',
25398:'they are for a component of the u.s. government, a sovereign entity.” in addition, existing standards require recognition of interentity',
25399:'costs to ensure that cost information is not misstated as a result of relationships between component reporting entities. while members',
25400:'noted that readers may need additional contextual information to understand what these complex relationships imply about component reporting entity information,',
25401:'the decision to exclude these entities from related party reporting placed such information requirements outside the scope of this statement.',
25402:'a98. during its due process, the board considered a request that ‘related parties’ language be modified to clarify that members',
25403:'appointed to boards as individuals and the entities they are affiliated with are not in related party relationships with the',
25404:'departments or agencies. the board did not believe additional language was necessary as the broad classes of exclusions provided were',
25405:'sufficient. board members noted concern with broad exclusions of board members and organizations with which they are affiliated because there',
25406:'may be situations where disclosures would be appropriate. further, current practices have provided meaningful and transparent information and the board',
25407:'believes this information should continue to be provided absent a change in circumstances. a99. the board further understood the respondent’s',
25408:'concern that the term ‘related party,’ as commonly used in financial reports, may imply less than armslength transactions. the board',
25409:'believes once federal standards are issued, the term ‘related parties’ in the federal environment will develop its own unique meaning—that',
25410:'is, relationships of such significance to the reporting entity that it would be misleading to exclude information if one party',
25411:'to the existing relationship has the ability to exercise significant influence over the otherparty’spolicydecisions.thereisafocusonexposuresto riskof lossorpotentialgain as a result of',
25412:'the relationship.additionally, the standards do not prevent an entity from referring to related parties as “affiliated institutions” or any other',
25413:'appropriately descriptive term. when doing so, it may be informative to explain the relationships by including information such as conflict',
25414:'of interest rules and other frameworks under which they operate. a100.during due process, certain respondents asked for clarification regarding the',
25415:'difference between a disclosure entity and a related party. more specifically, the respondents had 65 therefore, intragovernmental transactions would not',
25416:'be considered related party transactions. page 62 sffas 47 fasab handbook, version 20 06/21 sffas 47 difficulty finding a distinction',
25417:'between the characteristics of a related party and those of a disclosure entitymeetingthe misleading toexclude inclusionprinciple. when considering whether the',
25418:'principles required clarification, the board noted the key difference between related parties and included organizations is that related parties are',
25419:'not controlled or owned but are significantly influenced by or influencing the federal government. in considering whether an organization rises',
25420:'to “misleading to exclude” the board believes this distinction between included organizations and related parties will be helpful. the board',
25421:'did not believe there was a need to revise the standards. a101.the board recognizes the difficulty in applying new standards',
25422:'to complex relationships. however, the board believes the standards are clear. while there is a key change in the application',
25423:'of principles from the governmentwide perspective, central agency coordination and guidance during the implementation process will aid users in adopting',
25424:'this perspective. amendments to sffac 2, entity and display a102.this statement provides amendments to sffac 2, entity and display. this',
25425:'statement provides a description of the change to sffac 2 and an explanation as to why the change is being',
25426:'made. most of the conforming changes are rescissions that result from movement of criteria for determining what organizations are required',
25427:'to be included in the federal reporting entity’s gpffr from a concepts statement to a standards statement. a103.paragraphs 54—77 and',
25428:'79–112 of sffac 2 address concepts outside the scope of this statement and are not amended. a104.in addition, no changes',
25429:'are made to paragraphs 1137 of sffac 2 because the board believes these paragraphs provide the conceptual underpinning for understanding',
25430:'the structure of the federal government and how this relates to reporting entities for general purpose federal financial reporting.although there',
25431:'may be some small differences in terminologyin those paragraphs,the board did not believe theywere significant enough to warrant amendments. a105.paragraphs',
25432:'4750 of sffac 2 identify certain organizations or types of organizations the federal reserve system, government sponsored enterprises, and bailout',
25433:'entities that could be included in thegovernmentwide reporting entity based on the sffac 2concepts but that should not be included.',
25434:'this statement establishes principles to provide users of gpffrs with comprehensive financial information while recognizing the complexity of the federal',
25435:'government and its relationships with varied organizations. the principles can be applied to the organizations previously excluded and conclusions reached',
25436:'to include the organizations—either as consolidation entities or disclosure entities—or to continue to exclude the organizations. sffac 2 is being',
25437:'amended to ensure that concepts provide a page 63 sffas 47 fasab handbook, version 20 06/21 sffas 47 framework for',
25438:'standardssetting but do not themselves establish standards by listing specific exclusions. other unique situations a106.as part of the exposure draft',
25439:'process, the board also asked respondents if there were other unique situations that should be addressed within this statement. the',
25440:'board received input from respondents on several example organizations that they believe should be clarified in this statement. the board',
25441:'considered the suggestions against the goal to develop principlesbased standards that could be applied to all organizations. the board believes',
25442:'the standards are sufficiently clear. therefore, the board did not revise the proposed requirements in response to these unique circumstances.',
25443:'boardapproval and dissent a107.this statement was approved for issuance by 8 members of the board. one member dissented. the written',
25444:'ballots are available for public inspection at the fasabs offices. the dissent of the member who opposed the issuance of',
25445:'this statement is presented in paragraphsa108 througha115. a108.although mr. steinberg believes this statement achieves the objective of providing authoritative guidance',
25446:'for defining the federal government reporting entity, he dissents because he believes the statement implies, and therefore could lead readers',
25447:'to conclude, that the federal government considers receiverships, conservatorships, and intervention entities to be part of the federal government. he',
25448:'concurs that the federal government’s general purpose financialreport should disclose the relationshipsof these organizationsto the reporting entity, the nature and',
25449:'magnitude of their relevant activities during the period and balances at the end of the period, and the reporting entity’s',
25450:'future exposures to financial and nonfinancial risks and rewards resulting from these relationships, and has pointed to the numerous accounting',
25451:'standards already requiring those disclosures. however, he believes there are three compelling reasons for this statement to not imply that',
25452:'receiverships, conservatorships, and intervention entities are part of the federal government reporting entity, as is done in paragraphs 51 through',
25453:'55. a109.accounting literature has traditionally followed the postulate that, for an organization to be deemed part of a larger organization,',
25454:'the relationship has to be other than temporary—a condition that does not exist with the receiverships, conservatorships, and intervention entities.',
25455:'the desire to remain consistent with this postulate was pointed out by more than one respondent to the exposure draft.',
25456:'the board, nonetheless, maintained that organizations for which the relationships are temporary, such as receiverships, conservatorships, or intervention entities, are',
25457:'part of the federal government reporting entity, but modified the standards to state that they would be classified generally as',
25458:'page 64 sffas 47 fasab handbook, version 20 06/21 sffas 47 disclosure entities rather than consolidation entities. mr. steinberg believes',
25459:'the purpose of the postulate is to define the relationship that should exist in order that there be reporting, and',
25460:'not the form of the reporting itself. a110.the policy of the federal government is to not engage in activities that',
25461:'are typically conducted by the private sector. banking is an activity that since the nation’s founding, has mostly been conducted',
25462:'by the private sector.although failed and failing banks are taken into receivership,itisnotbecausethegovernmentintendstoprovidebanking services,but only to oversee an orderly liquidation or',
25463:'transfer of those banks’ assets, and thereby protect the depositors. likewise, the organizations for which the government has, from time',
25464:'to time, decided to provide temporary financial support, that is, intervention entities, are in sectors of the economy that the',
25465:'federal government recognizes are not its function: automobile manufacturing and financing, manufacture of weapons systems, commercial insurance, banking, state and',
25466:'local government. listing the receiverships, conservatorships, and intervention entities as part of the federal government reporting entity, as this statement',
25467:'does, can be inferred as an expansion of the federal government into areas traditionally reserved for the private sector. a111.',
25468:'some of the most strident political arguments in recent years are about the expanding reach of the federal government into',
25469:'the private sector. issuance of an accounting standard that could be read as including in the federal government reporting entity,',
25470:'entities normally viewed as outside the federal government for example, automobile manufacturers, automobile financing companies, defense manufacturers, insurance companies, privatelyowned',
25471:'banks, state and local governments supports the position of those who claim the federal government is slowly expanding its reach',
25472:'and becoming increasingly socialist.accounting standards should neither support a political position, nor give the appearance of such. a112.indeed, the inappropriateness',
25473:'of implying that receiverships, conservatorships, and intervention entities are part of the federal government reporting entity is revealed by a',
25474:'disavowal and apparent selfcontradiction in the statement itself. paragraphs 5155 identifyreceiverships,conservatorships, and intervention entities as one of the parts of',
25475:'the reporting entity that are deemed disclosure entities. paragrapha63, on the other hand, states that the board “wishes to avoid',
25476:'[the implication] that organizations owned or controlled as a result of interventions are considered ‘federal government entities’ when applying thecode',
25477:'ofprofessional conductestablished bytheamerican institute of cpas,” but then states that “this does not make the disclosure entities arising from intervention',
25478:'actions ‘federal government entities.’” underlining added a113.mr. steinberg agrees the accountability for receiverships, conservatorships, and intervention entities should be disclosed,',
25479:'but these types of organizations should not be listed in this statement in such a waythat they may be inferred',
25480:'byreadersto be part of the page 65 sffas 47 fasab handbook, version 20 06/21 sffas 47 federal government reporting entity.',
25481:'his beliefs are based on longstanding accounting postulates,theexistingpolicyofthe federalgovernment, andthepotentialappearance that the accounting standards support a particular political agenda. a114.mr.',
25482:'steinberg is also concerned with the manner in which this statement provides for the reporting of museums, performing arts companies,',
25483:'and other entities partially funded by appropriations and partially by donations in the federal government’s general purpose financial report. specifically,',
25484:'these entities have often viewed the activities funded by donations as conducted by organizations that are separate from the organization',
25485:'performing activities funded by appropriations. they therefore provided the department of the treasury with information for only the activities funded',
25486:'by appropriations. hence, the governmentwide financial reportoften presented the financial position and results for only a portion of the museums,',
25487:'performing arts companies, and other entities funded partly by appropriations and partly by donations. the board recognized the inappropriateness of',
25488:'financial statements presenting only a part of an entity and therefore agreed that the entirety of these entities should be',
25489:'included in the federal government reporting entity, whether through consolidation or as disclosure entities. this requirement was stated initially in',
25490:'two footnotes and in the basis for conclusions, but not in the body of the standard. one of the footnotes',
25491:'was subsequently moved to the body of the standard. a115.mr. steinberg believes that while the movement of the footnote to',
25492:'the body of the standard avoidsthedangerousprecedentofdefiningaccountingstandardsinonlyfootnotesandthe basis for conclusions, the requirement, as stated, will enable entities to still claim that',
25493:'the activities funded by donations are in separate organizations that do not meet the inclusion principles of “in the budget,”',
25494:'“majority ownership interest,” or “control.” therefore these portions of the entities might be inappropriately excluded from the federal government reporting',
25495:'entity’s general purpose financial statements. page 66 sffas 47 fasab handbook, version 20 06/21 sffas 47 appendix b: flowchart page',
25496:'67 sffas 47 fasab handbook, version 20 06/21 sffas 47 appendix c: illustrations preamble these illustrations demonstrate how the provisions',
25497:'of this statement could be applied to organizations given simplified hypothetical circumstances. they are for illustrative purposes only and are',
25498:'nonauthoritative. they do not: 1. represent actual organizations, 2. provide a thorough analysis of all the facts and circumstances that',
25499:'are needed to reach a conclusion in practice, 3. indicate a preferred method of analyzing facts and circumstances, and 4.',
25500:'substitute for the application of professional judgment to actual facts and circumstances. these illustrations follow the sequence presented in the',
25501:'decision flowchart inappendix b. all tentative conclusions are based primarily on the hypothetical circumstances presented. in most illustrations, the tentative',
25502:'conclusions refer to consideration of other factors by management and the auditor. this reference is included to emphasize that, in',
25503:'practice, consideration of all relevant facts and circumstances would be needed to reach conclusions. the reader should assume that the',
25504:'general reference to “other factors” means that such factors, in aggregate, supported the conclusions implied by the necessarily limited assumed',
25505:'facts and circumstances presented in each illustration. application of the standards to actual organizations requires consideration of the circumstances specific',
25506:'to each organization and the exercise of professional judgment. although the limited assumed facts and circumstances presented in the illustrations',
25507:'may be similar to situations at a particular reporting entity, they should not be used in practice as a substitute',
25508:'for a complete and thorough consideration of all of the relevant facts and circumstances, which may lead to a conclusion',
25509:'different from the tentative conclusions in these illustrations. for example, the illustrationsmakecertain assumptionsthat, in practice, require judgment of the specificfactsand',
25510:'circumstances to make appropriate determinations. all of the illustrations discuss administrative assignments to component reporting entities where there is only',
25511:'one component reporting entity relationship described. in reality, more than one component reporting entity may have a relationship with the',
25512:'illustrative organization. in such cases, additional information would need to be considered to determine whether other administrative assignments exist. page',
25513:'68 sffas 47 fasab handbook, version 20 06/21 sffas 47 abc department in the budget—consolidation entity assumed facts and circumstances',
25514:'congress establishedabc department abc, a federal organization, to promote entrepreneurship and innovation as a means to address national economic and',
25515:'environmental challenges. provisions that governabc are generally prescribed in legislation andabc accomplishesitsmission through theactivitiesof variousbureaus, grantstoresearchinstitutions, and contracts with universities',
25516:'and notforprofit organizations. the executive leadership ofabc consists of a secretary, deputy secretary, and three assistant secretaries. the president nominates',
25517:'and the senate confirms each of these officials. these officials serve at the pleasure of the president. abc is subject',
25518:'to all laws and regulations applicable to executive branch agencies. abc relies on appropriated public funds to conduct its mission',
25519:'and islisted in the schedule in the budget of the united states government: analytical perspectives—supplemental materials that provides budget account',
25520:'level information. the president and the congress considerabc’s requests for resources and determine the amount that should be budgeted to',
25521:'provide services. furthermore,abc is not considered to be a nonfederal organization receiving federal financial assistance. tentative conclusions based on the',
25522:'assumed facts and circumstances, management determined and the auditor concurred thatabc should be included in the governmentwide gpffr because it',
25523:'1 meetsthe first of the three inclusion principles being listed in the budget and 2 is not a nonfederal organization',
25524:'receiving federal financial assistance. classification as a consolidation entity or disclosure entity further, because it is listed in the budget,abc',
25525:'generally would qualify as a consolidation entity assuming no information to the contrary. in this example, management determined and the',
25526:'auditor concurred that there were no facts contradicting the assumption thatabc is a consolidation entity.asa consolidation entity,abc’s financial statementsshould be',
25527:'consolidated in the governmentwide gpffr. page 69 sffas 47 fasab handbook, version 20 06/21 sffas 47 administrativeassignments the assumed facts',
25528:'and circumstances do not indicateabc should be consolidated with another component reporting entity. further consideration ofabc’s relationships with other consolidation',
25529:'entities would be needed to determine ifabc has been administratively assigned to another component reporting entity. further consideration would also',
25530:'be needed to identify any consolidation entities or disclosure entities administratively assigned toabc. epsilon corporation in the budget—consolidation entity assumed',
25531:'facts and circumstances thecongressandthepresidentestablished epsiloncorporationasanindependentgovernment corporation to insure consumer funds placed in trust with certain types of institutions. federal legislation',
25532:'established provisions that govern epsilon’sactivities. epsilon is governed by a seven member board of directors and each board member isappointed',
25533:'bythe president and confirmed by the senate. the congress monitors epsilon’s activities by conducting hearings on epsilon’s programs and requesting',
25534:'governmentaccountability office gao and office of inspector general oig audits. epsilon is listed in the schedule in the budget of',
25535:'the united states government: analytical perspectives—supplemental materials schedule that provides budget account level information. epsilon receives its funding based on',
25536:'legislation permitting it to receive and spend premiums from the institutionsit insures. legislation limits how epsilon can invest proceeds from',
25537:'premiums and, to help ensure that epsilon remains financially viable, legislation requires epsilon to have a reserve fund. the board',
25538:'of directors determines the level of the reserve fund. if epsilon encounters a shortfall, the organization may borrow a limited',
25539:'amount from the u.s. department of the treasury treasury, but any additional funding requirements must be obtained from premium assessments.',
25540:'epsilon is required to periodically report to the congress and the president on matters such as: program performance results financial',
25541:'position, results of operations, and cash flows adequacy of internal controls and systems furthermore, epsilon is not considered to be',
25542:'a nonfederal organization receiving federal financial assistance. page 70 sffas 47 fasab handbook, version 20 06/21 sffas 47 tentative conclusions',
25543:'based on the assumed facts and circumstances, management determined and the auditor concurred that epsilon corporation should be included in',
25544:'the governmentwide gpffr because it meetsthe first inclusion principle in the budget and isnot a nonfederalorganization receiving federal financial assistance.',
25545:'classification as a consolidation entity or disclosure entity further, because it is listed in the budget, epsilon generally would qualify',
25546:'as a consolidation entity assuming no information to the contrary. in thisexample, management determined and the auditor concurred that there',
25547:'were no facts rebutting or contradicting the assumption that epsilon is a consolidation entity. as a consolidation entity, epsilon’s financial',
25548:'statements should be consolidated in the governmentwide gpffr. administrativeassignments there is no information included in the assumed facts and circumstances',
25549:'indicating that epsilon should be consolidated with another component reporting entity. further consideration of epsilon’s relationships with other consolidation entities',
25550:'would be needed to determine if epsilon has been administratively assigned to another component reporting entity or has had consolidation',
25551:'entitiesadministrativelyassigned to it.also, furtherconsideration would be needed to identify any disclosure entities administratively assigned to epsilon for which disclosures are',
25552:'needed. sigma association control based on persuasive indicator—disclosure entity financially independent assumed facts and circumstances the congress and the president',
25553:'established sigmaassociation sigma as a notforprofit, non taxpayer funded organization to market innovative u.s. agricultural technology worldwide and to respond',
25554:'to any claims of damage arising from new technology. the fundamental purpose of the corporation is specified in legislation and',
25555:'its mission statement is “to open new markets for u.s. agricultural technology through a cooperative marketing strategy and risksharing approach',
25556:'for market participants.” sigma is governed by a tenmember board of directors. five members are appointed by the president and',
25557:'confirmed by the senate. four members are elected by industry members. the page 71 sffas 47 fasab handbook, version 20',
25558:'06/21 sffas 47 secretary ofagriculture or his/her designee serves as a voting exofficio member of the board. no more than',
25559:'three of the appointed members may be from the same political party. board membersserve sevenyear terms and can onlybe removed',
25560:'for cause meaning theymay not be removed forpolicydecisions.also,congressmonitorssigma’sactivitiesbyconducting hearings on sigma’s programs and requesting gao audits. sigma is financed by',
25561:'fees imposed on industry members. sigma’s board of directors must establish an annual budget and legislation limits how sigma can',
25562:'invest proceeds from fees. to help ensure that sigma remains financially viable, legislation requires sigma to have a reserve fund.',
25563:'the board of directors determines the level of the reserve fund after considering input from industry members. if sigma encounters',
25564:'a shortfall, it may borrow a limited amount from the treasury, but anyadditionalfunding requirementsmust be obtained fromfuture feeassessments on industry',
25565:'members. tentative conclusions based on the assumed facts and circumstances, and other considerations, management determined and the auditor concurred that',
25566:'sigma should be included in the governmentwide gpffr because sigma meets the third inclusion principle control with expected benefits or',
25567:'risk of loss. indicators that the federal government can control sigma are that the congress and/or the president 1 established',
25568:'its fundamental purpose and mission through legislation, and 2 appoint a majority of the members of its board of directors',
25569:'its governing body. each of these facts individually would be sufficient to indicate control such that sigma would be included.',
25570:'classification as a consolidation entity or disclosure entity for this illustration, management determined and the auditor concurred that, based on',
25571:'the assumed facts and circumstances as well as other considerations not described in the illustrations, sigma should be reported as',
25572:'a disclosure entity because it is a financially independent organization. management and the auditor considered the assumed facts and circumstances',
25573:'presented below in the aggregate, weighed them against other considerations, and used professional judgment. evidence suggesting that it is a',
25574:'disclosure entity includes: 1. tax revenue is not appropriated for ongoing operations. 2. the corporation is relatively financially independent because',
25575:'it is primarily funded from a source other than appropriations. its budget and fees are not subject to congressional or',
25576:'presidential approval. page 72 sffas 47 fasab handbook, version 20 06/21 sffas 47 3. having sevenyear terms for directors who',
25577:'are not subject to removal for policy decisions indicate a higher degree of autonomy than executive branch appointees. this governance',
25578:'structure vests greater decisionmaking authority with the board while insulating it from political influence. as a result, congressional and presidential',
25579:'oversight is less direct since they are not involved in decisions such as the level of reserves needed. 4. whilesigmaispermittedtoborrowfromthetreasury,suchborrowingislimited.',
25580:'thismeans risks to the federal government are limited. instead, sigma is expected to maintain its operationsandmeet itsliabilitieswithrevenuesreceived from sourcesoutside of',
25581:'the federal government. evidence suggesting that sigma may be a consolidation entity includes: 1. the president and the senate, who',
25582:'appoint and confirm, respectively, members of the board of directors as well as establish organizational authorities in legislation, have a',
25583:'governance role. 2. sigmaprovidesaservicethatisnotavailablefrommarketparticipants. itsfeesareadjusted to recover losses rather than to respond to market influences. hence, its fees are not',
25584:'marketbased. administrativeassignment because each disclosure entity must be reported by at least one consolidation entity, management considered whether sigma has',
25585:'been administratively assigned to the department ofagriculture. evidence suggesting administrative assignment to the department ofagriculture includes that the secretary serves',
25586:'as an exofficio member of the board. as a result, management determined and the auditor concurred that the department of',
25587:'agriculture should disclose information regarding sigma in its gpffr. if sigma is also administratively assigned to other component reporting entities,',
25588:'then those component reporting entities should also consider the need to disclose information in their gpffrs. scholars university not included',
25589:'assumed facts and circumstances the congress and the president chartered scholars university as a small, private, independent, notforprofit educational institution',
25590:'and legislation describes the mission of the university. the page 73 sffas 47 fasab handbook, version 20 06/21 sffas 47',
25591:'legislation also indicates that the university is not an instrumentality of the federal government and that the federal government does',
25592:'not assume any liabilities of the university. scholars university is governed by a 29member board of trustees. the secretary of',
25593:'education is an exofficio member of the board and the remaining members are elected by the board for threeyear terms.',
25594:'the board controls and directs the university’s affairs such as determining the university’s tuition and fee structure, adding or removing',
25595:'colleges within the university, and establishing new research institutions. to support its mission, scholars university receives most of its revenue',
25596:'from tuition, fees, and private contributions. the university receives appropriations to support some of its academic programs. theuniversityislisted intheschedulein the',
25597:'budget of the united states government: analytical perspectives—supplemental materials that provides budget account level information under a department of education',
25598:'program because an amount is appropriated for scholars university each year. although the appropriations discuss limitations on how the funds',
25599:'may be used, the university generally has discretion over how it chooses to allocate funds for its academic programs and',
25600:'construction activities. tentative conclusions based on the assumed factsand circumstancesand other information, management determined and the auditor concurred that scholars',
25601:'university should not be included in the government wide gpffr. although it meets the first inclusion principle in the budget,',
25602:'management asserts that scholarsuniversityisa nonfederal organization receiving federal financial assistance in the form of a grant.anynonfederal organization listed in the',
25603:'budget should be assessed against the other two principles. so, management must determine if the other inclusion principles are met',
25604:'or if it would be misleading to exclude the university. the initial analysis is summarized below: ownership—the congress and the',
25605:'president chartered scholars university as a private, independent organization. there is no evidence that the federal government has an ownership',
25606:'interest in the university. control–based on the assumptions presented, the persuasive indicators of control have not been met. while the',
25607:'federal government chartered scholars university, the standardsprovide thatfurther indicatorsof controlmust be present toconclude that the organization is controlled. the remaining',
25608:'persuasive indicators—appointing or removing a majority of the governing board members, establishing financial and operating policies, and dissolving the university',
25609:'and having access to its assets—are not met. the available facts and circumstances suggest that scholarsis not controlled. [note, however,',
25610:'for brevity this illustration does not present an analysis of indicators of page 74 sffas 47 fasab handbook, version 20',
25611:'06/21 sffas 47 control that in the aggregate may reveal that scholars is controlled. such an analysis may be needed',
25612:'in practice.] misleading to exclude–scholars university is a small notforprofit that is listed in the budget solely as a program',
25613:'within the department of education. management determined and the auditors concurred that it is both quantitatively and qualitatively immaterial. also,',
25614:'there were no other facts and circumstances that would suggest that scholars university should be included in the gpffr. as',
25615:'a result, it would not be misleading to exclude. based on the assumed facts and circumstances and other considerations, management',
25616:'determined and the auditor concurred that scholars university should not be included in the governmentwide gpffr. education research institute eri',
25617:'control based on persuasive indicator–consolidation entity assumed facts and circumstances the purpose of the education research institute eri is to',
25618:'assist state and local officials in making informed decisions regarding effective education methods. eri was established by the congress and',
25619:'the president through a public law specifying the organization’s: status as a tax exempt notforprofit, purpose and duties, governance structure,',
25620:'sources of financing, and reporting requirements. the public law establishing eri requires reauthorization of its operations every five years. if',
25621:'the congress and the president do not authorize continued operation, eri must cease operations and distribute itsnet assets to a',
25622:'successor organizationdesignated by the federal government. if eri is unable to satisfy its liabilities prior to dissolution, the federal government',
25623:'will assume its liabilities. eri is governed by a sevenmember board of directors; five of whom are voting. two members',
25624:'are specific federal officials within the department of education who serve parttime and do not have voting rights. the remaining',
25625:'five serve fulltime, are appointed by theassociation of local school boards, and serve sixyear terms. one of these five members',
25626:'is elected by the board to serve as chairperson. page 75 sffas 47 fasab handbook, version 20 06/21 sffas 47',
25627:'the legislation creating eri designates funding of $1 per elementary school student per year to be made available from the',
25628:'general fund of the u.s. treasury to the eri trust fund. an annual transfer to eri is not listed in',
25629:'the schedule in the budget of the united states government: analytical perspectives—supplemental materials that provides budget account level information but',
25630:'is included in the department of education’s congressional budget justification. the board of directors is authorized to establish an annual',
25631:'budget not to exceed the amounts available in the trust fund. eri may fund up to 25% of its annual',
25632:'budget through donations but may not use federal funds to solicit donations. the department of education approves the eri annual',
25633:'budget. the department also reports information related to eri activities in its annual performance report and congressional budget justification. eri',
25634:'must provide annually an audited financial report to the department of education and relevant congressional committees. tentative conclusions based on',
25635:'the assumed facts and circumstances and other considerations, management determined and the auditor concurred that eri should be included in',
25636:'the governmentwide gpffr because the third inclusion principle control with risk of loss or expectation of benefit is met. apersuasive',
25637:'indicator of control exists because the federal government can unilaterally dissolve the organization and have access to its assets and',
25638:'responsibility for its liabilities. classification as a consolidation entity or disclosure entity for this illustration, management determined and the auditor',
25639:'concurred that, based on the assumed facts and circumstances as well as other considerations not described in the illustrations, eri',
25640:'should be reported as a consolidation entity. in arriving at this conclusion, management and the auditor considered the assumed facts',
25641:'and circumstancespresented below in the aggregate and, finding no other facts that in the aggregate contradict these, used professional judgment',
25642:'to determine that eri is a consolidation entity. evidence suggesting that eri is a consolidation entity includes: 1. it is',
25643:'primarily financed by taxes. 2. federal government has assumed the risks associated with eri’s liabilities. 3. thepurposeoferiistoassiststateandlocalofficialsbyprovidingconsultationserviceson a nonmarket basis.',
25644:'page 76 sffas 47 fasab handbook, version 20 06/21 sffas 47 4. eri’s annual budget is approved by the department',
25645:'of education and the department also provides information related to eri activities in its annual performance report and congressional budget',
25646:'justification. these activities show that elected officials, acting with and through politically appointed officials, make decisions regarding eri’s budget. evidence',
25647:'suggesting that eri is a disclosure entity includes: 1. amajorityofthemembersoftheboardofdirectorsisappointedby nonfederal officials. 2. eri is able to access donations to',
25648:'sustain some of its operations. administrativeassignment the department of education should consider whether or not eri is administratively assigned to',
25649:'it. evidence that indicates eri is administratively assigned includes education’s participation in eri’s budgetary process and inclusion of information regarding',
25650:'eri in its own congressional budget justification. having considered the above information and other available evidence, the department of education',
25651:'determined and its auditor concurred that it should consolidate eri’s financial statements in its gpffr. mediation corporation control based on',
25652:'indicators in theaggregate—disclosure entity assumed facts and circumstances mediation corporation mediation was established as a 501c3 nonmember notforprofit organization through',
25653:'a public law specifying the organization’s: status and operating location, purpose and duties, governance structure, sources of financing, and reporting',
25654:'requirements. the purpose of mediation is to ensure that lowincome individuals have access to mediation services to resolve noncriminal legal',
25655:'disputes. an assigned duty is to develop and maintain a network of state and local government organizations to deliver services',
25656:'financed by grants. network members may raise funds to finance delivery of services through taxes, donations, and other grants without',
25657:'limitation. page 77 sffas 47 fasab handbook, version 20 06/21 sffas 47 the governing board comprises 13 members including mediation’s',
25658:'executive secretary. the president nominates candidates to fill the board member positions. apanel of local government officialsparticipatinginthenetworkselectsnewmembersofthegoverningboardfromamong the nominees. no',
25659:'more than seven members may be affiliated with the same political party. the members elect their chairperson from among the',
25660:'members. the president appoints the executive secretary and the senate confirms the appointment. the executive secretary’s term is fifteen years',
25661:'during which the president may only remove the appointee for cause. mediationisfinanced byanannualappropriation,interestearnings,andgrantsfromanypublicor private grantmaking organization. grants must not finance',
25662:'more than 20 percent of its annual budget. the u.s. attorney general approves the annual budget.any liabilities incurred by mediation',
25663:'must be settled from its assets and are not backed by the full faith and credit of the u.s. government.',
25664:'an annual appropriation is provided in the budget of the united states government: analytical perspectives—supplemental materials that provides budget account',
25665:'level for “grants to the mediation corporation.” the appropriation is made to the department of justice which transfers budget authority',
25666:'to mediation. mediation manages its cash balances similar to other notforprofits and may retain any interest earned on unspent funds.',
25667:'in addition, it may apply for and receive grants from any grant making organization—public or private—subject to the 20 percent',
25668:'limitation. the public law creating mediation requires it to make annual audited financial reports publicly available. mediationalsofilesannualtaxreturnswiththe internalrevenueservice. furthermore, mediation',
25669:'is considered to be a nonfederal organization receiving federal financial assistance. tentative conclusions although mediation meets the first inclusion principle',
25670:'in the budget, it is a nonfederal organization receiving federal financial assistance. to determine if mediation should be included in',
25671:'the governmentwide gpffr, management considered the remaining inclusion principles— majority ownership interest and control with risk of loss or expectation',
25672:'of benefit. it is unclear, based on the assumed facts and circumstances, whether mediation is owned by the federal government',
25673:'and, therefore, meets the second inclusion principle. therefore, management must consider the control indicators to determine if the third inclusion',
25674:'principle control is met. none of the persuasive indicators of control are present based on the assumed facts and circumstances',
25675:'so considerable professional judgment is required to determine whether—in the aggregate—the indicators provide evidence of control. the indicators suggesting federal',
25676:'government control over mediation include: page 78 sffas 47 fasab handbook, version 20 06/21 sffas 47 1. the federal government',
25677:'provides significant input regarding selection of the organization’s governing board members since a selection can only be made from among',
25678:'candidates identified by the president. 2. the president appoints a key executive—the executive secretary—and may remove him or her for',
25679:'cause. 3. federal law restricts mediation’s capacity to generate revenues since only appropriations, interest earned, and grants may be used.',
25680:'in addition, only 20 percent of its annual needs may be met through grants. 4. theu.s. attorneygeneral approvestheannualbudget. 5. federal',
25681:'law requires annual audited financial reports. 6. federallawdirectsmediationtoworkthroughanetworkofgovernmentagenciestoprovide services. based on the assumed facts and circumstances and other considerations, and',
25682:'using professional judgment, management determined and the auditor concurred that mediation should be included in the governmentwide gpffr. classification as',
25683:'a consolidation entity or disclosure entity for this illustration, management determined and the auditor concurred that, based on the assumed',
25684:'facts and circumstances as well as other considerations not described in the illustrations, mediation should be reported as a disclosure',
25685:'entity. in arriving at this conclusion, management and the auditor considered the assumed facts and circumstancespresented below in the aggregate',
25686:'and, finding no other facts that in the aggregate contradict these, used professional judgment to determine that mediation is a',
25687:'disclosure entity. evidence suggesting that mediation is a consolidation entity includes: 1. it is primarily funded by taxes. 2. elected',
25688:'officials determine mediation’s budget, because at least 80 percent of its funding is appropriated to justice. in addition, an appointed',
25689:'federal official, the u.s.attorney general, approves mediation’s annual budget. page 79 sffas 47 fasab handbook, version 20 06/21 sffas 47',
25690:'evidence suggesting that mediation is a disclosure entity includes: 1. membersofitsgoverningbodyareselectedbynonfederalofficials,servelongertermsthan political appointees, must include members from different political parties,',
25691:'and may only be removed for cause. these conditions insulate the governing body from political influence. 2. mediationhassomeaccesstononfederalfundingthroughgrantsanditsnetworkofservice providersisfreetoaccessnonfederalfunding forservicedeliverysubject',
25692:'tothe20percent limitation. 3. federal government has not assumed risks related to mediation’s liabilities. administrativeassignments the department of justiceshould consider whether',
25693:'or not mediationisadministrativelyassigned to it. evidence that indicates it is administratively assigned includes the department of justice’s participation in mediation’s',
25694:'budgetary process. after considering the above and other factors, and using professional judgment, management at the department of justice determined',
25695:'and the auditor concurred that disclosures regarding mediation should be presented in its gpffr. bicycleamerica, inc. scenario a not included',
25696:'assumed facts and circumstances individual bicycle shop owners determined that a nationwide network of shops and trails was needed to',
25697:'encourage greater reliance on bicycles for transportation and invested in a new corporation, bicycleamerica ba. ba’s mission was to create',
25698:'a coasttocoast network and ensure wide accesstobicycling. sharesinthe ventureareheld bylocalbicycleshopsin allmajor cities. bais governed by a board of directors. the',
25699:'board controls and directs the organization’s affairs and interests. board members are elected by the shareholders to serve threeyear terms.',
25700:'until recently, bawas able to finance its operations from user fees. arecent lawsuit led to serious financial challenges and cash',
25701:'was unavailable to meet pressing needs. absent a cash inflow, bawas considering closing the trails. due to exceptional citizen reliance',
25702:'on the trails for transportation and recreation, the federal government intervened and enacted legislation to provide funding. page 80 sffas',
25703:'47 fasab handbook, version 20 06/21 sffas 47 the federal government provided a shortterm loan to ba. the federal financial',
25704:'intervention to preserve bawasnot separately identified in the budget, but was part of a larger federal program within the department',
25705:'of transportation. thefundinglegislationalsoestablishedatemporaryadvisorycommitteetomonitorba’sfinancial condition and inform congress of potential issues that may warrant additional actions. in addition, the advisory committee',
25706:'will develop a plan to aid bain returning to financial solvency and refinancing the shortterm loan. tentative conclusions based on',
25707:'the assumed facts and circumstances and other considerations, management determined and the auditor concurred that bashould not be included in',
25708:'the governmentwide gpffr. specifically, bais not listed in the budget. further, based on the available information and other considerations, management',
25709:'determined and the auditor concurred badoes not meet either the remaining ownership or control inclusion principle because bacontinues to be',
25710:'owned by common shareholders and governed by the existing board of directors. the advisory committee offers advice to the congress',
25711:'and does not have authority to direct bato act. management determined and the auditor concurred that, based on the assumed',
25712:'facts and circumstances as well as other considerations not described in the illustration, it would not be misleading to exclude',
25713:'ba. bicycleamerica, inc. scenario b ownership–disclosure entity intervention assumed facts and circumstances same as above except that in addition to',
25714:'the actions in scenarioaabove, the federal government received shares that carry 51 percent of the voting rights of bacommon stock',
25715:'and the advisory committee will develop a plan to sell the shares. tentative conclusions based on the changed assumptions and',
25716:'no information to the contrary, and using professional judgment, management determined and the auditor concurred that bashould be included in',
25717:'the governmentwide gpffr. when the federal government holds a majority ownership interest, albeit temporary, the owned organization should be included',
25718:'in the governmentwide gpffr. page 81 sffas 47 fasab handbook, version 20 06/21 sffas 47 classification as a consolidation entity',
25719:'or disclosure entity the available facts and circumstances indicate that the federal government’s involvement with bais an intervention. based on',
25720:'the assumed facts and circumstances and other considerations, management determined and the auditor concurred that bashould be reported as a',
25721:'disclosure entity because 1 separate legal identity is maintained, and 2 limited funding from general tax revenues is provided. the',
25722:'initial determination would need to be evaluated periodically to determine if the classification remains appropriate. administrativeassignments department of transportation was',
25723:'assigned responsibility for transferring funds to bawhich indicates an administrative assignment. as a result, management determined and their auditor concurred',
25724:'that the department should disclose information regarding bain its gpffr. if bais also administratively assigned to other component reporting entities,',
25725:'then those component reporting entities should also disclose information in their gpffrs. chatham laboratory control based on persuasive indicator–consolidation entity',
25726:'ffrdc assumed facts and circumstances federal department ofabc abc organized chatham laboratory as a federally funded research and development center',
25727:'ffrdc to conduct specialized engineering research that supportsabc’s mission related to infrastructure and leads to improved services. as specified in',
25728:'the agreement,abc provides the physical capital and ongoing funding for the ffrdc and sets research goals for chatham. abc selects',
25729:'a contractor to operate chatham and conduct research consistent with the established goals. abc is not involved in the daytoday',
25730:'operations of chatham. abc routinely evaluates chatham’s performance and maintains a research office to review strategic plans, consider progress, and',
25731:'serve as a liaison to other federal institutions.abc reports on chatham’s efforts in its own performance reports. chatham operations are',
25732:'funded entirely through appropriations provided toabc. abc identifies chatham initscongressionalbudget justification butchathamisnotspecificallyidentifiedin the budget of the united states government: analytical',
25733:'perspectives—supplemental materials schedule that provides budget account level information. instead, amounts for chatham are included in a larger research program',
25734:'which makes payments to the contractor consistent with the terms of the contract. chatham’s contract operator must submit financial and',
25735:'performance page 82 sffas 47 fasab handbook, version 20 06/21 sffas 47 reports toabc periodically.all chatham assets belong to the',
25736:'federal government and the results of chatham research are the property of the federal government. in addition,abc would be responsible',
25737:'for liabilities arising from use of the facilities to conduct research such as environmental cleanup liabilities. abc is also responsible',
25738:'for employee benefits in the event chatham operations are terminated. tentative conclusions based on the assumptions and other considerations, management',
25739:'determined and the auditor concurred that chatham should be included in the governmentwide gpffr. while contracting for the operation of',
25740:'chatham, officials atabc also act as the governing body by establishing the purpose and mission of chatham. further,abc continues in',
25741:'this role through its involvement in chatham’s strategic planning and monitoring of performance. establishing the purpose and mission of an',
25742:'organization is a persuasive indicator that control exists. classification as a consolidation entity or disclosure entity for this illustration, management',
25743:'determined and the auditor concurred that, based on the assumed facts and circumstances as well as other considerations not described',
25744:'in the illustrations, chatham should be reported as a consolidation entity. in arriving at this conclusion, management and the auditor',
25745:'considered the assumed facts and circumstancespresented below in the aggregate and, finding no other facts that in the aggregate contradict',
25746:'these, used professional judgment to determine that chatham is a consolidation entity. evidence suggesting that chatham is a consolidation entity',
25747:'includes: 1. it is primarily financed by taxes. 2. the federal government has assumed the risks associated with chatham’s liabilities.',
25748:'3. chatham’sannualbudgetisdevelopedbyabcofficialsandinformationrelatedtochatham activities is provided inabc’s performance report and congressional budget justification. this indicates that decisionmaking regarding the budget is',
25749:'exercised by elected officials through politically appointed officials and the budget process. evidence suggesting that chatham is a disclosure entity',
25750:'includes: 1. daytoday operating decisions are made by a contractor. after considering the above analysis and other factors, management determined',
25751:'and the auditor concurred that chatham is a consolidation entity. page 83 sffas 47 fasab handbook, version 20 06/21 sffas',
25752:'47 administrativeassignment abc should consider whether or not chatham is administratively assigned to it. in the example, evidence suggesting chatham',
25753:'is administratively assigned includesabc’s role in chatham’s strategic planning, budgeting, and administration. having considered the assumed facts and circumstances and',
25754:'other available evidence, the department ofabc determined and its auditor concurred that it should consolidate chatham’s financial statements in its',
25755:'gpffr. gotham laboratory not included–economic dependency insufficient to show control assumed facts and circumstances the department of xyz xyz, a',
25756:'department within the executive branch of the federal government, contracted with gotham laboratory gotham to conduct specialized engineering research that',
25757:'fulfills a federal mission related to infrastructure and leads to improved services of xyz.as specified in the agreement, xyz provides',
25758:'funding to gotham and gotham’s management team plans, manages, and executes the assigned research program. xyz serves on a panel',
25759:'providing input on the appointment of the board of directors for gotham. however, the board of directors elects new members',
25760:'and the board manages gotham’s research. gotham also may engage in any outside research activities approved by its board of',
25761:'directors. gotham performs services for various federal and nonfederal organizations but receives 90 percent of its funding from xyz. xyz',
25762:'receives appropriated funds to support the gotham research program. the remaining 10 percent of gotham funding is derived from contracts',
25763:'with other federal agencies and private industry as well as donations. gotham’s budget is not reviewed or approved by any',
25764:'federal officials. gotham is subject to the usual federal contract oversight and reporting requirements. tentative conclusions based on the assumptions',
25765:'and other considerations, management determined and the auditor concurred that gotham should not be included in the governmentwide gpffr. gotham',
25766:'is not listed in the budget of the united states government: analytical perspectives—supplemental materials schedule that provides budget account level',
25767:'information. further, based on the assumedfactsandcircumstancesand otherconsiderations, gothamdoesnot meettheinclusion principles of either majority ownership or control with risk of loss',
25768:'or expectation of benefit. although gotham appearsto be economicallydependent onthefederalgovernment, it ultimately page 84 sffas 47 fasab handbook, version 20',
25769:'06/21 sffas 47 retains discretion as to whether to accept funding or do business with the federal government. despite the',
25770:'influence resulting from this dependency, the federal government does not govern gotham’s financial and operating policies. further, management determined and',
25771:'the auditor concurred that, based on the assumed facts and circumstances as well as other considerations not described in the',
25772:'illustration, it would not be misleading to exclude gotham. andromeda prime power systems related party—gse assumed facts and circumstances the',
25773:'federal government createdandromeda prime power systems apps as a government sponsored enterprise gse to facilitate commercial space travel. apps controls',
25774:'interplanetary travel among a network of commercial space stations and is subject to federal regulations regarding safety and technology transfers',
25775:'to other nations. apps is governed by a ninemember board of directors elected by common stock shareholders. board members serve',
25776:'threeyear terms. apps issued common stock and received a federal government grant to finance its initial capital and startup costs.',
25777:'theapps is under no obligation to return the grant funds but is expected to promote u.s. competitive interests in the',
25778:'emerging space travel industry. during the reporting period,apps’ board approved a strategic plan to expand its systems to accommodate increased',
25779:'commercial demands andapps issued bonds to finance the initiative. the interest rate required by lenders indicates that the market assumes',
25780:'the federal government has implicitly guaranteed the payment of principal and interest. in its regulatory capacity, the federal government requiredapps',
25781:'to establish a capital reserve and created a fivemember appsadvisory board to monitor and advise congress onapps’ fiscal operations. apps',
25782:'derives its revenues from fees charged to commercial organizations and receives no ongoing federal support through the budget. tentative conclusions',
25783:'based on the assumptions and other considerations, management determined and the auditor concurred thatapps should not be reported in the',
25784:'governmentwide gpffr as a consolidation entity or disclosure entity. apps is not listed in the schedule in the budget of',
25785:'the united states government: analytical perspectives—supplemental materials that provides budget account page 85 sffas 47 fasab handbook, version 20 06/21',
25786:'sffas 47 level information and the federal government does not have a majority ownership interest in the company. further, management',
25787:'conducted a thorough assessment of control indicators and determined the federal government does not exercise control ofapps. regulation ofapps does',
25788:'not, by itself, establish control. however, based on the assumptionsand other considerations, management determined and the auditor concurred thatapps should',
25789:'be disclosed as a related party. related parties generally include gses not meeting the inclusion principles, especially those organizations for',
25790:'which the relationship is of such significance that it would be misleading to exclude information about it. u.s. museum scenario',
25791:'a in the budget—consolidation entity assumed facts and circumstances the u.s. museum the museum was organized to bring history and',
25792:'lessons about the united states to individuals through educational outreach, teacher training, traveling exhibitions, and scholarship. the museum is an',
25793:'independent establishment of the federal government and is governed by a board of trustees, known as the museum council. the',
25794:'council has 13 voting members and 2 nonvoting members. of the voting members, 11 are appointed by the president and',
25795:'serve 10yearterms appointmentsare staggered and the other2 are appointed from among membersof congress to serve during their term. the nonvoting',
25796:'members are selected by the council. the museum receives an annual appropriation as well as private donations. annual appropriations account',
25797:'for approximately 90 percent of operations and activities, with the remaining 10 percent coming from donor activities and museum sales.',
25798:'the museum is listed in the budget of the united states government: analytical perspectives—supplemental materials schedule that provides budget account',
25799:'level information.all donations are considered to be available for use unless specifically restricted by the donor or by time. furthermore,',
25800:'the museum is not considered to be a nonfederal organization receiving federal financial assistance. tentative conclusions based on the assumptions',
25801:'and other considerations, management determined and the auditor concurred that the museum should be included in the governmentwide gpffr because',
25802:'the museum meets the first inclusion principle in the budget. further, the president and the page 86 sffas 47 fasab',
25803:'handbook, version 20 06/21 sffas 47 congress appoint the museum council which indicates the federal government controls the museum which',
25804:'meets the third inclusion principle control with risk of loss or expectation of benefit. classification as a consolidation entity or',
25805:'disclosure entity because it is listed in the budget, the museum generally would qualify as a consolidation entity assuming no',
25806:'information to the contrary. in this example, management determined and the auditor concurred that there were no facts rebutting or',
25807:'contradicting the assumption that the museum is a consolidation entity. as a consolidation entity, its financial statements should be consolidated',
25808:'in the governmentwide gpffr. the financial statements included should be for the entire organization and thusinclude the sourcesand uses forboth',
25809:'the appropriationsand the donated funds. administrativeassignment based on a review by management, no other component reporting entity has been assigned',
25810:'administrative responsibilities for the museum. therefore, the museum is consolidated only directly into the governmentwide gpffr. u.s. museum scenario b',
25811:'control based on persuasive indicator—disclosure entity financially independent assumed facts and circumstances the u.s. museum the museum was originally organized',
25812:'by volunteers to bring history and lessons about the united states to individuals through educational outreach, teacher training, traveling exhibitions,',
25813:'and scholarship. the museumisintended to be a self supporting operation. shortly after its founding, it entered into a cooperative relationship',
25814:'with the department of federal museums, a department within the executive branch. the museum is incorporated as a notforprofit organization',
25815:'governed by the museum council. the council has15 votingmembersreferred to astrustees. the presidentiallyappointedheadof the department of federal museums serves as',
25816:'the council chairperson. of the remaining voting trustees, nine are appointed by the president and five are selected and approved',
25817:'by the council. except for the chairperson, all trustees serve tenyear terms which are staggered. the council selects a board',
25818:'of directors for the museum and appoints the chief executive officer. the museum is a publicprivate partnership which receives an',
25819:'annual appropriation as well as private donations, rental income, and sales revenue. no feesare charged for educational events page 87',
25820:'sffas 47 fasab handbook, version 20 06/21 sffas 47 or museum tours. rental income from the museum facilities is derived',
25821:'from rates competitive with other venues for similar events. rental of the facilities is intended to support museum activities such',
25822:'that the museum can eventually be self supporting. presently, annual appropriations account for approximately 15 percent of operations and activities,',
25823:'with the remaining 85 percent coming from donor activities, rental income, and museum sales. the museum is listed in the',
25824:'budget of the united states government: analytical perspectives— supplemental materials schedule that provides budget account level information. the funding received',
25825:'from donations is restricted to use by the museum and the trustees approve the annual budget including rental income and',
25826:'fundraising goals. the museum’s employees are not federal employees. the museum is required to fully fund any deferred compensation programs',
25827:'and to advise its employees that the federal government has not guaranteed their deferred compensation. tentative conclusions based on the',
25828:'assumed facts and circumstances and other considerations, management determined and the auditor concurred the museum should be included in the',
25829:'governmentwide gpffr because it meets the third inclusion principle control with risk of loss or expectation of benefit. although the',
25830:'museum also meets the first inclusion principle in the budget, it is a non federal organization receiving federal financial assistance.',
25831:'an assessment of the remaining inclusion principlesshowsthat the museummeetsthethirdinclusionprinciple controlwith riskof loss or expectation of benefit because it is controlled',
25832:'by the federal government since a majority of the trustees are appointed by the president; a persuasive indicator of control.',
25833:'classification as a consolidation entity or disclosure entity for this illustration, management determined and the auditor concurred that, based on',
25834:'the assumed facts and circumstances as well as other considerations not described in the illustrations, the museum should be reported',
25835:'as a disclosure entity. in arriving at this conclusion, management and the auditor considered the assumed facts and circumstancespresented below',
25836:'in the aggregate and, finding no other facts that in the aggregate contradict these, used professional judgment to determine that',
25837:'the museum is a disclosure entity. evidence suggesting that u. s. museum is a consolidation entity includes: 1. appointments to',
25838:'the council are made by elected officials. 2. museum services, educational events and tours, are provided on a nonmarket basis',
25839:'to the general public. page 88 sffas 47 fasab handbook, version 20 06/21 sffas 47 evidence suggesting that u.s. museum',
25840:'is a disclosure entity includes: 1. the museum is a separate legal organization – a notforprofit – and terms for',
25841:'a majority of council members are tenyears. this insulates the organization from political influence. further, daytoday operations are governed by',
25842:'a board of directors whose members are not directly appointed by elected officials. 2. the museum is intended to receive',
25843:'limited financing from taxes and market rates are charged for facility rentals. 3. the museum is required to make explicit',
25844:'that any liability for deferred compensation of its employeesisnot guaranteed bythefederal government. this indicates that limited risksare imposed on the',
25845:'federal government. disclosure entities should be presented by the component reporting entity to which they are administratively assigned and, if',
25846:'material, by the governmentwide entity. administrativeassignment management determined and the auditor concurred the department of federal museumsshould present the museum',
25847:'as a disclosure entity in its gpffr because the department is assigned administrative responsibility for the museum based on appointment',
25848:'of its head to serve as chairperson of the council. firefighters’ housing limited partnership owned and controlled—consolidation entity assumed facts',
25849:'and circumstances agency 123 has been authorized to establish prepositioned housing and equipment storage facilitieson federal land to ensure immediate',
25850:'and efficient deployment of firefighting resourcesin response to wildfires in remote areas. the enabling legislation allowsagency 123 to enter into',
25851:'a wide range of financial agreements with privatesector participants to provide housing and equipment storage for the firefighters. the agency',
25852:'and a private developer formed a limited partnership—firefighters’ housing limited partnership fhlp—to develop, operate, maintain, and own all housing and',
25853:'storage units and facilitieswithin a designated area for 25 years.agency 123 leased land to fhlp under a 25year ground lease.',
25854:'at the end of the 25year ground lease, the agency has the option to renew the partnership for another 25',
25855:'years. if it does not renew, all structures and land revert back to page 89 sffas 47 fasab handbook, version',
25856:'20 06/21 sffas 47 agency 123 in accordance with the agency’s residual ownership interest. during the 25year ground lease,agency 123',
25857:'will provide an annual payment to fhlp from its appropriated funds for management services, use of the housing byagency 123',
25858:'employees during the fire season, and equipment storage yearround. the private sector partner is guaranteed a minimum payment from fhlp',
25859:'and has no ownership interest in fhlp properties. the private sector partner also is entitled to a share of profits',
25860:'from nonfire season vacation rentals of the housing so long as the facilities meet established condition requirements. profits not distributed',
25861:'to the private sector partner are retained by fhlp and can be used for capital improvements including development of new',
25862:'housing in adjacent parks under similar terms. as part of the partnership agreement,agency 123 has significant authority to determine the',
25863:'policies governing fhlp’s activities and to affect daytoday decisions such as design and construction.anydebt incurred by fhlp must be authorized',
25864:'by the agency. furthermore, capital and operating budgets require agency approval and financial transactions are monitored on a monthly basis',
25865:'by the agency’s contract administration office. the partnership is required to produce audited financial statements annually. tentative conclusions based on',
25866:'the assumed facts and circumstances and other considerations, management determined and the auditor concurred that fhlp should be included in',
25867:'the governmentwide gpffr. asubstantial ownership interest is present via the agency’s continuing ownership interest. in addition, several control indicatorsare met',
25868:'as summarized in the following analysisof available information: 1. agency 123 may be able to direct the partnership regarding the',
25869:'establishment and subsequent revision of financial and operating policies through its review and approval of operating budgets, designs, and condition',
25870:'of the facilities. if so, this would be a persuasive indicator of control. management should weigh the impact of its',
25871:'role in directing the fhlp’s financial and operating policies and consider how much discretion falls to the private sector partner.',
25872:'2. other indicatorsintheaggregatemayindicatecontrol.agency123hassignificantauthority to: a. direct the ongoing use of assets, b. approve the budgets and business plans for fhlp,',
25873:'c. require audits, and page 90 sffas 47 fasab handbook, version 20 06/21 sffas 47 d. limit borrowing and investment',
25874:'by fhlp. classification as a consolidation entity or disclosure entity for this illustration, management determined and the auditor concurred that,',
25875:'based on the assumed facts and circumstances as well as other considerations not described in the illustrations, fhlp should be',
25876:'reported as a consolidation entity. in arriving at this conclusion, management and the auditor considered the assumed facts and circumstancespresented',
25877:'below in the aggregate and, finding no other facts that in the aggregate contradict these, used professional judgment to determine',
25878:'that fhlp is a consolidation entity. evidence suggesting that fhlp is a consolidation entity includes the following: 1. fhlp provides',
25879:'housing to firefighters as its primary function on a nonmarket basis. 2. it is financed by tax revenues supplemented by',
25880:'any retained profits from nonfire season rentals. 3. decisions aremadeby organizationalleaders atagency123whoareappointedbythe president and confirmed by the senate. 4. funds',
25881:'transferred to fhlp will be approved through the usual budgetary process so that fhlp funding will be included in the',
25882:'budget approved by the congress and the president. evidence suggesting that fhlp is a disclosure entity includes the following: 1.',
25883:'fhlphasalegalidentity separatefromagency123. 2. fhlp is authorized to provide vacation housing services to customers on a market basis and use the',
25884:'proceeds to first compensate the private sector partner and then reduce the cost of firefighter housing borne by the taxpayer.',
25885:'as a consolidation entity, fhlp’s financial statements should be consolidated by the component reporting entity to which it is administratively',
25886:'assigned. administrativeassignment management determined and the auditor concurred thatagency 123 should consolidate fhlp’s financial statements because it is assigned administrative',
25887:'responsibility for fhlp based on its inclusion of fhlp funding in its budget request and its coordination and monitoring of',
25888:'fhlp’s plans and performance. page 91 sffas 47 fasab handbook, version 20 06/21 sffas 47 the blue mountain observatory control',
25889:'based on indicators in theaggregate—disclosure entity ffrdc assumed facts and circumstances agency xyz created an ffrdc, the blue mountain observatorybmo,',
25890:'to provide facilities and leadership needed to conduct scientific research in a wide range of fields, including the study of',
25891:'black holes. agency xyz is bmos primary sponsor. university cooperative uc is a notforprofit membership corporation created by 50 universities',
25892:'conducting research that would benefit from use of bmo facilities. uc was created to seek the role of managing, operating,',
25893:'and maintaining bmo under a cooperative agreement withagency xyz. uc subsequently entered into a cooperative agreement withagency xyz. uc is',
25894:'governed by a board of trustees appointed to represent each of the 50 member universities. uc trustees appoint an individual',
25895:'to serve as president of bmo. the trustees also oversee bmo operations including providing input on strategic plans, approving the',
25896:'annual program plan before its submission toagency xyz for approval, responding toagency xyz input, and monitoring financial activities including establishing',
25897:'investment policies. uc employs staff to perform all bmo activities and these individuals are referred to as ‘bmo employees.’ member',
25898:'universities fund any nonbmo activities of uc. the cooperative agreement between uc andagency xyz ensures close coordination between agency xyz',
25899:'and bmo employees. the agreement contains requirements necessary foragency xyz’s oversight of both bmo’s programs and uc’s management activities, including',
25900:'the following provisions: 1. provide input to a strategic plan developed by bmo employees in collaboration with uc trustees. the',
25901:'strategic plan sets the overall direction and priorities for bmo. 2. agency xyz must approve the annual program plan and',
25902:'budget for use of resources. 3. uc mustprovidetoagencyxyz an annual scientific reportandauditedfinancial statements. 4. agency xyz participates in developing a',
25903:'fiveyear strategic plan. 5. bmoandagencyxyz mustmeetannuallytoreviewprogressandensurethatscientificand facility priorities remain consistent with those ofagency xyz. uc works cooperatively withagency xyz to',
25904:'ensure the effective implementation of the strategic mission of bmo to the benefit of the research community. midway through the',
25905:'current page 92 sffas 47 fasab handbook, version 20 06/21 sffas 47 cooperative agreement,agency xyz will conduct comprehensive reviews of',
25906:'science, facilities, and management to inform future decisions regarding recompetition of the cooperative agreement for the facility. ucisunder no obligation',
25907:'to continue in itsrole in managing, operating, and maintaining bmo. in the most recent fiscal year, bmo received $100 million',
25908:'in fundingfromagencyxyz through its cooperative agreement with uc. agency xyz proposed the $100 million in funding in its congressional budget',
25909:'justification and described how the funds would be used to support the research programs at bmo. in administering the funds',
25910:'provided byagency xyz for bmo programs, uc may: 1. expend funds to meet ongoing operational needs, 2. makeannualcashcontributionstoemployeebenefitsprogramsaccruedleaveandpension plans, 3.',
25911:'make annual payments due under longterm leases, and 4. construct or purchase new assets so long as all resulting property',
25912:'is titled to bmo. in the event the cooperative agreement with uc is terminated,agency xyz would assume management responsibility for',
25913:'the facility. further,agency xyz would seek appropriations for termination expenses such as postretirement benefit liabilities for bmo employees. however, agency',
25914:'xyz would be obligated to pay termination benefits only if funds were appropriated for that purpose. tentative conclusions based on',
25915:'the assumed facts and circumstances and other considerations, management determined and the auditor concurred that bmo should be included in',
25916:'the governmentwide gpffr. bmo is not listed in the budget of the united states government: analytical perspectives—supplemental materials schedule that',
25917:'provides budget account level information so other inclusion principles must be considered. bmo facilities are owned by the federal government',
25918:'and new assets are titled to the federal government. with respect to the control inclusion principle,agency xyz establishes the fundamental',
25919:'purpose and mission of bmo through its participation in strategic planning and the overall effort to ensure bmo goals are',
25920:'consistent withagency xyz research goals. this effort includes annual actions to approve bmo’s annual program plan and operating budget. these',
25921:'actions are persuasive indicators of control. page 93 sffas 47 fasab handbook, version 20 06/21 sffas 47 classification as a',
25922:'consolidation entity or disclosure entity for this illustration, management determined and the auditor concurred that, based on the assumed facts',
25923:'and circumstances as well as other considerations not described in the illustrations, bmo should be reported as a disclosure entity.',
25924:'in arriving at this conclusion, management and the auditor considered the assumed facts and circumstancespresented below in the aggregate and,',
25925:'finding no other facts that in the aggregate contradict these, used professional judgment to determine that bmo is a disclosure',
25926:'entity. evidence suggesting that bmo is a consolidation entity includes the following: 1. bmo provides, as its primary function, research',
25927:'facilities and leadership to university members of uc on a nonmarket basis. it is financed by taxpayer funds supplemented by',
25928:'nongovernment donors. 2. keyoperationaldecisions aremadebyorganizationalleaders atagencyxyz whoare appointed by the president and confirmed by the senate. 3. fundstransferredtobmowillbeapprovedthroughtheusualbudgetaryprocesssothatuse of tax',
25929:'revenues to support bmo is ultimately decided by the congress and the president. evidence suggesting that bmo is a disclosure',
25930:'entity includes the following: 1. bmohasalegalidentity separatefromagencyxyz. 2. the governance structure ensures that universities have substantial input regarding bmo’s strategic',
25931:'plans and annual program plan. the significant involvement of nongovernmental organizations lessens political influence. 3. bmo’s liabilities are not obligations',
25932:'of the u.s. government. 4. bmo is authorized to accept donations from nongovernment organizations. as a disclosure entity, bmo should',
25933:'be presented by the component reporting entity to which it is administratively assigned. administrativeassignment management determined and the auditor concurred',
25934:'thatagency xyz should disclose information about bmo because it isassigned administrative responsibility for bmo based on its inclusion of bmo',
25935:'funding in its budget request and its coordination and monitoring of bmo’s plans and performance. page 94 sffas 47 fasab',
25936:'handbook, version 20 06/21 sffas 47 table 1: summaryapplication of standard is the organization included in the governmentwide gpffr? consolidation',
25937:'entity or disclosure entity name in the budget owned control misleading to exclude is the organization included? a consolidation entity',
25938:'consolidated a disclosure entity disclosed abc yes yes organizations department listed in the budget generally would qualify as consolidation entities.',
25939:'epsilon yes yes organizations corporation listed in the budget generally would qualify as consolidation entities. sigma no no yes. amajority',
25940:'of the yes financially association governing board members is appointed by the president and confirmed by the senate and they',
25941:'established its fundamental purpose and mission through legislation. independent organization scholars yes butas a no no. scholars’ board of management',
25942:'no university nonfederal organization receiving federal financial assistance. trustees elects its respective board members. scholars’ board of trustees primarily directs',
25943:'the university’s affairs and the university seeks sources of revenue to operate virtually in a selfsustaining manner. and auditor agreement',
25944:'based on facts and circumstances it was not misleading to exclude. education no no yes, the federal yes theeritrustfund research',
25945:'government can is primarily funded institute unilaterally dissolve eri and have access to its assetsandresponsibility for its liabilities. through taxes,',
25946:'elected officials establish eri’s budget, services are provided on a nonmarket basis, and federal government assume risk. page 95 sffas',
25947:'47 fasab handbook, version 20 06/21 sffas 47 is the organization included in the governmentwide gpffr? consolidation entity or disclosure',
25948:'entity name in the budget owned control misleading to exclude is the organization included? a consolidation entity consolidated a disclosure',
25949:'entity disclosed mediation yes butas a no yes. considering the yes mediation’s corporation nonfederal organization receiving federal financial assistance. therefore,',
25950:'must assess against other principles. control indicators in the aggregate, the federal government controls mediation. it provides significant input on',
25951:'the selection of governing board members, appoints a key executive, limits mediation’s capacity to generate revenue, approves the annual budget,',
25952:'requires audited financial statements, and directs mediation to work with other governments. governing body is insulated from political influence and',
25953:'risks are not assumedbythe federal government. bicycle no no. bais no, governing board no,management no. advisory america,inc. owned by members',
25954:'are elected by and auditor committee offers scenarioa shareholder s. shareholdersratherthan subject to political appointment. agreement based on facts and',
25955:'circumstances it was not misleading to exclude. advice but does not have the authority to direct bato act. bicycle no',
25956:'yes, the yes intervention america,inc. federal activity— scenario b government acquired 51% of the votingrights in ba. separate legal entity',
25957:'with limitedfinancing from general taxes. chatham no the assets yes. the federal yes yes, chatham is laboratory and government establishes',
25958:'primarily funded by ffrdc research results are owned. the purpose and mission of chatham. taxes, and governance rests with the',
25959:'president and congress. page 96 sffas 47 fasab handbook, version 20 06/21 sffas 47 is the organization included in the',
25960:'governmentwide gpffr? consolidation entity or disclosure entity name in the budget owned control misleading to exclude is the organization included?',
25961:'a consolidation entity consolidated a disclosure entity disclosed gotham no no no no,management no. although it laboratory and auditor agreement',
25962:'based on facts and circumstances it was not material to exclude. may be economically dependent, gotham has discretion as to',
25963:'whethertoaccept funding from the government. andromeda no no no, apps’ governing no, management prime power body is elected by determined',
25964:'and systems common shareholders. the auditor gse the apps advisory boardadvisescongress and does not direct apps’ operations. concurred apps should',
25965:'be disclosed as a related party. u.s. yes yes yes. the museum museum isinthebudget and scenarioa primarily funded by taxes',
25966:'and governance rests with the president and congress. u.s. yes butas a no yes. the president yes the museum is',
25967:'museum nonfederal appoints a majority of a financially scenario b organization receiving federal financial assistance. the governing body’s members. independent',
25968:'organization. firefighters’ no ownership yes. agency 123 has yes yes.taxesfundthe housing of property significant authority to housing and risks limited',
25969:'is retained. direct the limited have been partnership partnership’s activities and to affect daytoday activities such as in design and',
25970:'construction and the partnership’s purpose is to carry out federal missions and objectives. assumed. page 97 sffas 47 fasab handbook,',
25971:'version 20 06/21 sffas 47 is the organization included in the governmentwide gpffr? consolidation entity or disclosure entity name in',
25972:'the budget owned control misleading to exclude is the organization included? a consolidation entity consolidated a disclosure entity disclosed blue',
25973:'mountain observatory ffrdc no property is owned by the federal government. yes. the federal government establishes thepurposeandmission of bmo. yes',
25974:'bmo is a separate legal entity and uc plays a significant role in its governance without political influence. page 98',
25975:'sffas 47 fasab handbook, version 20 06/21 sffas 47 appendix d:abbreviations aicpa americaninstituteofcertifiedpublicaccountants c.f.r. code of federal regulations cfr consolidated',
25976:'financial report of the u.s. government cre component reporting entity crs congressional research service ed exposure draft far federalacquisitionregulation fasab',
25977:'federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board fdic federal deposit insurance corporation ffrdc federally funded research and development center frs federal reserve system',
25978:'gaap generallyacceptedaccountingprinciples gao governmentaccountabilityoffice gpffr general purpose federal financial report oai otheraccompanyinginformation oig office of inspector general omb office of',
25979:'management and budget rsi required supplementary information sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards u.s. united states u.s.c. united states code page 99',
25980:'sffas 47 fasab handbook, version 20 06/21 sffas 47 appendix e: task force members owen barwell, department of energy lieutenant',
25981:'colonel richard brady, united states marine corp, department of defense terry bowie, formerly of nationalaeronautics and spaceadministration james l. chan,',
25982:'university of illinois at chicago naresh chopra, department of labor wendy calvin, department of transportation tom daxon, former oklahoma stateauditor',
25983:'ann davis, u.s. department of treasury lynda downing, governmentaccountability office abe dymond, formerly of governmentaccountability office joel grover, formerly of',
25984:'u.s. department of treasury, office of the inspector general mark hadley, congressional budget office regina kearney, office of management and',
25985:'budget karen kelbly, national credit unionadministration dan kovlak, formerly of kpmg andrew lewis, kpmg rick loyd, department of energy ned',
25986:'maguire, formerly of office of the dir. of national intelligence, oig sam papenfuss, congressional budget office reginald royster, department of',
25987:'housing and urban development fred selby, formerly of u.s. department of treasury, office of financial stability gary solamon, formerly of',
25988:'department of commerce, bureau of economicanalysis sandy van booven, national reconnaissance office denise williams, u.s. department of treasury, fiscal service',
25989:'adrienne e. young, formerly of national science foundation page 100 sffas 47 fasab handbook, version 20 06/21 statement of federal',
25990:'financialaccounting standards 48: opening balances for inventory, operating materials and supplies, and stockpile materials status issued january 27, 2016 effective',
25991:'date for periods beginning after september 30, 2016. earlier implementation is encouraged. affects sffac 3, par. 20, 22, 2325, 26,',
25992:'42, 44, and 53. affected by none. related guidance tr 18, implementation guidance for establishing opening balances summary this statement',
25993:'permits a reporting entity to apply an alternative valuation method in establishing opening balances for inventory, operating materials and supplies,',
25994:'and stockpile materials. this method is permitted when presenting financial statements, or one or more line items addressed by this',
25995:'statement, following generally accepted accounting principles gaap promulgated by the federalaccounting standardsadvisory board either 1 for the firsttime or 2',
25996:'after a period during which existing systems could not provide the information necessary for producing such gaapbased financial statements without',
25997:'use of the alternative valuation method. this statement isintendedto provide an alternative valuationmethod to adoption of gaapwhen historical records and',
25998:'systems do not provide a basis for valuation of opening balances in accordance with sffas 3, accounting for inventory and',
25999:'related property. page 1 sffas 48 fasab handbook, version 20 06/21 sffas 48 table of contents page summary 1 introduction',
26000:'3 standards 4 scope 4 definitions 4 disclosure requirements 6 effect on existing standardsamendments to sffas 3, acccounting for inventory',
26001:'and related property 6 effective date 9 appendix a: basis for conclusions 10 appendix b: abbreviations 19 appendix c: amendments',
26002:'to sffas 3 20 page 2 sffas 48 fasab handbook, version 20 06/21 sffas 48 introduction purpose 1. this statement',
26003:'permits a reporting entity to apply an alternative valuation method in establishing opening balances for inventory, operating materials and supplies',
26004:'om&s, and stockpile materials. these assets are addressed in statement of federal financial accounting standards sffas 3, accounting for inventory',
26005:'and related property. while sffas 3 addresses six types of tangible property, only inventory, om&s, and stockpile materials are required',
26006:'to be valued using the “initial amount” measurement approach.1 2. the alternative valuation method permitted by this statement may be',
26007:'applied when a reporting entity is presenting financial statements or one or more line items addressed by this statement following',
26008:'generally accepted accounting principles gaap promulgated by the federalaccounting standardsadvisory board fasab either 1 for the firsttime or 2 after',
26009:'a period during which existing systems could not provide the information necessary for producing such gaapbased financial statements without use',
26010:'of the alternative valuation method. materiality 3. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an item is material depends on the degree to',
26011:'which omitting or misstating information about the item makes it probable that the judgment of a reasonable person relying on',
26012:'the information would have been changed or influenced by the omission or the misstatement. 1 the measurement approach is how',
26013:'an asset or liability is measured in periods after initial recordingi.e., at the historical cost or initial transactionamount with subsequent',
26014:'adjustments for amortization, depreciation, or depletion, if applicable or at an amount, such as fair value, measured at each financial',
26015:'statement date. adifferent measurement approach may be appropriatefor different assets and liabilities.amounts initially recorded are referred to as the initial',
26016:'amount and amounts measured at each subsequent financial statement date are remeasured amounts. [statement of federal financialaccounting concepts sffac 7,',
26017:'measurement of the elements of accrualbasis financial statements in periods after initial recording, par. 7a] page 3 sffas 48 fasab',
26018:'handbook, version 20 06/21 sffas 48 standards scope 4. this statement applies when a reporting entity is presenting financial statements',
26019:'or one or more line items addressed by this statement following generally accepted accounting principles gaap promulgated by the federal',
26020:'accounting standards advisory board fasab either 1 for the firsttime or 2 after a period during which existing systems could',
26021:'not provide the information necessaryfor producing such gaapbased financialstatements without use of the alternative valuation method. the application of this',
26022:'statement based on the second condition is available once per reporting entity. 5. this statement may only be applied in',
26023:'establishing opening balances2 for the reporting period that the reporting entity, taken as a whole, makes an unreserved assertion that',
26024:'its financial statements, or one or more line items addressed by this statement, are presented fairly in accordance with gaap.',
26025:'6. reportingentitiesthatmeeteitherconditioninparagraph4andelecttoapplythealternative valuation method in establishing opening balances permitted by this statement are subject to the reporting requirements under paragraph',
26026:'13 of statement of federal financial accounting standards sffas 21: reporting corrections of errors and changes in accounting principles. definitions',
26027:'7. deemed cost—amount used as a surrogate for initial amounts that otherwise would be required to establish opening balances. 8.',
26028:'opening balances—account balances that exist at the beginning of the reporting period. opening balances are based upon the closing balances',
26029:'of the prior period and reflect the effects of transactions and events of prior periods and accounting policies applied in',
26030:'the prior period. opening balances also include matters requiring disclosure that existed at the beginning of the period, such as',
26031:'contingencies and commitments.3 2terms defined in the glossary are shown in boldface the first time they appear. 3adopted from auc',
26032:'510, opening balances – initial audit engagements, including reaudit engagements aicpa professional standards. page 4 sffas 48 fasab handbook, version',
26033:'20 06/21 sffas 48 9. unreserved assertion—an unconditional statement. alternative valuation method for opening balances 10. deemed cost is an',
26034:'acceptable valuation method for opening balances of inventory, operating materials and supplies om&s, and stockpile materials for the reporting period',
26035:'when the reporting entity makes an unreserved assertion that its financial statements, or one or more line items addressed by',
26036:'this statement, are presented fairly in accordance with gaap. 11. because the reporting entity may have multiple component reporting entities',
26037:'using various valuation methods simultaneously, deemed cost should be based on one, or a combination, of the following valuation methods:4',
26038:'a. standard price selling price5 or fair value6 b. latest acquisition cost7 c. replacement cost 8 d. estimated historical cost',
26039:'initial amount e. actual historical cost initial amount 4the methods are not listed in order of preference. 5 the latest',
26040:'known representative acquisition cost plus authorized cost recovery rate for each item of inventory and relatedproperty. this is establishedannually andisoftenreferred',
26041:'to as selling price. selling priceand fairvalue mayor may not be identical due to the intragovernmental nature of some sales.',
26042:'6 fair value is the amount at which an asset or liability could be exchanged in a current transaction between',
26043:'willing parties, other than in a forced or liquidation sale. sffac 7, par. 38. 7thelatestacquisitioncost lac methodprovides thatall likeunits thatareheld',
26044:'be valued at the invoice price of the most recent like item purchased, less any discounts, plus any additional costs',
26045:'incurred to bring the item to a form and location suitable for its intended use. fasab handbook glossary as of',
26046:'june 30, 2014 8 replacement cost is the amount required for an entity to replace the remaining service potential of',
26047:'an existing asset in a current transaction at the reporting date, including the amount that the entity would receive from',
26048:'disposing of the asset at the end of its useful life. sffac 7, par. 46 page 5 sffas 48 fasab',
26049:'handbook, version 20 06/21 sffas 48 12. once established using deemed cost, opening balances are to be considered consistent with',
26050:'gaap. no distinction or breakout of the deemed cost amount in the opening balances is required. disclosure requirements 13. areportingentity',
26051:'electingtoapplydeemed costinestablishingopeningbalances for inventory, om&s, or stockpile materials should disclose this fact and describe the method usedinthefirst reportingperiodin which thereporting',
26052:'entitymakesanunreservedassertion that its financial statements, or one or more line items addressed by this statement, are presentedfairlyinaccordance withgaap. financialstatements,orasapplicable, reportson',
26053:'line items, of subsequent periods need not repeat this disclosure unless the statements for which deemed cost was applied in',
26054:'establishing opening balances are presented for comparative purposes. no disclosure of the distinction or breakout of amount of deemed cost',
26055:'of inventory, om&s, or stockpile materials included in the opening balance is required. effect on existing standards amendments to sffas',
26056:'3, accounting for inventory and related property 14. this section amends sffas 3, accounting for inventory and related property, as',
26057:'described in the following paragraphs. 15. paragraph 20 is replaced with the following paragraph: “valuation. inventory shall be valued at',
26058:'either 1 historical cost or 2 a method that reasonably approximates historical cost.” 16. paragraph 22, the last sentence is',
26059:'amended by removing “e.g., a standard cost system.” 17. paragraphs 2325 are rescinded to remove the term latest acquisition cost',
26060:'lac from sffas 3 when used to mean that lac that is equivalent to historical cost inclusive of the valuation',
26061:'allowance. 18. paragraph 26 is replaced by the following paragraph which expands the exception to valuation in sffas 3 to',
26062:'incorporate thealternative valuation method for opening balances provided in this statement. page 6 sffas 48 fasab handbook, version 20 06/21',
26063:'sffas 48 26. valuation method for opening balances and exceptions to valuation. a. alternative valuation method for opening balances.9 deemed',
26064:'cost10 is an acceptable valuation method for opening balances of inventory, operating materials and supplies om&s, and stockpile materials when',
26065:'a reporting entity is presenting financial statements, or one or more line items addressed by statement of federal financial accounting',
26066:'standards sffas 48, opening balances for inventory, operating materials and supplies, and stockpile materials, following generally accepted accounting principles gaap',
26067:'promulgated by the fasab either 1 for the firsttime or 2 after a period during which existing systems could not',
26068:'provide the information necessary for producing such gaapbased financial statements without use of the alternative valuation method. the following should',
26069:'be considered in applying an alternative valuation method: i. the alternative valuation method may only be applied in establishing opening',
26070:'balances for the reporting period that the reporting entity, taken as a whole, makesanunreservedassertion11 that itsfinancialstatements, oroneormoreline items addressed by',
26071:'sffas 48, are presented fairly in accordance with gaap. ii. the application of this method based on the second condition',
26072:'specified above is available once per reporting entity. iii. reporting entities that meet either condition in paragraph 26a. and elect',
26073:'to apply the alternative valuation method in establishing opening balances permitted by sffas 48 are subject to the reporting requirements',
26074:'under paragraph 13 of statement of federal financial accounting standards 21: reporting corrections of errors and changes in accounting principles.',
26075:'iv. because the reporting entity may have multiple component reporting entities using various valuation methods simultaneously, deemed cost should be',
26076:'based on one, or a combination, of the following valuation methods:12 9opening balances are account balances that exist at the',
26077:'beginning of the reporting period. opening balances are based upon the closing balances of the prior period and reflect the',
26078:'effects of transactions and events of prior periods and accounting policies applied in the prior period. opening balances also include',
26079:'matters requiring disclosure that existed at the beginning of the period, such as contingencies and commitments. 10deemed cost is an',
26080:'amount used as a surrogate for initial amounts that otherwise would be required to establish opening balances. 11 an unreserved',
26081:'assertion is an unconditional statement. 12 the methods are not listed in order of preference. page 7 sffas 48 fasab',
26082:'handbook, version 20 06/21 sffas 48 1 standard price selling price13 or fair value14 2 latest acquisition cost15 3 replacement',
26083:'cost16 4 estimated historical cost initial amount 5 actual historical cost initial amount v. disclosure requirementsa reporting entity electing to',
26084:'apply deemed cost in establishing opening balances for inventory, om&s, or stockpile materials should disclose this fact and describe the',
26085:'method used in the first reporting period in which the reporting entity makes an unreserved assertion that its financialstatements, oroneormore',
26086:'line itemsare presentedfairlyinaccordance with gaap. financial statements, or as applicable, reports on line items, of subsequent periods need not repeat',
26087:'this disclosure unless the statements for which deemed cost was applied in establishing opening balances are presented forcomparativepurposes. nodisclosureofthedistinctionorbreakoutofamount of',
26088:'deemed cost of inventory, om&s, or stockpile materials included in the opening balance is required. b. exceptionsto valuation. anexceptionfor reportinginventory,om&s,and',
26089:'stockpile materials at net realizable value is available for agricultural, mineral, and other products e.g. petroleum with all the following',
26090:'criteria: i. units of which are interchangeable, ii. units of which have immediate marketability, iii. units for which appropriate costs',
26091:'may be difficult to obtain. 13the latest known representative acquisition cost plus authorized cost recovery rate for each item of',
26092:'inventory and relatedproperty. this is establishedannually and isoften referred to as selling price. selling priceand fairvalue mayor may not be',
26093:'identical due to the intragovernmental nature of some sales. 14 fair value is the amount at which an asset or',
26094:'liability could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. sffac',
26095:'7, par. 38 15 the latestacquisition cost lac method provides that all like units that are held be valued at',
26096:'the invoice price of the most recent like item purchased, less any discounts, plus any additional costs incurred to bring',
26097:'the item to a form and location suitable for its intended use. fasab handbook glossary as of june 30, 2014',
26098:'16 replacement cost is the amount required for an entity to replace the remaining service potential of an existing asset',
26099:'in a current transaction at the reporting date, including the amount that the entity would receive from disposing of the',
26100:'asset at the end of its useful life. sffac 7, par. 46 page 8 sffas 48 fasab handbook, version 20',
26101:'06/21 sffas 48 19. paragraph 42 is amended by adding the following after historical cost or on a basis that',
26102:'reasonablyapproximates historical cost. theprovisions ofparagraph26,alternative valuation method for opening balances, extend to operating material and supplies. 20. paragraph 44 is',
26103:'amended by deleting the last sentence: in addition, any other valuation method may be used if the results reasonably approximate',
26104:'those of one of the above historical cost methods e.g., a standard cost or latest acquisition cost system. 21. paragraph',
26105:'53, the first sentence is amended by adding the following after historical cost or on a basis that reasonably approximates',
26106:'historical cost. the provisions of paragraph 26, alternative valuation method for opening balances, extend to stockpile materials. paragraph53isalsoamended bydeletingthelast sentence:',
26107:'inaddition, anyothervaluation method may be used if the results reasonably approximate those of one of the above historical cost methods',
26108:'e.g., a standard cost or latest acquisition cost system. effective date 22. this statement is effective for periods beginning after',
26109:'september 30, 2016. earlier implementation is encouraged. the provisions of this statement need not be applied to immaterial items. page',
26110:'9 sffas 48 fasab handbook, version 20 06/21 sffas 48 appendixa: basis for conclusions this appendix discusses some factors considered',
26111:'significant by board members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and',
26112:'rejecting others. individual members gave greater weight to some factors than to others. the standards enunciated in this statementnot the',
26113:'material in this appendixshould govern the accounting for specific transactions, events, or conditions. this statement may be affected by later',
26114:'statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend',
26115:'this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not',
26116:'be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the',
26117:'rationale for each amendment. project history department of defense implementation guidance request project a1. infebruary2014,thedepartmentofdefensedodidentifiedseveralareasofconcernfor the boards consideration. the board',
26118:'agreed to undertake a project to address these areas by providing practical guidance within the framework of existing accounting standards',
26119:'and, where necessary, provide the appropriate guidance to address issues not addressed within the framework of existing accounting standards. a2.',
26120:'this statement is related to the request for guidance on the use of reasonable baseline estimates on the valuation of',
26121:'inventory, operating materials and supplies om&s, and stockpile materials from nongaap legacy systems. statement of federal financial accountingstandardssffas3, accounting for',
26122:'inventory and related property,requires valuation at historical cost initial amounts. a3. in the initial phase of the project, board staff',
26123:'met with senior officials from dod to develop a comprehensive list of inventory valuation methodologies in place and the status',
26124:'of implementation of an sffas 3 compliant system for each dod component. a4. based on the meetings and information provided',
26125:'it was determined that: a. most dod component legacy systems have valued inventory, om&s, and stockpile materialsatlatestacquisitioncostorstandard costsellingpriceratherthanhistorical cost. these',
26126:'legacy systems do not maintain a record of the cost of previous page 10 sffas 48 fasab handbook, version 20',
26127:'06/21 sffas 48 purchases. therefore, dod doesnot have the data necessaryfor revaluing inventory, om&s, and stockpile materials at transition from',
26128:'a nongaap to a gaap valuation that is, historical cost. b. dodcomponentstransitionedfromnongaaplegacysystemstosffas3compliant systems at different times. while dod has implemented',
26129:'systems that are sffas 3 compliant, it is difficult to determine at what point dod inventory valuation using a historical',
26130:'cost methodology for example, moving average cost will be cleansed eliminated through turnover of nongaap values derived from legacy systems.',
26131:'c. dod components advised that they do not have the information to provide historical turnover rates for the purpose of',
26132:'identifying items that have turnover rates such that the nongaap valuation method used prior to the adoption of sffas 3',
26133:'would approximate historical cost. d. dod does not have the information for revaluation and it is not practical or cost',
26134:'effective to develop models for revaluation. summary of outreach efforts and responses a5. the exposure draft ed, opening balances for',
26135:'inventory, operating materials and supplies om&s and stockpile materials, was issued on june 2, 2015 with comments requested by july',
26136:'20, 2015. a6. upon release of the ed, notices and press releases were provided to the fasab email listserv, the',
26137:'federal register, fasab news, the journal ofaccountancy,association of governmentaccountants today, the cpajournal, government executive, and the cpa letter, the cfo',
26138:'council, the council of the inspectors general on integrity and efficiency, and committees of professional associations generally commenting on exposure',
26139:'drafts in the past for example, the greater washington society of cpas,association of governmentaccountants financial management standards board. a7. this',
26140:'broad announcement was followed by direct mailings of the ed to the following relevant congressional committees: a. house appropriationssubcommittee on',
26141:'defense b. house committee on armed services c. house committee on oversight and government reform page 11 sffas 48 fasab',
26142:'handbook, version 20 06/21 sffas 48 d. house committee on the budget e. house committee on veterans affairs f. senate',
26143:'appropriationssubcommittee on defense g. senate committee on armed services h. senate committee on finance i. senate committee on homeland security',
26144:'and governmental affairs j. senate committee on the budget k. senate committee on veterans affairs a8. the dod also received',
26145:'the ed. a9. twelve responses were received from preparers, auditors, and professional associations. all respondents with the exception of one',
26146:'respondent that did not specify agreement or disagreement agreed with the proposal. the respondents identified certain issues that could be',
26147:'clarified within the statement or addressed in the basis for conclusions. a10. the board did not rely on the number',
26148:'in favor of or opposed to a given position. information about the respondents majority view is provided only as a',
26149:'means of summarizing the comments. the board considered each response and weighed the merits of the points raised. the respondents',
26150:'comments are summarized below. a11. two respondents requested that aspects of the scope be clarified. after considering the comments, the',
26151:'board considered options and decided to state consistently the conditions that entities must meet in order to apply the provisions',
26152:'of this statement rather than attempting to describe the many conditions for which the statement does not apply. additionally, the',
26153:'board believed it should address the applicability of statement of federal financialaccountingstandardssffas21: reporting corrections of errors and changes in accounting',
26154:'principles to those reporting entities that meet the conditions and elect to apply the provisions of this statement. specifically, paragraph',
26155:'12 states …for the purposes of this standard,changes in accounting principlesalso include those occasioned by the adoption of new federal',
26156:'financial accounting standards. therefore, reporting entities meeting the conditions and electing to apply this statement should follow the guidance in',
26157:'sffas 21 paragraph 13a c for all changes in accounting principles: a the cumulative effect of the change on prior',
26158:'periods should be reported as a change in accounting principle. the adjustment should be made to the beginning balance of',
26159:'page 12 sffas 48 fasab handbook, version 20 06/21 sffas 48 cumulative results of operations in the statement of changes',
26160:'in net position for the period that the change is made. b prior period financial statements presented for comparative purposes',
26161:'should be presented as previously reported; and c the nature of the changes in accounting principle and its effect on',
26162:'relevant balances should be disclosed in the current period. financial statements of subsequent periods need not repeat the disclosure. a12.',
26163:'sffas 21 provides that the adjustment should be made to the beginning balance of cumulative results of operations in the',
26164:'statement of changes in net position for the period that the change ismade. thus, no change would be made to',
26165:'the ending net position of the previousyear.the disclosuresshould be at a high level and explain that opening balances of a',
26166:'particular line item or group of line items were valued at deemed cost under this statement, briefly describe deemed cost,',
26167:'and indicate the effect of adoption on beginning net position. a13. in addition, changes to the basis for conclusions were',
26168:'made so it did not appear that references to dod in the basis for conclusions were intended to limit the',
26169:'applicability of deemed cost. while the statement resulted from a request from dod, it may be applied to any reporting',
26170:'entity that falls within the scope of the statement. a14. during due process, two respondents noted potential confusion due to',
26171:'the similarities between the valuation methods identified for use in arriving at deemed cost for opening balances and with methods',
26172:'identified for use in sffas 3. respondents questioned how the alternative valuation method differs from other valuation methods which approximate',
26173:'historical cost such as latest acquisition cost. they asked whether methods that are allowable under sffas 3 should be removed',
26174:'because those would not be considered alternative methods. a15. the board believes all reasonable methods should be allowed for opening',
26175:'balances. therefore, the list of potential deemed cost methods remains expansive. this list includes historical cost because deemed cost may',
26176:'be a consolidation of amounts based on historical cost methods and other methods that do not approximate historical cost. further,',
26177:'some respondents were confused by the references to latest acquisition cost. the boards intends that latest acquisition cost, without adjustment',
26178:'for unrealized holding gains and lossesneeded toapproximatehistoricalcost,bepermittedunderthedeemedcost method; thus, this method was not a method that approximates historical cost as',
26179:'provided by sffas 3. page 13 sffas 48 fasab handbook, version 20 06/21 sffas 48 a16. the board believes that',
26180:'amending sffas 3 to incorporate the alternative valuation approach for opening balances would clarify the intended application and address the',
26181:'concerns raised by respondents. specifically, removing the term latest acquisition cost lac from sffas 3 when used to meanthat lac',
26182:'isequivalent tohistoricalcost inclusive of the valuation allowance will avoid potential misunderstandings. the board believes removing this discussion of lac will',
26183:'prevent confusion regarding the use of lac adjusted to approximate historical cost through an allowance for unrealized holding gains or',
26184:'losses as a deemed cost method not adjusted to approximate historical cost as provided in this statement. to assist users,',
26185:'the board is providingappendix c:amendments to sffas 3, a marked version of the relevant sections inventory, operating materials and supplies,',
26186:'and stockpile materials of sffas 3. a17. in addition, it was suggested the term may as used in paragraph 11',
26187:'regarding the use of valuation methods presents an auditability challenge and respondents recommended it be changed to should. the boards',
26188:'intent was to be permissive regarding methods; however, after considering the suggestion that an unacceptable method could be used the',
26189:'language was changed. the board still believes the standards should provide for all methods, including those that are allowable under',
26190:'sffas 3, because this provides flexibility and a costeffective approach for large and complex organizations to include several valuation methods',
26191:'because the reporting entity may have components using different methods and/or adopting methods permitted under sffas 3 at different times.',
26192:'a18. in addition, four respondents requested clarification on the disclosure requirements. based on the comments, language was added to the',
26193:'disclosure paragraph to clarify that financial statements of subsequent periods need not repeat this disclosure unless the statements to which',
26194:'deemed cost was applied in establishing opening balances are presented for comparative purposes. one respondent requested clarification on what is',
26195:'meant by first reporting period in relation to interim reporting. the first reporting period would be the first financial statement',
26196:'year end that an unreserved assertion is made. the board does not believe this would include interim financial statements that',
26197:'presently are unaudited and do not include note disclosures. one respondent requested that the board consider adding a requirement for',
26198:'the amount of the deemed cost to be disclosed. the board considered carefully the disclosures that would provide the most',
26199:'meaningful information when developing the statement. considering the intent and purpose of this statement, the board does not believe such',
26200:'a disclosure would add sufficient value to warrant the significant effort and costs. a19. during due process, three respondents requested',
26201:'the term unreserved assertion be defined.theboardrevisedthestatementtoincludeadefinitionoftheterm. additionally,a respondentsuggested that certainentitiesmanagementsuchasdodmayberequiredto make assertionsregardingitsfinancialinformation.anexample ismanagement assertions that dod financial statements are validated',
26202:'as ready for audit by not later than september page 14 sffas 48 fasab handbook, version 20 06/21 sffas 48',
26203:'30, 2017. this statement refers to an unreserved assertion that the reporting entitys financial statements, or one or more line',
26204:'items addressed by this statement, are presented fairly in accordance with gaap. other assertions such as being ready for an',
26205:'audit may or may not accompany such an assertion. other minor changes were made to the statement as suggested byrespondents',
26206:'that improved the clarityof the document and terms. alternative valuation method consideration of other accounting standards a20. during deliberation on',
26207:'the project, the board considered the recently issued international public sectoraccounting standards ipsas no. 33, first time adoption of accrual',
26208:'basis international public sector accounting standards. the international public sector accounting standards board ipsasb reached several relevant conclusions with ipsas',
26209:'no. 33: a. use of deemed cost facilitates the introduction of ipsass in a cost effective way. b. multiple options',
26210:'for deemed cost are appropriate. c. the use of deemed cost should be restricted to those circumstances where reliable information',
26211:'about the historical cost of the asset is not available. d. use of deemed cost does not affect fair presentation.',
26212:'a21. the board believes that it should take an approach similar to the ipsasb standard. deemed cost is a surrogate',
26213:'for initial amounts and an acceptable valuation method for opening balances for inventory, om&s, and stockpile materials. use of deemed',
26214:'cost is intended to provide a costeffective approach to the adoption of sffas 3 where historical records and systems do',
26215:'not support such balances. alternative valuation method for opening balances a22. areportingentitymayusedeemedcostasanalternativevaluationmethodinestablishing opening account balances for inventory, om&s, and stockpile',
26216:'materials addressed in sffas 3 for the reporting period that the reporting entity first makes an unreserved assertion that its',
26217:'financial statements, or one or more line items addressed by this statement, are presented fairly in accordance with gaap. page',
26218:'15 sffas 48 fasab handbook, version 20 06/21 sffas 48 a23. this guidance is intended to provide a costeffective approach',
26219:'to the adoption of sffas 3 where historicalrecords and systemsdo not support such balances. therefore, most often deemed cost will',
26220:'be based on the reporting entity’s valuation method or system used for managing inventory, om&s, and stockpile materials prior to',
26221:'the adoption of sffas 3. a24. large and complex reporting entities such as dod may have used a variety of',
26222:'valuation methods prior to the adoption of sffas 3. therefore, this statement allows for deemed cost to include several valuation',
26223:'methods because the reporting entity may have components 1 using different methods simultaneously and/or 2 adopting a method permitted under',
26224:'sffas 3 at different times prior to establishing opening balances. deemed cost may be one of or a combination of',
26225:'valuation methods. however, this statement requires that the accounting for all activity after the opening balance is established comply with',
26226:'sffas 3. a25. opening balances in this statement are the balances at the beginning of the first reporting period when',
26227:'the entity makes an unreserved assertion that its financial statements, or one or more line items addressed by this statement,',
26228:'are fairly presented in accordance with gaap. once established using deemed cost, opening balances are to be considered consistent with',
26229:'historical cost requirements of sffas 3. a26. opening balances, established by application of this statement, should be included in ongoing',
26230:'inventoryvaluation methodsasa surrogate forthe initial amountsthat wouldhave existed had a gaap valuation method been used. further, no distinction or segregation',
26231:'of amounts arising from the opening balances is required. for example, cost of goods sold using deemed cost need not',
26232:'be distinguished from cost of goods sold at historical cost under a firstin firstout approach. the purpose of this statement',
26233:'is to provide an alternative valuation method for this specific situation. absent a reliable record of transactions related to hundreds',
26234:'of thousands of individual types of inventory, om&s, and stockpile materials, acceptance of nongaap values at the transition point to',
26235:'sffas 3 compliant systems is the most costeffective approach. a27. however, all activity after the opening balances for inventory, om&s,',
26236:'and stockpile materials are established must comply with the recognition, measurement, presentation, and disclosure requirements in sffas 3. implementation by',
26237:'component reporting entities a28. as stated above, complex reporting entities such as dod may have used a variety of valuation',
26238:'methods prior to the adoption of sffas 3. further, reporting entity components may have transitioned to an sffas 3 valuation',
26239:'method at different times; however, some components established balances for existing inventory, om&s, and stockpile materials at the time of',
26240:'transition using methods that were not in accord with sffas 3. therefore, page 16 sffas 48 fasab handbook, version 20',
26241:'06/21 sffas 48 given the timing of the transition to an sffas 3 valuation methodology, opening balances for the reporting',
26242:'entity may be based on transitional values based on one of the other methods listed in paragraph 11 of this',
26243:'statement and subsequent transactions consistent with sffas 3 methods. the result of combining these values is considered deemed cost. a29.',
26244:'acomponent reportingentitythatis intheprocess ofimplementing systemsthatare sffas 3 compliantis permitted to applythis statement at the time it makesan unreserved assertion that',
26245:'its financial statements, or one or more line items addressed by this statement, are presented fairly in accordance with gaap.',
26246:'this statement allows component reporting entities for example, dod components to make the assertion at different times. the reporting entity',
26247:'may make the assertion after a sufficient number of components do so. this statement considers the opening balances and subsequent',
26248:'transactions of these component reporting entities as deemed cost for the consolidated reporting entity when its assertion is made. a30.',
26249:'using the dod example, certain dod components may have transitioned at an earlier date tosffas 3compliantsystems;thisallowsthemto assertindependentlyof the largerdod. dod',
26250:'would make a dodwide assertion when a sufficient number of dod components are compliant.while adodcomponent’s “deemedcost” openingbalance might be earlier',
26251:'than the dodwide opening balance, the consolidation of the various methods would be dod’s opening balance deemed cost at the',
26252:'beginning of the period dod was able to make an unreserved assertion on its financial statements or one or more',
26253:'line items addressed by this statement. a31. consideringtheflexibilityallowedwiththestatement,reportingentitiesshouldensurethey are ready to make an unreserved assertion that their financial statements, or',
26254:'one or more line items addressed by this statement, are fairly presented prior to making the election since it may',
26255:'only be made once.acomplex entity should work with its components to ensure the most appropriate method allowed by this statement',
26256:'is selected. further, reporting entities should ensure issues such as supporting documentation for opening balances established are addressed and validated',
26257:'through sampling or other means, including consideration of any audit findings or conclusion affecting the reliability of the valuation, prior',
26258:'to making the unreserved assertion. the importance of a reporting entity being prepared to make the unreserved assertion is critical',
26259:'because the election may only be made once. for example, if a reporting entity makes an unreserved assertion regarding thefy2018beginningbalances,thereportingentitymust',
26260:'be able to support the valuation, in all material respects. if the audit for fy 2018 determines that the valuation',
26261:'does not comply with the alternative valuation in all material respects, the reporting entity then would need to: a. continueinsubsequentyearstocorrectorsupportthevaluationasofthebeginningof',
26262:'fy 2018, or page 17 sffas 48 fasab handbook, version 20 06/21 sffas 48 b. accept a modified audit report',
26263:'until the reporting entity demonstrates compliance with sffas 3 as amended, in all material respects. disclosure requirements a32. theelectiontoapplytheprovisionsofthisstatementdeemedcostinestablishingopening balances',
26264:'for inventory, om&s, or stockpile materials should be disclosed in the financial statements in the first reporting period in which',
26265:'the reporting entity makes an unreserved assertion that its financial statements, or one or more line items addressed by this',
26266:'statement, are presented fairly in accordance with gaap. the reporting entity should also disclose a description of what valuation methods',
26267:'deemed cost is based on, but no disclosure of amounts valued at deemed cost is required. a33. the board discussed',
26268:'that, with time, the valuation of inventory, om&s, and stockpile materials will not be materially different than historical cost because',
26269:'the older inventory may be consumed. if reporting entities are able to document that turnover rates for inventory,om&s, and stockpile',
26270:'materialsare such that the opening balance valuation isat historical cost, a reference to deemed cost would not be required. this',
26271:'statement, however, does not impose a requirement that reporting entities engage in an effort to conclude that the use of',
26272:'deemed cost is no longer necessary. boardapproval a34. this statement was approved unanimously. written ballots are available for public inspection',
26273:'at the fasab’s offices. page 18 sffas 48 fasab handbook, version 20 06/21 sffas 48 appendix b:abbreviations dod department of',
26274:'defense ed exposure draft fasab federalaccounting standardsadvisory board gaap generally acceptedaccounting principles ipsas international public sectoraccounting standards ipsasb international public',
26275:'sectoraccounting standards board lac latest acquisition cost om&s operating materials and supplies sffac statement of federal financialaccounting concepts sffas statement',
26276:'of federal financialaccounting standards page 19 sffas 48 fasab handbook, version 20 06/21 sffas 48 appendix c:amendments to sffas 3',
26277:'appendix c was provided to assist users. it provides a marked version of relevant sections of sffas 3. because the',
26278:'fasab handbook presents texts as amended. sffas 3 has been updated. users may viewappendix c as presented in sffas 48',
26279:'on the original standards webpage at http://fasab.gov/standards. page 20 sffas 48 fasab handbook, version 20 06/21 statement of federal financialaccounting',
26280:'standards 49: publicprivate partnerships: disclosure requirements status issued april 27, 2016 effective date for periods beginning after september 30, 2018.',
26281:'early adoption is permitted. affects none affected by none. summary this statement establishes principles to ensure that disclosures about publicprivate',
26282:'partnerships p3s are presented in the reporting entitys general purpose federal financial reports gpffrs. the principles guide financial reporting by',
26283:'establishing a p3 definition and identifying riskbasedcharacteristicsthat need toexist before considering the p3 arrangement or transaction for disclosure. this statement',
26284:'exempts certain arrangements or transactions from the p3 disclosure requirements contained herein. such exempt arrangements or transactions are subject to',
26285:'existing disclosure requirements in other statements of federal financialaccounting standards sffas applicable to such arrangements or transactions. thisstatement providesforfirstdeterminingthosearrangementsortransactionsthat areexempt',
26286:'from the provisions of this statement before proceeding to the p3 definition. federal p3s are defined as risksharing1 arrangements or',
26287:'transactions lasting more than five years between public and private sector entities. arrangements or transactions meeting the p3 definition are',
26288:'then evaluated against riskbased characteristics referred to as conclusive characteristics. should the arrangement or transaction not meet any one of',
26289:'the conclusive characteristics required for disclosure, the arrangement or transaction should then be evaluated against the suggestive characteristics beforeconcludingwhetherdisclosureisrequired. ifanarrangement',
26290:'or transaction warrants reporting, the disclosures should be provided. disclosure requirements comprise quantitative and qualitative information to assist users in',
26291:'understanding the nature of p3s such as the relative benefits/revenues being received in 1 risksharing exists when a public sector',
26292:'entity shares risks and rewards with a private sector entity whenever the benefits of the arrangement or transaction accrue to',
26293:'both the private sector entity and the public sector entity and 1 the public sector entity is at risk of',
26294:'loss, or 2 the private sector entitys ability to perform is at risk and success of the arrangement or transaction',
26295:'depends upon the public sectors intervention. page 1 sffas 49 fasab handbook, version 20 06/21 sffas 49 exchange for the',
26296:'governments consideration, the contractual terms governing payments to and from the government, and related risks including those deemed remote. disclosures',
26297:'can be provided by individual p3 or summarized; for example, by an entitys strategic objectives, departmental or bureau categorizations, or',
26298:'program budget classifications. this statement helps achieve the operating performance and budgetary integrity objectives outlined in statement of federal financialaccounting',
26299:'concepts sffac 1, objectives of federal financial reporting,bymakingp3smoreunderstandable. p3informationisimportantto meeting these objectives because the federal government is accountable to citizens',
26300:'for the proper administration of its resources. moreover, because p3s are a form of investment, they should be adequately disclosed',
26301:'in order to assist report users in determining: a the important assets of the u.s. government and how effectively they',
26302:'are being managed and b the identification of risks. this statement is effective for periods beginning after september 30, 2018.',
26303:'earlier implementation is permitted. page 2 sffas 49 fasab handbook, version 20 06/21 sffas 49 table of contents summary 1',
26304:'introduction 4 purpose 4 materiality 7 standards 8 scope 8 definition 10 identification of p3s requiring disclosure 11 disclosure requirements',
26305:'14 component reporting entity disclosures 14 financial report of the u.s. government disclosures 16 effective date 16 appendixa: basis for',
26306:'conclusions 17 appendix b: flowchart 34 appendix c:abbreviations 35 page 3 sffas 49 fasab handbook, version 20 06/21 sffas 49',
26307:'introduction purpose 1. to meet challenges such as those brought about by limited budgetary resources governments are increasingly establishing risksharing',
26308:'arrangements or transactions2 with the private sector. some of these arrangements or transactions may also involve private financingand enable governmental',
26309:'agenciesto fulfill their missionsto theirconstituentsthat would otherwise not be possible without such arrangements or transactions. 2. these risksharing arrangements or',
26310:'transactions are commonly referred to as public private partnerships p3s3 but may also be referred to asalternative financing arrangements, or',
26311:'privatization initiatives, some of which are extremely complex. for example, p3s may involve the use of appropriated funds, nonappropriated funds,',
26312:'third party financing, or significant amounts of private capital or investment. furthermore, p3s can 1 be so longterm in nature',
26313:'that costs along with the accompanying benefits may not be distributed equitablyacross generations, 2exclude contractual protectionsafforded the government by the',
26314:'federalacquisition regulation far such as, but not limited to: termination rights and obligations, contract by negotiation, cost accounting administration, and',
26315:'contract cost allowability, and 3 require the government to provide resources or absorb losses greater than other alternative procurement methods',
26316:'or competing inhouse performance.4 lastly, p3s may involve the transfer of government assets, including intellectual property, into private hands for',
26317:'extended periods of time. 3. as a result, the board recognizes that the accounting and reporting issues related to risk',
26318:'sharing can also be extremely complex, involving a wide array of assets and liabilities. p3s by their verydesign transfer or',
26319:'share various forms of risk among the p3partners. such risk allocation strategies are in essence the very incentives that serve',
26320:'as the foundation or buildingblocksforp3s. therefore, anentityshouldunderstandhowmuch total riskresides in an arrangement or transaction and how much of that risk',
26321:'has been 1 transferred to the 2risksharing can be either structural or transactional. p3 structuralarrangements are external to the government',
26322:'entitys operations and often involve the creation of a special purpose vehicle spv, trust, or limited partnership lp. for example,',
26323:'military base housing. p3transactionalarrangements are internal to the government entitys operations. for example, workshare programs not involving the creation of',
26324:'a spv, trust, or lp. 3 terms defined in the glossary are shown in boldface the first time they appear.',
26325:'4 inhouse refers to using government facilities and personnel as opposed to relying on commercial sources to supply the products',
26326:'and services the government needs. page 4 sffas 49 fasab handbook, version 20 06/21 sffas 49 private partner, 2 shared',
26327:'with the private partner, and 3 retained by the entity that is, the government sponsor. such an understanding relies on',
26328:'a thorough analysis of the underlying contractual agreements, guarantees, insurance, and indemnification strategies as well as the existence and nature',
26329:'of any underlying private party capital buffer that might exist; that is, the extent of any debt for example, bonds,',
26330:'loans and notes and equity for example, stocks, and other securities representing an ownership interest participation. 4. entitiescanexecutep3svia structural arrangements',
26331:'through the use of special purpose vehicles spvs and/or directly as program transactional arrangements. furthermore, many p3s are either discrete',
26332:'longterm leases or involve aspects of leasing. 5. the board has previously addressed various types of longterm arrangements or transactions',
26333:'in which the government participates for example, leases or guarantees. as such, accounting standards exist that provide for recognition and',
26334:'measurement of assets/liabilities and revenues/expenses as well as disclosures of certain risks in these longstanding types of arrangements or transactions.',
26335:'this statement supplements existing guidancetohelpensure adequate disclosureof thosearrangements/transactions thateither form the basis of or are part of a p3. therefore,',
26336:'existing accounting standards that govern the various types of longterm arrangements/transactions continue to apply. 6. tothatend,theboardnotesthattherearerisksassociatedwithp3s. for example,risks1 where actual',
26337:'costs will be greater than budgeted costs, 2 the entity may have to absorb part or all of the projects',
26338:'private debt, 3 the entity will not achieve expected returns on its investmentsinlimited partnerships, 4conditions may lead to a governmentacknowledged',
26339:'event where an entity assumes financial responsibility for the event, and 5 the public purpose or public value will not',
26340:'be fulfilled or achieved. because of the risks involved in entering into such longterm agreements, some of which involve government',
26341:'assets, specific disclosures regarding p3s are needed. such disclosures foster accountability and improve understanding of 1 the general risks inherent',
26342:'in p3 arrangements by revealing their purpose, objective, funding, operational and financial structures; and 2 contractual risks of loss such',
26343:'as early termination requirements. disclosures should generally accompany the related asset and/or liability display contained within the financial statements. 7.',
26344:'acontingencyisanexistingcondition,situation,or set of circumstances involving uncertainty as to possible gain or loss to an entity. some risks associated with p3s',
26345:'may result in the incurrence of losses and applying statement of federal financialaccounting standards 5 sffas 5: accounting for liabilities',
26346:'of the federal government would be appropriate. for recognition of losses, sffas 5 requires that a past event has occurred',
26347:'for which a future outflow or other sacrifice of resources is probable and measurable. disclosure should be provided for reasonably',
26348:'possible losses and probable losses that are not measureable. page 5 sffas 49 fasab handbook, version 20 06/21 sffas 49',
26349:'8. due to their very nature, p3s are used to manage risks, some of which may be risks of loss',
26350:'included in the terms of the contractual p3 arrangements or transactions that are deemed remote but are nonetheless material and',
26351:'may require disclosure. for example, excluding contractual protections afforded the government by the far5 inherently increases the entitys risk as',
26352:'does a relationship with an industry or private partner that may require the government to provide resources or absorb losses',
26353:'beyond what was contemplated. it is the boards opinion that remote risks of loss included in the terms of the',
26354:'contractual p3 arrangements or transactions that are material should be disclosed. therefore, consideration should be given to those risks that',
26355:'management does not expect to be likely yet could represent a risk of loss to the entity. with this being',
26356:'said, the board also recognizes that 1 certain remote risks may have a reasonably high materiality threshold and 2 not',
26357:'all individual remote risks in a p3 arrangement or transaction need to be disclosed to satisfy the requirements of this',
26358:'statement.as such, remote risks should not be dismissed from disclosure without further consideration of user needs and the qualitative and',
26359:'quantitative characteristics when applying materiality. 9. disclosures comprise quantitative and qualitative information and not all p3 risks can be readily',
26360:'or sufficiently measured. however, federal financial reports are most likely to meet reporting objectivesand, therefore, usersneedswhen disclosures help readersunderstand complex',
26361:'arrangements or transactions and the associated risk. to this end, qualitative disclosures are as important as quantitative disclosures. further, both',
26362:'quantitative and qualitative factors should be considered in assessing materiality as well as the nature and content of information to',
26363:'be disclosed. 10. because the board has identified the need for clarity with respect to questions that arise concerning the',
26364:'full costs including risk of these complex arrangements or transactions, this statement is a first step toward developing principlesbased guidance',
26365:'and identifying potential gaps in existing guidance. the board is working and will continue to work closely with stakeholders interested',
26366:'in improving the accounting and reporting of these complex arrangementsortransactions. byaddressing disclosure issues asa first step, the board will facilitate',
26367:'continued cooperation and greater interest in identifying areas requiring attention while minimizing preparer burden. it should be noted that the',
26368:'board also plans to address measurement, recognition, and reporting issues through continued consultation with stakeholders. this could lead to the',
26369:'issuance of additional guidance. 5for example, contractual protections afforded the government by the far include but are not limited to:',
26370:'termination rights and obligations, contract by negotiation, cost accounting administration, and contract cost allowability. page 6 sffas 49 fasab handbook,',
26371:'version 20 06/21 sffas 49 materiality 11. the provisions of this statement need not be applied to immaterial items. however,',
26372:'materiality should be applied cumulatively or in the aggregate by the entity. the determination of whether an item is material',
26373:'depends on the degree to which omitting or misstating information about the item makes it probable that the judgment of',
26374:'a reasonable person relying on the information would have been changed or influenced by the omission or the misstatement. refer',
26375:'to paragraphs 8 and 9 above for related comments. page 7 sffas 49 fasab handbook, version 20 06/21 sffas 49',
26376:'standards scope 12. this statement applies to federal entities that present general purpose federal financial reports, including the consolidated financial',
26377:'report of the u.s. government cfr, in conformance with generally accepted accounting principles, as defined by paragraphs 5 through 8',
26378:'of statement of federal financialaccounting standards sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards',
26379:'issued by the financial accounting standards board. 13. this statement is applicable to publicprivate partnerships p3s and this term is',
26380:'used to refer to a wide variety of service, management, operating, and research and development arrangements or transactions meeting the',
26381:'definition of p3s presented in paragraphs 16 through 18.6 such arrangements and transactions may include contracts, grants, reimbursable agreements, alternative',
26382:'financing arrangements, privatization initiatives, and other arrangements or transactions. 14. somep3scanresultinriskoflossandthereforeshouldbeassessedagainsttheriskbased conclusive and suggestive characteristics at paragraphs 20 and 21',
26383:'to identify those that should be disclosed. 15. the following arrangements and transactions are not subject to the provisions of',
26384:'this statement: a. nonleaseacquisitionsofproperty,plant,andequipmentpp&ethataresubjecttothe federalacquisition regulations far and the private entity is not directly financing, operating, or maintaining the pp&e',
26385:'as part of an overall risksharing arrangement or transaction 6 for purposes of this statement, the private sector refers to',
26386:'individuals and entities acting in their private capacities outside of the authority and control of federal, state, or local governments',
26387:'and encompasses forprofit businesses and nonprofit organizations that are outside of the authority and control of federal, state or local',
26388:'governments. page 8 sffas 49 fasab handbook, version 20 06/21 sffas 49 b. leases7 that are not bundled8 and are',
26389:'entered into using general services administration gsadelegated authority this statement does not amend existing standards applicable to leases and those',
26390:'standards remain applicable to all such arrangements/transactions. c. acquisition of supplies and services, including construction, research and development, and commercial',
26391:'items, made pursuant to the far simplifiedacquisition procedures far part 13 d. formal and informal arrangements or transactions that do',
26392:'not share risks or rewards andaresolelydesignedtofostergoodwill, encourage economicdevelopment,promote research and innovation, or coordinate and integrate strategic initiatives e. grants to',
26393:'state, local, and indian tribal governments and other public institutions and arrangements or transactions with foreign governments f. arrangements or',
26394:'transactions in which private entities voluntarily contribute nominal resources or provide incidental resources without expectation of compensation or government indemnification',
26395:'for any possible risk of loss 7 the term leases includes enhanced use leases and both capital and operating leases,',
26396:'as defined under current fasab standards. 8abundled lease typically arises when parties to a leasing arrangement agree to include additional',
26397:'products or services intheleasingarrangement,someof whichmight be related ortied directly to the underlying leased product or services for example, software updates',
26398:'or maintenance.although these additional products or services are not always expressly identified in the underlying lease agreement and may be',
26399:'documented in other agreements, they are nonetheless considered bundled with the underlying lease agreement. page 9 sffas 49 fasab handbook,',
26400:'version 20 06/21 sffas 49 definition 16. subject to the exclusions noted in paragraph 15 and for the purposes of',
26401:'this statement, federalpublicprivatepartnershipsp3sarerisksharing9arrangementsortransactionswith expected lives greater than five years between public and private sector entities. such arrangements or transactions provide',
26402:'a service or an asset for government and/or general public use where in addition to the sharing of resources, each',
26403:'party shares in the risks and rewards of said arrangements or transactions. 17. apublic sector entitysharesrisksandrewards withaprivatesector entity whenever the',
26404:'benefits of the arrangement or transaction accrue to both the private sector entity and the public sector entity and 1',
26405:'the public sector entity is at risk of loss, or 2 the private sector entitys ability to perform is at',
26406:'risk and success of the arrangement or transaction depends upon the public sectors intervention. 18. theexpectedlifeofap3isthetermorperiodforwhichtheentity,includingconsiderationof economicincentives, islikelyto participate inthe',
26407:'p3. the expectedlife isinitiallydetermined at the inception of the p3 arrangement when the economic incentives are identified and considered in',
26408:'the formation of the p3. economic incentives considered may include expected significantly reduced costs or increased efficiencies if contracts are',
26409:'renewed or if the p3 approach is continued realization of return on investment, continuity of mission critical services, flexibility, and',
26410:'significant costs associated with nonrenewal, such as required payments at the end of the contract to compensate the private party',
26411:'for significant capital investments. typically, expected life is documented in budget justifications, cost benefit or value for money analyses, or',
26412:'other analyses. expected life may extend beyond the current contract period including options or renewals. expected life is reevaluated as',
26413:'p3 contracts are renewed and when the entity identifies significant changes in circumstances during the contract period that may affect',
26414:'the expected life.10 19. arrangements or transactions which are not excluded by paragraph 15 and meet the definition in paragraphs',
26415:'16 through 18 should be assessed against the risk based characteristics in paragraphs 20 and 21. 9 risksharing can be',
26416:'either structural or transactional. p3 structuralarrangements are external to the government entitys operations and often involve the creation of a',
26417:'special purpose vehicle spv, trust, or limited partnership lp; for example, military base housing. p3 transactionalarrangements are internal to the',
26418:'government entitys operations; for example, workshare programs not involving the creation of a spv, trust, or lp. 10the basis for',
26419:'conclusions bfc paragrapha41 provides examples regarding determination of a p3s expected life. page 10 sffas 49 fasab handbook, version 20',
26420:'06/21 sffas 49 identification of p3s requiring disclosure 20. the following risk characteristics are conclusive evidence that p3s possess risk',
26421:'of loss indicating that disclosures should be provided. if any one of the following conclusive risk characteristics is met, the',
26422:'p3 arrangement or transaction should be disclosed. conclusive risk characteristics risk rationale11 11 the rationale presented herein explains why the',
26423:'board believes there is or may be risk of loss when the characteristic is present. the rationale discusses risk broadly',
26424:'and is not intended to create specific disclosure requirements. the disclosures are articulated in paragraph 24. please refer to bfc',
26425:'paragraphsa37 through a43 for related comments. 1. the arrangement or transaction results in the conveyance or creation of a longlived',
26426:'asset or longterm financing12 liability. 12 contractors routinely finance operations while awaiting payment of invoices. such routine financing is not',
26427:'indicative of a p3 in and of itself. not all p3s result in the conveyance or construction of an asset.',
26428:'however, in those that do, the governments risk may be significantly increased because of costs that accompany asset ownership or',
26429:'control. further, financing may be provided in whole or shared in part by private sector entities. note that some private',
26430:'partners may incur substantial financing liabilities in preparation for delivering services even if an asset is not created. 2. the',
26431:'federal entity participates in, helps sponsor, or is party to a special purpose vehicle spv, partnership, trust, and other such',
26432:'arrangements. entities such as spvs, partnerships, trusts, and other such arrangements can be established for a variety of strategic and/or',
26433:'tactical reasons. generally speaking, they are commonly considered riskcontainment vehicles and are more often than not, purposefully not included in',
26434:'budgets or balance sheets. p3s employing spvs, partnerships, trusts, and other such arrangements can be or most often become borrowing',
26435:'arrangements/transactions or alternative financing mechanisms. therefore, the risk rests in the fact that because spvs, partnerships, trusts, and other such',
26436:'arrangements can facilitate funding/financing, an agencys explicit or implicit longterm debt or promise to pay the established entity is not',
26437:'appropriately recognized in either budget or financial reports. 3. the arrangement or transaction covers a significant portion of the economic',
26438:'life of a project or asset. those p3 procurement or contract arrangements/transactions that cover a significant portion of the economic',
26439:'life of a project or asset pose greater risk to the federal entity because there is often no reprocurement or',
26440:'renegotiation opportunity for the agency. as a result, changed conditions that could warrant a fair and reasonable renegotiation or recompetition',
26441:'cannot be exercised and increased costs that would otherwise be avoided are incurred for the duration of the arrangement/transaction. page',
26442:'11 sffas 49 fasab handbook, version 20 06/21 sffas 49 4. a. the principal arrangement or transaction is exempt from:',
26443:'if a contract, the far; or the far for contracts and omb requirements for grants govern the administrative framework and',
26444:'include procurement, accounting, and legal requirements to help safeguard taxpayer dollars.therefore, those p3s exempt fromsuch requirements are at an increasedrisk',
26445:'because wellestablished safeguards and b. b. if a grant, office of management and budget omb requirements 2 c.f.r. title 2,',
26446:'part 200. contract resolution mechanisms are absent. 21. thefollowingriskcharacteristicsareevidencethatp3smaypossessriskoflossandrequire disclosure. the following suggestive risk characteristics should be considered in the',
26447:'aggregate. each suggestive risk characteristic will require entity judgment as each characteristic is analyzed in connection with the other suggestive',
26448:'risk characteristics. suggestive risk characteristics risk rationale11 11the rationale presented herein explains why the board believes there is or may',
26449:'be risk of loss when the characteristic is present. the rationale discusses risk broadly and is not intended to create',
26450:'specific disclosure requirements. the disclosures are articulated in paragraph 24. please refer to bfc paragraphs a37 through a43 for related',
26451:'comments. 1. avalue for money vfm13 analysis is performed. 13 in its publication the value for moneyanalysis: aguide for more',
26452:'effective psc and ppp evaluation, the national council of public private partnerships adopted the united kingdoms, her majestys treasury value',
26453:'for money definition as contained in her majestys valueassessment guide: vfm is defined as the optimum combination of wholeoflife costs',
26454:'and quality or fitness for purpose of the good or service to meet the users requirement. vfm is not the',
26455:'choice of goods and services based on the lowest cost bid. to undertake a wellmanaged procurement, it is necessary to',
26456:'consider upfront, and at the earliest stage of procurement, what the key drivers of vfm in the procurement process will',
26457:'be. the term vfm is commonly used in connection with p3 arrangements or transactions. vfm analyses are broader in scope',
26458:'emphasizing qualitative factors, as opposed to the more traditional quantitatively based costbenefit analyses most often performed. if an entity conducts',
26459:'a vfm analysis it may indicate that the project in question is a p3. vfms are typically more subjective than',
26460:'traditional costbenefit analyses and are sometimes prepared expost facto, thus increasing potential risk to the agency. 2. the consideration or',
26461:'items given up in an arrangement/transaction or their value are not readily apparent. generally under common law, consideration from both',
26462:'parties is required in order to have what constitutes a binding contract. some courts have ruled that in those cases',
26463:'where the exchange appears excessively one sided, no quidproquo exists and the contract may be void by law. therefore, in',
26464:'those cases where consideration or its value from either party is not readily apparent, such cases could leadto recourseor remedies',
26465:'that have adverse financial ramifications to the agency. page 12 sffas 49 fasab handbook, version 20 06/21 sffas 49 3.',
26466:'significant work force duties, activities, or knowledge are crossshared between public and private sector p3 parties. as federal entities face',
26467:'underutilization and skill retention issues, with congressional approval, some entities are entering into p3 arrangements/transactions to put both infrastructure and',
26468:'government personnel to heightened work. however, there is a concern that the analyses used to justify these arrangements or transactions',
26469:'often exclude government personnel costs, including associated legacy costs for example, pension and opeb. therefore, increased risk exists in those',
26470:'cases where such costs are excluded from costbenefit or vfm analyses because the government 1 is left absorbing these costs',
26471:'with no related activity base, 2 is exposed to potential liabilities arising from union and/or employee litigation, and 3 may',
26472:'lose governmental skillsets that would lead to costlier procurement options. 4. the focus is more on collaboration and informal, realtime,',
26473:'resolution processes than on formal, contractual, administrative processes. due to their very nature, p3 arrangements or transactions involve risksharing and',
26474:'in some cases, issues such as contract disputes are resolved informally. however, such informal resolution processes could lead to potential',
26475:'liability when contracting, procurement, or legal personnel arenot involved. therefore, therisk rests in the potential liability arising from informal resolution',
26476:'of what otherwise would require more formal contractual administrative processes. 5. the government relies on either the private sector partners',
26477:'or a third partys determination of a p3s performance or return on investment/equity without performing its own verification of performance',
26478:'or return on investment/equity. agencies often rely on 3rd party experts to assist in performing various types of analyses. it',
26479:'has been noted that conflicts of interest often exist because there are only a few firms who practice in this',
26480:'highly sophisticated area. as a result, some firms have provided advisory services to both the private partner and government sponsor',
26481:'of a p3 arrangement/transaction. in addition, fees are often based on the dollar volume of the arrangement/transaction creating what some',
26482:'believe are selfserving incentives. therefore, the risk in those p3 arrangements/transactions rests where an agency does not or cannot perform',
26483:'its own independent analysis, thus relying solely on either the private partner or a third party determination of a p3s',
26484:'performance or return on investment/equity without performing its own verification. such analyses may belie the significant risk the government has',
26485:'or will incur. page 13 sffas 49 fasab handbook, version 20 06/21 sffas 49 disclosure requirements component reporting entity disclosures',
26486:'22. the p3 disclosures at paragraph 24 below specify the inclusion of qualitative and quantitative information and may be aggregated',
26487:'or grouped by an entitys strategic objectives, departmental or bureaucategorizations, program budget classifications, orother means. 23. disclosures should generally accompany',
26488:'the related asset and/or liability display contained within the financial statements. depending on the circumstances, some of the required information',
26489:'may be disclosed due to other requirements. the resultant disclosures should be integrated so that concise, meaningful, and transparent information',
26490:'is provided and information is not repetitive. 24. disclosures should be provided for the initial period and all annual periods',
26491:'thereafter where an entity is party to a p3 arrangement/transaction. the following information should be disclosed: a. the purpose, objective,',
26492:'and rationale for the p3 arrangement or transaction and the relative benefits/revenues being received in exchange for the governments consideration,',
26493:'monetary and nonmonetary; and the entitys statutory authority for entering into the p3. b. adescription offederal andnonfederalfundingofthe p3over its expectedlife,',
26494:'including the mix and, where available, the amounts of such funding. for any amounts that are not available, the disclosures',
26495:'should indicate such. c. the operational and financial structure of the p3 including the reporting entitys rights and responsibilities, including:',
26496:'i. adescription ofthecontractualterms governingpayments toandfrom the government over the expected life of the p3 arrangement or transaction to include: 1.',
26497:'explanation of how the expected life was determined 2. the time periods payments are expected to occur 3. whether payments',
26498:'are made directly to each partner or indirectly through a thirdparty, such as, military housing allowances page 14 sffas 49',
26499:'fasab handbook, version 20 06/21 sffas 49 4. inkind contributions/services and donations ii. the amounts received and paid by the',
26500:'government during the reporting periods and the amounts estimated to be received and paid in aggregate over the expected life',
26501:'of the p3 d. identification of the contractual risks of loss the p3 partners are undertaking i. identification of such',
26502:'contractual risks of loss should include a description of 1 the contractual risk and 2 the potential effect on cash',
26503:'flows if the risks were realized for example, early termination requirements including related exit amounts and other responsibilities such as',
26504:'asset condition handback requirements, minimum payment guarantees, escalation clauses, contingent payments, or renewal options. ii. disclosure of remote risks of',
26505:'loss should be limited to those included in the terms of the contractual p3 arrangements or transactions. if remote risks',
26506:'of loss are disclosed, an explanation should be included that avoids the misleading inference that there is more than a',
26507:'remote chance of a loss. e. as applicable: i. associated amounts recognized in the financial statements such as gains or',
26508:'losses and capitalized items ii. significantinstancesofnoncomplianceswithlegalandcontractualprovisions governing the p3 arrangement or transaction iii. whether the private partners, including any special',
26509:'purpose vehicle spv, have borrowed or invested capital contingent upon the reporting entitys promise to pay whether implied or explicit',
26510:'iv. description of events of termination or default page 15 sffas 49 fasab handbook, version 20 06/21 sffas 49 financial',
26511:'report of the u.s. government disclosures 25. the u.s. governmentwide financial statements should disclose: a. a general description of p3',
26512:'arrangements or transactions b. the consolidated amounts the government received and paid during the reporting periods and estimated to be',
26513:'received and paid in aggregate over the expected life of the p3s c. a references to applicable component entity reports',
26514:'for additional information effective date 26. the requirements of this statement are effective for reporting periods beginning after september 30,',
26515:'2018. early adoption is permitted. theprovisions ofthisstatementneed notbe appliedto immaterialitems. page 16 sffas 49 fasab handbook, version 20 06/21 sffas',
26516:'49 appendixa: basis for conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in',
26517:'this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some',
26518:'factors than to others. the standards enunciated in this statement not the material in this appendix should govern the accounting',
26519:'for specific transactions, events, or conditions. this statement may be affected by later statements. the fasab handbook is updated annually',
26520:'and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text of the',
26521:'statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the',
26522:'reader can review the basis for conclusions of the amending statement for the rationale for each amendment. project history a1.',
26523:'this projectwasaddedtothefasabstechnical agendainapril2012because federal agencies have increasingly turned to publicprivate partnerships to accomplish goals and in light of budget pressures',
26524:'likely to further increase their use. although federal generally accepted accounting principles are fairly robust, the board noted that due',
26525:'to the complex nature of p3ssignificant study would be required regarding a host of issuesdealing with the definition, measurement, and',
26526:'recognition of p3s. in december 2012, the project plan was adopted with the overall goal of recognizing the full costs',
26527:'of p3s in the financial statements. in addition, a p3 task force was formed and held its first meeting in',
26528:'february 2013. a2. final standards or guidance were expected to follow a three year effort. specific project objectives include: a.',
26529:'defining terms b. providing guidance that is, identifying gaps for the recognition and measurement of: i. assets and liabilities ii.',
26530:'revenues and expenses iii. establishing disclosure requirements c. consideringguidanceforotherarrangements/transactionsrelatedtop3sforexample, saleleaseback or other longterm arrangements page 17 sffas 49 fasab handbook,',
26531:'version 20 06/21 sffas 49 a3. early in its deliberations the board was clear that forthcoming guidance must be consistently',
26532:'applied and covered by an overarching principles. the board noted its concern is with the risks to which the government',
26533:'is exposed and related disclosures. as a result, members decided that because p3s often involve innovative operational and complicated accounting',
26534:'practices, accompanied by sophisticated financing agreements, these complexities necessitate the establishment of disclosure requirements as a first step to 1',
26535:'developing uniform, principlesbased guidance, and 2 identifying potential gaps in existing guidance. to that end, the board decided that a',
26536:'broad p3 definition accompanied by riskbased characteristics should be pursued to establish a framework for determining which p3s should be',
26537:'disclosed. the board believes that the resulting disclosures will inform the need for and development of future standards providing recognition',
26538:'and measurement guidance specific to p3s. therefore, any further work will be undertaken after these disclosures become effective. a4. p3',
26539:'task force meetings for this phase of the project were held between february 2013 and may 2014. all meetings were',
26540:'well attended with representation from federal agencies, commercial sectors, and citizens. participants came from diverse disciplines such as accounting, auditing,',
26541:'facilities management, financial reporting, housing, information technology it, commercial and investment banking, procurement, and program management. to best meet the',
26542:'project goals and objectives, staff, in addition to engaging in task force discussions, initiated factfinding meetings with experts and practitioners',
26543:'both within and external to government. staff met with federal agency representatives, public policy experts, consultants, private equity participants, and',
26544:'a private it/cloud/software development firm. common themes and other matters a5. the most common themes arising from task force and',
26545:'fact finding meetings considered in developing the statement include: a. at a minimum, participants expect continued use if not growth',
26546:'in p3s. b. government employee legacy & relocation costs are not presently considered in value for money vfm14 analyses. 14',
26547:'vfm is a much broader concept than typical costbenefit analysis because it emphasizes value in more of a qualitative than',
26548:'quantitative manner. quantitatively, some vfm models use a projects internal rate of return irr to helpdetermineproject acceptability. thevfm concepthas drawn',
26549:'criticisms notonly because ofits subjectivity and lack of rigor in application, but because in somecases 1 cash flows can be',
26550:'easily managed to meet desired expectations and 2 vfm results are used as expost facto justifications for qualitatively made project',
26551:'and/or award decisions. it is important to note that the same criticisms can be made of the more traditional costbenefit',
26552:'analyses used in management decision making. page 18 sffas 49 fasab handbook, version 20 06/21 sffas 49 c. longterm nature',
26553:'of p3s is accepted, but concerns include i. lack of transparency in the solicitation and award processes along with the',
26554:'lack of competition hinders accountability and fair and reasonable pricing, ii. notapplyingthefederalacquisitionregulation15 farincreases government risk, and iii. some p3s circumvent',
26555:'procurement administration. d. inkind contributions are difficult to value or are overvalued and not always reported. e. p3 financial reporting',
26556:'is generally supported but agencies and participants vary in the what, how, and where of disclosures. for example, relative to',
26557:'significant and material p3 arrangements or transactions, some believe that property, plant, and equipment pp&e note disclosure would be sufficient',
26558:'whereas others believe that md&a discussion is more appropriate because of the sffas 15, managements discussion and analysis, requirement to',
26559:'address the future effects of existing, currentlyknown demands, risks, uncertainties, events, conditions and trends, while others suggest reporting in both',
26560:'locations. a6. other matters arising during task force and fact finding meetings included: a. increased risk to citizens. afew participants',
26561:'noted that p3s erode 1 the notion of public service for example, what is inherently governmental and 2 in many',
26562:'cases, belief in good government. this increased risk is evidenced by those entities that: i. purposefully avoid capital acquisition budgeting',
26563:'requirements ii. absorb availability risk16 absent sufficient private partner consideration 15the far is the primary regulation for use by all',
26564:'federal executive agencies in their acquisition of supplies and services with appropriated funds. it became effective on april 1, 1984,',
26565:'and is issued within applicable laws under the joint authorities of theadministrator of general services, the secretary of defense, and',
26566:'theadministrator for the nationalaeronautics and spaceadministration, under the broad policy guidelines of theadministrator, office of federal procurement policy, office of',
26567:'management and budget. 16availability risks or project completion risks exist when for example, defects in construction or quality shortfalls within',
26568:'the control of the private partner occur that preclude the asset or service from being available for its intended use',
26569:'requiring the government sponsor to intervene. page 19 sffas 49 fasab handbook, version 20 06/21 sffas 49 iii. lose control',
26570:'of assets iv. lock into longterm arrangements/transactions that cannot be recompeted or renegotiated v. are constrained by contract modification restrictions',
26571:'vi. are constrained by proximity and/or righttocompete restrictions vii. ignore government employee personnel legacy costs b. financing costs. to enable',
26572:'private financing to work, p3s must be longerterm in nature to allow for sufficient time to liquidate debt and achieve',
26573:'return on investment targets. this is significantly different than traditional procurement contract periods that are typically 5 years or less.',
26574:'c. performance metrics. financial reporting would be enhanced by incorporating performance metrics that could point to both risks and potential',
26575:'liabilities as they arise. summary of outreach efforts a7. the ed was issued october 1, 2014 with comments requested by',
26576:'january 2, 2015. upon release of the exposure draft, notices and press releases went to the following organizations: a. the',
26577:'federal register b. fasab news c. the journal of accountancy, aga today, the cpa journal, government executive and the cpa',
26578:'letter d. thecfocouncil,thecounciloftheinspectorsgeneralonintegrityandefficiency,the financial statementaudit network; and members of both the federal real property council and federal facilities council e.',
26579:'committees of professional associations generally commenting on exposure drafts in the past a8. this broad announcement was followed by electronic',
26580:'mailings of the exposure draft followed up by several reminder notices.to: page 20 sffas 49 fasab handbook, version 20 06/21',
26581:'sffas 49 a. b. relevant congressional committees i. house committee on oversight and government reform ii. senate committee on homeland',
26582:'security and governmentalaffairs public interest and labor union groups i. in the public interest ii. american federation of state, county',
26583:'and municipal employees a9. the board did not rely on the number in favor of or opposed to a given',
26584:'position. information about the respondents majority view is provided only as a means of summarizing the comments. the board considered',
26585:'the arguments in each response and weighed the merits of the points raised. the following paragraphs discuss significant issues identified',
26586:'by respondents followed by board decisions. respondents comments on the exposure draft a10.theexposuredraft wasissuedwithan alternativeviewthat expressed concernsoverthe1 breadth of the',
26587:'general definition, 2 disclosures related to certain remote risks, and 3 clarity of significant exposure. specific comments regarding respondent concerns',
26588:'and board redeliberations are noted in the following paragraphs as appropriate. definition: publicprivate partnerships a11.in consultation with constituents to include',
26589:'respondent comments received and related outreach concerning the breadth and scope of the definition, the board has further developed and',
26590:'refined the definition proposed in the exposure draft. the board desired establishing a definition that 1 reflected actual federal p3',
26591:'practices, 2 covered the wide breadth and diverse scope of federal assets, and 3 focused on the risksharing or risk',
26592:'transfer strategies that are the very essence of these complicated arrangements or transactions.thedefinitionisintended forgeneralapplicationtobeapplieduniformlyacross the federal government. a12.in reviewing the',
26593:'p3 definitionsof otherstandardsetters, the board notesthat their guidance is largely focused on service concession arrangements that is, a subset of',
26594:'p3s that directly benefit the general public. the definition contained in this statement is much broader given the wide breadth',
26595:'and diverse scope of federal assets being managed. it is important to note that 1 federal preparers and auditors have',
26596:'identified accounting topics that extend beyond those typically found in service concession arrangements, 2 oversight page 21 sffas 49 fasab',
26597:'handbook, version 20 06/21 sffas 49 entities such as the congressional budget office, gao, and inspectors general have defined and',
26598:'identified p3 arrangements or transactions to be more than just service concessions, and 3 service concession accounting guidance primarily reflects',
26599:'economic development initiatives such as new roads, toll roads, highways, airports, railways, and hospitals, whereas federal initiatives extend well beyond',
26600:'economic development such as the common defense and general welfare of the nation thus necessitating accounting guidance to best fit',
26601:'these federal initiatives. a13.in developing the definition, the board primarily relied on 1 the task forces review of existing definitions',
26602:'from several authoritative sources, 2 various respondent comments to thedefinition containedin the exposure draft, and 3 an adhocworkinggroupcomprised of selected',
26603:'respondents. the task force identified the more common characteristics of p3s which are believed to exist in the federal government.',
26604:'some of the more common p3 characteristics identified include: existence of very longterm contractual agreements for example, anywhere from five',
26605:'to 99 years, shared or transferred financing, agreements covering a significant portion of the projects or assets life, shared risks,',
26606:'shared rewards, shared skills and expertise, conveyance or creation of real and personal property, and the use of spvs. those',
26607:'respondents specifically commenting on the definition as well as the adhoc working group primarily suggested better linkage between the definition',
26608:'and the risk based characteristics. accordingly, the broad definition contained in the exposure draft was further refined and is as',
26609:'follows: subjecttotheexclusionsnotedinparagraph15andforthepurposesofthisstatement, federalpublicprivatepartnershipsp3sarerisksharing arrangementsortransactions with expected lives greater than five years between public and private sector entities. such arrangements or',
26610:'transactions provide a service or an asset for government and/or general public use where in addition to the sharing of',
26611:'resources, each party shares in the risks and rewards of said arrangements or transactions. scope,applicability and exclusions scope a14.the board',
26612:'recognizes that establishing a p3 definition reflecting the breadth and diverse scope of entity missions, operational strategies, available leasing authorities,',
26613:'and other variables might capture activities which are already being recognized or disclosed in the entitys financial statements. specifically, this',
26614:'is because the board has previously addressed various types of longterm arrangements/transactions in which the government participates for example, leases',
26615:'and guarantees. as such, existing accounting standards provide for recognition and measurement of assets/liabilities and revenues/expenses as well as disclosures',
26616:'of certain risks in these longstanding types of arrangements or transactions. however, the board believes that there is a need',
26617:'for disclosure requirements page 22 sffas 49 fasab handbook, version 20 06/21 sffas 49 specific to the risks existing in',
26618:'p3s for which there is no current accounting guidance. the requirements herein do not replace existing disclosure requirements in other',
26619:'sffass for similar arrangements or transactions such as leases. p3s are complex arrangements/transactions and an entity would apply all applicable',
26620:'standards to report relevant information in the notes. applicability a15.to help ensure achievement of the federal reporting objectives while minimizing',
26621:'unwarranted disclosure of p3 arrangements or transactions, the board has established filtersat severaldecision pointstoaid preparersin thisregard. the filtersarecategorizedas follows: a.',
26622:'definitionalfeaturesindicativeofrisk aftercarefulstudytheboardinitiallyidentified four major features of federal p3 arrangements or transactions that were embodied in the proposed definition: 1 agreements',
26623:'covering a significant portion of the economic life of a project or asset, and/or lasting more than five years, 2',
26624:'financing provided in whole or shared in part by the private partner, 3 conveyance or transfer of real property, personal',
26625:'property, or multisector skills and expertise, and 4 formation of spvs. however, as a result of respondent comments concerning linkage',
26626:'between the definition and the riskbased characteristicsand a working group recommendation, the board 1 realigned the four major features by',
26627:'incorporating them directly into the risk based characteristics and 2 within the definition, specifically excluding arrangements or transactions which are',
26628:'not more than 5 years in duration. b. riskbased characteristics the board has identified and refined during its re deliberations',
26629:'certain key characteristics discussed later that reflect varying degrees of risk that exist in federal p3s. therefore, should these characteristicsbe',
26630:'absent in a p3, the disclosure requirements of this statement would generally not apply. c. materiality as isthecustom withallstatements issuedbytheboard,onlythosep3s',
26631:'that are material qualitativelyand quantitatively in nature, more thoroughly discussed later, should be subject to the requirements of this statement.',
26632:'the board notes that because materiality assessments require both qualitative and quantitative judgments, specific guidance limiting preparer and auditor considerations',
26633:'of information would not be appropriate. exclusions a16.as a result of respondent comments concerning the breadth of the proposed definition,',
26634:'the adhoc working group recommended and the board adopted three additional exclusions. the three additional exclusions are: page 23 sffas',
26635:'49 fasab handbook, version 20 06/21 sffas 49 a. grants to state, local, and indian tribal governments and other public',
26636:'institutions, b. arrangements or transactions with foreign governments, and c. arrangements or transactions sharing nominal or incidental resources. the first',
26637:'two exclusions identified above reflect that this statement only applies when a federalentity isin arisksharing arrangement or transaction with theprivate',
26638:'sector17 and not a public sector institution. risks associated with publictopublic partnerships for example, federal to state or federal to',
26639:'local and those associated with foreign governments 1 are significantly different when compared to risks arising in publicprivate partnerships and',
26640:'2 warrant extensive research far beyond the scope of this statement. moreover, arrangements or transactions with indian tribal governments or',
26641:'foreign governments are closelygovernedbyselected agenciesand congressional committeesand are also beyond the scope of this statement. lastly, arrangements or transactions in',
26642:'which private entities voluntarily contribute nominal resources or provide incidentalresourceswithout expectation of compensation or government indemnification for any possible risk',
26643:'of loss are also excluded from the requirements of this statement. a17.in summary,thefollowingarrangementsortransactionsare excluded fromthe requirements of this statement: a.',
26644:'nonlease acquisitions of property, plant, and equipment that are subject to the far and the private entity is not directly',
26645:'financing, operating, or maintaining the pp&e as part of an overall risksharing arrangement or transaction, b. leases meeting certain conditions,',
26646:'c. acquisitions madeusingsimplifiedacquisition proceduresfarpart13, d. formal and informal arrangements or transactions that do not share risks or rewards andaresolelydesignedtofostergoodwill, encourage',
26647:'economicdevelopment,promote research and innovation, or coordinate and integrate strategic initiatives, e. grants to state, local, and indian tribal governments and',
26648:'other public institutions and those with foreign governments, and 17for purposes of this statement, the private sector refers to individuals',
26649:'and entities acting in their private capacities outside of the authority and control of federal, state or local governments and',
26650:'encompasses forprofit businesses and nonprofit organizations that are outside of the authority and control of federal, state or local governments.',
26651:'page 24 sffas 49 fasab handbook, version 20 06/21 sffas 49 f. arrangements or transactions sharing nominal or incidental resources.',
26652:'a18.concerning leases, in consultation with the p3 task force and after careful consideration, the board concluded: a. to exclude leases18',
26653:'that meet the following two conditions: a they are not bundled and b they are entered into using gsadelegated authority.',
26654:'such leases 1 have no significant p3 risk of loss, 2 are alreadysubject to existing fasab guidance, 3 have well',
26655:'defined farbased contractual processes and remedies in place to address risks associated with landlordtenant relationships, 4 have contractually capped payments',
26656:'for termination liabilities, and 5 have termination payments that are indemnified by gsas building fund. the board believes that if',
26657:'a lease is either bundled or not entered into using gsadelegated authority, the provisions of this statement should apply. b.',
26658:'to not broadly exclude enhanced use leases euls except for those meeting the two conditions cited above because they are',
26659:'more oriented towards p3s as a result of 1 possessing special authorities and not being subject to the far, 2',
26660:'often operating under a riskreward model as opposed to those entity leases that are basically a landlordtenant relationship and not',
26661:'a risksharing partnership, and 3 possibly including ancillary services and inkind consideration as part of the arrangement or transaction. because',
26662:'the board believes that euls could be encompassed by this statement, a determination should be made as to whether disclosures',
26663:'are required via the application of the riskbased characteristics. riskbased characteristics a19.although federal p3s are varied and complex, the board',
26664:'believes there are some common characteristics that can be used to identify those p3s that create risk of loss and',
26665:'should be disclosed. because the board is aware of the administrative burdens agencies face daytoday and that some p3 portfolios',
26666:'might be voluminous, in addition to identifying those p3s that create risk of loss, the riskbased characteristics can also be',
26667:'applied to assist a federal entity in determining which p3 arrangements or transactions do not require disclosure. 18the term leases',
26668:'includes enhanced use leases euls which are typically longterm lease agreements that allow public or private entities to use an',
26669:'agencys property.agency eulprograms have allowed entities to develop or occupy federal properties such as power plants, housing and healthcare facilities,',
26670:'office space, and parking facilities, and in return, federal agencies receive cash or inkind consideration. please note that there is',
26671:'no governmentwide definitionof euls. source: gao1314 federal real property: improvedcost reporting wouldhelp decisionmakers weigh the benefits of enhanced use leasing,',
26672:'december 2012. page 25 sffas 49 fasab handbook, version 20 06/21 sffas 49 a20.theriskbasedcharacteristicshavebeen developed,refined, andcategorized froman initial comprehensive list',
26673:'of characteristics that distinguishes federal p3s from traditional procurement actions. with the assistance of the task force, the board further',
26674:'analyzed and then selected riskbased characteristics which indicate significant p3 risk of loss. these riskbased characteristics are intended to: 1',
26675:'apply to all types of p3s: construction, housing, utilities, military depots, and others, and 2 assist a federal entity in',
26676:'ascertaining which p3 arrangements or transactions should be disclosed. once a p3 is identified for disclosure, such arrangements or transactions',
26677:'would then be evaluated in light of the entitys materiality considerations including quantitative and qualitative thresholds. a21.as a result of',
26678:'respondent comments concerning linkage between the definition and the risk based characteristics, the working group recommended and the board adopted',
26679:'an additional riskbased characteristic for grants and other arrangements. specifically, omb requirements2 c.f.r. title 2, part 200 for grantsgovern the',
26680:'administrative frameworkand include requirements to help safeguard and protect taxpayer dollars. therefore, those p3s exempt from such requirements are at',
26681:'an increasedrisk because wellestablished safeguards and resolution mechanisms are absent. conclusive and suggestive characteristics a22.the majority of respondents agreed with',
26682:'the riskbased characteristics, their related classification, and their proposed application. however, as mentioned above, the working group recommended and the',
26683:'board adopted an additional riskbased characteristic for grants and other arrangements. moreover, the board clarified the two categories of risk',
26684:'based characteristics conclusive and suggestive pursuant to respondent concerns. conclusive characteristics are those that existence of any one characteristic means',
26685:'the p3 arrangement or transaction should be disclosed. however, existence of any one of the suggestive characteristics is evidence that',
26686:'the p3 arrangement or transaction may possess riskof lossand require disclosure. such asuggestivecharacteristicshould be considered in the aggregate with all',
26687:'the other suggestive characteristics before a final decision is made. each conclusive characteristic is meant to be definitive whereas each',
26688:'suggestive characteristic requires entity judgment as each one is analyzed in connection with the other suggestive characteristics. a23.if a p3',
26689:'arrangement or transaction is subject to disclosure, it should be further evaluated in lightofmaterialityconsiderationsthatincludebothqualitative and quantitativeassessments. additionally, materiality should be',
26690:'applied cumulatively or in the aggregate by the entity. page 26 sffas 49 fasab handbook, version 20 06/21 sffas 49',
26691:'materiality considering user needs a24.as the standardssetting body for the federal government, the board has stated that there are two',
26692:'fundamental values that provide the foundation for governmental accounting and financial reporting: accountability and its corollary, decision usefulness. concepts explain',
26693:'that because a democratic government should be accountable for its integrity, performance, and stewardship, it follows that the government must',
26694:'provide information useful to assess that accountability. the board believes that p3 disclosures are an essential element in establishing accountability.',
26695:'a25.in applyingtheconceptofmateriality, theneedsofthe usersofthe annualfinancial report shouldbeconsidered. specifictop3sforexample,usersareinterested in: 1assessingthe costs and related risks of entering into such longterm agreements;',
26696:'2 assessing the efficiency and effectiveness of these risksharing agreements as well as the governments management of its assets and',
26697:'liabilities; and 3 determining how financial resources, budgetaryorotherwise, havebeenobtainedandusedandwhethertheiracquisitionanduse were in accordance with the entitys legal authorization. as a result,',
26698:'the board believes that the p3 disclosures required by this statement will help answer these questions while achieving the associated',
26699:'reporting objectives. qualitative and quantitativeassessments require judgment a26.in connection with concernsoverthe breadthand scope of the definition, some respondents suggested that',
26700:'the board develop a clear and objective materiality standard that would limit the disclosure requirement to those transactionsthat present substantial',
26701:'financial risk to the government. theboardbelievesthatrefiningthe definitionandaddingadditionalexclusions best addresses respondent concerns in this regard. respondents are reminded that materiality hasnot',
26702:'been formallydefinedin theaccountingcommunity;rather, it isamatter of judgment on the part of preparers of financial statements and the auditors who attest',
26703:'to them. the determination of whether an item is material: a. requires the exercise of considerable judgment, based on consideration',
26704:'of specific facts and circumstances, and b. depends on the degree to which omitting or misstating information about this item',
26705:'makes it probable that the judgment of a reasonable person relying on the information would have been changed or influenced',
26706:'by the omission or the misstatement. a27.the board believes that preparers and auditors are in the best position to exercise',
26707:'this judgment predicated on their direct knowledge of the specific facts and circumstances and page 27 sffas 49 fasab handbook,',
26708:'version 20 06/21 sffas 49 user needs. furthermore, the board believes that specific guidance concerning materiality assessments would limit preparer',
26709:'and auditor considerations and are therefore inappropriate. a28.the board notes that while a p3 arrangement or transaction might not be',
26710:'considered material from a quantitative standpoint, it may be considered qualitatively material and subject to this statements disclosure requirements if',
26711:'the disclosures would influence or change the judgment of the financial statement user. exclusive reliance on certain quantitative benchmarks or',
26712:'thresholds to assess materiality should be avoided. materiality includes probability assessments a29.decisionswhetherto recognize or, inthecaseof thisstatement, disclosea p3 arrangement or',
26713:'transaction maytake into account considerationsthat includeuncertainties. uncertainties can be expressed as a measurement of an appropriate attribute for example, historical',
26714:'cost, fair value, expected value, or some other attribute which may include an assessment of the probability of future flows',
26715:'of economic benefits or services emphasis added. furthermore, uncertaintiesare often subjected to assessmentsof the materialityof theitem, and the benefit versus',
26716:'the cost of recognition or, in this statements case, disclosure. a30.statementoffederalfinancialaccountingstandards5sffas5, accounting for liabilities of the federal government, states that',
26717:'probable refers to that which a. can reasonably be expected, or b. is believed to be more likely than not',
26718:'on the basis of available evidence or logic with the exception of pending or threatened litigation and unasserted claims. a31.the',
26719:'board notes that the concept of probability is imprecise and may be difficult to apply with respect to certain p3',
26720:'activities such as economic stabilization payments, in addition to other matters that could arise during the life of the p3',
26721:'arrangement or transaction. however, the more likely than not phrase in sffas 5 accommodates the assessment of the probabilityof thoseuncertaintiesoftenassociatedwithp3sduetotheirlongtermnatureand',
26722:'project variability. a32.historically, some studies including work done by gao suggest that, in practice, preparers and auditors in the private',
26723:'sector often interpret probable to mean a subjective assessment of probability considerably in excess of 50%. however, fasab has defined',
26724:'probable as more likely than not, that is, a subjective assessment of probability greater than 50% 51% or more. page',
26725:'28 sffas 49 fasab handbook, version 20 06/21 sffas 49 risks that are deemed remote a33.most of the respondents agreed',
26726:'with thealternative view that stated 1 disclosure of remote contingencies is not limited to the terms of contractual arrangements, 2',
26727:'the concept of significant exposure is not sufficiently clear to result in consistent disclosures, and 3 risks related to entity',
26728:'operations or performance referred to in thealternative view as business risks would be included in the risk disclosure. as such,',
26729:'respondents were concerned that such additional disclosures could overwhelm or mislead users. the board believes that it has addressed respondent',
26730:'concerns in this regard by refining the definition contained in the exposure draft, adding additional exclusions, eliminating references to significant',
26731:'exposure, andin emphasizing at paragraph24d that remoterisksof lossshould be limited to those that are included in the terms of the',
26732:'contractual p3 arrangements or transactions. the board is of the opinion that remote risks can and should be reported where',
26733:'appropriate as explained below. a34.sffas 5 provides that contingencies deemed remote that is, the chance that a loss has been',
26734:'incurred is slight are not recognized as a contingent liability or disclosed.19 however, sffas 5 requires that a contingent liability',
26735:'should be disclosed if any of the conditions for liability recognition are not met and there is at least a',
26736:'reasonable possibility that a lossor an additional loss may have been incurred. a35.the board believes that some risks of loss',
26737:'associated with p3s may be consistent with contingencies in sffas 5 that arise because of an existing condition, situation, or',
26738:'set of circumstances involving uncertainty as to possible gain or loss to an entity, including the concepts of probable, reasonably',
26739:'possible, and remote. it is this uncertainty, or risk in other words, that prompts entities to seek private partners who',
26740:'can best manage and/or contain the effects of the uncertainty that could ultimately lead to a loss. in applying sffas',
26741:'5 some contingencies may be identified for which the degree of uncertainty is so great that no reporting that is,',
26742:'recognition or disclosure is required by that statement. however, the board notes that 1 reporting such contingencies is not inconsistent',
26743:'with the provisions of sffas 5 and 2 as discussed above at paragrapha32, because fasab has defined 19per sffas 5,',
26744:'paragraph 38, a contingent liability should be recognized when all of these three conditions are met: apast event or exchangetransactionhas',
26745:'occurredfor example, afederalentityhas breached acontractwith a nonfederal entity. afutureoutflowor other sacrifice of resources is probable for example,the nonfederalentityhas filed alegal',
26746:'claimagainst a federalentity for breach of contract and the federalentitys managementbelieves theclaimislikely to be settled in favor of the claimant.',
26747:'the future outflow or sacrifice of resources is measurable for example, the federal entitys management determines an estimated settlement amount.',
26748:'page 29 sffas 49 fasab handbook, version 20 06/21 sffas 49 probable as more likely than not, the fasab framework',
26749:'suggests that reasonably possible and remote risks be assessed for disclosure at the remaining more narrow band. a36.due to their',
26750:'very nature, p3s can also possess risks of loss that may be considered remote butmaterial. forexample, excludingcontractualprotectionsaffordedthegovernment bythe federalacquisition regulation',
26751:'far inherently increases the entitys risk as does a relationship with an industry or private partner that may require the',
26752:'government to provide resources or absorb losses beyond what was contemplated. the board believes such p3 arrangements or transactions should',
26753:'be disclosed, subject to materiality, even though the risks of loss included in the terms of the contractual p3 arrangements',
26754:'or transactions may be deemed remote. the board further notes that enterprise risk management frameworks often focus on remote risks',
26755:'because of the magnitude of any potential adverse effects that might arise. therefore, consideration should be given to those risks',
26756:'that management does not expect to be likely, but represent a material riskof loss to the government if they were',
26757:'to occur. with this being said, the board also notes that such remote risks may have a reasonably high materiality',
26758:'threshold balanced by whether the omission is such that it is probable that the judgment of a reasonable person would',
26759:'have been changed or influenced by the disclosure. as such, remote risks should not be dismissed from disclosure without furtherconsideration',
26760:'of user needs and the qualitativeand quantitativecharacteristicswhen applying materiality. disclosure requirements of p3s a37.the task force conducted research and identified',
26761:'examples of disclosures surrounding p3s from a variety of international and national authoritative sources which address p3 information needs for',
26762:'different types of users. additionally, the task force considered factfinding meetings with public and private representatives regarding the types of',
26763:'information that diverse users believe are important. as a result, the task force overwhelmingly agreed with requiring disclosures concerning 1',
26764:'why the government selects a p3 model to conduct business, 2 the solicitation and procurement processes used, 3 how the',
26765:'p3 is structured, 4 the expected benefits, and 5 the total amounts expected to be paid. although it was noted',
26766:'that requiring a description of the solicitation andprocurement processesisunusualin financialreporting, the taskforce reached that conclusion because p3s fall outside the',
26767:'routine way governments procure services and such disclosures reveal the potential risk that governments assume, which can ultimately lead to',
26768:'liability recognition. a38.in analyzing the task forces recommendations the board considered the federal financial reporting objectives. of the four objectives',
26769:'outlined in statement of federal financial accounting concepts sffac 1, objectives of federal financial reporting, the operating performance and budgetaryintegrityobjectivesareidentifiedasbeingmostimportant',
26770:'forp3 page 30 sffas 49 fasab handbook, version 20 06/21 sffas 49 reporting. the board agreed that p3 reporting is',
26771:'important to meeting these objectives because the federal government is accountable to citizens for the proper administration of its resources.',
26772:'as such, the board agreed with the majority of the task forces recommendations. however, requiring disclosure of an entitys solicitation',
26773:'and procurement processes falls outside the realm of financial reporting. furthermore, the board questioned the informational value of such a',
26774:'disclosure and concluded that its cost also exceeded potential benefits identified by the task force. a39.p3s are a form of',
26775:'investment and they should be adequately disclosed in order to assist report users in determining: a the important assets of',
26776:'the u.s. government and how effectively they are being managed and b whether the governments financial position improved or deteriorated',
26777:'over the period of the p3. p3s often involve innovative operational and complicated accounting practices, accompanied by sophisticated financing agreements.',
26778:'these complexities necessitate the establishment of disclosure principles as a first step to 1 developing uniform principlesbased guidance, and 2',
26779:'identifying potential gaps in existing guidance. a40.respondents were mixed regarding disclosures with some stating that the disclosures are onerous and',
26780:'burdensome and the others in agreement with the proposed disclosures or seeking additional disclosures. as a result of considering the',
26781:'overall financial reporting objectives, andinlightofcertainrespondentcommentsregardingadministrativeburden, the board decided to not require disclosure of amounts estimated to be received and paid',
26782:'duringeachofthesucceedingfive years. thatis, onlythe amountsreceivedandpaid bythe government during the reporting periods and the amounts estimated to be received and paid',
26783:'in aggregate over the expected life of the p3 need be reported. in determining the expected life of the p3',
26784:'arrangement or transaction the entitys economic incentives that is, its risks and/or rewards should be considered. a41.the board offers two',
26785:'examples regarding the determination of a p3s expected life. first, consideraninfrastructure arrangement containing a master ground lease of 50yearswhere in',
26786:'exchange for an upfront payment the entity outleases governmentowned land for the constructionof anoffice buildingand at thesametimeentersintoanoccupancyleasewhich can be renewed',
26787:'for up to 75 years. the expected life of the p3 should be limited to 50 years given the fact',
26788:'that the entitys economic incentive at year 50 changes due to the master ground leases expiration. that is, at such',
26789:'time the entity may decide to renew the master ground lease and renegotiate its occupancy lease or sell the land',
26790:'and not renew the occupancy lease. as a result, the amounts estimated to be received and paid in aggregate over',
26791:'the 50 years would be reported. second, consider a spare parts sustainment program where an entity partners with an inventory',
26792:'logistics firm to handle the entire supply chain management function of a majorweaponssystemexpected toremain inservice forthe next 25 years.although by',
26793:'statute the entity can only enter into a 5 year for example, base year with 4 renewable options contract, it',
26794:'hasan economicincentive to maintain the relationship page 31 sffas 49 fasab handbook, version 20 06/21 sffas 49 beyond 5 years.',
26795:'this is primarily due to the fact that the private partner is likely to incur a substantial investment to manage',
26796:'the supply chain and the investment will need to be recovered over time. as a result, the amounts estimated to',
26797:'be received and paid in aggregate over the 25 years would be reported. aggregation a42.due to therelativecomplexityand potentialvoluminousnatureofp3sthatanentitymightbe party to,',
26798:'the statement permits entities to aggregate disclosures by providing broad and summarized information instead of unique or discrete arrangement or',
26799:'transaction detail. however, entities are permitted to disclose information related to individually significant p3 arrangementsortransactionsseparatelyifentitymanagement believesthat such disclosure would better',
26800:'meet user needs. a43.for example, disclosures of p3 arrangements or transactions could be aggregated by an entitys strategic objectives, departmental',
26801:'or bureau categorizations, program budget classifications, or other means. in this way users are presented with information that is comprehensive',
26802:'and material to an entitys financial statements without placing an undue burden on preparers to provide p3 specific or granular',
26803:'level information. respondents generally supported the aggregation of information. reporting period a44.disclosures should be provided for the initial period and',
26804:'all annual periods thereafter where an entity is party to a material p3 arrangement/transaction boardapproval and dissent a45.this statement was',
26805:'approved for issuance by 8 members of the board. one member dissented. the written ballotsare available for public inspection at',
26806:'the fasabs offices. the dissent of the member who opposed the issuance of this statement is presented in paragraphsa46 anda47.',
26807:'a46.ms. hodissents totheissuanceofthis statement. she believesthattheincreaseduseof p3s in the federal government makes the need for clarity in the accounting for',
26808:'p3s vitally important. ms. ho acknowledges that the taxpayer has the right to know what obligations thegovernmenthasagreedtoandwhatthetotalcostisforap3project. ms. hocommends fasab',
26809:'for their thorough examination of the issue, which encompassed several years. a47.ms. ho strongly supports more transparency in financial reporting',
26810:'of federal taxpayers dollars. however, she shares the concerns voiced by many agencies in response to the page 32 sffas',
26811:'49 fasab handbook, version 20 06/21 sffas 49 exposuredraft that the disclosures required by thisstatement willcreate a burdenthat does not',
26812:'justify the cost required to collect, analyze, report and audit the information needed to comply with this statements requirements. in',
26813:'particular, ms. ho feels that the expected life requirement will result in inconsistent application by agencies throughout government, which is',
26814:'contrary to the goal of the statement. page 33 sffas 49 fasab handbook, version 20 06/21 sffas 49 appendix b:',
26815:'flow chart 20 20the standards enunciated in this statement and not the material in this appendix should govern the accounting',
26816:'for specific transactions, events, or conditions. page 34 sffas 49 fasab handbook, version 20 06/21 sffas 49 appendix c:abbreviations aga',
26817:'association of government accountants bfc basis for conclusions cfr consolidated financial report of the u.s. government c.f.r. code of federal',
26818:'regulations cpa certified public accountant ed exposure draft eul enhanced use lease far federalacquisition regulation fasab federalaccounting standardsadvisory board gaap',
26819:'generallyaccepted accounting principles gao government accountability office gpffr general purpose federal financial reports gsa general servicesadministration irr internal rate of',
26820:'return it information technology lp limited partnership md&a managements discussion and analysis omb office of management and budget opeb other',
26821:'postemployment benefits p3 publicprivate partnership page 35 sffas 49 fasab handbook, version 20 06/21 sffas 49 pp&e property, plant, and',
26822:'equipment ppp publicprivate partnership psc public sector comparator sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards spv special purpose vehicle u.s. united states vfm',
26823:'value for money page 36 sffas 49 fasab handbook, version 20 06/21 statement of federal financialaccounting standard 50: establishing opening',
26824:'balances for general property, plant, and equipment:amending sffas 6, 10, and 23, and rescinding sffas 35 status issued august 4,',
26825:'2016 effective date for periods beginning after september 30, 2016. earlier implementation is encouraged. affects sffas 6, par. 25, 26,',
26826:'and 40. sffas 10, par. 16 and 36. sffas 23, amends par. 10 and rescinds par. 1118. sffas 35 is',
26827:'rescinded. affected by none. related guidance tr18, implementation guidance for establishing opening balances summary this statement provides implementation guidance to',
26828:'allow a reporting entity, under specific conditions, to apply alternative methods in establishing opening balances for general property, plant, and',
26829:'equipment. it amends statement of federal financialaccounting standards sffas 6, accounting for property, plant, and equipment, sffas 10, accounting for',
26830:'internal use software, and sffas 23, eliminating the category national defense property, plant, and equipment, and rescinds sffas 35, estimating',
26831:'the historical cost of general property, plant, and equipment: amending statements of federal financial accounting standards 6 and 23. the',
26832:'alternative methods include 1 using deemed cost to establish opening balances of general property, plant, and equipment, 2 selecting between',
26833:'deemed cost and prospective capitalization of internal use software, and 3 allowing an exclusion of land and land rights from',
26834:'opening balances with disclosure of acreage information and expensing of future acquisitions. the alternative methods are permitted when presenting financial',
26835:'statements, or one or more line items addressed by this statement, following generally accepted accounting principles gaap promulgated by the',
26836:'federalaccounting standardsadvisory board either 1 for the first time or 2 after a period during which existing systems could not',
26837:'provide the information necessary for producing such gaapbased financial statements without use of the alternative methods. the application of this',
26838:'statement based on the second condition is available to each reporting entity only once per line item addressed in this',
26839:'statement. page 1 sffas 50 fasab handbook, version 20 06/21 sffas 50 table of contents page summary 1 introduction 3',
26840:'standards 5 scope 5 definitions 6 amendments to sffas 6, accounting for property, plant, and equipment 6 amendments to sffas',
26841:'10, accounting for internal use software 11 amendments to sffas 23, eliminating the category national defense property, plant, and equipment',
26842:'rescission of sffas 35, estimating the historical cost of general property, plant, and equipment: amending statements of federal financial accounting',
26843:'standards 6 and 23 14 effective date 15 appendix a: basis for conclusions 16 appendix b: abbreviations 38 page 2',
26844:'sffas 50 fasab handbook, version 20 06/21 sffas 50 introduction purpose 1. this statementamends statementoffederalfinancialaccountingstandards sffas6, accounting for property, plant,',
26845:'and equipment, sffas 10, accounting for internal use software, and sffas 23, eliminating the category national defense property, plant, and',
26846:'equipment, and rescinds sffas 35, estimating the historical cost of general property, plant, and equipment:amending statements of federal financialaccounting standards',
26847:'6 and 23 by providing implementation guidance to allow a reporting entity, under specific conditions, to apply alternative methods in',
26848:'establishing opening balances for general property, plant, and equipment pp&e.1 2. thealternativemethodspermittedbythisstatementmaybeappliedwhenareportingentity is presenting financial statements, or one or more',
26849:'line items addressed by this statement, following generally accepted accounting principles gaap promulgated by the federal accounting standardsadvisory board fasab',
26850:'either 1 for the first time or 2 after a period during which existing systems could not provide the information',
26851:'necessary for producing such gaapbased financial statements without use of the alternative methods. the application of this statement based on',
26852:'the second condition is available to each reporting entity only once per line item addressed in this statement. 3. this',
26853:'statement provides implementation guidance to allow a reporting entity to apply an alternative valuation method deemed cost in establishing opening',
26854:'balances for general pp&e in the first reporting period in which the reporting entity makes an unreserved assertion that its',
26855:'financial statements, or one or more line items, are presented fairly in accordance with gaap. it also allows an exclusion',
26856:'of land and land rights from the opening balanceswith disclosure of acreage information andexpensingof futureacquisitions. it also provides for selecting',
26857:'between deemed cost and prospective capitalization of internal use software iusin the first reporting period in which the reporting entitymakesan',
26858:'unreserved assertion that its financial statements, or one or more line items, are presented fairly in accordance with gaap. the',
26859:'alternative methods provided in this statement should also be applied to correct subsequently discovered errors in general pp&e that was',
26860:'valued under an alternative method. 1 for a complete discussion of the definition, characteristics, recognition, and measurement principles for general',
26861:'pp&e, see sffas 6, par. 2139. for thedefinition, recognition, and measurement principles for internal use software, see sffas 10, par.',
26862:'934. page 3 sffas 50 fasab handbook, version 20 06/21 sffas 50 4. as a result of these amendments and',
26863:'rescission, all implementation guidance for general pp&e, with the exception of specific provisions applicable to ius, will be incorporated into',
26864:'sffas 6. the board believes providing implementation guidance for general pp&e other than ius in sffas 6 will provide a',
26865:'comprehensive guide for users in a single statement. materiality 5. theprovisionsofthisstatementneednotbeappliedtoimmaterialitems. thedetermination of whether an item is material depends on',
26866:'the degree to which omitting or misstating information about the item makes it probable that the judgment of a reasonable',
26867:'person relying on the information would have been changed or influenced by the omission or the misstatement. page 4 sffas',
26868:'50 fasab handbook, version 20 06/21 sffas 50 standards scope 6. this statement applies when a reporting entity is presenting',
26869:'financial statements, or one or more line items addressed by this statement, following generally accepted accounting principles gaap promulgated by',
26870:'the federalaccounting standardsadvisory board fasab either 1 for the first time or 2 after a period during which existing systems',
26871:'could not provide the information necessaryfor producing such gaapbased financialstatements without use of the alternative methods. the application of this',
26872:'statement based on the second condition is available to each reporting entity only once per line item addressed in this',
26873:'statement. this statement also is applicable to the financial report of the u. s. government for purposes of consolidating a',
26874:'component reporting entity meeting the above conditions. 7. thealternativemethodsprovidedinthisstatementmaybeappliedinestablishing opening balances2for the reporting period in which the reporting entity, taken',
26875:'as a whole, makes an unreserved assertion that its financial statements, or one or more line items addressed by this',
26876:'statement, are presented fairly in accordance with gaap. the alternative methods provided in thisstatement should also be applied to correct',
26877:'subsequentlydiscovered errors in general property, plant, and equipment pp&e that were valued under an alternative method. 8. areportingentitythatmeetseither condition inparagraph6',
26878:'and elects toapplythe alternative methodsin establishing opening balancespermitted by thisstatement is subject to the reporting requirements under paragraph 13 of',
26879:'statement of federal financial accounting standards sffas 21, reporting corrections of errors and changes in accounting principles, amendment of sffas',
26880:'7, accounting for revenue and other financing sources. 2 terms defined in the glossary are shown in boldface the first',
26881:'time they appear. page 5 sffas 50 fasab handbook, version 20 06/21 sffas 50 definitions definitionsin paragraphs9 –10arepresented within thestandardsbecausetheyare',
26882:'new terms intended to have a specific meaning when applying the standards. 9. opening balances—opening balances are account balances that',
26883:'exist at the beginning of the reporting period. opening balances are based upon the closing balances of the prior period',
26884:'and reflect the effects of transactions and events of prior periods and accounting policies applied in the prior period. opening',
26885:'balances also include matters requiring disclosure that existed at the beginning of the period, such as contingencies and commitments.3 10.',
26886:'unreserved assertion—an unreserved assertion is an unconditional statement. amendments to sffas 6, accounting for property, plant, and equipment 11. this',
26887:'paragraph amends sffas 6, accounting for property, plant, and equipment, paragraph 25 by adding the following language at the end',
26888:'of the first sentence: “unless the reporting entity made the election to implement the provisions of paragraph 40.g.i.” the revised',
26889:'paragraph 25 of sffas 6 is: 25. land and land rights acquired for or in connection with other general pp&e29',
26890:'shall be included in general pp&e unless the reporting entity made the election to implement the provisions of paragraph 40.f.i.',
26891:'12. this paragraph amends sffas 6, paragraph 26 by adding the following language as the second sentence: “although the measurement',
26892:'basis for valuing general pp&e remains historical cost, reasonable estimates may be used to establish the historical cost of general',
26893:'pp&e, in accordance with the asset recognition and measurement provisions herein.” 3adopted fromauc 510, opening balances – initial audit engagements,',
26894:'including reaudit engagements aicpa professional standards. 29 acquired for or in connection with other general pp&e is defined as land',
26895:'acquired with the intent to construct general pp&e and land acquired in combination with general pp&e, including not only land',
26896:'used as the foundation, but also adjacent land considered to be the general pp&es common grounds. page 6 sffas 50',
26897:'fasab handbook, version 20 06/21 sffas 50 the revised paragraph 26 of sffas 6 is: 26. allgeneralpp&e shall be recorded',
26898:'at cost. although the measurement basisforvaluing general pp&e remains historical cost, reasonable estimates may be used to establish the historical',
26899:'cost of general pp&e, in accordance with the asset recognition and measurement provisions herein. cost shall include all costs incurred',
26900:'to bring the pp&e to a form and location suitable for its intended use. for example, the cost of acquiring',
26901:'property, plant, and equipment may include… 13. this paragraph amends the implementation guidance provided in sffas 6 by replacing paragraph',
26902:'40. paragraph 40 of sffas 6 is replaced with: 40. alternative methods for establishing opening balances.44a the following guidance is',
26903:'applicable for the reporting period when the reporting entity is presenting financial statements, or one or more line items addressed',
26904:'by this statement, following generally accepted accounting principles gaap promulgated by fasab either 1 for the first time or 2',
26905:'after a period during which existing systems could not provide the information necessary for producing such gaapbased financial statements without',
26906:'use of the alternative methods. the following should be considered in establishing opening balances: a. the alternative methods for establishing',
26907:'opening balances may be applied for the reporting period in which the reporting entity, taken asa whole, makesan unreserved assertion44b',
26908:'that its financial statements, or one or more line items addressed by this statement, are presented fairly in accordance with',
26909:'gaap. the alternative methods provided in this statement should also be applied to correct subsequently discovered errors in general pp&e',
26910:'that were valued under an alternative method. b. theapplicationofthesealternativemethodsbasedonthesecondconditionspecified in paragraph 40 is available to each reporting entity only once',
26911:'per line item. 44a opening balances are account balances that exist at the beginning of the reporting period. opening balances',
26912:'are based upon the closing balances of the prior period and reflect the effects of transactions and events of prior',
26913:'periods and accounting policies applied in the prior period. opening balances also include matters requiring disclosure that existed at the',
26914:'beginning of the period, such as contingencies and commitments. 44b an unreserved assertion is an unconditional statement. page 7 sffas',
26915:'50 fasab handbook, version 20 06/21 sffas 50 c. a reporting entity that meets either condition in paragraph 40 and',
26916:'elects to apply any of the alternative methodsavailable in establishing opening balances is subject to the reporting requirements under paragraph',
26917:'13 of statement of federal financial accounting standards 21, reporting corrections of errors and changes in accounting principles, amendment of',
26918:'sffas 7, accounting for revenue and other financing sources. d. alternative valuation method. deemed cost44c is an acceptable valuation method',
26919:'for opening balances of general pp&e. because the reporting entity may have multiple component or subcomponent reporting entities44d using various',
26920:'valuation methods simultaneously, deemed cost should be based on one, or a combination, of the following valuation methods:44e i. replacement',
26921:'cost44f ii. estimatedhistoricalcostinitialamount. reasonableestimatesmaybebasedon: a cost of similar assets at the time of acquisition; b current cost of similar assets',
26922:'discounted for inflation since the time of acquisition that is, deflating current costs to costs at the time of acquisition',
26923:'by general price index; or c other reasonable methods, including latest acquisition cost and estimation methods based on information such',
26924:'as, but not limited to, budget, appropriations, engineering documents, contracts, or other reports reflecting amounts to be expended. 44c deemed',
26925:'cost is an amount used as a surrogate for initial amounts that otherwise would be required to establish opening balances.',
26926:'44d sffas 47, reporting entity, provides that “component reporting entity” is used broadly to refer toa reporting entity within a',
26927:'larger reporting entity. examples of component reporting entities include organizations such as executive departments and agencies. component reporting entities would',
26928:'also include subcomponents that may themselves prepare general purpose federal financial reports gpffrs. one example is a bureau that is',
26929:'within a larger department that prepares its own standalone gpffr. 44e the methods are not listed in order of preference.',
26930:'44f replacement cost istheamountrequiredfor anentitytoreplace theremaining servicepotentialof anexistingasset in a current transaction at the reporting date, including the amount that',
26931:'the entity would receive from disposing of the asset at theendof its useful lifestatementof federal financialaccountingconcepts sffac 7, measurement of',
26932:'the elements of accrualbasis financial statements in periods after initial recording, par. 46. page 8 sffas 50 fasab handbook, version',
26933:'20 06/21 sffas 50 iii. fair value44g e. establishing inservice dates. i. in some cases, the inservice date must be',
26934:'estimated. in estimating the year that the base unit was placed in service, if onlya range of yearscan be identified,',
26935:'then the midpoint of the range is an acceptable estimate of the inservice date. ii. it is not necessary to',
26936:'separately identify the inservice date for material improvements44h included in the opening balances of a base unit. all improvements included',
26937:'in the opening balances at deemed cost may be treated as if they were placed inservice at the date the',
26938:'base unit was placed inservice. f. alternative methods for land and land rights. a reporting entity should choose among the',
26939:'following alternative methods for establishing an opening balance for land and land rights. because a reporting entity may have multiple',
26940:'component or subcomponent reporting entities selecting different alternative methods, a reporting entity should establish an opening balance based on one,',
26941:'or a combination, of these alternative methods. however, application of a particular alternative method must be consistent within each individual',
26942:'subcomponent reporting entity prior to consolidation into the larger component reporting or reporting entity. i. thereportingentitymayexcludelandandlandrightsfromtheopeningbalanceof general pp&e. if this',
26943:'alternative method is applied, the reporting entity should expense future land and land right acquisitions. ii. land and land rights',
26944:'may be recognized in opening balances based on the provisions of the alternative valuation method deemed cost provided in paragraph',
26945:'40.d. g. once established using alternative methods, opening balances are considered consistent with gaap. h. component reporting entity disclosures: 44g',
26946:'fair value is the amount at which an asset or liability could be exchanged in a current transaction between willing',
26947:'parties, other than in a forced or liquidation sale sffac 7, par. 38. 44h material improvements are costs whicheither extendthe',
26948:'useful life of existinggeneral pp&e or enlargeor improve its capacity. page 9 sffas 50 fasab handbook, version 20 06/21 sffas',
26949:'50 i. a component reporting entity electing to apply deemed cost in establishing opening balances for general pp&e should disclose',
26950:'this fact and describe the methods used in the first reporting period in which the reporting entity makes an unreserved',
26951:'assertion that its financial statements, or one or more line items, are presented fairlyin accordance with gaap. financial statementsor, asapplicable,',
26952:'reports on line items of subsequent periods need not repeat this disclosure, unlessthefinancial statementsfor which deemed cost wasapplied in establishing',
26953:'opening balances are presented for comparative purposes. no disclosure of the distinction or breakout of the amount of deemed cost',
26954:'of general pp&e included in the opening balance is required. ii. a component reporting entity electing to apply the provisions',
26955:'of paragraph 40.f.i. to land and land rights should disclose this fact and describe the alternative methods used in the',
26956:'first reporting period in which the reporting entity makes an unreserved assertion that its financial statements, or one or more',
26957:'line items, are presented fairly in accordance with gaap. a component reporting entity electing to exclude land and land rights',
26958:'from its general pp&e opening balances must disclose, with a reference on the balance sheet to the related disclosure, the',
26959:'number of acres held at the beginning of each reporting period, the number of acresadded during the period, the number',
26960:'of acresdisposedof during the period, and the number of acres held at the end of each reporting period. a reporting',
26961:'entity electing to exclude land and land rights from its general pp&e opening balance should continue to exclude future land',
26962:'and land rights acquisition amounts and provide the disclosures. in the event different alternative methods are applied to land and',
26963:'land rights as permitted by paragraph 40.f. by subcomponent reporting entities consolidated into a larger reporting entity, the alternative method',
26964:'adopted by each significant subcomponent should be disclosed. i. financial report of the u.s. government disclosures i. when a component',
26965:'reporting entity elects to apply deemed cost, the u.s. governmentwide financial statements should disclose this fact, the identity of the',
26966:'component reporting entity, and a reference to the component reporting entity’s financial report. subsequent financial statements need not repeat this',
26967:'disclosure unlessthefinancial statementsfor which deemed cost wasapplied in establishing opening balances are presented for comparative purposes. no disclosure of the',
26968:'distinction or breakout of the amount of deemed cost of general pp&e included in the opening balance is required. ii.',
26969:'when a component reporting entity elects to apply the provisions of paragraph 40.f.i. to land and land rights, the u.',
26970:'s. governmentwide financial statements should disclose this fact, the number of acres held at the end of each reporting page',
26971:'10 sffas 50 fasab handbook, version 20 06/21 sffas 50 period, an explanation of the election, the identity of the',
26972:'component reporting entity, and a reference to the component reporting entity’s financial report amendments to sffas 10, accounting for internal',
26973:'use software 14. this paragraph amends sffas 10, accounting for internal use software, paragraph 16 by adding the following first',
26974:'sentence: although the measurement basis remains historical cost, reasonable estimates may be used to establish the capitalized cost of internally',
26975:'developed software, in accordance with the asset recognition and measurement provisions herein. the revised paragraph 16 of sffas 10 is:',
26976:'16. although the measurement basis remains historical cost, reasonable estimates may be used to establish the capitalized cost of internally',
26977:'developed software, in accordance with the asset recognition and measurement provisions herein. for internally developed software, capitalized cost should include',
26978:'the full cost direct and indirect cost incurred during the software development stage.6 such cost should be limited to costs',
26979:'incurred after… 15. this paragraph amends the implementation guidance provided in sffas 10 by replacing paragraph 36. paragraph 36 of',
26980:'sffas 10 is replaced with: 36. alternative methods for establishing opening balances.9athe following guidance is applicable for the reporting period',
26981:'when the reporting entity is presenting financial statements, or the line item addressed by this statement, following generally accepted accounting',
26982:'principles gaap promulgated by fasab either 1 for the first time or 2 after a period during which existing systems',
26983:'could not provide the information necessary for producing such gaapbased financial statements without use of the alternative methods. the following',
26984:'should be considered in establishing opening balances: 6for a full discussion of direct and indirect cost, see sffas no. 4,',
26985:'managerial cost accounting concepts and standards for the federal government june 1995, pars. 9092. also see, statement of federal financial',
26986:'accounting concepts no. 2, entity and display, pars. 9495. 9aopening balances are account balances that exist at the beginning of',
26987:'the reporting period. opening balances are based upon the closing balances of the prior period and reflect the effects of',
26988:'transactions and events of prior periods and accounting policies applied in the prior period. opening balances also include matters requiring',
26989:'disclosure that existed at the beginning of the period, such as contingencies and commitments. page 11 sffas 50 fasab handbook,',
26990:'version 20 06/21 sffas 50 a. the alternative methods for establishing opening balances may be applied for the reporting period',
26991:'in which the reporting entity, taken asa whole, makesan unreserved assertion9b that its financial statements, or the line item addressed',
26992:'by this statement, are presented fairly in accordance with gaap. the alternative methods provided in this statement should also be',
26993:'applied to correct subsequently discovered errors in general pp&e that were valued under an alternative method. b. theapplicationofthesealternativemethodsbasedonthesecondconditionspecified in paragraph',
26994:'36 is available only once to each reporting entity. c. a reporting entity that meets either condition in paragraph 36',
26995:'and elects to apply any of the alternative methodsavailable in establishing opening balances is subject to the reporting requirements under',
26996:'paragraph 13 of statement of federal financial accounting standards 21, reporting corrections of errors and changes in accounting principles, amendment',
26997:'of sffas 7, accounting for revenue and other financing sources. d. alternativemethods. areportingentityshouldchooseamongthefollowingalternative methods for establishing an opening balance for',
26998:'internal use software. because a reporting entity may have multiple component or subcomponent reporting entities9c selecting different alternative methods, a',
26999:'reporting entity should establish an opening balance based on one, or a combination, of these alternative methods. however, applicationofaparticularalternativemethodmust beconsistentwithineachindividual',
27000:'subcomponent reporting entity prior to consolidation into the larger component reporting or reporting entity. i. alternative valuation method. deemed cost9d',
27001:'is an acceptable valuation method for opening balances of internal use software. see ssfas 6 paragraph 40.d. for implementation guidance',
27002:'regarding deemed cost. ii. prospective capitalization. the reporting entity may choose prospective capitalization of internal use software. if the reporting',
27003:'entity elects prospective 9ban unreserved assertion is an unconditional statement. 9c sffas 47, reporting entity, provides that “component reporting entity”',
27004:'is used broadly to refer to a reporting entity within a larger reporting entity. examples of component reporting entities include',
27005:'organizations such as executive departments and agencies. component reporting entities would also include subcomponents that may themselves prepare general purpose',
27006:'federal financial reports gpffrs. one example is a bureau that is within a larger department that prepares its own standalone',
27007:'gpffr. 9ddeemed cost is an amount used as a surrogate for initial amounts that otherwise would be required to establish',
27008:'opening balances. page 12 sffas 50 fasab handbook, version 20 06/21 sffas 50 treatment, the reporting entity should choose between',
27009:'the following acceptable alternative methods at the opening balance date: a exclude all internal use software, inclusive of that under',
27010:'development at the opening balance date, from the opening balance. b exclude internal use software in service from the opening',
27011:'balance, but include amounts related to internal use software under development at the opening balance date. internal use software under',
27012:'development should be recognized in opening balances based on the provisions of paragraphs 15 through 27 or on the alternative',
27013:'valuation method deemed cost provided in paragraph 36.d.i. e. once established using alternative methods, opening balances are considered consistent with',
27014:'gaap. f. component reporting entity disclosures: i. a component reporting entity electing to apply deemed cost in establishing opening balances',
27015:'for internal use software should disclose this fact and describe the methods used in the first reporting period in which',
27016:'the reporting entity makes an unreserved assertion that its financial statements, or one or more line items, are presented fairly',
27017:'in accordance with gaap. financial statements or, as applicable, reports on line items of subsequent periods need not repeat this',
27018:'disclosure, unless the financial statements for which deemed cost was applied in establishing opening balances are presented for comparative purposes.',
27019:'no disclosure of the distinction or breakout of the amount of deemed cost of internal use software included in the',
27020:'opening balance is required. ii. a component reporting entity electing to apply the provisions of paragraph 36.d.ii. should disclose this',
27021:'fact and describe the alternative methods used in the first reporting period in which the component reporting entity makes an',
27022:'unreserved assertion that its financial statements, or one or more line items, are presented fairly in accordance with gaap. in',
27023:'the event different alternative methods are applied by subcomponent reporting entities consolidated into a larger reporting entity, the alternative method',
27024:'adopted by each significant subcomponent should be disclosed. financial statements or, as applicable, reports on line items of subsequent periods',
27025:'need not repeat this disclosure, unless the statements for which the alternative method was applied in establishing opening balances are',
27026:'presented for comparative purposes. no disclosure of the distinction or breakout of amount of deemed cost of internal use software',
27027:'included in the opening balance is required. page 13 sffas 50 fasab handbook, version 20 06/21 sffas 50 g. financial',
27028:'report of the u.s. government disclosures: i. when a component reporting entity elects to apply deemed cost, the u.s. governmentwide',
27029:'financial statements should disclose this fact, the identity of the component reporting entity, and a reference to the component reporting',
27030:'entitys financial report. subsequent financial statements need not repeat this disclosure unlessthefinancial statementsfor which deemed cost wasapplied in establishing opening',
27031:'balances are presented for comparative purposes. no disclosure of the distinction or breakout of the amount of deemed cost of',
27032:'internal use software included in the opening balance is required. ii. when a component reporting entity elects to apply the',
27033:'provisions of paragraph 36.d.ii., the u.s. governmentwide financial statements should disclose this fact, anexplanationoftheelection,the identityofthecomponentreportingentity,and a reference to the component',
27034:'reporting entitys financial report. amendments to sffas 23, eliminating the category national defense property, plant, and equipment 16. this section',
27035:'amends the implementation guidance provided in sffas 23, eliminating the category national defense property, plant, and equipment, as described in',
27036:'the following paragraphs. 17. paragraph 10 is replaced with: 10. see sffas 6 for implementation guidance applicable to all general',
27037:'pp&e. 18. paragraphs 1118 of sffas 23 are rescinded. rescissionofsffas35, estimating the historical cost of general property, plant, and equipment:',
27038:'amending statements of federal financial accounting standards 6 and 23 19. this paragraph rescinds sffas 35, estimating the historical cost',
27039:'of general property, plant, and equipment: amending statements of federal financial accounting standards 6 and 23 in its entirety. provisions',
27040:'from sffas 35 were incorporated into the implementation guidance of sffas 6 and sffas 10 as applicable. page 14 sffas',
27041:'50 fasab handbook, version 20 06/21 sffas 50 effective date 20. this statement is effective for periods beginning after september',
27042:'30, 2016. earlier implementation is encouraged. the provisions of this statement need not be applied to immaterial items. page 15',
27043:'sffas 50 fasab handbook, version 20 06/21 sffas 50 appendixa: basis for conclusions this appendix discusses some factors considered significant',
27044:'by board members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting',
27045:'others. individual members gave greater weight to some factors than to others. the standards enunciated in this statement–not the material',
27046:'in this appendix–should govern the accounting for specific transactions, events, or conditions. this statement may be affected by later statements.',
27047:'the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this',
27048:'statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be',
27049:'updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale',
27050:'for each amendment. project history department of defense implementation guidance request project a1. infebruary2014,thedepartmentofdefensedodidentifiedseveralareasofconcernfor fasab’s consideration. the board agreed to',
27051:'undertake a project to address these areas by providing practicalguidancewithin the framework of existingaccounting standardsand, where necessary, by providing the',
27052:'appropriate guidance to address issues not addressed within the framework of existing accounting standards. a2. this statement is issued in',
27053:'response to dod’s request for guidance on establishing opening balances for general property, plant, and equipment pp&e. accounting for the',
27054:'federal government’s general pp&e is complex and continues to be a challenge for large federal departments. this topic has been',
27055:'addressed in numerous statements of federal financialaccounting standards sffass and interpretations as well as guidance issued by theaccounting andauditing policy',
27056:'committee. sffas 6, accounting for property, plant, and equipment, sffas 10, accounting for internal use software, sffas 23, eliminating the',
27057:'category national defense property, plant, and equipment, and sffas 35, estimating the historical cost of general property, plant, and equipment:',
27058:'amending statements of federal financial accounting standards 6 and 23 address the accounting and reporting requirements for general pp&e. a3.',
27059:'duringtheproject,theboard’sstaffmetwithdodofficials,aswellasmembersoftheaudit community, to develop an understanding of the issues faced by dod in establishing their baseline for general pp&e. this',
27060:'included discussing valuation methodologies employed, page 16 sffas 50 fasab handbook, version 20 06/21 sffas 50 management assertions and the',
27061:'completion of audits, and the status of implementation of a system compliant with general accepted accounting principles gaap for the',
27062:'dod components. a4. based on the meetings and information provided it was determined that: a. dod’s financial systems and many',
27063:'aspects of dod’s accounting policy for general pp&e have not been in accordance with gaap. b. many dod organizations that',
27064:'maintain several different accounting and property systems are involved in acquiring general pp&e assets. c. dod has not had consistent',
27065:'procedures related to general pp&e acquisitions or document retention. d. allmajorsystemsdodhasutilizedforacquisitionsofgeneralpp&ehaveeithernever been audited or, when audited, had significant deficiencies or',
27066:'material weaknesses. e. capital improvement projects have not been reliably tracked, so dod was unable to determine the date the',
27067:'improvements were placed in service or to establish a valuation baseline. f. dod has approximately 440,000 separate real property assets,',
27068:'and many real property assets were built more than 40 years ago. g. dod records related to land values are',
27069:'not in a structured, searchable system. the recordsarenot digitized and accessing them involves searching boxed records. also, source documents, such',
27070:'as deeds, may not be complete, and court records often have gaps given the length of time involved. h. dod',
27071:'does not have a complete inventory of its internal use software ius, and costs of ius have not been captured',
27072:'consistently. i. general equipment is a broad category that includes military equipment and consists of hundreds of thousands of assets.',
27073:'a5. afterconsideringthestatusofdod’seffortsandthefactthatdodhashadnumerousyears to implement the standards and has shown little progress, the board discussed the merits of the project. specifically,',
27074:'one member had concerns regarding the board’s role and potentiallyunderminingthe board’sown credibility byactingto offer relief to dodbecause the department has',
27075:'been unable to adopt gaap requirements. the board acknowledges that appearance is a concern. however, the board has been tasked',
27076:'with establishing standards for which the benefits exceed the cost. page 17 sffas 50 fasab handbook, version 20 06/21 sffas',
27077:'50 a6. the board noted that while dod has had numerous years to meet the standards and become gaap compliant,',
27078:'they have not. conditions remain that existed when fasab issued many of these standards, and the cost to implement all',
27079:'the standards concurrently is greater than would have been incurred if standards were implemented in a timely manner.the goalofthisstatement istoavoid',
27080:'requiring the expenditure of taxpayerdollars in recreating information that would have been of greater benefit in the past for example,',
27081:'to evaluate major acquisition/construction programs as they were executed, but for which the current use is limited to accountability and',
27082:'assessing the cost of current services. the board proposed less costly alternatives that will support this objective. a7. the board',
27083:'believes assisting dod with establishing a baseline benefits all parties. providing a starting point will enable dod to focus on',
27084:'needed improvements to systems and controls to process transactions going forward and thereby establish and maintain reliable financial information regarding',
27085:'future pp&e acquisitions. establishing a sound financial management system is of primary importance. a8. the board also acknowledges that other',
27086:'standardsetters have provided guidance for organizations implementing an entire body of standards for the first time. the challenge of establishing',
27087:'opening balances for large public sector entities warrants the flexibilities provided in this statement. summary of outreach efforts and responses',
27088:'a9. fasab issued the exposure draft ed establishing opening balances for general property, plant, and equipment: amending statement of federal',
27089:'financial accounting standards sffas 6, sffas 10, sffas 23, and rescinding sffas 35 on december 22, 2015, with comments requested',
27090:'by february 4, 2016. a10. upon release of the ed, fasab provided notices and press releases to the fasab subscription',
27091:'email list, the federal register, fasab news, the journal of accountancy, association of governmentaccountantstopics, the cpa journal, government executive, the',
27092:'cpa letter, the chief financial officers council, the council of the inspectors general on integrity and efficiency, and committees of',
27093:'professional associations generally commentingon edsinthepastforexample,thegreaterwashington societyofcpasand theassociation of governmentaccountants financial management standards board. a11. fasabfollowedupthisbroadannouncementwithdirectmailingsoftheedtothefollowing relevant congressional committees: a. house',
27094:'appropriations—subcommittee on defense b. house committee on armed services page 18 sffas 50 fasab handbook, version 20 06/21 sffas 50',
27095:'c. house committee on oversight and government reform d. house committee on the budget e. house committee on veterans affairs',
27096:'f. senate appropriations—subcommittee on defense g. senate committee on armed services h. senate committee on finance i. senate committee on',
27097:'homeland security and governmental affairs j. senate committee on the budget k. senate committee on veterans affairs a12. fasab received',
27098:'22 responses from preparers, auditors, users of federal financial information, and professional associations. the majority of respondents agreed with the',
27099:'proposals to: 1 permit openingbalancesof generalpp&eto be valued based ondeemed cost and require the related disclosures, 2 allow a reporting',
27100:'entity to choose among alternative methods in establishing an opening balance for ius and require the related disclosures, and 3',
27101:'rescind sffas 35. a13. however, approximately onehalf of the respondents disagreed with the proposal to allow exclusion of land from',
27102:'the opening balances of general pp&e. they also disagreed with the proposal to require a reporting entity electing to exclude',
27103:'land from its general pp&e opening balances to exclude future land acquisition amounts. a14. the respondents identified certain issues that',
27104:'could be clarified within the statement or addressed in the basis for conclusions. a15. the board did not rely on',
27105:'the number of respondents in favor of or opposed to a given position. information about the respondents’ majority view is',
27106:'provided only as a means of summarizingthe comments. the board considered each responseandweighed themerits of the points raised. the respondents’',
27107:'comments are summarized below. land a16. when developing the ed, the board proposed options for land that were different from',
27108:'those for other general pp&e. allocation of the cost of general pp&e, excluding land, among accounting periods is essential to',
27109:'assessing operating performance. statement of federal financialaccounting concepts sffac 1, objectives of federal financial reporting, focuses on relating costs to',
27110:'accomplishments in reporting an entity’s operating performance. cost information isof fundamentalimportance, both toprogrammanagersin operating their activities efficiently and effectively and',
27111:'to executive and congressional decision makers in determining resource allocation. general pp&e is capitalized and depreciated to provide this information.',
27112:'because land is not depreciated due to its infinite useful life, the benefits of capitalizing land are primarily in the',
27113:'period of acquisition. that is, page 19 sffas 50 fasab handbook, version 20 06/21 sffas 50 the cost of the',
27114:'land is identified so the acquisition can be evaluated and capitalized. in doing so, the period operating costs are not',
27115:'overstated. in future periods, the ongoing benefit is that accountability for the asset is established. a17. the board carefully considered',
27116:'those aspects of the land category, along with measurementchallenges,costbenefitconsiderations,andthequalitativecharacteristicsof financial information. the board determined the most practical and costbeneficial approach',
27117:'to establishing an opening balance for land would be to permit the reporting entity to exclude land from the opening',
27118:'balance of general pp&e and to support accountability through disclosures. the board proposed that the reporting entity disclose, with a',
27119:'note reference on the balance sheet, the number of acres of land held at the beginning of each reporting period,',
27120:'the number of acres added during the period, the number of acres disposed ofduring the period, and the number of',
27121:'acres held at the end of each reporting period.areporting entity electing to exclude land from its general pp&e opening balance',
27122:'would continue to exclude amounts for future land acquisitions. accordingly, the reporting entity would provide the disclosures each year thereafter.',
27123:'a18. some members who supported excluding land expressed concern regarding the resulting inconsistency in reporting and suggested the board begin',
27124:'a project on land in the near future to review existing standards, to explore options to improve reporting on land,',
27125:'and to seek a consistent approach. other members wanted to explore valuing existing land holdings based on deemed cost consistent',
27126:'with general pp&e or on a set amount per acre of land. the board asked respondents whether they agreed or',
27127:'disagreed with the proposal to allow exclusion of land from the opening balances of general pp&e even though other component',
27128:'reporting entities would report the cost of certain land in general pp&e. the board also requested feedback regarding three alternative',
27129:'approaches: 1 to value general pp&e land holdings based on historical cost, a set amount per acre of land, deemed',
27130:'cost, or another valuation method, 2 to defer any changes in the current requirements until the board completes a reexamination',
27131:'of the appropriate basis of accounting for land, or 3 to adopt another option. a19. approximatelyonehalfoftherespondentsdisagreedwiththeedtoallowexclusionofland from the opening balances',
27132:'of general pp&e. nearly all respondents supported a land project to reexamine standards for reporting on land. in addition, the',
27133:'majority of the respondentspreferredthatthe board deferchangesto thecurrentland requirements,such as exclusions of land from the balance sheet or other actions that',
27134:'may affect future acquisitions, until the board completes the reexamination. a20. as part of due process, the board carefully considered',
27135:'the following: a. respondents’ comments regarding land, b. dod feedback regarding implementation challenges and options, and fasab’s land page 20',
27136:'sffas 50 fasab handbook, version 20 06/21 sffas 50 c. project plan entitled accounting and reporting of government land. a21.',
27137:'respondents’ key reasons for disagreeing with the proposal to allow exclusion of land were 1 inconsistent accounting treatment that would',
27138:'be consolidated at the government wide level and 2 the potential that a temporary change may lead to added cost',
27139:'for reporting entities electing to implement the statement. consistent with the support for permitting opening balances of general pp&e to',
27140:'be valued based on deemed cost, respondents agreed that deemed cost and/or existing standards could be used to value opening',
27141:'balances of land. a22. the board considered dod’s feedback because dod would most likely elect to implement the statement. dod',
27142:'conveyed the following important factors to the board: a. dod reports that it owns considerable land qualifying as general pp&e.',
27143:'dod would have to expend significant financial and personnel resources to determine the valuation of land. b. in contrast to',
27144:'the information used to establish deemed cost for other general pp&e, information that would be necessary to establish deemed cost',
27145:'for land would not be used for dod management purposes. c. dod supports reporting acreage information until the land project',
27146:'is completed. the potential for future valuation requirements was not viewed as more costly than requiring deemed cost and later',
27147:'changing the valuation requirements. dod noted there are current accountability requirements, and it is actively working on obtaining acreage information.',
27148:'a23. althoughrespondents’ conveyedthatinconsistency was aconcern,theboardnotes that current standards are not consistent because they differentiate between stewardship land and land acquired',
27149:'in connection with development or construction of an item of general pp&e. stewardship land is not capitalized, but disclosures of',
27150:'information regarding use of the land and physical measures are required see sffas 29, heritage assets and stewardship land. land',
27151:'classified as general pp&e is capitalized at historical cost. stewardship land can be used in development or construction of general',
27152:'pp&e but is not capitalized. a24. the land project is being initiated to address such inconsistencies, and board members showed',
27153:'a strong commitment to moving forward and expediting the project to resolve inconsistencies. at the february 2016 board meeting, the',
27154:'board approved a project plan entitled accounting and reporting of government land. the requirements in sffass 6 and 29 have',
27155:'resulted in significant differences in accounting treatment for land holdings. the land project will consider additional research and factors to',
27156:'determine how best to account for and to report land. however, the board does not believe decisions to be made',
27157:'in the land project should delaythe exclusionof land from opening balancesasprovided in page 21 sffas 50 fasab handbook, version 20',
27158:'06/21 sffas 50 this statement. this statement is of limited scope and seeks cost beneficial options for opening balances. if',
27159:'the exclusion was not available, component reporting entities would be required to adopt one of the valuation methods available under',
27160:'deemed cost. the land project may reach conclusions that make such valuation methods obsolete, and the costs incurred to adopt',
27161:'deemed cost would have been unnecessary. a25. further, the board has expressed a commitment to complete the land project quickly',
27162:'to resolve inconsistencies. the board has also communicated to those parties most likely to be impacted that decisions made regarding',
27163:'land are subject to change as a result of the land project. a26. as noted above, consistent with the support',
27164:'for opening balances of general pp&e to be valued based on deemed cost, respondentsexpressed that deemed cost could be used',
27165:'to value opening balances of land. therefore, the board believes deemed cost should also remain an option for establishing opening',
27166:'balances for land. as a result, a larger component reporting entity may establish an opening balance for land based on',
27167:'a combination of multiple subcomponent reporting entities’ alternative methods, which may or may not be the same. this is permitted',
27168:'by the statement. however, application of a particular alternative method must be consistent within each subcomponent reporting entity prior to',
27169:'its consolidation into a larger component reporting entity. a27. one area that board members believe needs transparency and additional clarification',
27170:'is the potential for inconsistent accounting treatment at the governmentwide level, with some land reported in dollars and some in',
27171:'acres. the issue is further complicated by the fact that stewardship land is also included as a note reference on',
27172:'the balance sheet and reported in physical units, which may be different than acres. without additional information to explain whatisincluded',
27173:'atthe consolidated level, this situation would not be clear to readers at the governmentwide level. therefore, the board added a',
27174:'narrative disclosure requirement for the governmentwide financial report. the disclosure requiresa narrative explanation ofanyelection made by component reportingentities regardingland. each',
27175:'component reporting entity electing to exclude land should be identified with a reference to the component reporting entity’s financial report.',
27176:'a28. after considering all of the above factors, the board considered the pros and cons of deferring significantaction on land',
27177:'until the completion of the land project, as requested by the respondents who disagreed with the proposal. while the respondents',
27178:'are correct that land will be treated inconsistently, the board believes it has a responsibility to weigh the cost of',
27179:'developing deemed cost for vast land holdings against the possibility that the land projectwill conclude that such deemed costs are',
27180:'not useful. therefore, the board adopted its proposal to permit land to be excluded from the opening balance of general',
27181:'pp&e and to support accountability through disclosures. page 22 sffas 50 fasab handbook, version 20 06/21 sffas 50 a29. although',
27182:'some land rights4 may not have an indefinite useful life, the board proposed in the ed similarlytowhat it didwith respect',
27183:'to land that an exclusion of landrights from the opening balances with disclosure of acreage information and expensing of future',
27184:'acquisitions. the board recognizes that land rights are diverse, situation specific, and may not always result in disclosures required by',
27185:'this statement. in fact, sffas 6 provides that land rights that are for a specified period of time shall be',
27186:'depreciated or amortized over that time period. the board believes this is a cost effective approach for opening balances of',
27187:'land rights and completion of the land project would more fully research the issues and provide comprehensive standards. the board',
27188:'reiterates that decisions made within this statement regarding land and land rights are subject to change based upon the results',
27189:'of the land project. a30. althoughthemajorityofrespondentsagreedwiththeproposaltorescindsffas35andto permitreasonable estimatesin the preparationof financialstatements, thisprovision of the statement generated many comments from respondents.',
27190:'a31. acommonsuggestionprovidedbyrespondents was thatreportingentitieswouldbenefit fromtheinclusionoflanguagefromparagraph195 oftheedinsffas6andsffas10to clarifythatthe board intended reasonable estimatesto be applicable to any general pp&e versus just opening',
27191:'balances.although the board believes the broad statement provided in the paragraph should be sufficient to address the matter, members agreed',
27192:'including the provisions of paragraph 19 of the ed in sffass 6 and 10 may be clearer. specifically, sffas 6,',
27193:'paragraph 26, and sffas 10, paragraph 16, were amended to specify that although the measurement basis for valuing general pp&e',
27194:'remains historical cost, reasonable estimates may be used. a32. respondents who disagreed with the proposal to rescind sffas 35 primarily',
27195:'cited audit concerns and the valuable guidance provided in sffas 35 as their reasoning. however, many of the detailed concerns',
27196:'expressed by respondents are addressed through existing guidance. the board reiterates as explained in the ed that technical release 13,',
27197:'implementation guide for estimating the historical cost of general property, plant, and equipment, remains in effect regardless of these amendments',
27198:'and that each significant provision of sffas 35 was incorporated in the amendments—including the ability to use estimates in the',
27199:'future. in addition, sffas 4, managerial cost accounting standards and concepts, establishes a requirement for cost accounting that acknowledges the',
27200:'use of cost finding techniques and the allocation of costs on a reasonable and consistent basis. 4“land rights” are interests',
27201:'and privileges held by the entity in land owned by others, such asleaseholds, easements, water and water power rights, diversion',
27202:'rights, submersion rights, rightsofway, and other like interests in land. 5“reasonableestimatesarepermittedinthepreparation offinancialstatementssubsequentto therescission ofsffas 35.” page 23 sffas 50 fasab',
27203:'handbook, version 20 06/21 sffas 50 the board also believes it important to point out the statement provides for the',
27204:'use of deemed cost to correct errors in the opening balances. reporting entities should consider all available gaap guidance when',
27205:'implementing new accounting standards. internal use software ius a33. while the majority of respondents agreed with the proposal to allow',
27206:'a reporting entity to choose among alternative methods in establishing an opening balance for ius, several respondents expressed their concerns',
27207:'to the board. five respondents expressed concern with prospective capitalization of ius, but agreed with deemed cost as an alternative',
27208:'method. the respondents did not believe component reporting entities should be able to adopt inconsistent alternative methods when establishing an',
27209:'opening balance for ius. in contrast, one respondent believed prospective capitalization of ius should be the only option because this',
27210:'would enhance consistency while also appropriately balancing the value and cost of the information in the financial statements. a34. the',
27211:'board recognizes the concerns raised by respondents and considered them during the development of the statement. while the board understands',
27212:'the importance of consistency and comparability in financial reporting, the board believes users of federal financial statements often have different',
27213:'objectives and may not necessarily compare asset values among various reporting entities in the way that users of financial statements',
27214:'do in a commercial setting. a35. the board considered the fact that there may be component reporting entities such as',
27215:'working capital funds that charge rates for which the prospective treatment would be undesirable. the board determined it would be',
27216:'best to provide optimum flexibility by providing for the option of deemed cost for ius. therefore, the board agreed the',
27217:'statement should allow for the alternative methods in establishing opening balances for ius. a36. the statement requires the application of',
27218:'a particular alternative be consistent within each of the subcomponent reporting entities6 prior to consolidation. in the event different alternative',
27219:'methods are applied by subcomponent reporting entities, the alternative method applied by each significant subcomponent reporting entity should be disclosed.',
27220:'the board believes the disclosure requirements regarding the different alternative 6sffas 47, reporting entity, provides that “component reporting entity” is',
27221:'used broadly to refer to a reporting entity within a larger reporting entity. examples of component reporting entities include organizations',
27222:'such as executive departments and agencies. component reporting entities would also include subcomponents that may themselves prepare general purpose federal',
27223:'financial reports gpffrs. one example is a bureau that is within a larger department that prepares its own standalone gpffr.',
27224:'page 24 sffas 50 fasab handbook, version 20 06/21 sffas 50 methods for establishing opening balances for ius, if applicable,',
27225:'will support sufficient analysis for users of federal financial statements. a37. the board believes a reporting entity should be allowed',
27226:'to choose among alternative methods in establishing an opening balance for ius. concerns regarding inconsistencies will resolve quickly due to',
27227:'the short useful life of ius. other areas a38. certain respondents requested clarifying language be added to expand upon the',
27228:'phrase “one or more line items addressed by this statement,” to define line items as being line items on the',
27229:'financial statements or line items within the note disclosures. the board acknowledgesthe termline itemis quite broad, especiallyinrelation togeneralpp&e. the preparer',
27230:'can use judgment to decide upon the line items to present either on the face of a financial statement or',
27231:'in related disclosures. therefore, the board believes line items may be based on a class of general pp&e, such as',
27232:'those currently included in the required disclosures, or on other reasonable means of disaggregation on the face of the statement',
27233:'or in the notes. a39. arespondentaskedfor clarificationwhetherthestandards applyto thegovernmentwide reporting entity. it is the intention of the board that all',
27234:'standards apply to any entity— component or governmentwide unless otherwise stated. sffas 24, selected standards for the consolidated financial report',
27235:'of the united states government, states that sffass “apply to all federal entities, that is, to the government as a',
27236:'whole and to component entities … unless provision is made for different accounting treatment in a current or subsequent sffas.”',
27237:'because this statement applies to firsttime adopters as well as entities making an unreserved assertion for the first time, this',
27238:'statement is applicable to the governmentwide reporting entity for purposes of consolidating component reporting entities at any time. a40. several',
27239:'respondents provided comments regarding “inservice dates,” questioning whether the inservice dates for material improvements are the same as the base',
27240:'unit and if reporting entities should disregard the inservice dates for material improvements. the board notes the statement is permissive.',
27241:'material improvements included in the opening balances at deemed cost may be treated as if they were placed inservice at',
27242:'the date the base unit was placed inservice, but this treatment is not required. alternative valuation method and implementation guidance',
27243:'a41. during deliberation on the project, the board considered the recentlyapproved sffas 48, opening balances for inventory, operating materials and',
27244:'supplies, and stockpile page 25 sffas 50 fasab handbook, version 20 06/21 sffas 50 materials. sffas 48 permits a reporting',
27245:'entity to apply an alternative valuation method in establishing opening balances for inventory, operating materials and supplies, and stockpile materials.',
27246:'deemed cost, or the amount used as a surrogate for initial amounts that otherwise would be required to establish opening',
27247:'balances, was the alternative valuation method for valuation of opening balances in accordance with sffas 3, accounting for inventory and',
27248:'related property, as amended by sffas 48. a42. the board based part of its decision to select deemed cost in',
27249:'sffas 48 on international public sectoraccounting standard ipsas 33, firsttime adoption of accrual basis international public sector accounting standards. the',
27250:'international public sector accounting standards board reached several relevant conclusions in ipsas 33: a. use of deemed cost facilitates the',
27251:'introduction of ipsass in a costeffective way. b. multiple options for deemed cost are appropriate. c. the use of deemed',
27252:'cost should be restricted to those circumstances where reliable information about the historical cost of the asset is not available.',
27253:'d. use of deemed cost does not affect fair presentation. a43. consistent with the decisions in sffas 48, the board',
27254:'believes a similar approach is appropriate with this project. deemed cost is a surrogate for initial amounts and an acceptable',
27255:'valuation method for opening balances for general pp&e. use of deemed cost is intended to provide a costeffective approach to',
27256:'the adoption of sffas 6, as amended, where historical records and systems do not support such balances. a44. the board',
27257:'determined permitting a reporting entity to apply alternative methods in establishing opening balances for general pp&e would be most appropriate',
27258:'through implementation guidance. the implementation guidance for general pp&e currently resides in several statements. accordingly, this statement amends sffas 6,',
27259:'sffas 10, and sffas 23, and rescinds sffas 35 by providing implementation guidance to allow a reporting entity, under specific',
27260:'conditions, to apply alternative methods in establishing opening balances forgeneralpp&e. further, basedon these amendmentsandrescission, all implementation guidance for general pp&e,',
27261:'with the exception of specific provisions applicable to ius, will be in sffas 6. the board believes providing implementation guidance',
27262:'for all general pp&e in sffas 6 will provide a more inclusive approach and a comprehensive guide for users versus',
27263:'reviewing multiple statements that relate to this topic. page 26 sffas 50 fasab handbook, version 20 06/21 sffas 50 amendments',
27264:'to statements of federal financialaccounting standards amendments to sffas 6, accounting for property, plant, and equipment a45. thisstatementamendssffas6implementationguidancetoincludealternativemethods for establishing',
27265:'opening balances. areporting entity may use deemed cost as an alternative valuation method in establishing opening account balances for general',
27266:'pp&e for the reporting period in which the reporting entity first makes an unreserved assertion that its financial statements, or',
27267:'one or more line items addressed by this statement, are presented fairly in accordance with gaap. the presentation of line',
27268:'items may vary in detail. for example, components of general pp&e, such as land, may be a separate line item,',
27269:'or there may be a single line item for all general pp&e. further, a reporting entity may determine it would',
27270:'like to make an unreserved assertion on classes of general pp&e disclosed in the notes to the financial statements. a46.',
27271:'thisguidanceisintendedtoprovideacosteffectiveapproachtotheadoptionofsffas6, where historical records and systems do not support such balances. accordingly, this statement provides flexibility by permitting use of',
27272:'several measurement attributes and estimates. deemed costs should be based on one, or a combination, of the following valuation methods:',
27273:'replacement cost, estimated historical cost, reasonable estimates, or fair value. the board believes application of deemed cost is the most',
27274:'costeffective option. plant replacement value prv a47. dod currently estimates plant replacement value prv, which is based on cost factors',
27275:'such as averages of contractual cost data from the prior three years, commercially available cost data, and modelsusing general price',
27276:'information. prv isinclusive of capital improvements. while prv has not been used for financial reporting purposes, dod officials have stated',
27277:'it is used for decision making and management purposes. this statement allows for prv to be used as a starting',
27278:'point in establishing replacement cost for real property. a48. sffac 7, measurement of the elements of accrualbasis financial statements in',
27279:'periods after initial recording, paragraph 47, explains there may be several ways of arriving at an estimate of replacement cost:',
27280:'replacement cost is a remeasured amount, an entry value that is often advocated for assets used in providing services, such',
27281:'as capital assets and inventory not held for sale. replacing the remaining service potential of an existing asset is not',
27282:'the same as acquiring an identicalasset. however,in practice,itmaybe difficult to measure remaining service potential directly. there may be several ways',
27283:'of arriving at an approximation. for page 27 sffas 50 fasab handbook, version 20 06/21 sffas 50 example, one way',
27284:'would be to measure the current costofa similar asset, reduced by an appropriate amount to allow for the lower service',
27285:'potential of the existing asset due to its age and condition. thus, the replacement cost of an asset is not',
27286:'the same as the fair value of either an equivalent new asset or the existing asset at the reporting date.',
27287:'for example, to arrive at the replacement cost of a fiftyyearold office building at the midpoint of its expected life,',
27288:'the fair value of an equivalent, newly constructed office building would have to be adjusted for the value of the',
27289:'difference in age or service potential. in addition, the fair value of the existing building may be higher than the',
27290:'replacement cost because the building can be put to alternative uses that produce greater benefits to the owner. a49. although',
27291:'the prv can be used as a starting point in establishing replacement cost for real property, adjustments would be needed.',
27292:'further, the preparer would need to substantiate the prv data used. government property in the hands of contactors a50. government',
27293:'property in the hands of contactors has been a challenging area for reporting entities. this may include governmentfurnished equipment and',
27294:'contractoracquired equipment. previous boards believed the accounting treatment for such assets should be consistent with that of other assets because',
27295:'there is no conceptual difference. further, most would agree there should be accountability over governmentowned assets in the hands of',
27296:'others. a51. sffas 6, paragraph 18 provides that pp&e includes “property owned by the reporting entity in the hands of',
27297:'others for example, state and local governments, colleges and universities, or federal contractors” and paragraph 34 along with the footnote',
27298:'to paragraph 34 elaborates that pp&e should be recognized when title passes or is delivered to the acquiring entity or',
27299:'to an agent of the entity. for pp&e acquired by a contractor on behalf of the entity for example, the',
27300:'entity will ultimately hold title to the pp&e, pp&e should also be recognized upon delivery, or constructive delivery, whether to',
27301:'the contractor for use in performing contract services or to the entity. a52. duringthe dueprocess deliberationofsffas23in2003,this issue alsosurfaced. a respondent,',
27302:'unaware of existing standards, encouraged the board to develop standards that address this type of property because the respondent believed',
27303:'that “accounting control over this property is deplorable.” as discussed in the basis for conclusions to sffas 23,thepreviousboardfoundthat “despitethe existence',
27304:'of standardsforcontractor held assets since late 1995, little progress has been made in resolving the issue. the board does not',
27305:'believe that deferral of standards related to vast amounts of pp&e will facilitate resolution of the contractual and administrative details',
27306:'needed to reasonably comply with generally accepted accounting principles.” page 28 sffas 50 fasab handbook, version 20 06/21 sffas 50',
27307:'a53. the board understands that certain reporting entities may have longstanding contracts lacking the contractual terms and systems needed to',
27308:'accumulate the necessary information. the alternative valuation method—deemed cost—is applicable to general pp&e in the hands of others. the board',
27309:'considered other alternatives, including those proposed by dod, to mitigate the cost of properly reporting such pp&e. dod’s proposal intended',
27310:'to take a prospective approach for establishing completeness and accountability for governmentpropertyinthehandsof contactors. much of dod’srationale wasbased on the belief',
27311:'that government property in the hands of contactors is immaterial and that the equipment has a short useful life. however,',
27312:'existing data have known integrity and reliability issues that preclude reliance on them as a basis for prospective treatment. dod',
27313:'also based the proposal on the fact that they would incur significant costs to bring these assets to record. the',
27314:'board notes that gaap is not the only cost driver. dod has other accountability obligations and a management need for',
27315:'complete records to support decision making.7 a54. the board concluded that the current dod process of including improved contract clauses',
27316:'in new or modified contracts should continue. as existing contracts expire or are modified, this issue should be resolved. based',
27317:'on preliminary estimated information presented by dod, 77% of the current contracts expire in 2016 and 12% expire in 2017.',
27318:'hence, assuming that these estimates are reasonably accurate, processes would be in place to capture government property in the hands',
27319:'of contactors by 2018 through issuance of new contracts with required clauses. considering that much of the information and data',
27320:'indicates the contracts for government property in the hands of contactors will expire soon and the assets may be immaterial',
27321:'or fully depreciated, with time, dod may be in a position to support that this line item is not materially',
27322:'misstated. this supports that accounting treatment for government property in the hands of contactors should continue to be consistent with',
27323:'general pp&e. a55. the board conducted outreach on this topic prior to issuing the ed. feedback from the audit community',
27324:'conveyed that the issues dod encountered with property in the hands of contactors are the same for all dod general',
27325:'pp&e. with respect to dod’s proposal, there were noted audit challenges due to gray areas, such as no established cutoff',
27326:'date, the need for clarity with definitions, and complexities with implementation. in addition, there were noted existence and completeness challenges.',
27327:'there was also a belief that challenges will remain until the necessary contractual improvements are fully implemented. combination of methods',
27328:'permitted 7in a may 13, 2014, statement to the u. s. senate committee on homeland security and governmentalaffairs, then dod',
27329:'comptroller robert hale acknowledged the importance of completeness when he explained, “our audit strategy focuses first ontheelements of our business',
27330:'that mostoften influence our decision making—namely budgetary dollars and the existence and completeness of property records.” page 29 sffas 50',
27331:'fasab handbook, version 20 06/21 sffas 50 a56. the board recognizes that large and complex reporting entities, such as dod,',
27332:'may have used a variety of valuation methods prior to the adoption of a gaapcompliant method. therefore, this statement allows',
27333:'for deemed cost to include several valuation methods because the reporting entity may have components 1 using different methods simultaneously',
27334:'and/or 2 adopting a method permitted under sffas 6 at different times prior to establishing opening balances. deemed cost should',
27335:'be based on one, or a combination,ofthe acceptedvaluationmethods. however,thisstatement requiresthatthe accounting for all activity after the opening balance is established',
27336:'comply with sffas 6. a57. the purpose of this statement is to provide alternative methods for reporting entities meeting the',
27337:'scope conditions set forth in paragraph 6 of this statement. absent a reliable record of transactions related to hundreds of',
27338:'thousands of records and related assets, this is the most costeffective approach for determining opening balances while reporting entities, such',
27339:'as dod, finalize a sound gaapcompliant financial management system. all activity after the opening balances for general pp&e are established',
27340:'must comply with the recognition, measurement, presentation, and disclosure requirements in sffas 6. amendments to sffas 10, accounting for internal',
27341:'use software a58. sffas 10 provides accounting standards for ius used by federal entities. previously, ius had been addressed in',
27342:'sffas 6. because certain questions remained, the board decided to review the issues and to develop a separate statement. a59.',
27343:'ius addressed by sffas 10 includes purchased commercial “offtheshelf” software, contractordeveloped software, and internallydeveloped software. under the provisions of sffas',
27344:'10, ius is classified as general pp&e as defined in sffas 6. with the issuance of sffas 10, the section',
27345:'on ius in sffas 6 was rescinded. sffas 10 provided guidance regarding the definition of ius, the types of cost',
27346:'elements to capitalize, the timing and thresholds of capitalization, amortization periods, accounting for impairment, as well as other guidance. a60.',
27347:'when sffas 10 was issued, the previous board in effect provided for prospective implementation of sffas 10 in paragraph 36',
27348:'by stating that “cost incurred prior to the initial application of this statement, whether capitalized or not, should not be',
27349:'adjusted to the amounts that would have been capitalized, had this statement been in effect when those costs were incurred.”',
27350:'a61. the board acknowledges that reporting entities have had numerous years to implement sffas 10 as well as other standards.',
27351:'the fact remains that some entities have not had or do not have systems that can provide the information necessary;',
27352:'therefore, the conditions remain that existed when many of these standards were issued. the board considered certain unique aspects to',
27353:'this category of general pp&e that justify a similar page 30 sffas 50 fasab handbook, version 20 06/21 sffas 50',
27354:'treatment that was provided when sffas 10 was established. specifically, the board believes it would be costbeneficial to allow prospective',
27355:'treatment of ius because it typically has a shorter useful life than other assets and is a soft asset that',
27356:'is harder to inventorywhen compared to tangible assets.these factsmake the cost of implementation higher than for other general pp&e and',
27357:'the benefit lower due to the shorter time the ius would be reported as an asset for amortization. a62. therefore,',
27358:'the board believes the most appropriate path is to amend the implementation guidance provided in sffas 10 to provide for',
27359:'prospective application of ius if the reporting entity elects to do so. considering the various stages of implementation within reportingentities,theboarddeterminedthisstatement',
27360:'shouldprovideflexibility.therefore, the guidance also provides for an alternative valuation method consistent with general pp&e. considering ius is classified as general',
27361:'pp&e, the board believes it is appropriate to allow use of deemed cost and to refer users to the deemed',
27362:'cost implementation guidance in sffas 6. together, these amendments allow the preparer to elect: a. to establish opening balances for',
27363:'existing ius based on deemed cost, b. toestablishanopeningbalanceofzeroandtocapitalizecostsconsistentwithsffas 10 prospectively, or to c. establish an opening balance of zero for',
27364:'ius in service, and to establish an opening balance for ius in development based on deemed cost, and to capitalize',
27365:'costs consistent with sffas 10 prospectively. a63. basedontheflexibilityofferedforestablishingopeningbalancesforius,alargerreporting entity may establish an opening balance for ius based on a combination',
27366:'of multiple component reporting entities’ alternative methods, which may or may not be the same. therefore, a larger reporting entity',
27367:'may have multiple component reporting entities8 that selected different alternative methods. this is permitted by the statement; a larger reporting',
27368:'entity may establish an opening balance based on a combination of alternative methods.application of a particular alternative method must be',
27369:'consistent within each individual subcomponent reporting entity prior to consolidation into the larger reporting entity. 8sffas 47, reporting entity, provides',
27370:'that “component reporting entity” is used broadly to refer to a reporting entity within a larger reporting entity. examples of',
27371:'component reporting entities include organizations such as executive departments and agencies. component reporting entities would also include subcomponents that may',
27372:'themselves prepare general purpose federal financial reports gpffrs. one example is a bureau that is within a larger department that',
27373:'prepares its own standalone gpffr. page 31 sffas 50 fasab handbook, version 20 06/21 sffas 50 amendments to sffas 23,',
27374:'eliminating the category national defense property, plant, and equipment a64. the purpose of sffas 23 was to amend specific standards',
27375:'with regard to national defense nd pp&e. more specifically, sffas 23 rescinded the term “nd pp&e.” a65. sffas 23 also',
27376:'provided implementation guidance for assets reclassified as general pp&e. much ofthat guidance referred to the requirementsin the implementation guidance provided',
27377:'in sffas 6. sffas 23 was effective for periods beginning after september 30, 2002,withearlierimplementationencouraged. theboardbelievesitappropriateto rescind the implementation guidance in',
27378:'sffas 23 and to refer users to the implementation guidance in sffas 6 that applies to all general pp&e, including',
27379:'general pp&e assets previously considered nd pp&e. a66. by rescinding the paragraphs in sffas 23, the board ensured the appropriate',
27380:'relevant guidance was included in the amendments to the sffas 6 implementation guidance. the board chose not to rescind sffas',
27381:'23 in its entirety because the standards provide other amendments, such as rescinding the term nd pp&e as discussed above,',
27382:'which must be maintained. rescission of sffas 35, estimating the historical cost of general property, plant, and equipment: amending statements',
27383:'of federal financial accounting standards 6 and 23 a67. the purpose of sffas 35 was to clarify that reasonable estimates',
27384:'of original transaction data’s historical cost may be used to value general pp&e. it was to establish a cost effective',
27385:'method to comply with sffas 6 by allowing reasonable estimates determined in accordance with sffas 6, as amended. while rescinding',
27386:'sffas 35 in its entirety, the board ensured any pertinent guidance was included in the amendments to the sffas 6',
27387:'implementation guidance. a68. theboardalsoreiteratestheconclusions oftheprevious board. as explainedinsffas 35, basis for conclusions, paragrapha12: the board stresses to federal entities that',
27388:'the measurement basis for gpp&e remains historical cost; however, reasonable estimates are allowed. the board believes entities should use judgment',
27389:'regarding the decision to use estimated historical cost in lieu of original transaction based data. the board also notes that',
27390:'estimates are widely used throughout the financial statements. in this case, estimates should provide a reasonable approximation of historical cost;',
27391:'the measurement basis required for gpp&e. a69. when sffas 35 was issued, the board believed that allowing or encouraging estimates',
27392:'as reporting entities worked towards implementing systems and processes that could page 32 sffas 50 fasab handbook, version 20 06/21',
27393:'sffas 50 capture historical data would be beneficial. however, it appears this hasnot occurred at all departments, and there has',
27394:'been an overreliance that was unintended. the language in sffas 35 has often been misinterpreted to mean something other than',
27395:'reasonable estimates is in accordance with sffas 6. a70. therefore, the board believes it is appropriate to rescind sffas 35.',
27396:'the board acknowledges that reasonable estimates are permitted in the preparation of financial statements, with or without the existence of',
27397:'sffas 35.as noted in paragrapha17 of sffas 35, “estimates that do not lead to material misstatements are acceptable without guidance',
27398:'from the board.” a71. prior to the issuance of the ed, dod raised concerns with the board’s proposal to rescind',
27399:'sffas 35 based on the time it would take for dod to become full cost compliant. dod requested the board',
27400:'consider retaining sffas 35 or providing transitionalguidance in this area. the board believes current standards provide flexibility and there are',
27401:'resources other than sffas 35 within the gaap hierarchy to assist in this area. for example, there is guidance technical',
27402:'releases to assist in accumulating, allocating, and reporting the cost of general pp&e when there is no detailed cost accounting',
27403:'system. a72. technical release 15, implementation guidance for general property, plant, and equipment cost accumulation, assignment and allocation provides illustrations',
27404:'and implementation guidance related to recognition requirements for programmatic, managerial, administrative, and other elements of program costs incurred during the',
27405:'general pp&e lifecycle, as well as decisions regarding the granularity of cost information and acceptable methods for recognizing those costs.',
27406:'this implementation guidance is not dependent on sffas 35 and remains applicable even if sffas 35 is rescinded. a73. additionally,',
27407:'sffas 4 established a requirement for cost accounting that acknowledges the use of cost finding techniques. the requirement is: each',
27408:'reporting entity should accumulate and report the cost of its activities on a regular basisformanagementinformationpurposes.costsmaybeaccumulatedeitherthroughthe use of cost accounting systems',
27409:'or through the use of cost finding techniques. a74. management has discretion in applying the cost assignment methods identified in',
27410:'sffas 4, managerial cost accounting standards and concepts to accumulate acquisition costs. of particular importance is the emphasis on economic',
27411:'feasibility with regard to direct tracing of costs to outputs. sffas 4, paragraph 124, provides that [in] principle, costs should',
27412:'be assigned to outputs in one of the methods listed below in the order of preference: a. directly tracing costs',
27413:'wherever economically feasible; page 33 sffas 50 fasab handbook, version 20 06/21 sffas 50 b. assigning costs on a causeandeffect',
27414:'basis; and c. allocating costs on a reasonable and consistent basis. disclosures a75. the disclosures required for component reporting entities',
27415:'and the governmentwide reporting entity are also included in the amendments to the implementation guidance in sffas 6 and 10.',
27416:'specifically, the election to apply the provisions of this statement should be disclosed in the financialstatementsin the first reporting period',
27417:'in whichthe component reporting entity makes an unreserved assertion that its financial statements, or one or more line items addressed',
27418:'by this statement, are presented fairly in accordance with gaap. the first reporting period would be the first yearend financial',
27419:'statement that an unreserved assertion ismade. the board doesnot believe the first reporting period should be an interim reporting period',
27420:'because interim financial statements presently are unaudited and do not include note disclosures. a76. the board notes that the term',
27421:'“unreserved assertion” may be used in other contexts. for example, certain entities’ management such as dod may be required to',
27422:'make management assertions regarding their financial information and that their financial statements are validated as ready for audit by no',
27423:'later than september 30, 2017. this statement refers to an unreserved assertion that the reporting entity’s “financial statements, or one',
27424:'or more line items addressed by this statement, are presented fairly in accordance with gaap.” other assertions—such as being ready',
27425:'for an audit—may or may not accompany such an assertion. a77. thecomponentreportingentitydisclosuresintheamendmentstosffas6addressboth component reporting entities that may have elected to',
27426:'only apply deemed cost in establishing the opening balances for general pp&e as well as component reporting entities that elected',
27427:'to apply the provision to exclude land and land rights from opening balances. for those component reporting entities only applying',
27428:'deemed cost, the component reporting entity should disclose a description of what valuation methods deemed costis based on, but no',
27429:'disclosure of amounts valued at deemed cost is required. this disclosure need not be repeated unless the financial statements or,',
27430:'as applicable, reports on line items are presented for comparative purposes. a78. acomponent reportingentityelectingto excludelandandland rightsshoulddisclosethis fact and describe the',
27431:'alternative method used in the first reporting period in which the reporting entity makes an unreserved assertion that its financial',
27432:'statements, or one or more line items, are presented fairly in accordance with gaap and continue to be so as',
27433:'long as an amount is not reported on the balance sheet. in addition, those reporting entities electing to exclude land',
27434:'and land rights from its general pp&e opening balances page 34 sffas 50 fasab handbook, version 20 06/21 sffas 50',
27435:'must also disclose, with a note reference on the balance sheet, the number of acres held atthe beginningofeach reportingperiod,the numberof',
27436:'acresaddedduring theperiod, the number of acres disposed ofduring the period, and the number of acres held at the end of',
27437:'each reporting period. the board believes requiring these disclosures would meet accountability requirements and ensure appropriate measures continue to be',
27438:'taken for existence and completeness requirements.as discussed above, the board determined that a larger component reporting entity may establish an',
27439:'opening balance for land and land rightsbased on a combination ofmultiple subcomponent reporting entities’alternative methods, which may or may not',
27440:'be the same. however, application of a particular alternative method must be consistent within each subcomponent reporting entity prior to',
27441:'its consolidation into a larger component reporting entity. a79. the component reporting entity disclosures in the amendments to sffas 10',
27442:'address that component reporting entities may have elected to apply different alternative methods in establishing the opening balance of internal',
27443:'use software. this statement provides for an alternative valuation method of deemed cost that is consistent with general pp&e and',
27444:'prospective capitalization of ius.acomponent reporting entity electing to apply the alternative methods should disclose this fact and describe the alternative',
27445:'methods used in the first reporting period in which the reporting entity makes an unreserved assertion that its financial statements,',
27446:'or one or more line items, are presented fairly in accordance with gaap. in the event different alternative methods are',
27447:'applied by subcomponent reporting entities consolidated into a larger reporting entity, the alternative method adopted by each significant subcomponent should',
27448:'be disclosed. a80. further,thegovernmentwidereportingentityshoulddisclosewhenacomponentreporting entity elects to apply deemed cost along with a reference to the component reporting entity’s financial',
27449:'report. in addition, when a component reporting entity elects to exclude land and land rights, this also should be disclosed,',
27450:'along with an explanation of the election,the number of acres with a reference to the component reporting entity’s financial report.',
27451:'the governmentwide reporting entity should disclose when a component reporting entity elects to apply deemed cost in establishing opening balances',
27452:'for internal use software. in addition, when a component reporting entity elects to apply prospective capitalization, an explanation of the',
27453:'election and reference to the component reporting entity’s financial report should be disclosed. application of this statement a81. acomponent reportingentityin',
27454:'theprocess ofimplementingsystemsthataregaapcompliantispermitted toapplythisstatement at the timeit makesan unreservedassertion that its financial statements, or one or more line items addressed by',
27455:'this statement, are presented fairly in accordance with gaap. this statement allows component reporting page 35 sffas 50 fasab handbook,',
27456:'version 20 06/21 sffas 50 entities for example, dod components to make the assertion at different times. the reporting entity',
27457:'may make the assertion after a sufficient number of components do so. this statement considers the opening balances and subsequent',
27458:'transactions of these componentreporting entities as deemed cost for the consolidated reporting entity when its assertion is made. a82. using',
27459:'the dod example, certain dod components may have transitioned at an earlier date to gaapcompliant systems; this allows them to',
27460:'assert independently of the larger dod. it is anticipated dod will make a dodwide assertion when a sufficient number of',
27461:'dod components are compliant. while a dod component’s “deemed cost” opening balance might be earlier than the dodwide opening balance,',
27462:'the consolidation of the various methods would be the dod’s opening balance deemed cost at the beginning of the period',
27463:'dod wasable to make an unreserved assertion on itsfinancial statements, or one or more line items, addressed by this statement.',
27464:'a83. consideringtheflexibilityallowedwiththestatement,reportingentitiesshouldensurethey are ready to make an unreserved assertion that their financial statements, or one or more line items addressed',
27465:'by this statement, are fairly presented prior to making the election because it may only be made once.acomplex entity should',
27466:'work with its components to ensure the most appropriate method allowed by this statement is selected. further, reporting entities should',
27467:'ensure issues, such as supporting documentation for opening balances, are addressed and validated through sampling or other means, including consideration',
27468:'of any audit findings or conclusion affecting the reliability of the valuation, prior to making the unreserved assertion. it is',
27469:'critical that a reporting entity be prepared to make the unreserved assertion because the election may only be made once.',
27470:'for example, if a reporting entity makes an unreserved assertion regarding the fiscal year 2018 beginning balances, the reporting entity',
27471:'must be able to support the valuation in all material respects. if the audit for fiscal year 2018 determines that',
27472:'the valuation does not complywiththealternativevaluationinallmaterialrespects, thereportingentitythenwould need to continue in subsequent years to correct or to support the valuation as',
27473:'of the beginning of fiscal year 2018. a84. reporting entities that meet the conditions specified in paragraph 6 and elect',
27474:'to apply the alternative methods in establishing opening balances permitted by this statement are subject to the reporting requirements under',
27475:'paragraph 13 of sffas 21, reporting corrections of errors and changes in accounting principles, amendment of sffas 7, accounting for',
27476:'revenue and other financing sources. specifically, paragraph 12 of sffas 21states, “forthepurposesofthisstandard,changesinaccountingprinciplesalso include those occasioned by the adoption of new',
27477:'federal financial accounting standards.” page 36 sffas 50 fasab handbook, version 20 06/21 sffas 50 a85. therefore, reporting entities meeting',
27478:'the conditions and electing to apply this statement should follow the guidance in sffas 21 paragraph 13.a. – 13.c. for',
27479:'all changes in accounting principles: a. thecumulativeeffectofthechangeonpriorperiodsshouldbereportedasa “change in accounting principle.” the adjustment should be made to the beginning balance',
27480:'of cumulative results of operations in the statement of changes in net position for the period that the change is',
27481:'made. b. prior period financial statements presented for comparative purposes should be presented as previously reported. c. the nature of',
27482:'the changes in accounting principle and its effect on relevant balances should be disclosed in the currentperiod. financialstatementsof subsequentperiods need',
27483:'not repeat the disclosure. a86. sffas 21 provides that the adjustment should be made to the beginning balance of cumulative',
27484:'results of operations in the statement of changes in net position for the period that the change ismade. thus, no',
27485:'change would be made to the ending net position of the previousyear. the disclosuresshould be at a high level and',
27486:'explain that opening balances of a particular line item or group of line items were valued at deemed cost under',
27487:'this statement, then briefly describe deemed cost and indicate the effect of adoption on beginning net position. a87. in addition,',
27488:'the alternative methods provided in this statement should also be applied in correcting subsequently discovered errors in general pp&e that',
27489:'was valued under an alternative method. boardapproval a88. this statement was approved unanimously. written ballots are available for public inspection',
27490:'at fasab’s offices. page 37 sffas 50 fasab handbook, version 20 06/21 sffas 50 appendix b:abbreviations dod department of defense',
27491:'ed exposure draft fasab federal accounting standards advisory board gaap generally accepted accounting principles ipsas international public sector accounting standards',
27492:'ius internal use software nd national defense omb office of management and budget pp&e property, plant, and equipment prv plant',
27493:'replacement value sffac statement of federal financial accounting concepts sffas statement of federal financial accounting standards page 38 sffas 50',
27494:'fasab handbook, version 20 06/21 statement of federal financialaccounting standards 51: insurance programs status issued january 18, 2017 effective date',
27495:'for periods beginning after september 30, 2018. affects sffas 5, rescinds par. 97121. affected by none. summary thisstatement establishesaccountingandfinancialreportingstandardsforinsurance programs.',
27496:'it provides standards to ensure that insurance programs are adequately defined and report consistent information about the liabilities for losses',
27497:'incurred and claimed as well as expected losses during remaining coverage. these standards replace the insurance and guarantee program standards',
27498:'provided in paragraphs 97121 of statement of federal financialaccounting standards 5, accounting for liabilities of the federal government. to support',
27499:'consistency, this statement identifies three categories: 1 exchange transaction insurance programs other than life insurance, 2 nonexchange transaction insurance programs,',
27500:'and 3 life insurance programs. insurance programs are categorized based upon the type of revenue received as defined by statement',
27501:'of federal financialaccounting standards 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting.',
27502:'this statement provides guidance as to how and when insurance programs should recognize revenue, expenses, and liabilities according to the',
27503:'aforementioned categories. the recognition, measurement, and disclosure guidance provides for concise, meaningful, and transparent information regarding the operating performance of',
27504:'insurance programs. insurance programs is the first phase in a multiple phase project entitled risk assumed. other programs designed to',
27505:'manage risk for the federal government will be addressed by future research conducted under the risk assumed project. the provisions',
27506:'of this statement need not be applied to immaterial items. the determination of whether an item is material depends on',
27507:'the degree to which omitting or misstating information about the item makes it probable that the judgment of a reasonable',
27508:'person relying on the information would have been changed or influenced by the omission or the misstatement. page 1 sffas',
27509:'51 fasab handbook, version 20 06/21 sffas 51 table of contents page summary 1 standards 3 scope 3 definitions 4',
27510:'exchange transaction insurance programs other than life insurance 7 nonexchange transaction insurance programs 12 life insurance programs 15 disclosuresapplicabletothe consolidatedfinancialreportoftheu.s.government',
27511:'19 effective date 19 appendix a: basis for conclusions 20 appendix b: abbreviations 34 page 2 sffas 51 fasab handbook,',
27512:'version 20 06/21 sffas 51 standards scope 1. this statement applies when a reporting entity is presenting general purpose federal',
27513:'financial reports gpffrs, including the consolidated financial report of the u.s. government cfr, in conformance with generally accepted accounting principles',
27514:'gaap as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy of generally',
27515:'accepted accounting principles, including the application of standards issued by the financial accounting standards board. 2. this statement provides general',
27516:'principles that should guide preparers of gpffrs in accountingforand reportingonexchangeand nonexchangeinsurance transactions, related claims and liabilities, losses, and costs of',
27517:'insurance programs. other items related to insurance program activities such as revenue classification that are not addressed in this statement',
27518:'should be reported in accordance with other standards. 3. this statement rescinds the insurance and guarantees section in sffas 5,',
27519:'accounting for liabilities of the federal government, paragraphs 97121. 4. this statement establishes three categories of insurance and related guidance:',
27520:'exchange transaction insurance programs other than life insurance, nonexchange transaction insurance programs, and life insurance programs. in addition, there is',
27521:'a section providing governmentwide disclosure requirements. page 3 sffas 51 fasab handbook, version 20 06/21 sffas 51 definitions definitions in',
27522:'paragraphs 5 through 21 are presented within the standards because they are new terms intended to have a specific meaning',
27523:'when applying the standards. 5. insurance programinsurance program is a general term used to refer to a program that is',
27524:'authorized by law to financially compensate a designated population of beneficiaries by accepting all or part of the risk for',
27525:'losses incurred as a result of an adverse event. 6. the following are excluded from insurance programs: a. programs that',
27526:'administer direct loans and loan guarantees1 b. programs that qualify as social insurance2 c. programs authorized to engage in disaster',
27527:'relief activities3 d. programs that provide grants e. programs that provide benefits or assistance based on an individuals or a',
27528:'households income and/or assets f. programs that assume the risk of loss arising from federal government operations4 g. programs that',
27529:'pay claims through an administrative or judicial role for individuals or organizations who claim they have been harmed by a',
27530:'federal agency5 1sffas 2, accounting for direct loans and loan guarantees. 2 sffas 17, accounting for social insurance including unemployment',
27531:'insurance. 3therobertt. stafforddisaster relief and emergencyassistanceact public law 100707, commonly referredtoas the staffordact, is the act that authorizes and regulates',
27532:'disaster relief programs. 4 for example, see governmentaccountability office gao05265r, catalogue of federal insurance activities, enclosure iv: description of accounts',
27533:'with federal selfinsurance activity 5an example may include an administrative settlement or tort claim resulting from military events. page 4',
27534:'sffas 51 fasab handbook, version 20 06/21 sffas 51 h. programs that indemnify contractors, agreement partners, and other third parties',
27535:'for loss or damage incurred while or caused by work performed for a federal agency6 i. workers or occupational illness',
27536:'compensation programs that compensate current or former employees or survivors and certain third parties for injuries and occupational diseases obtained',
27537:'while working for a federal agency 7. adverse event—an adverse event may be a singleoccurring event or a series of',
27538:'events that cause losses to the beneficiary or beneficiaries as identified in the insurance arrangement. 8. cash surrender value—the cash',
27539:'surrender value is the sum of money that will be returned to the policyholder on a life insurance policy if',
27540:'the policy is canceled before its maturity or the insured event death occurs. 9. claimadjustmentexpensescae—claim adjustmentexpenses caeare incremental costs directly',
27541:'attributable to investigating, settling, and/or adjusting claims. an incremental cost is one that can result only when claims have been',
27542:'incurred. cae include but are not limitedtolegaland adjustersfees. cae maybe incurredthrough workperformedbyfederal employees and/or contractors. 10. arrangement period—arrangement period is',
27543:'the period over which adverse events that occur are covered. 11. exchange transaction insurance programs other than life insurance—exchange transaction',
27544:'insurance programs other than life insurance cover the risk of loss from adverse events, other than death of individuals, involved',
27545:'in exchange transactions with the federal government as defined in sffas 7.7 12. inforce—inforce refers to arrangements that are unexpired',
27546:'as of a given date. 13. incurred but not reported ibnr—claims incurred but not reported ibnr are estimated claims from',
27547:'events that have occurred as of the end of the reporting period but have not yet been reported for settlement.',
27548:'6theseareadministrativesettlements fortransactions with contractors under the federalacquisition regulations authorized indemnification clauses, as well as authorized indemnification clauses within other legally',
27549:'binding arrangements. first responders within programs that do not have a statutory insurance or guarantee mission are also within this',
27550:'scope. 7sffas 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting. page 5',
27551:'sffas 51 fasab handbook, version 20 06/21 sffas 51 14. insurance claim—an insurance claim is a formal request for payment',
27552:'for losses as authorized under the insurance arrangement. 15. insurancearrangement arrangement—an “insurance arrangement” arrangement is a general term used for',
27553:'a contract or other agreement between an insurance program and specific parties, such as but not limited to individuals, state,',
27554:'local, or foreign governments, other federal agencies, or businesses.an arrangement may include and/or identify: a. the term the insurance arrangement',
27555:'is inforce, b. the insurance program’s responsibilities, c. the risk assumed by the insurance program, such as: i. all risk',
27556:'for covered losses, ii. partialriskbyfillingagapwherecommercialinsurancecompaniesarenotableor willing to provide the insurance, iii. a timing risk wherein the insurance program provides compensation',
27557:'for losses in anticipation that future funding sources will be sufficient to cover all or part of past benefits paid,',
27558:'or iv. risks shared with a third party. d. the adverse event, e. the insured party or parties and their',
27559:'premium requirements, f. the beneficiary or beneficiaries and their responsibilities for filing claims, and/or g. the financial compensation. 16. insurance',
27560:'portfolio—an “insurance portfolio” is a grouping of insurance programs or arrangements that have some meaningful relationship based on arrangement period/duration,',
27561:'shared risks, management, customers, geographic regions, or other factors. 17. liability for losses on remaining coverage—the “liability for losses on',
27562:'remaining coverage” is an accrued obligation to beneficiaries attributable to coverage of insured events anticipated to occur after the end',
27563:'of the reporting period through the open arrangement period. page 6 sffas 51 fasab handbook, version 20 06/21 sffas 51',
27564:'18. life insurance programs—“life insurance programs” cover the risk of loss from death of individuals. 19. nonexchange transaction insurance programs—“nonexchange',
27565:'transaction insurance programs” cover the risk of lossfrom adverse eventsthrough nonexchange transactions, as defined in sffas 7. 20. premiums— “premiums”',
27566:'is a general term used to refer to exchange revenue8billed by insurance programs. programs may refer to their exchange revenue',
27567:'by various terms, including but not limited to premiums, assessments, and/or fees. 21. recoveries—“recoveries” include monies: a. returned from another',
27568:'agency through an indemnification agreement, b. returned from a third party or commercial insurance company to repay all or part',
27569:'of a loss originally paid for by the program, c. recouped from the sale of salvageable parts through acquisition and',
27570:'disposal or salvage of assets, and/or d. received from adjustments made to previously paid insurance claims. exchange transaction insurance programs',
27571:'other than life insurance 22. exchange transaction insurance programs other than life insurance collect premiums through arrangements to cover the',
27572:'risk of loss from adverse events other than death of individuals. 23. an insurance program other than a life insurance',
27573:'program receiving any exchange revenue should be designated as an exchange transaction insurance program other than life insurance. 8see sffas',
27574:'7, par. 33, for the exchange revenue definition andappendix b: guidance for the classification of transactions, par. 284, for the',
27575:'classification of exchange revenue insurance programs. page 7 sffas 51 fasab handbook, version 20 06/21 sffas 51 recognition and measurement',
27576:'revenue and liability for unearned premiums 24. premiums should be recognized as revenue when earned over the period of the',
27577:'arrangement in proportion to insurance protection provided. 25. aliabilityfor unearnedpremiums shouldberecognizedfor theamountofpremiums collected and/or due by the end of the',
27578:'reporting period that have not yet been earned in proportion to the insurance protection to be provided during the remaining',
27579:'arrangement period. liability for unpaid insurance claims 26. aliabilityforunpaidinsuranceclaimsshouldberecognizedforadverseeventsthatoccurred before the end of the reporting period. the liability should be',
27580:'initially recorded at the estimated settlement amount and remeasured at the end of each reporting period. 27. the estimated settlement',
27581:'amount includes: a. outflows to liquidate: i. claims that have been reported but not paid ii. claims incurred but not',
27582:'reported ibnr 1. asingleoccurring eventoraseries of eventscausingloss mustbe completed by the end ofthe reporting period to be considered an adverse',
27583:'event of the reporting period.9 2. management should use judgment to determine if an adverse event causes claims ibnr prior',
27584:'to the reporting date. b. related estimated cae, and c. estimated inflows from recoveries not realized at the end of',
27585:'the reporting period. 9ifaseries ofeventscausingloss beginspriortothe reporting date and additionalpending events are required to result in losses, then it is',
27586:'not considered an adverse event and should not be included in the estimated settlement costs for claims ibnr. page 8',
27587:'sffas 51 fasab handbook, version 20 06/21 sffas 51 i. if estimated recoveries exceed the related claims for an insurance',
27588:'portfolio then recognition is limited to the amount of the related claims.10 ii. recoveries should be recognized as reductions of',
27589:'claims, rather than as revenue. 28. adjustments to the liability for unpaid insurance claims, other than those resulting from payments',
27590:'made to liquidate existing liability balances, should be recognized as a component of claims expense. 29. guidance from sffas 39,',
27591:'subsequent events: codification of accounting and financial reporting standards contained in the aicpa statement on auditing standards, applies to subsequent',
27592:'events relating to unpaid insurance claims. liability for losses on remaining coverage 30. the liability for losses on remaining coverage',
27593:'as of the end of the reporting period represents the estimated amounts to be paid to settle claims including cae',
27594:'for the remaining open arrangement period in excess of the sum of both: a. related unearned premiums as of the',
27595:'end of the reporting period and b. premiums due after the end of the reporting period that relate to the',
27596:'remaining open arrangement period. 31. estimates should be determined by considering insurance portfolios rather than individual arrangements. 32. the liability',
27597:'should be estimated using methods designed to address uncertainties concerning future events. 33. the objective of such methods is a',
27598:'reasonable estimate of expected cash flow. while there are various ways to determine expected cash flow, methods usingactuarial standards of',
27599:'practice11 are generally appropriate. 34. nospecificmethodis required. anentitymustuse judgmentbasedontheriskinherentin the insurance portfolio, sensitivity to external factors, and the availability of',
27600:'relevant 10any amount expected to be recovered in excess of the recognized claim, which will result in a gain, should',
27601:'not be recognized until any contingencies relating to the recovery have been resolved because a contingent gain cannot be recognized',
27602:'until realized. 11see http://www.actuarialstandardsboard.org/standardsofpractice/ last accessed october 18, 2016. page 9 sffas 51 fasab handbook, version 20 06/21 sffas 51',
27603:'information to select a method. areporting entity should consider all relevant information at the balance sheet date. this information may',
27604:'include: a. historical experience; b. adjustments to historical experience for differences in current conditions; c. current conditions; d. trends; e.',
27605:'assumptions about future events; f. risk factors; g. uncertainties about possible variations in the amount or timing of the potential',
27606:'settlement of claims; and h. as appropriate, data, projections, and supporting analysis supplied by independent experts. 35. sffas 39 addresses',
27607:'subsequent events and provides guidance regarding recognized and nonrecognized events. all subsequent events relating to losses on remaining coverage should',
27608:'be classified as nonrecognized events. nonrecognized eventsare to be disclosed in accordance with sffas 39, paragraph 15. 36. if the',
27609:'effect of the time value of money is significant, for example, when settlement may occur overseveral years, then the estimatedsettlement',
27610:'amount should be discounted. see sffas 33, pensions, other retirement benefits, and other postemployment benefits: reporting the gains and losses',
27611:'from changes in assumptions and selecting discount rates and valuation dates, par. 2832 for guidance on selecting discount rates. 37.',
27612:'adjustments to the liability for losses on remaining coverage should be recognized as a component of claims expense. disclosure requirements',
27613:'factors in determining disclosures 38. materiality is an overarching consideration in financial reporting for information that should be presented regarding',
27614:'exchange transaction insurance programsother thanlife insurance. materiality judgments consider both quantitative and qualitative factors. acceptable quantitative factors may include whether',
27615:'certain groups of arrangements are accumulating page 10 sffas 51 fasab handbook, version 20 06/21 sffas 51 large claim expenses',
27616:'or unpaid claim liability balances. acceptable qualitative factors may include whether a group of arrangementsisof immediate concern to constituents, politically',
27617:'sensitive, and/or controversial. 39. disclosuresshouldbeintegratedsothatconcise,meaningful,andtransparentinformationis provided in a comprehensive note regarding the insurance program and related balances, or by providing',
27618:'references to relevant notes elsewhere in the gpffr, such as the debt note to the financial statements. disclosuresapplicable to component',
27619:'entity reports 40. thefollowinginformation shouldbeprovidedforeachmaterialinsuranceportfolio,and/orin aggregate for all remaining insurance portfolios, and/or individual insurance arrangements: a. what is insured or',
27620:'guaranteed, for whom, and what other government agencies and/or commercial insurance programs administer or assume risk for any part of',
27621:'the program b. full costs,12 premiums collected, appropriations used, and borrowing needed during the reporting period, as well as the',
27622:'ability to repay borrowing c. investing activities, such as buying treasury securities d. arrangement duration and renewal characteristics, such as',
27623:'noncancelable or guaranteed renewals e. premium pricing policies in accordance with sffas 7, par. 46 including risk characteristics used in',
27624:'determining premiums and any requirements to set premium prices that do not cover the full estimated cost to settle claims',
27625:'f. the nature and magnitude of uncertainty of estimated amounts to be paid to settle future claims, including: i. the',
27626:'basis and estimation method ii. significant risk assumptions and factors, including relevant trend information iii. how much risk, if any,',
27627:'is shared by third parties 12 see sffas 4, managerial cost accounting standards and concepts, par. 80104. page 11 sffas',
27628:'51 fasab handbook, version 20 06/21 sffas 51 g. thetotalamountofcoverageprovidedthroughinsuranceinforceasoftheendofthe reporting period13 h. any events that caused a material change',
27629:'in the amounts recognized during the reportingperiod, suchaslowprobabilityhighimpact adverseevents,changesinlaws, and/or actuarial assumptions 41. information for changes in the liability balance',
27630:'for unpaid insurance claims should be provided as follows: a. beginning balance b. claims expense c. cae14 d. payments to',
27631:'settle claims e. recoveries and other adjustments f. ending balance nonexchange transaction insurance programs 42. nonexchange insurance programs collect funds',
27632:'on demand and/or receive appropriations to cover the risk of loss from certain adverse events. 43. an insurance program other',
27633:'than a life insurance program receiving any exchange revenue should be designated as an exchange transaction insurance program other than',
27634:'life insurance. 13 an explanation should be included that avoids the misleading inference that there is more than a remote',
27635:'likelihood that claims equal to the entire insurance inforce amount will be filed at the same time. 14 claimsadjustment expenses',
27636:'should be recognized for claims occurring prior to the end of the current reporting period. page 12 sffas 51 fasab',
27637:'handbook, version 20 06/21 sffas 51 recognition and measurement revenue 44. nonexchange transaction insurance programs should apply general revenue recognition',
27638:'standards as found in sffas 7 as amended. liability for unpaid insurance claims 45. aliabilityforunpaidinsuranceclaimsshouldberecognizedforadverseeventsthatoccurred before the end of the',
27639:'reporting period. the liability should be initially recorded at the estimated settlement amount and remeasured at the end of each',
27640:'reporting period. 46. the estimated settlement amount includes: a. outflows to liquidate: i. claims that have been reported but not',
27641:'paid ii. claims ibnr 1. aseries ofevents causingloss mustbecompletedbythe end ofthe reporting period to be considered an adverse event of',
27642:'the reporting period.15 2. management should use judgment to determine if an adverse event causes claims ibnr prior to the',
27643:'reporting date. b. related estimated cae, and c. estimated inflows from recoveries not realized at the end of the reporting',
27644:'period. i. if estimated recoveries exceed the related claims for a specific portfolio then recognition is limited to the amount',
27645:'of the related claims.16 15if a series of events causing loss begins prior to the reporting date and additional pending',
27646:'events are required to result in losses, then it is not considered an adverse event and should not be included',
27647:'in the estimated settlement costs for claims ibnr. 16any amount expected to be recovered in excess of the recognized claim',
27648:'which will result in a gain should not be recognized until any contingencies relating to the recovery have been resolved;',
27649:'a contingent gain cannot be recognized until realized. page 13 sffas 51 fasab handbook, version 20 06/21 sffas 51 ii.',
27650:'recoveries should be recognized as reductions of claims, rather than as revenue. 47. adjustments to the liability for unpaid insurance',
27651:'claims, other than those resulting from payments made to liquidate existing liability balances, should be recognized as a component of',
27652:'claims expense. 48. guidance from sffas 39 applies to subsequent events relating to unpaid insurance claims. disclosure requirements factors in',
27653:'determining disclosures 49. materiality is an overarching consideration in financial reporting for information that should be presented regarding nonexchange transaction',
27654:'insurance programs. materiality judgmentsconsider both quantitative and qualitative factors.acceptablequantitative factors may include whether certain groups of arrangements are accumulating large',
27655:'claim expenses or unpaid claim liability balances. acceptable qualitative factors may include whether a group of arrangements is of immediate',
27656:'concern to constituents, politically sensitive, and/or controversial. 50. disclosuresshouldbeintegratedsothatconcise,meaningful,andtransparentinformationis provided in a comprehensive note regarding the insurance program and related',
27657:'balances, or byproviding referencesto relevant noteselsewhere in the gpffr but which relate to the insurance program. disclosuresapplicable to component reporting',
27658:'entities 51. the following information should be provided for each material insurance portfolio, and/or in aggregate for all remaining insurance',
27659:'portfolios, and/or individual insurance arrangements: a. what is insured or guaranteed, for whom, and what other government agencies and/or commercial',
27660:'insurance programs administer or assume risk for any part of the program b. full costs,17 premiums collected, appropriations used, and',
27661:'borrowing needed during the reporting period, as well as the ability to repay borrowing c. investing activities, such as buying',
27662:'treasury securities 17see sffas 4, managerial cost accounting standards and concepts, paragraphs 80 104. page 14 sffas 51 fasab handbook,',
27663:'version 20 06/21 sffas 51 d. any events that caused a material change in the amounts recognized during the reportingperiod,',
27664:'suchaslowprobabilityhighimpact adverseevents,changesinlaws, and/or actuarial assumptions 52. information for changes in the liability balance for unpaid insurance claims should be provided',
27665:'as follows: a. beginning balance b. claims expenses c. cae18 d. payments to settle claims e. recoveries and other adjustments',
27666:'f. ending balance life insurance programs 53. life insurance programs collect premiums for life insurance arrangements to cover the risk',
27667:'of loss from death of individuals. recognition and measurement revenue 54. premiums should be recognized as revenue when due from',
27668:'policyholders. liability for unpaid insurance claims 55. aliabilityforunpaidinsuranceclaimsshouldberecognizedforadverseeventsthatoccurred before the end of the reporting period. the liability should be initially',
27669:'recorded at the estimated settlement amount and remeasured at the end of each reporting period. 56. the estimated settlement amount',
27670:'includes: 18claimsadjustment expenses should be recognized for claims occurring prior to the end of the current reporting period. page 15',
27671:'sffas 51 fasab handbook, version 20 06/21 sffas 51 a. outflows to liquidate: i. claims that have been reported but',
27672:'not paid ii. claims ibnr b. related estimated cae, and c. estimated inflows from recoveries, such as monies recovered from',
27673:'improper payments, not realized at the end of the reporting period. i. if estimated recoveries exceed the related claims for',
27674:'a group of arrangements then recognition is limited to the amount of the related claims.19 ii. recoveries should be recognized',
27675:'as reductions of claims, rather than as revenue. 57. adjustments to the liability for unpaid insurance claims, other than those',
27676:'resulting from payments made to liquidate existing liability balances, should be recognized as a component of claims expense. 58. guidance',
27677:'from sffas 39 applies to subsequent events relating to unpaid insurance claims. liability for future policy benefits 59. the liability',
27678:'for future policy benefits represents the expected present value of future claims to be paid to, or on behalf of,',
27679:'existing policyholders, less the expected present value of future net premiums to be collected from those policyholders. 60. sffas 39',
27680:'addresses subsequent events and provides guidance regarding recognized and nonrecognizedevents.all subsequent eventsrelating tothe liabilityforfuturepolicybenefits should be classified as nonrecognized events.',
27681:'nonrecognized eventsare to be disclosed in accordance with sffas 39, paragraph 15. 61. estimates should be determined by considering insurance',
27682:'portfolios rather than individual arrangements. 19any amount expected to be recovered in excess of the recognized claim which will result',
27683:'in a gain should not be recognized until any contingencies relating to the recovery have been resolved; a contingent gain',
27684:'cannot be recognized until realized. page 16 sffas 51 fasab handbook, version 20 06/21 sffas 51 62. the liability is',
27685:'estimated using appropriate financial and/or actuarial methods that include assumptions, such as estimates of expected investment yield, mortality, morbidity, terminations,',
27686:'and expenses. for more information, see sffas 33. 63. changes in the liability for future policy benefits that result from',
27687:'periodic reestimations should be recognized as an expense during the period in which the changes occur. 64. the effects of',
27688:'changes in relevant law or policy should be recognized when those changes occur. disclosure requirements factors in determining disclosures 65.',
27689:'materiality is an overarching consideration in financial reporting for information that should be presented regarding life insurance programs. materiality judgments',
27690:'consider both quantitative and qualitative factors. acceptable quantitative factors may include whether certain groups of arrangements are accumulating large claim',
27691:'expenses or unpaid claim liability balances. acceptable qualitative factors may include whether a group of arrangements is of immediate concern',
27692:'to constituents, politically sensitive, and/or controversial. 66. disclosuresshouldbeintegratedsothatconcise,meaningful,andtransparentinformationis provided in a comprehensive note regarding the insurance program and related balances,',
27693:'or byproviding referencesto relevant noteselsewhere in the gpffr but which relate to the insurance program. disclosuresapplicable to component reporting entities',
27694:'67. the following information should be provided for each material insurance portfolio, and/or in aggregate for all remaining insurance portfolios,',
27695:'and/or individual insurance arrangements: a. thetypeoflifeinsuranceandspecificcharacteristicsofthoseproducts,suchaswhen and how benefits are paid and what other government agencies or commercial insurance programs',
27696:'administer and/or assume risk for any part of the program b. premium pricing policies in accordance with sffas 7, par.',
27697:'46 including risk characteristicsusedindeterminingpremiumsandrequirementstosetpremiumprices that do not cover the full estimated cost to settle claims c. full costs,20 premiums collected,',
27698:'appropriations used, and borrowing needed during the reporting period, as well as the ability to repay borrowing 20see sffas 4,',
27699:'managerial cost accounting standards and concepts, par. 80104. page 17 sffas 51 fasab handbook, version 20 06/21 sffas 51 d.',
27700:'investing activities, such as buying treasury securities e. the nature and magnitude of uncertainty to estimate the amounts to be',
27701:'paid to settle future claims, including the basis and estimation method i. significant risk assumptions and factors, including relevant trend',
27702:'information ii. how much risk, if any, is shared by third parties f. the total value of life insurance policies',
27703:'issued—insurance inforce—at the end of the reporting period, which represents the maximum risk exposure21 g. the net cash surrender value',
27704:'of policies at the end of the reporting period, including appropriate information to aid in avoiding the misleading inference that',
27705:'there is a more than remote likelihood that 100% of all policies will cancel at the end of the reporting',
27706:'period h. any events that caused a material change in the amounts recognized during the reportingperiod, suchaslowprobabilityhighimpact adverseevents,changesinlaws, and/or actuarial',
27707:'assumptions 68. information for changes in the liability balance for unpaid insurance claims should be provided as follows: a. beginning',
27708:'balance b. claims expenses c. cae22 d. payments to settle claims e. recoveries and other adjustments f. ending balance 21',
27709:'an explanation should be included that avoids the misleading inference that there is more than a remote likelihood that claims',
27710:'equal to the entire insurance inforce amount will be filed at the same time. 22 claimsadjustment expenses should be recognized',
27711:'for claims occurring prior to the end of the current reporting period. page 18 sffas 51 fasab handbook, version 20',
27712:'06/21 sffas 51 disclosuresapplicable to the consolidated financial report of the u.s. government 69. the cfr should disclose the following',
27713:'information:23 a. a broad description of insurance programs b. a general reference to relevant component reporting entity reports24 c. the',
27714:'balance for insurance program liabilities d. a narrative discussion of programs’ ability or inability to repay any borrowing e. thetotalamountofcoverageprovidedthroughinsuranceinforceasoftheendofthe',
27715:'reporting period25 effective 70. the requirements of this statement are effective for reporting periods beginning after september 30, 2018. the',
27716:'provisions of this statement need not be applied to immaterial items. 23 disclosure is “reporting information in notes or narrative',
27717:'regarded as an integral part of the basic financial statements.” 24 the term “component reporting entity” is used to distinguish',
27718:'between the u.s. federal government and its components. the u.s. federal government is composed of organizations that manage resources and',
27719:'are responsible for operations. these include major departments and independent agencies, which are generally divided into sub organizations, for example,smallerorganizational',
27720:'units with a wide variety of titles,including bureaus,administrations, agencies, and corporations. 25 include an explanation about the insurance inforce amount',
27721:'that avoids the misleading inference that there is more than a remote likelihood that claims equal to this maximum risk',
27722:'exposure will be paid at the same time. page 19 sffas 51 fasab handbook, version 20 06/21 sffas 51 appendixa:',
27723:'basis for conclusions this appendix discusses some factors considered significant by members in reaching the conclusions in this statement. it',
27724:'includes the reasons for accepting certain approaches and rejecting others. some factors were given greater weight than other factors. the',
27725:'guidance enunciated in the statement—not the material in this appendix—should govern the accounting for specific transactions, events or conditions. this',
27726:'statement may be affected by later statements. the fasab handbook is updated annually and includes a status section directing the',
27727:'reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are updated for',
27728:'changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for conclusions',
27729:'of the amending statement for the rationale for each amendment. project history a1. thefederalaccountingstandardsadvisoryboardfasabor “the board” undertooka project to improve',
27730:'the accounting and reporting of all significant risks assumed by the federal government. due to the breadth of the risk',
27731:'assumed project, the board decided to break it into multiple phases. these standards address the first phase – insurance programs.',
27732:'other programs designed to manage risk for the federal government will be addressed by future research conducted under the risk',
27733:'assumed project. a2. fasab undertook insurance programs as phase i of the risk assumed project because while paragraphs 97121 in',
27734:'sffas 5 include a requirement to report risk assumed for insurance programs, the resulting information as reported by various agencies',
27735:'is not comparable. further review found thatitischallenging to determine the operational results and financial position of insurance programs. a3. in',
27736:'addition, the board’s conceptual framework now provides a definition of liability and describesmeasurement attributes that were not available when fasab',
27737:'developed sffas 5.statementoffederalfinancialaccountingconceptssffac5,definitions of elements and basic recognition criteria for accrualbasis financial statements, defines liability as “a present obligation of',
27738:'the federal government to provide assets or services to another entity at a determinable date, when a specified event occurs,',
27739:'or on demand.” sffac 7, measurement of the elements of accrualbasis financial statements in periods after initial recording, defines attributes',
27740:'of elements that may be measured. this statement adopts the most current concepts so that the accounting principles for insurance',
27741:'liabilities provide comprehensive guidance for consistent reporting. page 20 sffas 51 fasab handbook, version 20 06/21 sffas 51 a4. project',
27742:'goals are to: a. define federal insurance programs and related terms, b. ensure consistent reporting for all insurance programs implemented',
27743:'by the federal government, c. addressmeasuringuncertaintyregardingestimatinglossesonopenarrangementsas of the end of the reporting period, d. ensure disclosures address uncertainties and risk',
27744:'factors, and e. provide for reporting on significant risks assumed in order to meet the stewardship and operating performance objectives',
27745:'of federal financial reporting. a5. the board formed a task force to assist in developing the proposed standards for insurance',
27746:'programs. task force members included accounting, budget, and insurance subject matter experts from federal agencies and independent public accounting firms.',
27747:'a6. the task force met several times over the course of the project, delivered an education session to the board,',
27748:'and also exchanged numerous ideas and recommendations electronically. staff sought the task force’s views and recommendations in developing and describing',
27749:'alternatives to present to the board during the development of these standards. the task force’s assistance was essential and its',
27750:'views carefully considered by members duringdeliberations. the taskforce played an important rolein the research andrelease of the proposed standards and',
27751:'this statement. summary of outreach efforts and responses a7. fasab issued the ed, titled insurance programs, on december 30, 2015,',
27752:'with comments requested by march 30, 2016. a8. upon release of the ed, fasab provided notices and press releases to',
27753:'the fasab email listserv, the federal register, fasab news, the journal of accountancy,association of governmentaccountants topics,the cpa journal, government executive,thecpa',
27754:'letter, the chieffinancial officers council,the council of the inspectors general on integrity and efficiency, and committees of professional associations generally',
27755:'commenting on eds in the past for example, the greater washington society of cpas,association of governmentaccountants financial management standards board.',
27756:'page 21 sffas 51 fasab handbook, version 20 06/21 sffas 51 a9. fasabfollowedupthisbroadannouncementwithdirectmailingsoftheedtothefollowing relevant congressional committees: a. house agriculture committee',
27757:'b. house appropriations committee i. subcommittee on agriculture, rural development, food and drug administration and related agencies ii. subcommittee on',
27758:'oversight and government reform iii. subcommittee on homeland security c. house budget committee d. house committee on veterans affairs e.',
27759:'house committee on homeland security —subcommittee on emergency preparedness, response, and communications, majority f. house committee on financial services g.',
27760:'senate agriculture committee h. senate appropriations committee i. subcommittee on agriculture, rural development, food and drug administration and related agencies',
27761:'ii. subcommittee on homeland security i senate committee on banking, housing, and urban affairs—subcommittee on securities, insurance, and investment j.',
27762:'senate budget committee k. senate committee on finance l. senate committee on health, education, labor & pensions m. senate committee',
27763:'on homeland security and governmental affairs n. senate committee on veterans affairs a10. fasab received 18 responses from preparers, auditors,',
27764:'professional associations, and citizens. the majority of respondents agreed with proposals for new definitions and exclusions; they also agreed with',
27765:'the three categories: exchange transaction insurance programs other than life insurance, nonexchange transaction insurance programs, and life insurance programs for',
27766:'reporting insurance programs. a11. however,theauditorsandaccountingassociationsdisagreedwiththeproposalsforhowto estimate the settlement of future claims for the liability for losses on remaining coverage. a12.',
27767:'somerespondentsalsoidentifiedcertainissuesthatcouldbeclarifiedwithinthestatement or addressed in the basis for conclusions. a13. the board did not rely on the number in favor of',
27768:'or opposed to a given position. staff provides the board information about the respondents’ majority view only as a means',
27769:'of page 22 sffas 51 fasab handbook, version 20 06/21 sffas 51 summarizingthe comments.the board considered each responseandweighed themerits of',
27770:'the points raised. the respondents’ comments are summarized in the following section. keyareas of improvement a14. sffas5resultedininconsistentreportingamonginsuranceprogramsduetotheabsence of definitions and',
27771:'use of terms like possible loss, probable future events, measurable, and uncertainty. the board considered existing concepts and standards for',
27772:'similar circumstances such as loan guarantees to identify options for improvement. the board also considered task force testimony that insured',
27773:'events are often hard to project due to their high impact yet low probability nature and the lack of available',
27774:'data to predict them. as a result, the board determined that current reporting could be improved through: a. definitions of',
27775:'relevant terms, b. clarity for what programs are excluded, c. guidance for revenue recognition and unearned premiums, d. consistent recognition',
27776:'of liabilities including future loss estimates, and e. structured disclosure requirements. definitions of relevant terms and excludedactivities a15. during the',
27777:'initial phase of the project, the board determined that definitions of relevant terms would be necessary for consistent reporting. staff',
27778:'worked extensively with the task force to develop these definitions. the board decided to use general terms to include all',
27779:'currentinsurance and future insurance programs in this statement. the board determined that the following provided the foundation for the definitions',
27780:'developed for this project. a. insurance program—while most respondents did agree with the definition, programs that were not structured like',
27781:'commercial insurance programs with actual contracts requested clarification. in addition, respondents found inclusion of the term “nonloan guarantee” inthedefinition confusing;',
27782:'thiswassubsequentlyremoved. therefore, the board defined a federal insurance program by its fundamental nature. the substance—and not the name—of a programdeterminesif',
27783:'it isan insurance program and therefore subject to these standards. i. exclusions—a number of respondents requested clarification on what activities',
27784:'were excluded from this statement. one respondent requested that the board expand upon the exclusion of entitlement programs to avoid',
27785:'excluding insurance page 23 sffas 51 fasab handbook, version 20 06/21 sffas 51 programs that perform entitlementlike activities but are',
27786:'actually insurance programs. ii. one respondent recommended including fiduciary funds, workers’ compensation programs, and programs established to pay claims on',
27787:'adverse events that occurred in the past. iii. a number of respondents requested that the board provide context to explain',
27788:'the exclusions in this proposed standard. b. therefore, the board amended the wording of certain exclusions to aid in assessing',
27789:'the programs and activities that should be excluded. c. each of the activities and programs excluded involve risk and, therefore,',
27790:'share a characteristic of insurance programs. the board concluded that judgment is required in applying the exclusions and that providing',
27791:'context may aid in making such judgments. the rationale for each exclusion is presented below: i. programs that administer direct',
27792:'loans and loan guarantees are excluded because standards for these programs are provided in sffas 2, accounting for direct loans',
27793:'and loan guarantees. ii. programs that qualify as social insurance are excluded because standards for these programs are provided in',
27794:'sffas 17, accounting for social insurance includingunemployment insurance. iii. programs authorized to engage in disaster relief activities are excluded because',
27795:'while benefits are based on losses from adverse events, coverage is available broadly to the population and benefits may not',
27796:'be as clearly defined as in insurance programs. these aspects make it more challenging to apply the recognition and measurement',
27797:'provisions of this statement. disaster relief activities will be addressed in a later phase of risk assumed. iv. programs that',
27798:'provide grants are excluded because while grants may be based on losses from adverse events, other criteria make it more',
27799:'challenging to apply the recognition and measurement provisions of this statement. v. programs that provide benefits or financial assistance based',
27800:'on an individuals or a households income and/or assets are excluded because while an adverse event may be a cause',
27801:'of the income/asset criteria, it is the criteria that determine the benefits or assistance and not the event behind it.',
27802:'vi. programsthatassumetheriskoflossarisingfromfederalgovernmentoperations; workers’ or occupational illness compensation programs; programs that pay page 24 sffas 51 fasab handbook, version 20 06/21',
27803:'sffas 51 claims through an administrative or judicial role for individuals or organizations who claim they have been harmed by',
27804:'a federal agency; and programs that indemnify contractors, arrangement partners, and other third parties for loss or damages incurred while',
27805:'or caused by work performed for a federal agency are excluded. the board updated these exclusions by removing a reference',
27806:'to self insurance and missions because these terms were unclear to respondents. the board determined that the cost incurred for',
27807:'such activities and programs are part of the full cost of doing business. for example, a program with fleet vehicles',
27808:'that pays for damage from accidents out of funds designated as operation and maintenance would include such costs in the',
27809:'overall program cost. d. adverse event—each insurance program is responsible for settling losses that result from specific adverse events. the',
27810:'board learned through an education session with the federal crop insurance corp that an adverse event may be a single',
27811:'event or a series of events. therefore, an adverse event has not occurred until all of the events in a',
27812:'series occur. e. insurance arrangement—while most respondents agreed with the term “contract” some respondents noted that they do not have',
27813:'formal contracts and may then be excluded from this statement. the task force provided information that exchange transaction insurance programs',
27814:'and life insurance programs engage in an explicit agreement or arrangement. the board decided to change the term from “insurance',
27815:'contract” to “insurance arrangement” to capture the nature of the arrangement as defined by law or regulation. therefore, the definition',
27816:'of an insurance arrangement includes the elements that insurance programs agree upon to provide settlement of losses to beneficiaries. f.',
27817:'insurance portfolios—one respondent requested that the board define insurance portfolios and refer to that term consistently throughout the statement. the',
27818:'board agreed and added a definition for insurance portfolios. g. insuranceprogramcategories—theboarddeterminedthataninsuranceprogramwill fit into one of three categories. each category processes',
27819:'different types of transactions that settle losses from specific adverse events. the categories are as follows: i. exchange transaction insurance',
27820:'programs other than life insurance cover the risk of loss from adverse events, other than death of individuals, involved in',
27821:'exchange transactions as defined by sffas 7. ii. nonexchange transaction insurance programs cover the risk of loss from adverse events',
27822:'through nonexchange transactions as defined by sffas 7. page 25 sffas 51 fasab handbook, version 20 06/21 sffas 51 iii.',
27823:'life insurance programs cover the risk of loss from death of individuals. h. anumberofrespondentsrequestedadditionalinformationforbetterunderstandingof the exchange and nonexchange transaction categories',
27824:'other than life insurance. in particular, respondents wanted to know 1 how to determine if a program should be classified',
27825:'as a nonexchange transaction insurance program and 2 how to classify a program if it receives both exchange and nonexchange',
27826:'revenue. i. the board’sintention for the exchange transaction insurance programs other than life insurance and nonexchange transaction insurance programs is',
27827:'to define these categories in relation to the revenue standards in sffas 7. ii. some respondents were confused by the',
27828:'board’s reference to only sffas 7 and not sffas 5 in defining these categories. ssfas 7 and sffas 5 each',
27829:'define exchange transactions as occurring when “each party to the transaction sacrifices value and receives value in return.”26 the board',
27830:'determined that classifying the programs based on the type of revenue received would be straightforward and that no other substantive',
27831:'difference would result. iii. this statement addresses revenue recognition that is unique to each category, but does not reiterate the',
27832:'revenue recognition standards. to address this, the board added a general statement in the scope section that refers the preparer',
27833:'to other standards when necessary. iv. the board notes that some insurance programs may be funded with both exchange and',
27834:'nonexchange revenue. the board concluded that a program other than life insurance that receives any exchange revenue should be designated',
27835:'as an exchange transaction insurance program other than life insurance. v. nonexchange transaction insurance programs cover the risk of loss',
27836:'from adverse events through nonexchange transactions, such as collection of nonexchange revenue or use of appropriations. for example, some levy:',
27837:'1 excise taxes which, like other taxes, are determined by the governments power to compel payment and are classified by',
27838:'sffas 7, paragraph 243 as nonexchange revenue; 2 surcharges which, like excise taxes, are determined by the governments power to',
27839:'compel mandatory recoupment of the federal share of pay for losses. 26 see sffas 5, par. 22, and sffas 7,',
27840:'par. 33. page 26 sffas 51 fasab handbook, version 20 06/21 sffas 51 revenue recognition and liability for unearned premiums',
27841:'a16. exchange transaction insurance programs other than life insurance recognize revenue in proportion to the insurance protection to be provided.',
27842:'any revenue collected but not earned prior to the end of the reporting period is recognized as unearned premiums. a.',
27843:'the following is an example of revenue that is earned evenly over a 12month arrangement period because insurance protection is',
27844:'provided evenly during the arrangement period. the premium of $1,200 is collected on july 1.by september 30, threemonthshavebeencoveredearningtheexchangeprogram$300. theremaining $900',
27845:'is unearned because the remaining arrangement period is still open into the next fiscal year: from october 1 through june',
27846:'30. the $900 is recognized separately on the balance sheet as unearned premium. b. the following is an example of',
27847:'revenue that is earned for three equivalent national rallies held during a 12month arrangement period. the premium of $1,500 is',
27848:'collected on july 1. by september 30, two of the three rallies have occurred, earning the exchange program $1,000. the',
27849:'remaining $500 is unearned because the third rally is not scheduled until december 20, which is during the remaining arrangement',
27850:'period from october 1 through june 30. the $500 is recognized separately on the balance sheet as unearned premium. a17.',
27851:'nonexchange transaction insurance programs do not recognize unearned premiums because they do not earn premiums. the board believes that insurance',
27852:'programs in this category should apply general revenue recognition standards. therefore, no specific revenue recognition guidance is provided in this',
27853:'statement. a18. life insurance programs do not recognize unearned premiums. the board concluded that revenue from life insurance arrangements should',
27854:'be recognized when due from policyholders because there is no better basis for determining when revenue is earned. premiums are',
27855:'due and collected each pay period or on another recurring basis over the entireduration ofthearrangement. inaddition,the expected presentvalue offuturenet premiums',
27856:'is deducted from the expected present value of future claims to arrive at the liability for future policy benefits. recognition',
27857:'of liabilities and measurement of future loss estimates a19. liability for unpaid claims is recognized for all categories. regardless of',
27858:'category, at the end of the reporting period insurance programs might be processing claims for losses due to adverse events',
27859:'that occurred by the end of the reporting period. page 27 sffas 51 fasab handbook, version 20 06/21 sffas 51',
27860:'a. theamountsdueforclaimsthathavebeensubmittedbutnotpaidareincludedinthe liability for unpaid claims. b. there are also claims ibnr. the amounts for these claims are not known',
27861:'and must be estimated for adverse eventsthat occurred by the endof the reporting period. if an adverse event is a',
27862:'series of events not completed by the end of the reporting period, then the board concluded that these are not',
27863:'claims ibnr and should not be included in the liability for unpaid claims. nonetheless, for exchange transaction insurance programsotherthanlife insurance,',
27864:'such seriesshould be considered inestimating a liability for losses on remaining coverage. c. claimsadjustmentexpensesarecostsdirectlyrelatedtosettlingclaimsfromadverse events that occurred by the end',
27865:'of the reporting period. the board concluded that cae should be included in the liability for unpaid claims for submitted',
27866:'and ibnr claims to recognize the full cost to settle claims. a20. recognition of a liability for losses on remaining',
27867:'coverage is required for exchange transaction insurance programs other than life insurance. a. research by the task force determined that',
27868:'a program has a service obligation to pay for any losses caused by adverse events during the entire arrangement period.',
27869:'the board agrees and therefore decided to separate the liability for losses on remaining coverage from the liability from the',
27870:'unpaid claims portion. b. the board concluded that recognizing a reasonable estimate of future losses for the open arrangement period',
27871:'that extends beyond the end of the reporting period will remove ambiguity created by sffas 5 standards to recognize contingency',
27872:'liabilities. c. according to sffas 5, paragraph 38, contingent liabilities must be recognized if a past transaction has occurred and',
27873:'a future outflow or other sacrifice of resources is probable and measureable. under the new standards, the liability for losses',
27874:'on remaining coverage is the estimated future cash flows arising from adverse events that are expected to happen during the',
27875:'period that coverage will be provided. therefore, the board’s next challenge was how to consistently address uncertainty regarding measurement. d.',
27876:'task force research showed that federal insurance programs were using a variety of statistical modeling methods to estimate future losses',
27877:'depending on their unique uncertainties and risk factors. for example, the department of agriculture’s risk management agency oversees crop insurance',
27878:'and relies upon a regression analysis;27 the department of homeland security’s federal emergency management 27 regression analysis is a statistical',
27879:'technique used to measure the extent to which a change in one quantity variable is accompaniedby a changein some other',
27880:'quantity variable. gao,aug1, 1974case study cs5, using regression analysis to estimate costs published, page 1. page 28 sffas 51 fasab',
27881:'handbook, version 20 06/21 sffas 51 agency oversees flood insurance and relies on a lognormal distribution;28 and the national credit',
27882:'union administration uses an internal econometric model that applies estimated failure and loss rates, taking into account the historical loss',
27883:'history, insuree, risk ratings, insuree financial ratios, and other conditions. e. to address such measurement challenges, the financial accounting standards',
27884:'board statement of financial accounting concepts no. 7, paragraphs 4454, describesa varietyof pricingtoolsand methodsfordeveloping an expectedcash flow estimate. f. to',
27885:'allow for a variety of estimating methods for federal insurance programs, the ed required that programs should first use expected',
27886:'cash flow to estimate the cost to settle claims on remaining coverage. the ed acknowledged that there would be various',
27887:'methods available to estimate cash flows and probabilities. further, the proposal provided that if expected cash flow estimates were not',
27888:'practical and appropriate, then an entity could estimate a single mostlikely amount to be paid to settle future claims during',
27889:'the remaining open arrangement period. g. a number of respondents were concerned with implementation of and auditing to the terms',
27890:'“practical and appropriate.” h. in addition, one member believed that the entity should be able to use any method that',
27891:'provides a reasonable estimate of cash flows, based on all available information existing at the balance sheet date, including experience',
27892:'with previous trends, and, as appropriate, the views of independent experts. however, the majorityof membersstill preferred expected cash flow to',
27893:'estimated cash flow. after discussion, all members agreed to allow any method for which the objective is a reasonable estimate',
27894:'of expected cash flows. this allows management the flexibility to choose a method that produces a reasonable estimate of expected',
27895:'cash flows specific to the program’s future adverse event uncertainties and risk factors. a21. recognition of a liability for future',
27896:'policy benefits is required for life insurance programs. future benefits and premiums are estimated using financial and/or actuarial methods, depending',
27897:'on the portfolio risk characteristics and arrangement duration. these amounts are discounted to the present value to recognize the liability',
27898:'for future benefits. 28 in statistics the best known distribution is the normal, the familiar bellshaped curve which is symmetrical',
27899:'about its mean. certain other distributions stem from the normal. for example… the lognormal distribution…arandom variate x is lognormally distributed',
27900:'if the logarithm of x is normally distributed. in short, the distribution of x is itself lognormal when the distribution',
27901:'of log x is normal.atypical lognormal distribution is skewed to the right and has a lower bound such that the',
27902:'probability of x being less than this lower bound is exactly zero. lester g. telser, review of the lognormal distribution,',
27903:'journal of farm economics 41. no 1, feb., 1959, page 161. page 29 sffas 51 fasab handbook, version 20 06/21',
27904:'sffas 51 a22. estimates for the liability for losses on remaining coverage and future policy benefits are recognized by insurance',
27905:'portfolios with similar characteristics, including arrangement duration. the board decided not to define “arrangement duration” due to the subjective nature',
27906:'of duration. for example, one insurance program might determine that a 36month arrangement is shortduration, while another assigns the arrangement',
27907:'to a longduration group. recognizing these liabilities by groups of arrangements allows judgment by each insurance program in defining the',
27908:'duration of their arrangements. subsequent events a23. certain respondents requested clarification regarding subsequent events and the application ofsffas 39 inrelation',
27909:'to whether these standardsare to addtoorsupplement sffas 39.the boarddeterminedthatthetreatment of subsequent eventsshoulddifferfor the liability for unpaid insurance claims versus the',
27910:'liability for losses on remaining coverage as follows. liability for unpaid insurance claims a24. for the liability for unpaid insurance',
27911:'claims, events or transactions occurring after the balance sheet date but before the financial report is issued are considered subsequent',
27912:'events.asubsequent event may or may not result in the adjustment of the financial statements, depending on whether it is a',
27913:'recognized or nonrecognized event. see sffas 39 for detailed guidance. examples of subsequent events for insurance programs with a september',
27914:'30 yearend and a november 15 financialstatement fs publication date may include the following. a. recognized event: claims settled on',
27915:'october 30 for an amount significantly different from the liability recorded for a major disaster that occurred on september 20',
27916:'would require adjustment to the liability for unpaid claims in the financial statements. page 30 sffas 51 fasab handbook, version',
27917:'20 06/21 sffas 51 b. nonrecognized event: a major disaster that occurs on october 20 would not require an adjustment',
27918:'to the financial statements but may require disclosure. liability for losses on remaining coverage a25. the liability for losses on',
27919:'remaining coverage estimates future events. due to the uncertainty of the occurrence, magnitude, and timing of these future events, the',
27920:'board decidedthatallsubsequent eventsrelating totheliabilityfor losseson remaining coverage should be classified as nonrecognized events in accordance with sffas 39, paragraph 15.',
27921:'page 31 sffas 51 fasab handbook, version 20 06/21 sffas 51 disclosures a26. disclosures are required for each insurance program',
27922:'category to aid the reader in understanding the estimates and fiscal health of insurance programs in relation to the risk',
27923:'they assume for losses incurred due to adverse events. avoiding duplicity of information a. task force research informed the board',
27924:'that current standards required presentation of similar information in multiple places for example, notes and required supplementary information, which burdened',
27925:'the agencies and readers. in addition, disclosures were inconsistent among programs, making it difficult to determine the fiscal health—the amount',
27926:'of loss estimated versus the amount and funding types necessary to settle the actual losses—of individual programs as well as',
27927:'insurance programs at the governmentwide level. b. the board concluded that the updated disclosures will avoid duplication by allowing insurance',
27928:'programs to reference relevant notes. changes in the liability for unpaid insurance claims c. for consistent reporting, the board requires',
27929:'a reconciliation of the liability for unpaid claims that a number of insurance programs already produce. the board reviewed the',
27930:'current reconciliations and consolidated relevant information for consistent reporting. all categories should report this information so readers receive consistent information.',
27931:'d. the board concluded that requiring disclosure of full costs, premiums collected, appropriations used, borrowing needed during the reporting period,',
27932:'as well as the ability to repay the borrowing should provide a holistic picture of an insurance program’s performance. insurance',
27933:'inforce e. the board concluded that disclosing the balance of insurance inforce as of the end of the reporting period',
27934:'will provide useful information as to the maximum risk exposure to the program. however, one respondent requested, and the board',
27935:'subsequently agreed, to update the standard to provide more clarity on how the program should explain that paying the full',
27936:'amount of insurance inforce is very unlikely. page 32 sffas 51 fasab handbook, version 20 06/21 sffas 51 low probability,',
27937:'high impact adverse eventsuncertainty f. some respondents were concerned about how to disclose the uncertainty of adverse events, including those',
27938:'that are low probability, high impact very rare, but upon occurrence causes extreme loss. the board understands that uncertainty is',
27939:'subjective to each insurance program in relation to the risks it insures—which may cause extreme loss that is hard to',
27940:'estimate. some programs may also encounter uncertainty in relation to a multitude of events that must occur over time and',
27941:'often do not occur within one reporting period. i. the following are examples of hard to predict adverse events that',
27942:'may cause substantial losses: a “katrina” type29 of hurricane, a political uprising in a country that completely disrupts american businesses,',
27943:'or an unusual detrimental weather pattern combined with volatile commodity pricing. ii. due to this uncertainty in magnitude and timing,',
27944:'the board concluded that the disclosure about estimating uncertainty allows management to discuss its particular constraints in determining the liability',
27945:'for losses on remaining coverage. disclosures – financial report of u.s. government a27. disclosures for the financial report of the',
27946:'u.s. government should be reported at a high level of detail. the board concluded that detailed disclosures should be found',
27947:'at the component reporting entity level. boardapproval this statement was approved unanimously. written ballots are available for public inspection at',
27948:'fasab’s office. 29 per femahurricane katrina was a longlived hurricane that made landfall three times along the united states coast',
27949:'and reached category 5 at its peak intensity cnn reported that …hurricane katrina is the costliest disaster in the history',
27950:'of the global insurance industry. the national flood insurance program paid out $16.3 billion in claims private insurance companies have',
27951:'paid an estimated $41.1 billion in claims. page 33 sffas 51 fasab handbook, version 20 06/21 sffas 51 appendix b:abbreviations',
27952:'cae claim adjustment expense cfr consolidated financial report of the u.s. government fasab federalaccounting standardsadvisory board fasb financialaccounting standards board',
27953:'gaap generallyaccepted accounting principles gao government accountability office gasb governmentalaccounting standards board ibnr incurred but not reported omb office of',
27954:'management and budget rsi required supplementary information sfas statement of financial accounting standards fasb sffac statement of federal financial accounting',
27955:'concepts sffas statement of federal financial accounting standards page 34 sffas 51 fasab handbook, version 20 06/21 statement of federal',
27956:'financialaccounting standards 52: tax expenditures status issued may 31, 2017 effective date for periods beginning after september 30, 2017. earlier',
27957:'implementation is encouraged. affects none. affected by none. summary this statement requires certain information on tax expenditures to assist users',
27958:'of the consolidated financial report of the u.s. government cfr in understanding the existence, purpose, and impact of tax expenditures.',
27959:'specifically, this statement requires that the cfr: 1. include narrative disclosures and information regarding tax expenditures that inform the reader',
27960:'regarding the: a. definition of tax expenditures, b. general purpose of tax expenditures, c. impact on and treatment of tax',
27961:'expenditures within the federal budget process, and d. impact of tax expenditures on the governments financial position and condition. 2.',
27962:'alert readers regarding the availability of published information on tax expenditure estimates, such as those published annually by the department',
27963:'of the treasurys office of tax policy. this statement also encourages presentation of tax expenditure estimates as other information oi1',
27964:'in the cfr.2 1 the term other information oi used in this statement and the term other accompanying information oai,',
27965:'as defined by statement of federal financialaccounting concepts sffac 6, par. 5, are synonymous. 2although the federalaccounting standardsadvisory board fasab',
27966:'does not require oi to be presented, fasab may at times encourage voluntary reporting of items to help in the',
27967:'development of information that may enhance overall federal financial reporting. for example, fasab may consider an item to be relevant',
27968:'to entity operations but, for the moment, does not meet other criteria for required information. page 1 sffas 52 fasab',
27969:'handbook, version 20 06/21 sffas 52 the provisions of this statement need not be applied to immaterial items. the determination',
27970:'of whether an item is material depends on the degree to which omitting or misstating information about the item makes',
27971:'it probable that the judgment of a reasonable person relying on the information would have been changed or influenced by',
27972:'the omission or the misstatement. page 2 sffas 52 fasab handbook, version 20 06/21 sffas 52 table of contents summary',
27973:'1 standards 4 scope 4 definition 4 disclosure requirements 5 required supplementary information 5 other information 6 effective date 7',
27974:'appendixa: basis for conclusions 8 appendix b: tax expenditures explained 22 appendix c: task force members 31 appendix d:abbreviations 32',
27975:'page 3 sffas 52 fasab handbook, version 20 06/21 sffas 52 standards scope 1. this statement requires narrative disclosures and',
27976:'information regarding tax expenditures, and it encourages the presentation of a selection of the major tax expenditure estimates, such as',
27977:'those published annually by the department of the treasurys treasury office of tax policy, as other information oi in the',
27978:'consolidated financial report of the u.s. government cfr.3 2. the reporting requirements in this statement apply to the cfr. they',
27979:'do not apply to the financialstatements of component reporting entities. they also do not affect the reporting in the budget',
27980:'of the u.s. government or any other special purpose report. 3. thisstatementdoesnotalterorcontradictthedefinitionoftaxexpenditures,asestablished by the congressional budget and impoundment controlact of',
27981:'1974. this statement does not affect the treasury or the joint committee on taxations jct interpretation of the statutory definition.',
27982:'hence, this statement does not affect the policies and practices of treasurys office of tax policy or the jct with',
27983:'respect to the definition, identification, recognition, and measurement of tax expenditures. definitions 4. tax expenditures the congressional budget and impoundment',
27984:'controlact of 1974 public law 93344 defines tax expenditures as revenue losses attributable to provisions of the federal tax laws',
27985:'which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate',
27986:'of tax, or a deferral of tax liability. while the term revenue losses is used in the statutory definition, tax',
27987:'expenditures have traditionally been measured as reductions in federal tax revenues relative to normal baseline provisions of an individual and',
27988:'corporate income tax system, which were properly 3 the term other information oi used in this statement and the term',
27989:'other accompanying information oai, as defined by statement of federal financialaccounting concepts sffac 6, par. 5, are synonymous. page 4',
27990:'sffas 52 fasab handbook, version 20 06/21 sffas 52 approved and authorized by the congress to accomplish identified policy objectives,',
27991:'recognizing that federal tax revenues would be reduced. 5. baseline provisions baselineprovisions arethestartingpointsusedtomeasuretheimpactoftaxexpenditures on tax revenues as compared to revenues',
27992:'that would be collected otherwise, absent the special exclusion, exemption, deduction, credit, preferential rate, or deferral. certain practical aspects of',
27993:'the tax code are incorporated into the baselinesuch as progressive tax rates, personal exemptions, standard deductions, deductions of expenses incurred',
27994:'in order to earn income, and deferrals of unrealized income. disclosure requirements financial report of the u.s. government disclosures 6.',
27995:'disclosures about tax expenditures should help provide readers with a general understanding of how tax expenditures affect the governments tax',
27996:'collections, financial position,and financialcondition; and howbudgetary objectivescanbeachieved through the mechanism of tax expenditures. 7. disclosures within the notes to the',
27997:'financial statements should include: a. a plain language definition of the term tax expenditures;4 b. examples of types of tax',
27998:'expenditures, such as special deductions, credits, deferrals, preferential rates, exemptions, and exclusions; and c. adescriptionofhowtaxexpendituresaffectnonexchangerevenue,taxcollections,and refunds, as well as whether',
27999:'tax expenditure amounts are presented in the basic financial statements. required supplementary information managements discussionandanalysis 8. managements discussion and analysis',
28000:'md&a should include: 4this statement does not establish the wording of the plain language definition. page 5 sffas 52 fasab',
28001:'handbook, version 20 06/21 sffas 52 a. a plain language definition of the term tax expenditures; b. the general purpose',
28002:'of tax expenditures; c. examples of types of tax expenditures, such as special deductions, credits, deferrals, preferential rates, exemptions, and',
28003:'exclusions; d. information about other factors that may affect tax collections in order to place tax expenditure information in an',
28004:'appropriate context; e. a description of how tax expenditures are treated for budgetary and financial reporting purposes, including their impact',
28005:'on the surplus or deficit and their treatment within the federal budget process, and how they affect the governments financial',
28006:'position and condition; and f. a statement regarding the availability of published information on tax expenditures, such as the treasury',
28007:'office of tax policys unaudited annual report on tax expenditures, and how that information can be obtained. other information 9.',
28008:'thefederalaccountingstandardsadvisoryboardfasabor theboardencouragesthe presentation of a selection of the major tax expenditure estimates, such as those published annually by treasurys office',
28009:'of tax policy, as oi in the cfr. 10. the board encourages the presentation of tax expenditure estimates in a',
28010:'manner that informs readers of: a. the general magnitude of tax expenditures and their impact on federal revenues revenue effect',
28011:'during the fiscal year; b. the source of the estimates; and c. the availability of published information wherein the estimates',
28012:'presented in oi were originally published, such as the treasury office of tax policys unaudited annual report on tax expenditures,',
28013:'and how that information can be obtained. page 6 sffas 52 fasab handbook, version 20 06/21 sffas 52 effective date',
28014:'11. the requirements of this statement are effective for reporting periods beginning after september 30, 2017. earlier implementation is encouraged.',
28015:'the provisions of this statement need not be applied to immaterial items. page 7 sffas 52 fasab handbook, version 20',
28016:'06/21 sffas 52 appendixa: basis for conclusions this appendix discusses some factors considered significant by board members in reaching the',
28017:'conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight',
28018:'to some factors than to others. the standards enunciated in this statementnot the material in this appendixshould govern the accounting',
28019:'for specific transactions, events, or conditions. this statement may be affected by later statements. the fasab handbook is updated annually',
28020:'and includes a status section directing the reader to anysubsequent statements that amend this statement. within the text of the',
28021:'statements, the authoritative sections are updated for changes. however, this appendix will not be updated to reflect future changes. the',
28022:'reader can review the basis for conclusions of the amending statement for the rationale for each amendment. introduction a1. in',
28023:'sffac 1, the board established four objectives of federal financial reporting. these objectives provide a framework for assessing the existing',
28024:'accountability and financial reportingsystemsofthefederalgovernmentandforconsideringnewaccountingstandards. the objectives address 1 budgetary integrity, 2 operating performance, 3 stewardship, and 4 systems and controls.',
28025:'a. this statement contributes to objectives 1, 2, and 3. i. objective 1, budgetary integrity, states that: federal financial reporting',
28026:'should assist in fulfilling the governments duty to be publicly accountable for moniesraised through taxes and other means and for',
28027:'their expenditure in accordance with the appropriations laws that establish the governments budget for a particular fiscal year and related',
28028:'laws and regulations. 1. subobjective 1astates that: federal financial reporting should provide information that helps readers to determine how budgetary',
28029:'resources have been obtained and used … 2. subobjective 1c states that: page 8 sffas 52 fasab handbook, version 20',
28030:'06/21 sffas 52 federal financial reporting should provide information that helps readers to determine how information on the use of',
28031:'budgetary resources relates to information on the costs of program operations. ii. objective 2, operating performance, states that: federal financial',
28032:'reporting should assist report users in evaluating the service efforts, costs, and accomplishments of the reporting entity, and the manner',
28033:'in which these service efforts have been financed… iii. objective 3, stewardship, states that: federal financial reporting should assist report',
28034:'users in assessing the impact on the country of the governments operations and investments for the period and how, as',
28035:'a result, the governments and the nations financial conditions have changed and may change in the future. federal financial reporting',
28036:'should provide information that helps the reader to determine whether 1 the governments financial position improved or deteriorated over the',
28037:'period, 2 future budgetary resources will likely be sufficient to sustain public services and to meet obligations as they come',
28038:'due, and 3 government operations have contributed to the nations current and future wellbeing. a2. tax expenditures reduce federal revenues',
28039:'as a result of tax legislation. these reductions have historically been measured relative to normal baseline provisions of an individual',
28040:'and corporate income tax system. many tax expenditures resemble mandatory spending programs for which spending is typically determined by rules',
28041:'for eligibility and benefit formulas. other tax expenditures resemble discretionary spending programs for which the congress appropriates annual funding. forgoing',
28042:'budgetary resources through the use of tax expenditures can be a method of achieving policy objectives without direct outlays of',
28043:'funds by federal agencies and programs. accordingly, the board sought to provide budgetary information, which contributes to objective 1. in',
28044:'particular, such tax expenditure information should contribute to subobjectives1aand1cbyprovidinginformation to assist readers in understanding how tax expenditures affect the availability',
28045:'of budgetary resources and tax collections, and how certain policy objectives are addressed through the mechanism of forgoing tax revenues.',
28046:'a3. taxexpendituresmaybeusedasoneofmanymeanstoaccomplishpolicyobjectivesofthe federal government. although tax expenditures are not direct outlays of federal funds, they are often viewed as alternatives',
28047:'to other policyinstruments, such as spending or regulatory page 9 sffas 52 fasab handbook, version 20 06/21 sffas 52 programs.',
28048:'the board believes that the service efforts, costs, and accomplishments of the reporting entitythe u.s. governmentinclude those service efforts undertaken,',
28049:'costs incurred through, and accomplishments resulting from the use of tax expenditures. accordingly, financial reports should provide operating performance information,',
28050:'which contributes to objective 2. a4. because tax expenditures may be viewed as alternatives to spending or regulatory programs, they',
28051:'can also be viewed as government investments of forgone budgetary resources designed to address policy objectives. thus, individual tax expenditures',
28052:'may affect 1 the governments financial position, 2 the budgetary resources available to sustain public services and to meet obligations',
28053:'as they come due, and/or 3 the nations current and future wellbeing.accordingly, financial reports should provide stewardship information, which contributes',
28054:'to objective 3. project history a5. in october 2014, the board approved this project in order to determine what information',
28055:'regarding tax expenditures should be included in general purpose federal financial reports gpffrs. the decision followed an october 2013 educational',
28056:'briefing to the board that resulted in identifying the topic as a high priority. a6. throughouttheproject,theboardreliedonataskforcethatincludedexpertsintheareasof tax expenditures, tax policy,',
28057:'and federal financial reporting. the task force provided critical assistance and knowledge to the board and fasab staff in developing',
28058:'1 recommendations to the board, 2appendix b: tax expenditures explained, and 3 illustrations that were included in the exposure draft',
28059:'ed. the task force also provided technical comments and feedback on working drafts and attended board meetings to answer technical',
28060:'questions and provide insight during deliberations. a7. in december 2015, the task force issued its report to the fasab, which',
28061:'included three recommendations to the board and three optionsfor the boards consideration with respect to the presentation of tax expenditure',
28062:'estimates in the cfr. a. the first recommendation of the task force was to include an introduction section or backgroundpaper,',
28063:'as drafted bythetaskforce, to educate readersof and respondents to the boards ed and the final statement regarding tax expenditures. i.',
28064:'the board approved this recommendation to be implemented in a proposed standard, but elected to include a condensed introduction section',
28065:'along with thefullbackgroundpaperdevelopedbythetaskforcewithminorchangesas page 10 sffas 52 fasab handbook, version 20 06/21 sffas 52 an appendix section appendix b: tax',
28066:'expenditures explained. this recommendation was ultimately implemented in this statement. b. the second recommendation of the task force was to',
28067:'require certain narrative disclosures regarding tax expenditures within the notes to the financial statements and md&aof the cfr. i. task',
28068:'force members decided early in the project that they did not generally supportissuing proposedstandardsthataffectedcomponent reportingentities of the federal government due',
28069:'to potentially significant challenges and costs associated with doing so. for example, implementing accounting standards foridentifying taxexpendituresthatarekeyperformanceorfinancialindicators for a component',
28070:'reporting entity could be time consuming and costly to the preparer. ii. the task force concluded that this recommendation would',
28071:'improve users awareness and understanding of tax expenditures while avoiding extensive, voluminous, or costly disclosures. iii. the board approved the',
28072:'recommendation to be implemented in a proposed standard with certain minor changes to the recommendation as written in the task',
28073:'force report. this recommendation was ultimately implemented in this statement. c. thethirdrecommendationofthetaskforcewastorequiretheinclusionofhyperlinksin the cfrto informreaders regardingother onlinesourcesof informationwherereaders of the',
28074:'governmentwide report can obtain more detailed information regarding tax expenditures. i. fasabstaffworkedwithmembersofthetaskforceandothermembersofthe federal financial statement auditing community to develop proposed',
28075:'language for implementing this recommendation. ii. the board discussed how best to implement this recommendation. board members came to the',
28076:'conclusion that the language in paragraph 8.f provides discretion to the preparer to embed a hyperlink to information sources that',
28077:'it deems to be most appropriate, should reporting on tax expenditures evolve, expand, or improve in the future. iii. theboardsoughttodeveloparequirementthatwouldcontinuetoberelevant',
28078:'in the future and also allow the preparer to exercise discretion in selecting information sources that are referenced in the',
28079:'cfr. page 11 sffas 52 fasab handbook, version 20 06/21 sffas 52 iv. board members determined that implementing the requirement',
28080:'in paragraph 8.f will likely necessitate the use of electronic hyperlinking in the cfr, given 1 the costs and burdens',
28081:'of using alternative methods for implementing the requirement, such as postage and printing costs, and 2 the availability and minimal',
28082:'costs associated with hyperlinking to electronic information available on the internet. the board encourages the use of hyperlinks in implementing',
28083:'the requirement. v. the board concluded that the requirement in paragraph 8.f makes it sufficiently clear to the preparer and',
28084:'auditor that the reader should be informed that the information referenced is unaudited. moreover, the board concluded that md&awas an',
28085:'appropriate section for directing users to unaudited reports. d. options for consideration proposed by the task force regarding the presentation',
28086:'of tax expenditureestimateswereto1encouragethe inclusionoftaxexpenditureestimates as oi in the cfr, 2 require the inclusion of tax expenditure estimates within required supplementary',
28087:'information rsi of the cfr, or 3 neither encourage nor require the inclusion of tax expenditure estimates within the cfr',
28088:'and focus exclusively on narrative content and links to other resources for comprehensive reporting of estimates. i. task force members',
28089:'who supported the placement of tax expenditure estimates in oi were primarily concerned about the quality, timeliness, and availability of',
28090:'reliable data upon which these estimates are based. these task force members were also concerned that existing differences in the',
28091:'list of tax expenditures identified by two credible sources of such estimatestreasurys office of tax policy and the jctmay pose',
28092:'challenges, particularly if such information were audited. additionally, estimation methodologies for certain tax expenditures can neither be tested nor improved',
28093:'over time by way of assessing their historical performance against tax return data or transactions; assessing historical performance for certain',
28094:'tax expenditures requires the use of data that are not collected on tax returns or otherwise available because theseestimatesareimputedratherthanbasedonrecordabletransactionsthat actuallyoccurred.',
28095:'taskforcememberssupportingtheinclusionof estimatesin oi believed that these unique challenges impede the preparers ability to 1 identify a generally accepted universe of',
28096:'tax expenditures; 2 develop estimatesgenerally accepted as reliable, fair, and correctly measured; and 3 include estimates within rsi or basic',
28097:'information without negative or potentially unresolvable audit challenges. page 12 sffas 52 fasab handbook, version 20 06/21 sffas 52 ii.',
28098:'these members recommendedand the board ultimately concludedthat encouraging the inclusion of estimates in oi avoids such costs and challenges, increases',
28099:'transparency and context surrounding the general magnitude and impact of tax expenditures on the governments financial position, and elevates tax',
28100:'expenditure estimates into an unaudited section of the cfr to create more transparency. requirement for information in md&aand notes a8.',
28101:'theboardconcludedthatthecfrsmd&ashouldincludeadiscussionoftaxexpenditures, their general purpose, and how they affect the governments financial position and condition. this statement also requires discussion of',
28102:'other factors that may affect tax collections in order to place tax expenditure information in an appropriate context. the specific',
28103:'requirements are presented in paragraph 8 and subparagraphs 8.a8.f. a9. requiringinformation ontax expenditures inthemd&aandnotes to thefinancial statements in the cfr',
28104:'is important for the following reasons: a. discussion regarding the topic of tax expenditures is currently absent; however, tax expenditures',
28105:'have had a significant impact on the federal governments financial position, tax collections, and performance outcomes each year. the significant',
28106:'impact of tax expenditures warrants discussion in md&abecause md&ashould provide a clear and concise description of the reporting entity and',
28107:'its … activities, program and financial performance, systems, controls, legal compliance, financial position, and financial condition.6 b. tax expenditures are',
28108:'significant to the management, budgetary, and oversight functions of the congress and theadministration. tax expenditures are often used by thefederalgovernment',
28109:'asamechanismtoaddresspolicyobjectives. taxexpenditures may also affect the judgment of citizens about the efficiency and effectiveness of the tax code in accomplishing',
28110:'certain financial or policy objectives. therefore, tax expenditures are consistent with the provisions of statement of federal financial accounting standards',
28111:'15, paragraph 6, which states: md&ashould deal with the vital few matters; i.e., the most important matters that will probably',
28112:'affect the judgments and decisions of people who rely on the gpffr as a 6statement of federal financialaccounting standards 15,',
28113:'par. 1. page 13 sffas 52 fasab handbook, version 20 06/21 sffas 52 source of information. … matters to be',
28114:'discussed and analyzed are those that management of the reporting entity believes it is reasonable to assume could: i. lead',
28115:'to significant actions or proposals by top management of the reporting unit; ii. be significant to the managing, budgeting, and',
28116:'oversight functions of the congress and theadministration; or iii. significantly affect the judgment of citizens about the efficiency and effectiveness',
28117:'of their federal government. c. in sffac 1, the board established four objectives of federal financial reporting. these objectives provide',
28118:'a framework for assessing the existing accountability and financial reporting systems of the federal government and for considering new accounting',
28119:'standards.7theobjectivesaddress1budgetaryintegrity,2operatingperformance, 3 stewardship, and 4 systems and controls. d. objective 1, budgetary integrity, states that: federalfinancialreportingshould assist infulfilling thegovernmentsdutyto bepublicly',
28120:'accountableformoniesraisedthroughtaxesandothermeansandfortheirexpenditure inaccordancewiththeappropriationslawsthat establishthegovernmentsbudget fora particular fiscal year and related laws and regulations. i. subobjective1astates that: federal financial reporting should provide',
28121:'information that helps readers to determine how budgetary resources have been obtained and used … ii. subobjective 1c states that:',
28122:'federal financial reporting should provide information that helps readers to determine how information on the use of budgetary resources relates',
28123:'to information on the costs of program operations. e. tax expenditures reduce federal revenues via tax legislation. many tax expenditures',
28124:'resemble mandatory spending programs for which spending is typically determined by rules for eligibility and benefit formulas. other tax expenditures',
28125:'resemble discretionary spending programs for which the congress appropriates annual funding. forgoing 7 sffac 1, par. 109. page 14 sffas',
28126:'52 fasab handbook, version 20 06/21 sffas 52 budgetary resourcesthroughthe use of taxexpenditurescan bea method of achieving policy objectives without',
28127:'direct outlays of funds to federal agencies and programs. accordingly, themd&aandfinancialstatementnoterequirementsinthisstatementwill provide budgetary information and contribute to addressing objective 1.',
28128:'in particular, the disclosure requirements will contribute to addressing subobjectives 1aand 1c because these disclosures provide readers with an understanding',
28129:'of how tax expendituresaffect theavailabilityof budgetaryresourcesand taxcollections, and how certain policy objectives are addressed through the mechanism of forgoing tax',
28130:'revenues. f. objective 2, operating performance, states that: federal financial reporting should assist report users in evaluating the service efforts,',
28131:'costs, and accomplishments of the reporting entity, and the manner in which these service efforts have been financed; and the',
28132:'management of the entitys assets and liabilities. g. tax expenditures are used as one of many means to accomplish policy',
28133:'objectives of the federal government.although tax expenditures are not direct outlays of federal funds, they are often viewed as alternatives',
28134:'to other policy instruments, such as spending or regulatory programs. the service efforts, costs, and accomplishments of the reporting entitythe',
28135:'u.s. governmentinclude those service efforts undertaken, costs incurred through, and accomplishments resulting from the use of tax expenditures.accordingly,thisstatementwillresult in informationthatalertsreadersto',
28136:'the efforts and costs associated with tax expenditures and, therefore, will provide operating performance information and contribute to addressing objective',
28137:'2. h. objective 3, stewardship, states that: federal financial reporting should assist report users in assessing the impact on the',
28138:'country of the governments operations and investments for the period and how, as a result, the governments and the nations',
28139:'financial conditions have changed and may change in the future. federal financial reporting should provide information that helps the reader',
28140:'to determine whether 1 the governments financial position improved or deteriorated over the period, 2 future budgetary resources will likely',
28141:'be sufficient to sustain public services and to meet obligations as they come due, and 3 government operations have contributed',
28142:'to the nations current and future wellbeing. i. because tax expenditures are often viewed as alternatives to spending or regulatory',
28143:'programs, they can be viewed as government investments of forgone budgetary page 15 sffas 52 fasab handbook, version 20 06/21',
28144:'sffas 52 resources designed to address policy objectives. thus, tax expenditures affect 1 the governments financial position, 2 the budgetary',
28145:'resources available to sustain public services and to meet obligations as they come due, and 3 the nations current and',
28146:'future wellbeing. accordingly, the board concluded that the requirements for md&a and notes to the financial statements in the cfr',
28147:'provide stewardship information and contribute to addressing objective 3. a10. requiring information on tax expenditures in the notes to the',
28148:'financial statements in the cfr is important for the following reasons: a. the requirements will help readers understand that the',
28149:'tax system is used to accomplish policy goals as well as collect revenue. b. the requirements will help readers understand',
28150:'that some efforts and related costs are not transparent in the financial statements but do affect them. c. the requirements',
28151:'provide context of other factors affecting tax collection in order to place tax expenditures in an appropriate context and help',
28152:'readers to have a more complete understanding of factors affecting the governments financial position and condition. a11. the information reported',
28153:'in accordance with the requirements of this statement for md&a and the notes to the financial statements in the cfr',
28154:'will improve users awareness and understanding of taxexpenditures, their use, and their relationship to and impact on federal revenues and',
28155:'the overall financial position of the u.s. government. a12. the information reported in accordance with requirements of this statement will',
28156:'help users to evaluate and understand 1 the impact of the tax code on budgetary resources and uses; 2 the',
28157:'service efforts, costs, and accomplishments of the reporting entity, and the manner in which these service efforts have been financed',
28158:'and/or affected by the tax system; and 3 how the tax code relates to and/or affects the governments investments and',
28159:'financial position, and how the governments financial condition has changed and may change in the future as a result. reporting',
28160:'estimates in other information a13. regarding costbenefit considerations, sffac 1, paragraph 155 states that for many purposes, other information sources',
28161:'and other techniques to maintain and demonstrate accountability are either essential or more costeffective. paragraphs 910 of this statement provide',
28162:'readers with a means of easily accessing other relevant tax expenditure information sources. page 16 sffas 52 fasab handbook, version',
28163:'20 06/21 sffas 52 a14. regarding the inclusion of estimates in oi and informing readers of the source and availability',
28164:'of published information wherein the estimates were originally published; the board concluded thatsuitable amountsof detail, context, and explanationscan accompany estimatespresentedin',
28165:'a reasonablyconcise mannerwhile also meeting the needsof users with different levels of knowledge regarding tax expenditures. accordingly, the inclusion of',
28166:'statementstoalertreadersthat the published informationincludesa completepopulation of thetaxexpenditure estimatesidentified bythereporting partyandwhethersuch information includes details of the estimating conventions and explanatory definitions',
28167:'of the tax expenditures presented in oi would also be helpful to users. a15. the board may elect to evaluate',
28168:'the costs, limitations, benefits, and other implications of developing additional measurement, recognition, and disclosure guidance in the future. a16. given',
28169:'the conceptual issues that make tax expenditures unauditable, before any future efforts are potentially undertaken, the following matters need to',
28170:'be considered: a. how best to define, identify, and measure tax provisions that are both relevant for financial reporting purposes',
28171:'and generally accepted by economists and other experts b. whether it is feasible to develop estimates that are considered to',
28172:'be representationally faithful, consistent, comparable, and auditable c. if auditability can be achieved, what considerations would enable the preparer and',
28173:'auditor to achieve their respective responsibilities in a reasonably effective and efficient manner summary of outreach effortsand responses a17. the',
28174:'ed was issued june 2, 2016, with comments requested by september 15, 2016. upon its release, notices and press releases',
28175:'were sent to the following organizations: a. the federal register; b. fasab news and the related listserv subscribers, including: i',
28176:'the journal of accountancy, aga today, accounting today, the cpa journal, government executive and the cpa letter; ii the cfo',
28177:'council, the council of the inspectors general on integrity and efficiency, and the financial statement audit network; page 17 sffas',
28178:'52 fasab handbook, version 20 06/21 sffas 52 iii committees of professional associations generally commenting on fasab eds in the',
28179:'past; and iv other individuals and organizations in the federal accountability community. a18. this broad announcement was followed by electronic',
28180:'mailings of the ed and subsequent reminder notices to: a. relevant congressional committees, including: i. the house committee on oversight',
28181:'and government reform, ii. the senate committee on homeland security and governmental affairs, iii. the house committee on ways and',
28182:'means, iv. the senate committee on finance, v. the house committee on the budget, vi. the senate committee on the',
28183:'budget, and vii. the jct; b. nonprofit, public policy, and accounting organizations, such as: i. state and territorial cpa societies,',
28184:'ii. accounting, tax, and public policy and research organizations, iii. accounting and auditing firms, and iv. taxpayer associations; c. individuals',
28185:'that have published articles, commentary, and/or research regarding tax expenditures, such as: i. college professors, ii. economists, and iii. tax',
28186:'policy analysts. page 18 sffas 52 fasab handbook, version 20 06/21 sffas 52 a19. the board did not rely on',
28187:'the number in favor of or opposed to a given position. information about the respondents majority view is provided only',
28188:'as a means of summarizing the comments. the board considered each response and weighed the merits of the points raised.',
28189:'the respondents comments are summarized below. a20. fasab received 12 responses from federal agencies, users of federalfinancialinformation, and professional associations.',
28190:'the majority of respondents agreed with the proposed requirementsintheed,which are implemented inthisstatement inparagraphs68andthe related subparagraphs. a21. however, some respondents disagreed',
28191:'with board proposals in the ed to encourage the presentation of major tax expenditure estimates in oi in a manner',
28192:'that informs readers of the general magnitude of tax expenditures and their impact on federal revenues. afew respondents viewed rsi',
28193:'as a more appropriate classification for the information. other respondents expressed a preference to exclude estimates from the cfr altogether',
28194:'and refer readers to external resources wherein comprehensive reports and estimates can be obtained. a22. the board carefully considered respondents',
28195:'views and found them to be consistent with the considerations,costs,benefits, and views expressed by taskforce and board members in earlier',
28196:'deliberations. a23. the board concluded that it would not be appropriate to change the ed proposal from encouraging the presentation',
28197:'of major tax expenditure estimates from external sources in oi to requiring such information in rsi. such a change would',
28198:'classify the information as required information. for reasons discussed in paragraphsa7.d.i anda16, the board concluded that such a requirement must',
28199:'be preceded by the development of recognition and measurement criteria. a24. the board also concluded that it would not be',
28200:'appropriate to remove the ed proposal to encourage the presentation of major tax expenditure estimates. for reasons discussed in paragrapha7.d.ii,',
28201:'the board maintains that the implementation of paragraphs 910 and the related subparagraphs will enhance user awareness and understanding of',
28202:'tax expenditures and their relationship to and impact on federal revenues and the overall financial position of the u.s. government.',
28203:'a25. one respondent expressed that requirements to report on tax expenditures should also be extended to at least certain component',
28204:'reporting entities. the respondent noted that many component reporting entity objectives and achievements are financed as much through tax expenditures',
28205:'as through outlays. page 19 sffas 52 fasab handbook, version 20 06/21 sffas 52 a26. the board agrees that tax',
28206:'expenditures contribute to component reporting entity performance objectives and costs inherent to the achievement of those objectives. in its review',
28207:'of the respondents comment letter, the board concluded that costbenefit considerations regarding its decision not to extend requirements to component',
28208:'reporting entities should be clarified in the basis for conclusions. a27. the board concluded early in the project that there',
28209:'is strong evidence of significant challenges to identifying and assigning tax provisions and aligning those provisions with agency goals. board',
28210:'members considered problems identified in a government accountability office gao report issued in july 2016,8 including the following: a. there',
28211:'is a continuing lack of clarity about the roles of different federal agencies in conducting reviews of tax expenditures. this',
28212:'lack of clarity can lead to inaction in identifying tax expenditures contributions to agency goals. b. whether or not agencies',
28213:'have a defined role in administering tax expenditures influences whether those agencies identify tax expenditure contributions to their goals. i.',
28214:'if agencies do not have a defined role in administering a tax expenditure, they may choose not to identify the',
28215:'tax expenditures contributions to their goals. ii. the agencies that linked tax expenditures to performance measures typically had a defined',
28216:'role in administering them, and therefore collected data on those tax expenditures. a28. before efforts can be undertakenby fasabto extendrequirements',
28217:'to component reporting entities, many issues need to be considered and deliberated by the board, such as: a. how best',
28218:'to define and identify tax provisions that are relevant for financial reporting purposes, b. the extent to which a component',
28219:'reporting entitys role in administering a tax provision should affect recognition of that tax provision for financial reporting purposes, c.',
28220:'the extent to which the alignment of a component reporting entitys missions, goals, and objectives with the accomplishments of a',
28221:'tax provision should affect recognition of that provision for financial reporting purposes, and 8 gao, tax expenditures: opportunities exist to',
28222:'use budgeting and agency performance processes to increase oversight, gao16622 washington, d.c.: july 7, 2016. page 20 sffas 52 fasab',
28223:'handbook, version 20 06/21 sffas 52 d. the types of information most relevant to users of gpffrs and how this',
28224:'information should be presented therein, if at all. a29. afew respondents expressed concerns about or provided suggested edits to an',
28225:'illustration included in the ed. a30. instead of addressing comments on the illustration, the board elected to remove the illustration',
28226:'from the ed for the following reasons: a. the primary purpose of the illustration was to enable ed respondents to',
28227:'envision how the proposed requirements might be implemented in the cfr. b. the illustration was in a nonauthoritative appendix. c.',
28228:'there is only one cfr. treasury and the office of management and budget omb officials expressed that including such an',
28229:'illustration in the final statement was not essential to understanding provisions of the standard. d. the illustration may become outdated',
28230:'as the cfr preparer may develop more innovative ways to present information and/or as tax policy evolves. boardapproval a31. this',
28231:'statement was approved by the board with a vote of seven members in favor of its issuanceandtwomembers,ms. hoandmr. reger,abstainingfromthe vote.',
28232:'written ballots are available for public inspection at the fasab office. page 21 sffas 52 fasab handbook, version 20 06/21',
28233:'sffas 52 appendix b: tax expenditures explained purpose in light of the board’s mission to improve federal financial reporting, it',
28234:'is paramount that such reportingassistsreportusersinevaluatingtheservice efforts,costs, accomplishments, andfiscal sustainability of the federal government and in understanding how these efforts and',
28235:'accomplishments have been financed. although tax expenditures have similarities to federal spendingintheirimpact on serviceefforts,costs, accomplishments,and fiscalsustainability;they have historically received little',
28236:'focus in general purpose federal financial reporting. establishing reporting requirements with respect to this topic requires an understanding of tax',
28237:'expenditures, the methods used to estimate income tax expenditures, and considerations in using those estimates. this section provides an overview',
28238:'of tax expenditures to aid preparers and users in understanding reporting in regard thereto. specifically, this section: 1. defines tax',
28239:'expenditures and describes the six types of tax expenditures; 2. provides context with respect to the purpose of tax expenditures,',
28240:'why they are important, and their relationship to government performance, taxpayer behaviors, and the economy; and 3. summarizes how tax',
28241:'expenditure estimates are prepared by treasury. this ultimately affects how tax expenditure estimates can be used and interpreted. background the',
28242:'congressional budget and impoundment controlact of 1974 the budgetact defines tax expenditures as “…revenue losses attributable to provisions of the',
28243:'federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit,',
28244:'a preferential rate of tax, or a deferral of tax liability.” section 3a3 of public law 93344 generally, tax expendituresare',
28245:'provisionsin the taxlawavailable to certainsubsets of taxpayers who engage in certain activities, face special circumstances, or otherwise meet certain criteria.',
28246:'the government uses tax expenditures to stimulate behavior that will accomplish public policy page 22 sffas 52 fasab handbook, version',
28247:'20 06/21 sffas 52 goals such as facilitating homeownership, reducing the cost of borrowing for state and local governments, encouraging',
28248:'higher education, or promoting domestic energy production. tax expenditures are “revenue losses” in that the provisions reduce income taxes owed',
28249:'and, therefore, revenuecollected. taxexpendituresresemblefederalspendinginthat such provisions affect the federal deficit/surplusbyimpacting income tax revenue; however, taxexpenditures are often not treated the',
28250:'same as federal spending for budgetary or financial reporting purposes.9 many tax expenditures resemble mandatory spending programs for which spending',
28251:'is typically determined by rules for eligibility and benefit formulas. other tax expenditures resemble discretionary spending programs for which the',
28252:'congress appropriates annual funding. many tax expenditures can only be removed or changed through tax legislation. while tax expenditures help',
28253:'determine the government’s net revenue, tax expenditure estimates are not explicitly displayed in the statements of net cost or changes',
28254:'in net position. how tax expendituresare identified the first step in identifying tax expenditures is defining the tax baseline so',
28255:'that the provisions considered “special” per the budgetact definition above can be distinguished from those provisions consistent with a baseline',
28256:'tax system. traditionally, for the federal income tax, the baseline tax system is a comprehensive income tax with certain practical',
28257:'provisions that are generally accepted as being part of a baseline tax system. accordingly, provisions such as the personal exemption,',
28258:'standard deductions, deductions of expenses incurred in earning income, and a progressive rate structure are considered to be part of',
28259:'the baseline tax system for measurement purposes. judgments about such provisions are based on a general consensus view of analysts',
28260:'regarding practical provisions of a baseline tax system versus “special” provisions that constitute a tax expenditure. for example, the personal',
28261:'exemption and standard deduction are viewed as defining a zerorate bracket that is part of baseline tax law as are',
28262:'the other graduated rate brackets in the individual income tax. in contrast, the child tax credit is considered a tax',
28263:'expenditure because it provides a “special” benefit that would not exist under baseline tax law. 9 incertaincases atax preferencemay provide',
28264:'cash in the form ofa refundable tax credit even if the taxpayerowes no tax. the budget records payments to taxpayers',
28265:'for refundable tax credits such as earned income tax credits that exceed the taxpayer’s tax liability as outlays. as such,',
28266:'a portion of this type of tax preference is reported as outlays in the budget to the extent payments exceed',
28267:'the taxpayer’s liability, whereas the portion offsetting the taxpayer’s liability reduces budget revenues but is not explicitly reported in the',
28268:'budget. page 23 sffas 52 fasab handbook, version 20 06/21 sffas 52 after determining the baseline tax system, the credits,',
28269:'deductions, special exceptions and allowances that reduce tax liability below the level implied by the baseline tax system are then',
28270:'considered to be tax expenditures. types of tax expenditures there are six types of tax expenditures—exclusions, exemptions, deductions, credits, preferential',
28271:'rates, and deferrals. below describes each and provides an example. table 1: examples of provisions that are tax expenditures when',
28272:'theyare exceptions to the normal [baseline] tax structure tax expenditure description examples exclusion excludes income that would otherwise employees generally',
28273:'pay no income taxes on constitute part of a taxpayers gross income. contributions their employers make on their behalf for',
28274:'medical insurance premiums. exemption reducesgross incomefortaxpayersbecause taxpayers maybe able to reduce their tax of their status or circumstances. liability if',
28275:'they have a dependent who is a child aged 19 through 23 and is a fulltime student. deduction reduces gross',
28276:'income due to expenses taxpayers may be able to deduct state and taxpayers incur. local income taxes and property taxes.',
28277:'credit reduces tax liability dollarfordollar. taxpayers with children under age 17 additionally, some credits are refundable potentially can qualify for',
28278:'up to a $1,000 meaning that a credit in excess of tax liability partially refundable, per child credit, provided results',
28279:'in a cash refund. their income does not exceed a certain level. preferential tax rate reduces tax rates on some',
28280:'forms of income. capital gains on certain income are subject to lowertax rates underthe individual income tax. deferral delays recognition',
28281:'of income or accelerates taxpayers may defer paying tax on interest some deductions otherwise attributable to earned on certain u.s.',
28282:'savings bonds until the future years. bonds are redeemed. source: gao13167sp: guide for evaluating tax expenditures. in considering these six',
28283:'types of tax expenditures, it may be possible to achieve certain public policy outcomes in a variety of ways. for',
28284:'example, some public policy outcomes may be achieved through a preferential rate, a deduction, or a credit. because a variety',
28285:'of approaches can produce the same cash effect, the types are different in form rather than substance. most reports do',
28286:'not categorize tax expenditures by type. the types are presented to aid in understanding the mechanisms used to establish preferences.',
28287:'page 24 sffas 52 fasab handbook, version 20 06/21 sffas 52 budgetact requirements and history the term “tax expenditures” was',
28288:'introduced in 1967 byassistant secretary for tax policy, stanley surrey, in a speech calling for a “full accounting” of them.',
28289:'following his speech, estimates were prepared bytreasury and later by the jct of the congress. in 1974, the budgetact charged',
28290:'the house and senate budget committees with the duty “to request and evaluate continuing studies of tax expenditures, to devise',
28291:'methods of coordinating tax expenditures, policies, and programs with direct budget outlays, and to report the results of such studies',
28292:'to the senate on a recurring basis.” the budgetact further required that the annual president’s budget include tax expenditure estimates.10',
28293:'estimates are now available annually from both the jct11 and the president’s budget.12 each jct report contains a discussion of',
28294:'the concept of tax expenditures, identification of new tax expenditures enacted into law, a general explanation on how the committee',
28295:'staff measures tax expenditures, estimates of tax expenditures, and distributions of selected individual tax expenditures by income class. treasury prepares',
28296:'estimates provided in the president’s budget. these estimates are for the current fiscal year and the ten years thereafter. the',
28297:'estimates are intended to support budget analysis and are a measure of the economic benefits that are provided through the',
28298:'tax laws to various groups of taxpayers and sectors of the economy. the estimates also may be useful in assessing',
28299:'the efficiency and effectiveness of achieving specific public goals through the use of tax expenditures. treasury provides the tax expenditure',
28300:'estimates before the end of each fiscal year and makes them available on the treasury website before the president’s budget',
28301:'is issued.13 10 kleinbard, edward. tax expenditure framework legislation, research paper series and legal studies research paper series, paper no.',
28302:'c101. usc center in law, economics and organization. 2010. 11 see https://www.jct.gov/publications.html?func=select&id=5 for jct publications on tax expenditures. as of',
28303:'january 6, 2017, estimates for fiscal years 20152019 were available in report number jcx141r15. 12 see https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/ap14expenditures.pdf for thefiscal year',
28304:'2017 president’s budget. theanalytical perspectives, chapter 14 provides estimates for fiscal years 2015 through 2025. last accessed january 6, 2017.',
28305:'13 see http://www.treasury.gov/resourcecenter/taxpolicy/pages/taxexpenditures.aspx for the latest estimates of tax expenditures. last accessed january 6, 2017. page 25 sffas 52 fasab',
28306:'handbook, version 20 06/21 sffas 52 government performance reporting for tax expenditures the government performance and resultsact of 1993 gpra',
28307:'originally put in place a framework for performance planning and reporting, and the gpramodernizationact of 2010 gprama has significantlyenhanced the',
28308:'statutory framework.14 the gpramaframeworkaims at taking a more crosscutting and integrated approach to focusing on results and improving government performance.',
28309:'omb is required to coordinate with agencies to establish federal government priority goals—otherwise referred to as crossagency priority cap goals.15',
28310:'gpramarequires certain agencies to identify a subset of agency goals as agency priority goals apg, which reflect the highest priorities',
28311:'of each agency. fully implementing gprama requirements could provide the foundation for reviewing tax expenditure performance and assessing their contributions',
28312:'toward federal goals. gpramarequires omb to identify tax expenditures that contribute to the cap goals. in addition, omb guidance has',
28313:'directed agencies to identify tax expenditures that contribute to theirapgs since 2012 and to their strategic objectives since 2013.16 while',
28314:'omb has determined that there are no tax expenditures that are critical to achievement of the current cap goals, agencies',
28315:'have not yet completed actions necessary to identify tax expenditures that contribute to theirapgs.17 how treasury prepares theadministration’s estimates as',
28316:'noted in the definition above, tax expenditures arise from special provisions allowing an exclusion, exemption, or deduction from gross income,',
28317:'a credit, a preferential rate of tax, or a deferral of liability. deciding whether a provision of tax law is',
28318:'a special exception to the baseline income tax system is a matter of judgment. the baseline used by treasury to',
28319:'identify these specialexceptionsisadapted from acomprehensive incometaxapproachinwhichincome isthe sum of consumption and the change in net wealth in a given period',
28320:'of time with certain 14 pub. l. no. 10362, 107 stat. 285 aug. 3, 1993 and pub. l. no. 111352,',
28321:'124 stat. 3866 jan. 4, 2011. 15 omb set the first interim cap goals in 2012 and identified the next',
28322:'set of cap goals in march 2014, which is to be updated every four years. 16 omb, circulara11 2015. 17',
28323:'gao, managing for results: implementation of gpra modernization act has yielded mixed progress in addressing pressing governance challenges, gao15819 washington,',
28324:'d.c.: sept. 28, 2015 and gao, omb improved implementation of crossagency priority goals, but could be more transparent about measuring',
28325:'progress, gao16509 washington, d.c.: may 20, 2016. page 26 sffas 52 fasab handbook, version 20 06/21 sffas 52 departures.18 this',
28326:'baseline assumes an individual income tax and a separate corporate income tax.19 preparing tax expenditure estimates requires consideration of certain',
28327:'information about the economy, presently and in the future. treasury estimates for economic activity are consistent with the economic assumptions',
28328:'in the president’s midsession review of the prior year’s budget and reflect current law as of july 1.20 each tax',
28329:'expenditure is measured by the difference between tax liability under current law and the tax liability that would result if',
28330:'the tax expenditure provision were repealed and had never existed. it is assumed that there is no behavioral response to',
28331:'the elimination of the provision and taxpayers simply recalculate their tax in the absence of the provision in question. thus,',
28332:'tax expenditures calculate revenues forgone by the existence of the rule but not necessarily the amount of revenue that would',
28333:'be raised if it were repealed. for example, the ability to deduct mortgage interest expense on owneroccupied housing is considered',
28334:'to be a tax expenditure. the taxexpenditure estimate reportsthe revenue change that would occur if this deduction were repealed, but',
28335:'does not take into account any revenue effect that might occur as a result of most changes in taxpayer behavior,',
28336:'such as taxpayer decisions to own homes. however, in recalculating the tax due in the absence of this deduction, the',
28337:'tax expenditure estimate assumes taxpayers would switch from itemizing deductions to claiming the standard deduction if that were tax minimizing',
28338:'in the absence of the ability to deduct mortgage interest on an itemized return. when possible, treasury uses samples of',
28339:'tax returns provided by the internal revenue service as the basis for tax expenditure estimates. for provisions benefiting individual tax',
28340:'filers the individual tax model itm tax calculator is often used. the itm is based upon a stratified sample of',
28341:'individual tax returns that represent the entire tax filing population. this sample is augmented byadditionaldata to represent the u.s. population.',
28342:'theitm projectsthese individual records forward consistent with theadministration’s economic forecast. the itm tax calculator allows the computation of tax for',
28343:'each record under differing tax laws. 18 forexample,one major departure is thatincome istaxable only when it is realized in exchange.',
28344:'thus, the deferralof tax onunrealized capitalgains is not regarded as a tax expenditure.another example is that values of assets and',
28345:'debt are not generally adjusted for inflation. 19 treasury and the jct differ in their assumed baselines from which tax',
28346:'expenditures are measured. for a summary ofthedifferences seealtshuler, rosanneandrobert dietz. “reconsidering tax expenditure estimation.” the national tax journal, june 2011,',
28347:'64 2, part 2, 459490. 20 “current law baseline” refers to the budget estimates prepared by theadministration based on laws',
28348:'enacted at the time they are prepared. if a provision will expire or change under currently enacted law then the',
28349:'baseline projections reflects the effects of that expiration or change. page 27 sffas 52 fasab handbook, version 20 06/21 sffas',
28350:'52 for example, the lifetime learning tax credit is considered a tax expenditure because the baseline tax system would not',
28351:'allow credits targeted at particular activities, investments, or industries. treasury uses the itm tax calculator to compute tax liability for',
28352:'each filing unit under current law and current law with the lifetime learning tax credit removed. as another example, the',
28353:'exclusion of public assistance benefits is considered a tax expenditure because transfers from the government would be considered income to',
28354:'the taxpayer under the baseline tax system. since tax records do not record the receipt of these types of benefits,',
28355:'treasury estimates the value of this tax expenditure by supplementing historical bureau of economicanalysis national income and productaccounts data with',
28356:'u.s. department of health and human services and state expenditure data to determine the total forecasted value of public assistancetransfers',
28357:'to taxpayers under current lawover the budget window. the taxexpenditure iscalculated bymultiplying the aggregate publictransfersbyanestimate of the average effective tax',
28358:'rate for tax filers receiving public assistance benefits. treasury estimates the cash effect of each tax expenditure. some tax expenditures',
28359:'represent deferrals of taxation a tax not paid in the current tax year will be paid in a future tax',
28360:'year when thedeferral reverses. estimatesfor suchdeferralsare basedonthenet taxeffect of current year deductions or exclusions and reversals of prior year deferrals',
28361:'included in current year taxable income.21 for example,definedcontributionemployer plans are estimated as the nettaxeffectof current year contributions excluded from income',
28362:'and income reported upon withdrawals from plans. yeartoyear differences in the calculations for each tax expenditure reflect changes in tax',
28363:'law, including phase outs of tax expenditure provisions and changes that alter the baseline income tax structure, such as the',
28364:'tax rate schedule, the personal exemption amount, the standard deduction, and other factors. for example, the dollar value of tax',
28365:'expenditures tends to increase and decrease as taxrates increase and decrease, respectively, without anyother changes in law. understanding estimates tax',
28366:'expenditure estimates are developed to aid policymakers. it is important to understand that they are not transactionbased amounts. the estimates',
28367:'are updated annually using the best availabledataand models. however, data limitationsand resource constraintsareinherent inthe process. for example, some data collected',
28368:'on tax returns are not available in time for the annual estimates; other data are not collected on tax returns',
28369:'at all and must always be estimated. 21 tocomplement these estimates,treasuryalso reports adiscountedpresentvalue estimate of the future net revenue effects',
28370:'for the tax expenditure activity in the most recently concluded calendar year. page 28 sffas 52 fasab handbook, version 20',
28371:'06/21 sffas 52 the major considerations regarding the estimates are identified below. not necessarily equivalent to forgone revenue. estimates should',
28372:'be regarded as approximations. as with expenses incurred with spending programs, tax expenditure estimates do not necessarily equal the change',
28373:'in the deficit22 that would result from repealing these special provisions because: a. eliminating a tax expenditure may have incentive',
28374:'effects that alter economic behavior and b. tax expenditures are interdependent even without incentive effects. difficulty in calculating totals.atotalfortheestimatedtaxexpendituresisnotprovidedin the',
28375:'president’sbudget because each tax expenditure is estimated independently assuming other parts of the tax code remain unchanged. the estimates might',
28376:'be different if two or more tax expenditures were changed simultaneously because of potential interactions among provisions. nonetheless, other experts',
28377:'do present a total summing the separate estimates. the congressional budget office cbo has modeled the interaction of the ten',
28378:'largest tax expenditures in the individual income tax law and found that interactions that overstate the effect are similar in',
28379:'size to interactions that understate the effect.23 asa result, cbo concluded that the total is a meaningful estimate for the',
28380:'general magnitude of tax expenditures under current tax law. if the law changes in significant ways the interactions may not',
28381:'result in offsetting overand understatements of the effect to the same extent. completeness. as noted earlier, significant judgments are required',
28382:'to identify special provisions of the income tax code. given the complexity of the tax code, differences in judgments lead',
28383:'some to include provisions in tax expenditure lists that others would exclude and vice versa. in addition, special provisions can',
28384:'be included in taxes other than income taxes for example, excise taxes, but these generally are not included in reports',
28385:'on tax expenditures. expiring provisions. estimates are based on tax law enacted as of july 1 of the reporting year',
28386:'and assume that any provisions scheduled to expire will expire. as noted above, provisions likely to be extended are ignored',
28387:'for estimation purposes until 22 notethat repealing certain spending programs would also not reduce the deficit by the amount of',
28388:'spending because of interaction with other programs and the tax system. for example, social security benefits may be taxed so',
28389:'that eliminating the benefits would also reduce tax revenue and possibly increase spending in other benefit programs. thus, the change',
28390:'in the deficit would be smaller than the direct spending eliminated through the adjustment to the social security program. 23',
28391:'congressional budget office. the distribution of major tax expenditures in the individual tax system. may 2013. page 29 sffas 52',
28392:'fasab handbook, version 20 06/21 sffas 52 such legislation isactuallyenacted. in otherwords, estimatesarebased on current law rather than analyzing policy',
28393:'outcomes likely to occur. as a result, an extensive knowledge of tax policy may be required in order to understand',
28394:'multiyear tax expenditure projections when provisions are scheduled to expire or when provisions of previous legislation are phased in. alternatives.',
28395:'estimates involve significant judgments and, as a result, there are alternative approaches to estimation. for example, alternatives regarding the application',
28396:'of marginal tax rates, treatment of related tax provisions, or selection of a different baseline such as a consumption tax',
28397:'rather than an income tax would affect tax expenditure estimates. in addition, while estimates are provided for the cash current',
28398:'revenue effect for each of the ten fiscal years covered by the projections, a present value alternative that considers the',
28399:'full life cycle of the taxable activity may be more useful for taxexpendituresinvolving deferrals or other longterm revenue effects. for',
28400:'such tax expenditures, the present value effects are important because deferrals will reverse in later years, and a presentvalue estimate',
28401:'for the activity in the current calendar year would include this activity. see http://www.treasury.gov/resourcecenter/taxpolicy/pages/taxexpenditures.aspx for a complete listing of tax',
28402:'expenditures reported and estimated by treasury. page 30 sffas 52 fasab handbook, version 20 06/21 sffas 52 appendix c: task',
28403:'force members r. scottbell department ofthetreasury,senioraccountant robert bixby the concord coalition, executive director robertdietz nahb,tax andmarketanalysis, senior vice president bertedwards',
28404:'gwscpafederalissues andstandardscommittee fiscmember regina kearney officeofmanagementandbudget, senioradvisor johnmcclelland department ofthetreasury,office oftaxanalysis, economist jamesmctigue, jr. governmentaccountabilityoffice,strategic issues,director tim morgan pricewaterhousecoopers, partner',
28405:'retired danmurrin ey,partner;gwscpafiscmember marylynnsergent governmentaccountabilityoffice,strategic issues,assistantdirector jamie taber office of management and budget, economist alexandra thornton center for american progress,',
28406:'tax policy, senior director robin valentine kpmg llp, partner david weiner congressional budget office, tax analysis division, assistant director page',
28407:'31 sffas 52 fasab handbook, version 20 06/21 sffas 52 appendix d:abbreviations apg agency priority goals cap crossagency priority cbo',
28408:'congressional budget office cfr consolidated financial report of the u.s. government ed exposure draft fasab federalaccounting standardsadvisory board gao government',
28409:'accountability office gpffr general purpose federal financial report gpra government performance and resultsact of 1993 gprama gpra modernizationact of 2010',
28410:'itm individual tax model jct joint committee on taxation md&a management’s discussion andanalysis oai otheraccompanying information oi other information omb',
28411:'office of management and budget rsi required supplementary information sffac statement of federal financialaccounting concepts sffas statement of federal financialaccounting',
28412:'standards page 32 sffas 52 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 53: budget andaccrual reconciliation:amending sffas',
28413:'7, and 24, and rescinding sffas 22 status issued october 27, 2017 effective date affects affected by for periods beginning',
28414:'after september 30, 2018. earlier implementation is permitted. sffas 7, par. 80, 81, 82, 91, 92, 93, 95, 96, 97,',
28415:'98, 99, 100, 101 and 102. sffas 22 is rescinded. sffas 24, par. 9. none. summary this statement amends requirements',
28416:'for a reconciliation between budgetary and financial accounting information established by statement of federal financialaccounting standards sffas 7, accounting for',
28417:'revenue and other financing sources and concepts for reconciling budgetary and financial accounting. to increase informational value and usefulness, and',
28418:'to support the governmentwide financial statement reconciling net operating cost to the budget deficit, this statement provides for the budget',
28419:'and accrual reconciliation bar to replace the statement of financing. the bar explains the relationship between the entitys net outlays',
28420:'on a budgetary basis and the net cost of operations during the reporting period. the bar will start with net',
28421:'cost of operations and be adjusted by components of net cost that are not part of net outlays, components of',
28422:'net outlays that are not part of net cost, and other temporary timing differences, which reflect some special adjustments. the',
28423:'provisions of this statement need not be applied to immaterial items. the determination of whether an item is material depends',
28424:'on the degree to which omitting or misstating information about the item makes it probable that the judgment of a',
28425:'reasonable person relying on the information would have been changed or influenced by the omission or the misstatement. page 1',
28426:'sffas 53 fasab handbook, version 20 06/21 sffas 53 table of contents summary 1 standards 3 scope 3 amendments to',
28427:'sffas 7 3 rescission to sffas 22 8 amendment to sffas 24 8 effective date 8 appendixa: basis for conclusions',
28428:'10 appendix b:abbreviations 16 page 2 sffas 53 fasab handbook, version 20 06/21 sffas 53 standards scope 1. this statement',
28429:'applies when a component reporting entity is presenting general purpose financial reports in conformance with sffas 34, the hierarchy of',
28430:'generally accepted accounting principles, including the application of standards issued by the financial accounting standards board. this information is not',
28431:'required in the consolidated financial report of the u.s. government as a whole. amendments to sffas 7, accounting for revenue',
28432:'and other financing sources and concepts for reconciling budgetary and financial accounting sffas 7 2. paragraphs 80 to 82 of',
28433:'sffas 7 established standards regarding a reconciliation and are replaced with the following paragraphs: 80. budgetary and financial accounting information',
28434:'are complementary, but both the types of information and the timing of their recognition are different. to better understand these',
28435:'differences, the reconciliation should explain the relationship between the net cost of operations1 and net outlays by the entity during',
28436:'the reporting period. the reconciliation should reference the reported net outlays2 and related adjustments as defined by office of management',
28437:'and budget omb circulara11: preparation, submission, and execution of the budget. 81. the net cost of operations should be adjusted',
28438:'by 1the terms net cost of operations and net cost are used interchangeably to refer to the total cost incurred',
28439:'by the reporting entity less exchange revenue earned during the period. 2omb circular a11: preparation, submission, and execution of the',
28440:'budget states, “outlay means a payment to liquidate an obligation other than the repayment to the treasury of debt principal.',
28441:'outlays are a measure of government spending. subtract all offsetting collections unexpired and expired from gross outlays to yield net',
28442:'outlays so that the contribution of the budget account to the federal governments bottom line the surplus or deficit can',
28443:'be determined.” page 3 sffas 53 fasab handbook, version 20 06/21 sffas 53 a. components of net cost that are',
28444:'not part of net outlays e.g., depreciation and amortization expenses of assets previously capitalized, change in asset/liabilities; b. components of',
28445:'net outlays that are not part of net cost e.g., acquisition of capital assets; and c. other temporary timing differences',
28446:'e.g., prior period adjustments due to correction of errors. 82. theadjustmentsshouldbepresentedandexplainedinappropriatedetailandina manner that best clarifies the relationship between net outlays',
28447:'and the accrual basis amounts used in financial accounting.anarrative explaining the purpose, the nature, and the line items of the',
28448:'reconciliation also should be presented with the reconciliation. the amount and nature of noncash outlays should be disclosed. for purposes',
28449:'of this statement, noncash outlays are outlays that are recognized without a concurrent cash disbursement, such as interest accrued by',
28450:'the department of the treasury treasury on debt held by the public and the change in allowance for subsidy cost.',
28451:'3. paragraphs91to 93ofsffas7amendedstatementoffederalfinancialaccounting concepts 2, entity and display, to address the then new reconciliation. to ensure sffac 2 aligns with',
28452:'the amended standards, these paragraphs are replaced with the following paragraphs: 91. subobjective 1c of the budgetary integrity objective states',
28453:'that information is needed to help the reader to determine how information on the use of budgetary resources relates to',
28454:'information on the costs of program operations and whether information on the status of budgetary resources is consistent with other',
28455:'accounting information on assets and liabilities. this objective arises because accrualbased expense measures used in financial statements differ from the',
28456:'obligation and outlaybased measures used in budgetary reporting. 92. to satisfy this objective, information is needed about the differences between',
28457:'budgetary and financial i.e., proprietary accounting that arise as a result of the different measures. this could be accomplished through',
28458:'a budget and accrual reconciliation bar that reconciles the net budgetary outlays for a federal entitys programs and operations to',
28459:'the net cost of operating that entity. the data presented could be for the reporting entity as a whole, for',
28460:'the major suborganization units, for major budget accounts, or for aggregations of budget accounts, rather than for each individual budget',
28461:'account of the entity. 93. the budget and accrual reconciliation is added to sffac no. 2s suggested listofitemsincludedinthesectiontitled financialreporting foranorganizational',
28462:'page 4 sffas 53 fasab handbook, version 20 06/21 sffas 53 entity. in addition, a footnote referencing the reconciliation of',
28463:'net costs to outlays should be added stating the following: omb will provide guidance regarding details of the display for',
28464:'the budget andaccrual reconciliation, including whether it should be presented as a basic financial statement or as a schedule in',
28465:'the notes to the basic financial statements. 4. theheaderbeforeparagraph95ofsffas7titled statementoffinancing isreplacedwith budget andaccrual reconciliation. 5. paragraphs 95 to 102 of',
28466:'sffas 7 amended sffac 2 to provide for the reconciliation. these paragraphs are amended to ensure the concepts and the',
28467:'related illustration presented asappendix1g of sffac2align with the amended standards. paragraphs95 to 102 and the related illustration are replaced with',
28468:'the following: 95. the purpose of the reconciliation of net costs to outlays is to explain how budgetaryresourcesoutlayedduringtheperiodrelatetothe netcostofoperations forthe',
28469:'reporting entity.thisinformation should bepresentedin a way thatclarifies the relationship between the outlays reported through budgetary accounting and the accrual basis',
28470:'of financial i.e., proprietary accounting. by explaining this relationship, the reconciliation provides the information necessary to understand how the budgetaryoutlaysfinancethenet',
28471:'costof operations andaffectthe assets and liabilities of the reporting entity. the appropriate elements for the reconciliation are indicated in the',
28472:'following paragraphs. they provide logical groupings of reconciling items that help the reader move from outlays to net cost of',
28473:'operations. 96. net cost of operations is from the statement of net cost. 97. components of net cost that are',
28474:'not part of net outlays are most commonly atheresultofallocating assetstoexpensesovermorethan one reporting period e.g., depreciation and the writedown of assets',
28475:'due to revaluations, b the temporary timing differences between outlays/receipts and the operating expense/revenue during the period, and c costs',
28476:'financed by other entities imputed interentity costs. 98. components of net outlays that are not part of net cost are',
28477:'primarily amounts provided in the current reporting period that fund costs incurred in prior years and amounts incurred for goods',
28478:'or servicesthathave been capitalized on the balance sheet e.g., plant, property and equipment acquisition and inventory acquisition. 99. other temporary',
28479:'timing differences reflect special adjustments e.g., prior period adjustments due to correction of errors. page 5 sffas 53 fasab handbook,',
28480:'version 20 06/21 sffas 53 100. net outlays isthe summation ofthe above amountsand equalsthe statement of budgetary resources net outlays',
28481:'amount. 101. thepreparershould presentmaterialamountsseparatelyinthereconciliation and discuss these in the narrative. the use of other captions should be minimized and individually',
28482:'material amounts should not be netted to report an immaterial amount. 102. the following is an example for the financial',
28483:'statement format. this format and its narrative will be added to the appendices of sffac no. 2. entity and display,appendix',
28484:'1g example financial statement formats budget andaccural reconciliaiton narrative budgetary and financial accounting information differ. budgetary accounting is used for',
28485:'planning and control purposes and relates to both the receipt and use of cash, as well as reporting the federal',
28486:'deficit. financial accounting is intended to provide a picture of the governments financial operations and financial position so it presents',
28487:'information on an accrual basis. the accrual basis includes information about costs arising from the consumption of assets and the',
28488:'incurrence of liabilities. the reconciliation of net outlays, presented on a budgetary basis, and the net cost, presented on an',
28489:'accrual basis, provides an explanation of the relationship between budgetary and financial accounting information. the reconciliation serves not only to',
28490:'identify costs paid for in the past and those that will be paid in the future, but also to assure',
28491:'integrity between budgetary and financial accounting. the analysis below illustrates this reconciliation by listing the key differences between net cost',
28492:'and net outlays. unrealized valuation loss on investment in the reconciliation is related to the write down of security investment',
28493:'due to recent market volatility, which did not result in an outlay but did result in a cost. the large',
28494:'increase of accounts payable compared to last year is because this years rent expense has not been paid but was',
28495:'included in the net cost this year and not included in the outlays. the large variance in the transfers in/out',
28496:'without reimbursement between fiscal year fy 201x and fy201x is primarily due to the transfer of program management responsibility from',
28497:'agency 1 to agency 2 as discussed in further detail in note x. in addition, the decrease in imputed financing',
28498:'source is a result of the payment in fy201x for the abc settlement. this is an illustration of what might',
28499:'be presented in the narrative paragraph. it is an example of how to explain the material line items in the',
28500:'reconciliation and describes why some material line items either increase or decrease net cost but do not have the same',
28501:'impact on net outlays. page 6 sffas 53 fasab handbook, version 20 06/21 sffas 53 reconciliation examplefor the year ended',
28502:'september 30, 201x intrawith the total fy governmental public 201x net cost $xxx $xxx $xxx components of net cost that',
28503:'are not part of netoutlays: property, plant, and equipment depreciation xxx xxx xxx property, plant, and equipment disposal & xxx',
28504:'xxx xxx revaluation yearend credit reform subsidy reestimates xxx xxx xxx unrealized valuation loss/gain on investments xxx xxx xxx increase/decrease',
28505:'in assets: accounts receivable xxx xxx xxx loans receivable xxx xxx xxx investments xxx xxx xxx other assets xxx xxx',
28506:'xxx increase/decrease in liabilities: accounts payable xxx xxx xxx salaries and benefits xxx xxx xxx insurance and guarantee program liabilities',
28507:'xxx xxx xxx environmental and disposal liabilities xxx xxx xxx other liabilities unfunded leave, unfunded feca, xxx xxx xxx actuarial',
28508:'feca other financing sources: federal employee retirement benefit costs paid by opm xxx xxx xxx and imputed to the agency',
28509:'transfers out in without reimbursement xxx xxx xxx other imputed financing xxx xxx xxx totalcomponentsofnetcostthatarenotpartof xxx xxx xxx net outlays',
28510:'components of net outlays that are not part of netcost: effect of prior year agencies credit reform subsidy rexxx xxx',
28511:'xxx estimates acquisition of capital assets xxx xxx xxx page 7 sffas 53 fasab handbook, version 20 06/21 sffas 53',
28512:'intrawith the total fy governmental public 201x acquisition of inventory xxx xxx xxx acquisition of other assets xxx xxx xxx',
28513:'other xxx xxx xxx total components of net outlays thatare not part ofnet cost xxx xxx xxx other temporary timing',
28514:'differences xxx xxx xxx net outlays $xxx $xxx $xxx3 rescission of sffas 22, change in certain requirements for reconciling obligations',
28515:'and net cost of operations, amendment of sffas 7, accounting for revenue and other financing 6. sffas 22 is rescinded',
28516:'in its entirety by this statement. amendment to sffas 24, selected standards for the consolidated financial report of the united',
28517:'states government 7. the following paragraph replaces sffas 24, paragraph 9: 9. paragraphs 7782 of sffas 7 are not applicable',
28518:'to the consolidated financial report of the u.s. government as a whole.1 [text of footnote 1: footnote rescinded by sffas',
28519:'53.] effective date 8. the requirements of this statement are effective for reporting periods beginning after september 30, 2018. early',
28520:'adoption is permitted. in the initial year of implementation, the 3 total net outlays can be linked to the statement',
28521:'of budgetary resources, and equals gross outlays less actual offsetting collections and distributed offsetting receipts. the net outlays for intragovernmental',
28522:'and with the public listed in the format are calculated totals. page 8 sffas 53 fasab handbook, version 20 06/21',
28523:'sffas 53 disclosure requirements that were applicable in prior reporting periods sffas 7 unamended paragraphs 80 to 82 are not',
28524:'required for comparative presentations. the provisions of this statement need not be applied to immaterial items. page 9 sffas 53',
28525:'fasab handbook, version 20 06/21 sffas 53 appendixa: basis for conclusions this appendix discusses some factors considered significant by board',
28526:'members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches and rejecting others. individual',
28527:'members gave greater weight to some factors than to others. the standards enunciated in this statementnot the material in this',
28528:'appendixshould govern the accounting for specific transactions, events, or conditions. this statement may be affected by later statements. the fasab',
28529:'handbook is updated annually and includes a status section directing the reader to anysubsequent statements that amend this statement. within',
28530:'the text of the statements, the authoritative sections are updated for changes. however, this appendix will not be updated to',
28531:'reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale for each',
28532:'amendment. project history a1. the statement of financing sof note disclosure has been criticized as too complex and not useful.',
28533:'in july 2012,theassociation of governmentaccountants research report titled governmentwide financial reporting suggested improvements in the processes used to prepare the',
28534:'consolidated financial report, as well as related standards. moreover, the consolidated financial report of the u.s. government cfr includes a',
28535:'basic financial statement reconciling the unified budget deficit deficit and the net cost of operations. the deficitis based on receiptsand',
28536:'outlays rather than obligations. the current component reporting entity obligationbased sof reconciliation does not align with the cfr reconciliation. a2.',
28537:'infebruary2016,theboardagreedtoundertakeaprojecttoassessthesof andformeda budget andaccrual reconciliation bar task force. through this project, the board planned to address concerns regarding the reconciliation',
28538:'and the need to support the cfr reconciliation by aligning the component reporting entity disclosures with the cfr requirements. in',
28539:'addition to agreeing with the concerns of the board, the bar task force identified the following topics to be addressed:',
28540:'a. the complexity and usefulness of the sof note b. ways to more directly relate budgetary data and accrual data',
28541:'for a less complex presentation c. support for the cfr reconciliation statement limited to component reporting entity requirements page 10',
28542:'sffas 53 fasab handbook, version 20 06/21 sffas 53 a3. thebartaskforce,whichincludedindustryrepresentativesfromseveralpublicaccounting and consulting firms, as well as representatives with financial',
28543:'reporting preparation and policy background from the following federal agencies, supported the development of this proposed statement: a. department of',
28544:'energy doe b. treasury c. department of veteransaffairs va d. small businessadministration sba e. u.s. coast guard uscg f. securities',
28545:'and exchange commission sec a4. during the initial phase of the project, the bar task force was divided into subgroups',
28546:'to research a the usefulness of the current sof, b a new component reporting entity reconciliationformat,andcthepotentialamendmenttotheexistingstandardstoadopt the new reconciliation format.',
28547:'the sof subgroup reviewed 23 major agencies current sof notes to understand their current sof note preparation process and surveyed',
28548:'task force members on the advantages and disadvantages of the current sof note. based on the research result, the task',
28549:'force came to the following conclusions: a. each agency established its own processes. b. the sof is time consuming to',
28550:'prepare. c. without governmentwide guidance, the sof note is not comparable between agencies. d. the sof note is too complex',
28551:'to be useful. a5. subsequently, the bar task force researched and developed a first draft of the bar format based',
28552:'on the objectives identified. in addition, the bar subgroups a performed agency level piloting of the bar, b researched detailed',
28553:'account level guidance needed to support the bar, c aligned the current format to the related cfr format, and d',
28554:'conducted other research including consideration of changes to the existing standards. a6. in june 2016, the board approved the bar',
28555:'task forces recommendations based on its research results. these recommendations included the following: page 11 sffas 53 fasab handbook, version',
28556:'20 06/21 sffas 53 a. the current sof note should be replaced due to its complexity and limited usefulness. b.',
28557:'there is a need to develop an alternative presentation format that would better relate budgetary and accrual data, as well',
28558:'as support the cfr reconciliation. a7. by the end of july 2016, the task force proposed an updated bar. six',
28559:'agenciesdoe, sba, sec,treasury, uscg, and vapiloted the bar and provided their feedback on the pilot process and how the updated',
28560:'bar compares to the current sof note. based on the pilot results, the bar task force identified many advantages and',
28561:'some disadvantages of replacing the sof note with a reconciliation of net cost to net outlays. a8. inaugust2016, theboardtentatively approvedthe',
28562:'newformat andsupportedcontinued development efforts, including involving more agencies to pilot the bar. by the end of this project phase, a',
28563:'total of 13 agenciesincluding 11 cabinet agenciesjoined the pilot efforts. a9. based on feedback from the task force and pilot',
28564:'agencies, the new bar a. supports the cfr reconciliation, b. is easier to prepare than the current sof note disclosure,',
28565:'c. iseasierforusersnotfamiliarwithfederalbudgetingandaccountingtounderstanddue to its similarity to the commercial cash flow statement, and d. requires that each agency develop a new',
28566:'process to support the development of the new bar. a10. the task force developed detailed account level guidance for each',
28567:'line item of the bar and compared it to the information needed to support the cfr budget deficit and net',
28568:'cost reconciliation. the task force found that a majority of the current cfr reconciliation line items will be supported by',
28569:'the new reconciliation. the remaining line items primarily relate to budget receipts, which were intentionally omitted in the new reconciliation',
28570:'to simplify the presentation and reduce the preparation burden on the component reporting entities. a11. according to the task force',
28571:'respondents, the new reconciliation is an improvement in comparison to the existing reconciliation. the bar is more closely aligned with',
28572:'information presented incomponent reportingentityfinancialstatements. it iseasiertounderstand, and readily auditable. further, the requirement to provide a narrative explanation of the reconciliationandsignificantreconcilingitemsalsoenhancesitsunderstandability.',
28573:'formost agencies, it does not require a change of the agencies current software. page 12 sffas 53 fasab handbook, version',
28574:'20 06/21 sffas 53 a12. treasury has collaborated with the task force representatives in developing guidance that could be used',
28575:'to prepare the bar. such guidance will facilitate implementation and reduce costs. summary of outreach efforts and responses a13. the',
28576:'board issued the exposure draft ed, budget and accrual reconciliation, on december 21, 2016, with comments requested by march 14,',
28577:'2017. a14. upon release of the ed, fasab provided notices and press releases to the fasab subscription email list, the',
28578:'federal register, fasab news, the journal of accountancy, association of governmentaccountants topics, the cpajournal, government executive, the cpa letter, the',
28579:'financial statementaudit network, and committees of professional associations generally commenting on eds in the past for example, the greater washington',
28580:'society of cpas and theassociation of governmentaccountants financial management standards board. a15. fasab received 27 responses from preparers, users of',
28581:'federal financial information, and professional associations. the majority of respondents agreed with the proposals to 1 replace the sof with',
28582:'the bar, 2 present the bar as a footnote, and 3 present a narrative disclosure accompanying the bar. a16. approximately',
28583:'half of the respondents disagreed with the proposed effective date and the proposal for the restatement of comparative prior period',
28584:'information. nine out of 27 respondents also disagreed with the proposal to have a breakdown of the intragovernmental and with',
28585:'the public in the reconciliation. a17. some respondents identified certain issues that could be clarified within the statement or addressed',
28586:'in the basis for conclusions. a18. the board did not rely on the number of respondents in favor of or',
28587:'opposed to a given position. information about the respondents majority view is provided only as a means of summarizing the',
28588:'comments. the board considered each response and weighed the merits of the points raised. the respondents significant comments are summarized',
28589:'below. a19. some respondents disagreed with the proposed effective date because they believed it did not allow them sufficient time',
28590:'to test the new format. to maximize agency success in adopting the proposed statement and allow each agency sufficient time',
28591:'testing the new process, the board agreed to change the effective date to periods beginning after september 30, 2018, with',
28592:'early adoption permitted. page 13 sffas 53 fasab handbook, version 20 06/21 sffas 53 a20. some respondents stated that to',
28593:'restate prior period data, a oneyear phasein period would be needed. during this time, comparative data could be collected and',
28594:'reported while agencies continued to provide the sof. most of the respondents believed that a change to the bar format',
28595:'should be done prospectively. the board considered that the restatement ofthe priorperiod data does not add anyadditionalvalue,and the prior year',
28596:'sof would not be comparable with the bar format during the implementation year. ultimately, the board agreed to present only',
28597:'data for one reporting period in the first year of implementation, with a comparative presentation in the following reporting period.',
28598:'a21. the agencies listed various reasons or challenges that they would face, should agencies be required to present separately in',
28599:'the bar intragovernmental and with the public data. for example, while the bar reconciles line items from the statement of',
28600:'net cost and statement of budgetary resources, only the statement of net cost provides information needed to distinguish between amounts',
28601:'that are intragovernmental as opposed to with the public. that distinction is not made regarding amounts, including outlays, shown on',
28602:'the statement ofbudgetaryresources. afew agencies alsostatedthatoutlays bytrading partnerarenotreadilyavailableintheircurrent systems, andagenciesareconcernedabout theadditionalsysteminvestmentcost andthelaborintensiveworktosegregateinformation for certain line items associated with this breakdown',
28603:'request. a22. treasury has stated it needs the audited breakdown of intragovernmental and with the public to support the elimination',
28604:'process during consolidation. without the breakdown, the bar format is less beneficial for the cfr reconciliation because intragovernmental amounts will',
28605:'not be identified for elimination. a23. after carefully considering the comments received on the breakdown, the board proposed an updated',
28606:'bar format without the breakdown of the budgetary net outlays. however, the format retains the breakdown of line items above',
28607:'the net outlays based on the following: a. although the bar format is illustrated in the statement, this statement does',
28608:'not explicitly require this breakdown. the office of management and budget omb and treasury have the option to establish more',
28609:'or less detailed requirements upon implementation or in the future. b. in the proposed bar format, the line items for',
28610:'the section components of net cost that are not part of net outlays are taken directly from the balance sheet',
28611:'and the statement of net cost. the needed breakdowns already exist in those statements. the majority of the individual line',
28612:'items for the section components of net outlays that are not part of net cost can be supported by ussglfor',
28613:'the breakdown. a24. to ensure the updated bar format reasonably addressed agency concerns before finalizing this statement, treasury updated the',
28614:'detailed account level guidance with a page 14 sffas 53 fasab handbook, version 20 06/21 sffas 53 breakdown of intragovernmental',
28615:'and with the public. the updated format and guidance were provided to the nine agencies expressing concerns about the breakdown',
28616:'during the comment period. six of the nine agencies responded after piloting both the format and the guidance, and they',
28617:'all preferred this updated format. based on the positive feedback from those respondents, the revised format is included as an',
28618:'illustration to be presented in sffac 2 as amended by this statement. a25. the board believes disclosing information about any',
28619:'noncash outlays would aid in preparing the cfr reconciliation of the budget surplus deficit to the change in cash. boardapproval',
28620:'a26. this statement was approved for issuance by all members of the board. page 15 sffas 53 fasab handbook, version',
28621:'20 06/21 sffas 53 appendix b:abbreviations bar budget and accrual reconciliation cfr consolidated financial report of the u.s. government doe',
28622:'department of energy fasab federalaccounting standardsadvisory board feca federal employees compensation act fy fiscal year gaap generallyaccepted accounting principles omb',
28623:'office of management and budget opm office of personnel management sba small businessadministration sec securities and exchange commission sffac statement',
28624:'of federal financialaccounting concepts sffas statement of federal financialaccounting standards sof statement of financing treasury department of the treasury uscg',
28625:'united states coast guard va department of veteransaffairs page 16 sffas 53 fasab handbook, version 20 06/21 statement of federal',
28626:'financialaccounting standards 54: leases:anamendment of sffas 5,accounting for liabilities of the federal government and sffas 6, accounting for property, plant,',
28627:'and equipment status issued april 17, 2018 effective date for periods beginning after september 30, 2023. earlier adoption is not',
28628:'permitted. affects sffas 5, par. 43 46 are rescinded sffas 6 par. 20 and 29 are rescinded affected by none.',
28629:'summary this statement revises the financial reporting standards for federal lease accounting. it provides a comprehensive set of lease accounting',
28630:'standards to recognize federal lease activities in the reporting entity’s general purpose federal financial reports and includes appropriate disclosures. this',
28631:'statement requires that federal lessees recognize a lease liability and a leased asset at the commencement of the lease term,',
28632:'unless it meets any of the scope exclusions or the definition/criteria of shortterm leases, or contracts or agreements that transfer',
28633:'ownership, or intragovernmental leases. afederal lessor would recognize a lease receivable and deferred revenue, unless it meets any of the',
28634:'scope exclusions or the definition/criteria of shortterm leases, contracts or agreements that transfer ownership, or intragovernmental leases. the provisions of',
28635:'this statement need not be applied to immaterial items. the determination of whether an item is material depends on the',
28636:'degree to which omitting or misstating information about the item makes it probable that the judgment of a reasonable person',
28637:'relying on the information would have been changed or influenced by the omission or the misstatement. page 1 sffas 54',
28638:'fasab handbook, version 20 06/21 sffas 54 table of contents summary 1 standards 3 scope 3 definition 4 lease term',
28639:'5 shortterm leases 8 contracts oragreements thattransfer ownership 9 intragovernmental leases 9 lessee recognition, measurement, and disclosures for leases other',
28640:'than shortterm 11 leases, contracts oragreements that transfer ownership, and intragovernmental leases lessor recognition, measurement, and disclosures for leases other',
28641:'than shortterm leases, contracts oragreements that transfer ownership, and intragovernmenal leases financial report of the u.s. government disclosures 19 lease',
28642:'incentives and lease concessions 19 contracts oragreements withmultiplecomponents 20 contract oragreementcombinations 21 lease terminations and modifications 21 subleases 23 saleleaseback',
28643:'transactions 23 leaseleaseback transactions 24 amendments to sffas 5, accounting for liabilities of the federal government, and sffas 24 6,',
28644:'accounting for property, plant, and equipment implementation 27 effective date 28 appendixa: basis for conclusions 29 appendix b:abbreviations 41 page',
28645:'2 sffas 54 fasab handbook, version 20 06/21 sffas 54 standards scope 1. this statement applies to federal entities that',
28646:'present general purpose federal financial reports, including the consolidated financial report of the u.s. government cfr, in conformance with generally',
28647:'accepted accounting principles, as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy',
28648:'of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board. 2. for purposes',
28649:'of applying this statement, a lease1 is defined as a contract or agreement whereby one entity lessor conveys the right',
28650:'to control the use of property, plant, and equipment pp&e2 the underlying asset to another entity lessee for a period',
28651:'of time as specified in the contract or agreement in exchange for consideration. to qualify as a lease, the underlying',
28652:'asset typically should be identified by being explicitly specified in a contract or agreement. however, an asset also can be',
28653:'identified by being implicitly specified at the time that the asset is made available for use by the lessee. leases',
28654:'include contracts or agreements that, although not explicitly identified as leases, meet the definition of a lease. 3. to determine',
28655:'whether a contract or agreement conveys the right to control the use of the underlying asset, a federal entity should',
28656:'assess whether the contract or agreement gives the lessee both of the following: a. the right to obtain economic benefits',
28657:'or services from use of the underlying asset as specified in the contract or agreement b. therighttocontrolaccesstotheeconomicbenefitsorservicesoftheunderlyingasset as specified in',
28658:'the contract or agreement 4. the lease definition excludes contracts or agreements for services, except those contracts or agreements that',
28659:'contain both a lease component and a service component par.73. a service contract is a contract that directly engages the',
28660:'time and effort of a contractor whose primary purpose is to perform an identifiable task rather than to provide a',
28661:'tangible asset. 1terms defined in the glossary are shown in boldface the first time they appear. 2sffas 6, accounting for',
28662:'property, plant, and equipment. page 3 sffas 54 fasab handbook, version 20 06/21 sffas 54 5. this statement does not',
28663:'apply to a. leases of assets under construction or b. leases licenses of internal use software sffas 10, accounting for',
28664:'internal use software, as amended. definitions definitions in paragraphs 6 through 13 are presented within the standards because they are',
28665:'new terms intended to have a specific meaning when applying the standards. 6. lease – alease is defined as a',
28666:'contract or agreement whereby one entity lessor conveys the right to control the use of pp&e the underlying asset to',
28667:'another entity lessee for a period of time as specified in the contract or agreement in exchange for consideration. 7.',
28668:'shortterm lease – ashortterm lease is a lease with a lease term as defined in par. 1421 of 24 months',
28669:'or less. 8. intragovernmental lease – an intragovernmental lease is a contract or agreement occurring within a consolidation entity or',
28670:'between two or more consolidation entities as defined in sffas 47, reporting entity3 whereby one entity lessor conveys the right',
28671:'to control the use of pp&e the underlying asset to another entity lessee for a period of time as specified',
28672:'in the contract or agreement in exchange for consideration. 9. lease incentives – lease incentives include lessor payments made to',
28673:'or on behalf of the lessee to entice the lessee to sign a lease. lease incentives may include upfront cash',
28674:'payments to the lessee; for example, moving costs, termination fees to the lessee’s prior lessor, or the lessor’s assumption of',
28675:'the lessee’s lease obligation under a different lease with another lessor. 10. lease concessions – lease concessions are rent discounts',
28676:'made by the lessor to entice the lessee to sign a lease. lease concessions include rent holidays/free rent periods, reduced',
28677:'rents, or commission credits. 3sffas 47, reporting entity, par. 38–42. page 4 sffas 54 fasab handbook, version 20 06/21 sffas',
28678:'54 11. leasehold improvements – leasehold improvements are additions, alterations, remodeling, renovations, or other changes to a leased property that',
28679:'either extend the useful life of the existing property or enlarge or improve its capacity and are paid for financed',
28680:'by the lessee. 12. lessor improvements – lessor improvements are additions, alterations, remodeling, renovations, or other changes to a leased',
28681:'property that either extend the useful life of the existing property or enlarge or improve its capacity and are paid',
28682:'for financed by the lessor rather than by the lessee. 13. initial direct lease costs – initial direct lease costs',
28683:'are costs that are directly attributable to negotiating and arranginga lease orportfolio of leasesthat would not have been incurred without',
28684:'entering into the lease. lease term 14. theleasetermisthenoncancelableperiodpluscertainperiodssubjecttooptionstoextend or terminate the lease. the noncancelable period is the shorter of a.',
28685:'the period identified in the lease contract or agreement that precedes any option to extend the lease or b. the',
28686:'period identified in the lease contract or agreement that precedes the first option to terminate the lease. 15. the lessee’s',
28687:'lease term includes the noncancelable period and the following periods, if applicable: a those periods specified in the lease contract',
28688:'or agreement that relate to a lessee’s option to extend the lease if it isprobable, based on all relevant factors,',
28689:'that the lessee will exercise that option b. thoseperiodsspecifiedintheleasecontractoragreementthatfollowalessee’soption to terminate thelease up untilthe point intime whenthere isanotheroption or,ifnone, the',
28690:'end of the lease if it is probable, based on all relevant factors, that the lessee will not exercise that',
28691:'option c. those periods specified in the lease contract or agreement that relate to a lessor’s option to extend the',
28692:'lease if there is significant evidence, based on all relevant factors, that the lessor will exercise that option page 5',
28693:'sffas 54 fasab handbook, version 20 06/21 sffas 54 d. thoseperiodsspecifiedintheleasecontractoragreementthatfollowalessor’soption to terminate thelease up untilthe point intime whenthere isanotheroption',
28694:'or,ifnone, the end of the lease if there is significant evidence, based on all relevant factors, that the lessor will',
28695:'not exercise that option 16. the options should be considered in chronological order. if a determination is made that an',
28696:'additional period will not be added to the lease term for an option based on the likelihood criteria above, subsequent',
28697:'options would not be considered. for example, if the lessee determined that it was not probable that a lessee option',
28698:'to extend would be exercised; any subsequent option periods would not be evaluated. 17. the lessor’s lease term includes the',
28699:'noncancelable period and the following periods, if applicable: a. those periods specified in the lease contract or agreement that relate',
28700:'to a lessor’s option to extend the lease if it is probable, based on all relevant factors, that the lessor',
28701:'will exercise that option b. thoseperiodsspecifiedintheleasecontractoragreementthatfollowalessor’soption to terminate thelease up untilthe point intime whenthere isanotheroption or,ifnone, the end of the',
28702:'lease if it is probable, based on all relevant factors, that the lessor will not exercise that option c. those',
28703:'periods specified in the lease contract or agreement that relate to a lessee’s option to extend the lease if there',
28704:'is significant evidence, based on all relevant factors, that the lessee will exercise that option d. those periods specified in',
28705:'the lease contract or agreement that follows a lessee’s option to terminate the lease up until the point in time',
28706:'when there is another option or, if none, the end of the lease if there is significant evidence, based on',
28707:'all relevant factors, that the lessee will not exercise that option 18. the options should be considered in chronological order.',
28708:'if a determination is made that an additional period will not be added to the lease term for an option',
28709:'based on the likelihood criteria above, subsequent options would not be considered. for example, if the lessor determined that it',
28710:'was not probable that a lessor option to extend would be exercised; any subsequent option periods would not be evaluated.',
28711:'19. indeterminingtheleasetermforboththelesseeandlessor,thefollowingspecificprovisions should be applied: page 6 sffas 54 fasab handbook, version 20 06/21 sffas 54 a. periods for which',
28712:'both the lessee and lessor 1 have an option to terminate the lease without permission from the other party or',
28713:'2 have to agree to extend are cancelable periods and are excluded from the lease term. for example, monthtomonth lease',
28714:'holdovers, also referred to as rolling lease extensions, or any lease that continues into a holdover period until a new',
28715:'contract or agreement is signed would be considered cancelable if both the lessee and the lessor have an option to',
28716:'terminate. therefore, either could cancel the lease at any time. these holdover periods are cancelable periods and should be excluded',
28717:'from the lease term.4 b. if the lease provisions allow for the termination of a lease due to a the',
28718:'purchase of the underlying asset, b the payment of all sums due, or c the default on payments, these provisions',
28719:'are not considered options to terminate. c. an availability of funds or cancellation clause allows federal lessees to cancel a',
28720:'lease agreement, typically on an annual basis, if funds for the lease payments are not appropriated. this type of clause',
28721:'should affect the lease term only when it is probable that the clause will be exercised. 20. at the commencement',
28722:'of a lease term, lessors and lessees should assess all factors relevant to the likelihood that the lessee will exercise',
28723:'options identified in paragraph 1519, whether these factors are contract or agreement based, underlying asset based, market based, or federal',
28724:'specific. the assessment often will require the consideration of a combination of these interrelated factors. examples of factors to consider',
28725:'include, but are not limited to, the following: a. asignificant economicincentive,suchas contractual or agreementterms and conditions for the optional periods',
28726:'that are favorable compared with current market rates b. asignificant economicdisincentive,suchascosts toterminatetheleaseandsigna newleaseforexample, negotiation costs, relocationcosts, abandonmentofsignificant leasehold improvements, costs',
28727:'of identifying another suitable underlying asset, costs associated with returning the underlying asset in a contractually specified condition or to',
28728:'a contractually specified location, or a substantial cancellation penalty c. the history of exercising options to extend or terminate 4',
28729:'sffas 1, accounting for selected assets and liabilities, applies to any related accounts payable or accounts receivable amounts. page 7',
28730:'sffas 54 fasab handbook, version 20 06/21 sffas 54 d. the extent to which the asset underlying the lease is',
28731:'mission critical to the federal entity 21. lessors and lessees should reassess the lease term only if one or more',
28732:'of the following events occur: a. the lessor or lessee elects to exercise an option that was previously presumed would',
28733:'not be exercised under the likelihood criteria in paragraphs 15 and 17 b. the lessororlessee does not elect to exercise',
28734:'an option that waspreviously presumed would be exercised under the likelihood criteria in paragraphs 15 and 17 c. an event',
28735:'specified in the lease contract or agreement that requires an extension or termination of the lease takes place. shortterm leases',
28736:'22. ashortterm leaseis aleasewithaleaseterm as definedinparagraphs 14 21 of24 months or less. lessee treatment of shortterm leases 23. alesseeshouldrecognizeshorttermleasepaymentsasanexpensebasedonthepayment provisions',
28737:'of the contract or agreement and standards regarding recognition of accounts payable and other related amounts. the lessee should recognize',
28738:'an asset if payments are made in advance of the reporting period to which they relate or a liability for',
28739:'rent due if paymentsare made subsequent to thatreportingperiod. the lesseeshould recognizelease incentives and lease concessionsfor example, arent holidayperiod of one',
28740:'ormore months free as reductions of lease rental expense on a straightline basis over the lease term. lessor treatment of',
28741:'shortterm leases 24. alessor shouldrecognizeshorttermlease payments as revenuebasedonthepayment provisions of the contract or agreement and standards regarding recognition of accounts',
28742:'receivableandotherrelatedamounts. thelessorshouldrecognizea liabilityifpaymentsare received in advance of the reporting period to which they relate or an asset for rent due',
28743:'if payments are received subsequent to that reporting period. the lessor should recognize any lease incentive or concession for example,',
28744:'a rent holiday period with one or more months free as reductions of lease rental income on a straightline basis',
28745:'over the lease term. page 8 sffas 54 fasab handbook, version 20 06/21 sffas 54 contracts oragreements that transfer ownership',
28746:'25. acontractoragreementthatatransfersownershipoftheunderlyingassettothelesseeby the end of the contract or agreement and b does not contain options to terminate par. 14– 19,',
28747:'but that may contain an availability of funds or cancellation clause that is not probable of being exercised par.19.c, should',
28748:'be reported as a purchase of that asset by the lessee or as a financed sale of the asset by',
28749:'the lessor.5 intragovernmental leases 26. an intragovernmental lease is a contract or agreement occurring within a consolidation entity or between',
28750:'two or more consolidation entities as defined in sffas 47whereby one entity lessor conveys the right to controlthe use of',
28751:'pp&e the underlying asset to another entity lessee for a period of time as specified in the contract or agreement',
28752:'in exchange for consideration. any lease that meets the definition of an intragovernmental lease would be required to follow the',
28753:'accounting and disclosure guidance described in paragraphs 27–38. 27. alessee shouldrecognizeleasepayments,includingleaserelatedoperating costsfor example, maintenance, utilities, taxes, etc. paid to the',
28754:'lessor, as expenses based on the payment provisions of the contract or agreement and standards regarding recognition of accounts payable',
28755:'and other related amounts. prepaid rent or a payable for rent due should be recognized as an asset or liability,',
28756:'respectively, and an expense should be recognized in the appropriate reporting period based on the specifics of the lease provisions.',
28757:'28. alessor shouldrecognizeleasereceipts, includingleaserelated operatingcosts for example, maintenance, utilities, or taxes received from the lessee as income based on the',
28758:'provisions of the contract or agreement and standards regarding recognition of accounts receivable and other related amounts. rent paid in',
28759:'advance or a receivable should be recognized as a liability or asset, respectively, and income should be recognized in the',
28760:'appropriate reporting period based on the specifics of the lease provisions. 29. rental increases may be fixed in the lease',
28761:'and take place with the passage of time for example, be based on such factors as anticipated increases in costs',
28762:'or anticipated appreciation in property values, but the amount of the increase is specified in the lease or they may',
28763:'be contingent on future events. 5sffas 6, accounting for property, plant, and equipment, par. 26. page 9 sffas 54 fasab',
28764:'handbook, version 20 06/21 sffas 54 30. rental increases may also be variable and based on future changes in specific',
28765:'economic factors on which lease payments are based, for example, future sales or usage activity levels or future inflation tied',
28766:'to a specific economic indicator where the specific amount of the change is not known. 31. if the lease provides',
28767:'for rental increases, a lessee should recognize the expense in the period of the increase. 32. lease incentives should be',
28768:'recognized by the lessee as deferred revenue when received from the lessor and then as reductions of lease rental expense',
28769:'on a straightline basis over the lease term. the lessee should recognize the expensesor lossesto which the incentives relate in',
28770:'the reporting period the costs are incurred. for example, an incentive equal to the moving expense incurred by the lessee',
28771:'to occupy the leased space reduces rent expense over the lease term, and the moving expense is recognized in the',
28772:'reporting period incurred that is, when the move occurs. lease incentives provided to the lessee should be recognized by the',
28773:'lessor as reductions of lease rental income on a straightline basis over the lease term. 33. lease concessions should be',
28774:'recognized by the lessee as reductions of lease rental expense on a straightline basis over the lease term. lease concessions',
28775:'should be recognized by the lessor as reductions in rental income on a straightline basis over the lease term. 34.',
28776:'leasehold improvements that are placed in service at or after the beginning of the lease term should be amortized over',
28777:'the useful life the normal operating life in terms of utility to the lessee of the leasehold improvement, but no',
28778:'longer than the expected lease term. 35. lessorimprovementsarecomponentsoftheleasedpropertyandshouldbecapitalizedand depreciated by the lessor over their useful life consistent with the lessor’s',
28779:'accounting for pp&e.6 36. initial direct lease costs incurred by the lessee should be expensed when incurred. initial direct lease',
28780:'cost incurred by the lessor should be expensed when incurred. disclosures for intragovernmental leases 37. lessees should disclose the following',
28781:'regarding intragovernmental lease activities which may be grouped for purposes of disclosure: 6this recognition is consistent with pp&e capital improvements',
28782:'outlined in sffas 6, accounting for property, plant and equipment, par. 37. page 10 sffas 54 fasab handbook, version 20',
28783:'06/21 sffas 54 a. a general description of significant intragovernmental leasing arrangements, including general lease terms with any applicable specific',
28784:'intragovernmental requirements b. annual lease expense in total and by major leased pp&e category. 38. lessors should disclose the following',
28785:'regarding intragovernmental lease activities which may be grouped for purposes of disclosure: a. ageneraldescriptionof significantleases, includingabreakdownofthenumber of leases with federallyowned',
28786:'assets and privatelyowned assets b. future lease payments that are to be received to the end of the lease term',
28787:'for each of the five subsequent fiscal years and in fiveyear increments thereafter lessee recognition, measurement, and disclosures for leases',
28788:'other thanshortterm leases, contracts oragreements that transfer ownership, andintragovernmental leases 39. at the commencement of the lease term, a lessee',
28789:'should recognize a lease liability and a pp&e righttouse lease asset hereinafter referred to as the lease asset, except as',
28790:'provided in paragraphs 22–24 shortterm leases, paragraph 25 contracts or agreements that transfer ownership, and paragraph 26–38 intragovernmental leases. lease',
28791:'liability 40. alessee initially shouldmeasuretheleaseliability atthepresentvalueofpayments expected to be made during the lease term. measurement of the lease liability should',
28792:'include the following, if required by a lease: a. fixed payments b. variable payments that depend on an index or',
28793:'a rate such as the consumer price index or a market interest rate, initially measured using the index or rate',
28794:'as of the commencement of the lease term c. variable payments that are fixed insubstance as described in paragraph 41',
28795:'d. amounts that are probable of being required to be paid by the lessee under residual value guarantees page 11',
28796:'sffas 54 fasab handbook, version 20 06/21 sffas 54 e. the exercise price of a purchase option if it is',
28797:'probable that the lessee will exercise that option f. payments for penalties for terminating the lease, if the lease term',
28798:'reflects the lessee exercising 1 an option to terminate the lease or 2 an availability of funds or cancellation clause',
28799:'g. any lease incentives par. 70–71 receivable from the lessor h. any other payments to the lessor that are probable',
28800:'of being required based on an assessment of all relevant factors 41. variable payments based on future performance of the',
28801:'lessee or usage of the underlying asset should not be included. rather, these variable payments should be recognized as an',
28802:'expense in the reporting period in which those payments are incurred. however, any component of these variable payments that is',
28803:'fixed insubstance should be included in the lease liability. an example is a lease payment based on a percentage of',
28804:'sales or usage but with a required minimum amount to be paid. that required minimum payment is fixed in substance.',
28805:'42. the future lease payments should be discounted using the interest rate the lessor charges the lessee, which may be',
28806:'the interest rate implicit in the lease. if the interest rate cannot be reasonably estimated by the lessee, the lessee’s',
28807:'estimated incremental borrowing rate7 the estimated rate that would be charged for borrowing thelease payment amounts for the lease term',
28808:'should be used. 43. insubsequentfinancialreportingperiods,thelesseeshouldcalculatetheamortizationofthe discount on the lease liability and recognize that amount as interest expense for the period.',
28809:'any payments made should be allocated first to the accrued interest liability and then to the lease liability. 7afederal lessee’s',
28810:'incremental borrowing rate would be the department of thetreasury borrowing rate for securities of similar maturity to the term of',
28811:'the lease unless the entity has its own borrowing authority. page 12 sffas 54 fasab handbook, version 20 06/21 sffas',
28812:'54 44. the lessee should remeasure the lease liability at subsequent financial reporting dates if one or more of the',
28813:'following changes8 have occurred at or before that financial reporting date, based on the most recent lease contract or agreement',
28814:'before the changes, and if the changes individually or in the aggregate, are expected to significantly affect the amount of',
28815:'the lease liability since the previous measurement: a. there is a change in the lease term. b. an assessment of',
28816:'all relevant factors indicates that the likelihood of a residual value guarantee being required to be paid has changed from',
28817:'probable to not probable or vice versa. c. an assessment of all relevant factors indicates that the likelihood of a',
28818:'purchase option being exercised has changed from probable to not probable, or vice versa. d. there is a change in',
28819:'the estimated amounts for payments already included in the liability except as provided in par. 45. e. there is a',
28820:'change in the interest rate the lessor charges the lessee if used as the initial discount rate. f. acontingency, upon',
28821:'which some or all of the variable payments that will be made over the remainder of the lease term are',
28822:'based, is resolved such that those payments now meet the criteria for measuring the lease liability in paragraph 40. for',
28823:'example, an event occurs that causes variable payments that were contingent on the performance or use of the underlying asset',
28824:'to become fixed payments for the remainder of the lease term. 45. if a lease liability is remeasured for any',
28825:'of the changes in paragraph 44, the liability also should be adjusted for any change in an index or rate',
28826:'used to determine variable lease payments if that change in the index or rate is expected to significantly affect the',
28827:'amount of the liability since the previous measurement. alease liability is not required to be remeasured solely for a change',
28828:'in an index or rate used to determine variable payments. 46. thelesseealsoshouldupdatethediscountrateaspartoftheremeasurementifoneorboth of thefollowing changeshave occurred and the changesindividually or',
28829:'in the aggregate are expected to significantly affect the amount of the lease liability: 8 changes arisingfrom amendments to a',
28830:'lease contract or agreement should be accounted for under the provisions of par. 80–86 for lease modifications and terminations. page',
28831:'13 sffas 54 fasab handbook, version 20 06/21 sffas 54 a. there is a change in the lease term. b.',
28832:'an assessment of all relevant factors indicates that the likelihood of a purchase option being exercised has changed from probable',
28833:'to not probable, or vice versa. 47. alease liabilityisnot requiredtoberemeasured, nor isthediscount rate requiredtobe reassessed, solely for a change in',
28834:'the lessee’s estimated incremental borrowing rate. 48. if the discount rate is required to be updated based on the provisions',
28835:'in paragraph 46, the discount rate should be based on the revised interest rate the lessor charges the lessee at',
28836:'the time the discount rate is updated. if that interest rate cannot be readily determined, the lessee’s estimated incremental borrowing',
28837:'rate at the time the discount rate is updated should be used. leaseasset 49. alessee shouldinitiallymeasuretheleaseasset as thesum ofthe following:',
28838:'a. the amount of the initial measurement of the lease liability par. 40 b. leasepaymentsmadetothelessoratorbeforethecommencementoftheleaseterm, less any lease incentives par.',
28839:'70–71 c. initial direct lease costs that are necessary to place the lease asset into service 50. alease asset shouldbeamortizedinasystematicandrational',
28840:'manner over theshorter of the lease termor the useful life of the underlying asset, except as provided in paragraph 51.',
28841:'the amortization of the lease asset should be reported as amortization expense. 51. if a lease contains a purchase option',
28842:'that the lessee has determined is probable of being exercised, the lease asset should be amortized over the useful life',
28843:'of the underlying asset. in that circumstance, iftheunderlying asset isnondepreciable, suchasland,the leaseasset should not be amortized. 52. theleaseassetgenerallyshouldbeadjustedbythesameamountwhenthecorresponding lease liability',
28844:'is remeasured based on paragraph 44–48. however, if this change reduces the carrying value of the lease asset to zero,',
28845:'any remaining amount should be reported in the statement of net cost as a gain. 53. leased assets classified as',
28846:'pp&e are subject to sffas 44, accounting for impairment of general property, plant, and equipment remaining in use. the change',
28847:'in the manner or duration of use of the underlying asset is an indicator that the right of use asset',
28848:'may be page 14 sffas 54 fasab handbook, version 20 06/21 sffas 54 impaired sffas 44, par. 12. if the',
28849:'underlying asset is impaired, it should be reduced first for any change in the corresponding lease liability. any remaining amount',
28850:'should be recognized as an impairment.9 component reporting entity disclosure requirements for lessees 54. lessees should disclose the following regarding',
28851:'lease activities which may be grouped for purposes of disclosure, other than shortterm leases: a. a general description of its',
28852:'leasing arrangements, including: i. the basis, terms, and conditions on which variable lease payments not included in the lease liability',
28853:'are determined ii. the existence, terms, and conditions of residual value guarantees provided by the lessee b. the total amount',
28854:'of lease assets and the related accumulated amortization, to be disclosed separately from other pp&e assets c. the amount of',
28855:'lease expense recognized for the reporting period for variable lease payments not previously included in the lease liability d. principal',
28856:'and interest requirements to the end of the lease term, presented separately, for the lease liability for each of the',
28857:'five subsequent years and in fiveyear increments thereafter e. the amount of the annual lease expense and the discount rate',
28858:'used to calculate the lease liability lessor recognition, measurement, and disclosures for leases other thanshortterm leases, contracts oragreements that transfer',
28859:'ownership, andintragovernmenal leases 55. atthecommencementoftheleaseterm,alessorshouldrecognizealeasereceivableanda deferredrevenue, exceptasprovidedin paragraph22–24shorttermleases,paragraph25 contracts or agreements that transfer ownership, and paragraphs 26–38 9sffas 44, accounting',
28860:'for impairment of general property, plant, and equipment remaining in use, par. 18–25. page 15 sffas 54 fasab handbook, version',
28861:'20 06/21 sffas 54 intragovernmental leases. any initial direct lease costs incurred by the lessor should be reported as an',
28862:'expense of the period. lease receivable 56. alessor initiallyshouldmeasuretheleasereceivable atthepresentvalueoflease payments to be received for the lease term, reduced by',
28863:'any provision for uncollectible amounts. measurement of the lease receivable should include the following types of payments that might be',
28864:'required by a lease: a fixed payments b. variable payments that depend on an index or a rate such as',
28865:'the consumer price index or a market interest rate, initially measured using the index or rate as of the commencement',
28866:'of the lease term c. variable lease payments that are fixed insubstance as described in paragraph 57 d. residual value',
28867:'guarantees that are fixed payments in substance par. 57 e. any lease incentives par. 70–71 payable to the lessee 57.',
28868:'variable payments based on future performance of the lessee or usage of the underlying asset should not be included in',
28869:'the measurement of the lease receivable. rather, those paymentsshouldberecognizedasrevenuein the reportingperiod towhichthosepayments relate. however, any component of those variable payments',
28870:'that is fixed in substance should be included in the lease receivable. for example, if a lease payment is based',
28871:'on a percentage of sales but has a required minimum payment, that required minimum is a fixed payment in substance.',
28872:'similarly, a residual value guarantee is an insubstance fixed payment if it stipulates theunderlying asset willbe sold at the end',
28873:'of the lease term, with the lessee assuming a liability for any shortfall if the sales price is less than',
28874:'an agreedupon minimum amount. 58. amounts to be received under residual value guarantees that are not fixed in substance should',
28875:'be recognized as a receivable and revenue when a a guarantee payment is required as agreed to by the lessee',
28876:'and lessor and b the amount can be reasonably estimated. amounts to be received for the exercise price of a',
28877:'purchase option or penalty for lease termination should be recognized as a receivable and revenue when those options are exercised.',
28878:'59. the future lease payments to be received should be discounted using the rate the lessor charges the lessee, which',
28879:'may be the interest rate implicit in the lease. lessors are not page 16 sffas 54 fasab handbook, version 20',
28880:'06/21 sffas 54 required toapplyimputed interest but maydo so asa meansof determiningtheinterest rate implicit in the lease. 60. insubsequentfinancialreportingperiods,thelessorshouldcalculatetheamortizationofthe discount',
28881:'on the receivable and report that amount as interest revenue for the period. any payments received should be allocated first',
28882:'to the accrued interest receivable and then to the lease receivable. 61. the lessor should remeasure the lease receivable at',
28883:'subsequent financial reporting periods if one or more of the following changes have occurred at or before that financial reporting',
28884:'period, basedonthemostrecent leasecontract oragreement beforethechanges,10 andthe changes individually or in the aggregate, are expected to significantly affect the amount of',
28885:'the lease receivable since the previous measurement: a. there is a change in the lease term. b. there is a',
28886:'change in the interest rate the lessor charges the lessee. c. a contingency, upon which some or all of the',
28887:'variable payments that will be received over the remainder of the lease term are based, is resolved such that those',
28888:'payments now meet the criteria for measuring the lease receivable in paragraph 56. for example, an event occurs that results',
28889:'in variable payments that were contingent on the performance or use of the underlying asset becoming fixed payments for the',
28890:'remainder of the lease term. 62. if a lease receivable is remeasured for any of the changes in paragraph 61,',
28891:'the receivable also should be adjusted for any change in an index or rate used to determine variable lease payments',
28892:'if that change in the index or rate is expected to significantly affect the amount of the receivable since the',
28893:'previous measurement. alease receivable is not required to be remeasured solely for a change in an index or rate used',
28894:'to determine variable lease payments. 63. the lessor also should update the discount rate as part of the remeasurement if',
28895:'one or both of thefollowing changeshave occurred and the changesindividually or in the aggregate are expected to significantly affect the',
28896:'amount of the lease receivable: a. there is a change in the lease term. 10 changes arising from amendments to',
28897:'a lease contract oragreementshould be accounted for underthe provisionsof par. 80–86 for lease modifications and terminations. page 17 sffas 54',
28898:'fasab handbook, version 20 06/21 sffas 54 b. there is a change in the interest rate the lessor charges the',
28899:'lessee. deferred revenue 64. alessor initiallyshouldmeasurethedeferredrevenuetoincludethefollowing: a. the amount of the initial measurement of the lease receivable par. 56 b.',
28900:'lease payments received from the lessee at or before the commencement of the lease term that relate to future periods',
28901:'for example, the final month’s rent, less any lease incentives par. 70–71 paid to, or on behalf of, the lessee',
28902:'at or before the commencement of the lease term 65. alessor subsequently shouldrecognize thedeferredrevenuein asystematic andrational manner over the term',
28903:'of the lease. the deferred revenue generally should be adjusted using the same amount as the change resulting from the',
28904:'remeasurement of the lease receivable as discussed in paragraphs 61–63. underlyingasset 66. alessor shouldnotderecognizetheasset underlyingthelease. alessor shouldcontinueto apply other applicable',
28905:'guidance to the underlying asset, including depreciation and impairment. however, if the lease contract or agreement requires the lessee to',
28906:'return the asset in its original or enhanced condition, a lessor should not depreciate the asset during the lease term.',
28907:'component reporting entity disclosures for lessors 67. lessors should disclose the following regarding lease activities which may be grouped for',
28908:'purposes of disclosure, other than shortterm leases: a. ageneraldescriptionofitsleasingarrangements,includingthebasis,terms, and conditions on which any variable lease payments not included in',
28909:'the lease receivable are determined b. the carrying amount of assets on lease by major classes of assets, and the',
28910:'amount of related accumulated depreciation c. the total amount of revenue for example, lease revenue, interest revenue, and any other',
28911:'leaserelated revenue recognized in the reporting period from leases page 18 sffas 54 fasab handbook, version 20 06/21 sffas 54',
28912:'d. the amount of revenue recognized in the reporting period for variable lease payments and other payments not previously included',
28913:'in the lease receivable, including revenue related to residual value guarantees and termination penalties 68. in addition to the disclosures',
28914:'in paragraph 67, if a federal entity’s principal ongoing operations consist of leasing assets through the use of nonintragovernmental leases,',
28915:'the federal entity should disclose a schedule of future lease payments that are included in the lease receivable, showing principal',
28916:'and interest, for each of the five subsequent years and in fiveyear increments thereafter. financial report of the u.s. government',
28917:'disclosures 69. if applicable, the financial report of the u.s. government should disclose the following regarding its lease activities: a.',
28918:'a general description of its leasing arrangements b. the total amount of lease assets, and the related accumulated amortization, to',
28919:'be disclosed separately from other pp&e assets c. principal and interest requirements to the end of the lease term, presented',
28920:'separately, for the lease liability for each of the five subsequent years and in fiveyear increments thereafter d. a general',
28921:'reference to relevant component reporting entity reports lease incentives and lease concessions 70. lease incentives include lessor payments made to',
28922:'or on behalf of the lessee to entice the lessee to sign a lease. lease incentives may include upfront cash',
28923:'payments to the lessee, for example, moving costs, termination fees to lessee’s prior lessor, or lessor’s assumption of the lessee’s',
28924:'lease obligation under a different lease with another lessor. lease concessions are rent discounts made by the lessor to entice',
28925:'the lessee to sign a lease. lease concessions include rent holidays/free rent periods, reduced rents, or commission credits. 71. lease',
28926:'incentives and lease concessions reduce the amount that a lessee is required to pay for a lease. lease incentives and',
28927:'lease concessions that provide payments to, or on behalf of, a lessee at or before the commencement of a lease',
28928:'term are included in initial measurement by directly reducing the amount of the lease asset par. 49. lease incentive page',
28929:'19 sffas 54 fasab handbook, version 20 06/21 sffas 54 and lease concession payments to be provided after the commencement',
28930:'of the lease term should be accounted for by lessees and lessors as reductions of lease payments for the periods',
28931:'in which the incentive or concession payments will be provided. those payments shouldbemeasuredbylesseesconsistentlywiththelessee’sleaseliabilitypar. 40–48and by lessors consistently with the lessor’s',
28932:'lease receivable par. 56–63. accordingly, lease incentive and lease concession payments to be provided after the commencement of the lease',
28933:'term are included in initial measurement and any remeasurement if they are fixed or fixed in substance, whereas variable or',
28934:'contingent lease incentive or lease concession payments are not included in initialmeasurement. lessor improvementsthat are madeto or on behalf of',
28935:'the lessee without additional cost to the lessee should be accounted for by the lessee and the lessor consistent with',
28936:'other lease incentives and lease concessions.as leasehold improvements are paid for financed by the lessee, leasehold improvements would not be',
28937:'considered a lease incentive or concession received from the lessor. contracts oragreements with multiple components 72. lessors and lessees may',
28938:'enter into contracts or agreements that contain multiple components, such as a contract or agreement that contains both a lease',
28939:'component and a nonlease component, or a lease that contains multiple underlying assets. 73. if a lessor or lessee enters',
28940:'into a contract or agreement that contains both a lease such as the right to use a building and a',
28941:'nonlease component such as a maintenance services for the building, the federal entity should account for the lease and nonlease',
28942:'components as separate contracts or agreements, unless the contract or agreement meetsthe exception in paragraph 76. 74. if a lease',
28943:'involves multiple underlying assets and the assets have different lease terms, the lessorandlesseeshouldaccountforeach underlyingasset asaseparateleasecomponent. the provisions of this paragraph',
28944:'should be applied unless the contract or agreement meets the exception in paragraph 76. 75. toallocatethecontractoragreementpricetothedifferentcomponents,lessorsandlessees should first use any',
28945:'prices for individual components that are included in the contract or agreement, as long as the price allocation does not',
28946:'appear to be unreasonable based on the terms of the contract or agreement and professional judgment, maximizing the use of',
28947:'observable information, for example, using readily available observable standalone prices. standalone prices are those that would be paid or received',
28948:'if the same or similar assets were leased individually or if the same or similar nonlease components such as services',
28949:'were contracted individually. some contract or agreements provide discounts for bundling multiple leases or lease and nonlease components together in',
28950:'one contract or agreement. these discounts may be taken into account when determining whether individual page 20 sffas 54 fasab',
28951:'handbook, version 20 06/21 sffas 54 component prices do not appear to be unreasonable. for example, if the individual component',
28952:'prices are each discounted by the same percentage from normal market prices, those component prices would not be considered unreasonable.',
28953:'76. if a contract or agreement does not include prices for individual components or if any of those prices appear',
28954:'to be unreasonable as provided in paragraph 75, lessors and lessees should useprofessionaljudgmentto determinetheirbest estimate forallocatingthecontract or agreement price to',
28955:'those components, maximizing the use of observable information. if it is not practicable to determine a best estimate for price',
28956:'allocation for some or all components in a contract or agreement, a federal entity should account for those components as',
28957:'a single lease unit. 77. ifmultiplecomponentsareaccountedforasasingleleaseunitasprovidedforinparagraph 76 , the accountingforthat unit should be based on the primaryleasecomponent withinthat unit. for',
28958:'example, the primary lease component’s lease term should be used for the unit if the lease components have different lease',
28959:'terms. contract oragreement combinations 78. contracts or agreements that are entered into at or near the same time with the',
28960:'same counterparty should be considered to be part of the same lease contract or agreement if either of the following',
28961:'criteria is met: a. the contracts or agreements are negotiated as a package with a single objective. b. the amount',
28962:'of consideration to be paid in one contract or agreement depends on the price or performance of the other contract',
28963:'or agreement. 79. if multiple contracts or agreements are determined to be part of the same lease contract or agreement,',
28964:'that contract or agreement should be evaluated in accordance with the guidance for contracts or agreements with multiple components in',
28965:'paragraphs 72–77. lease terminations and modifications 80. the provisions of a lease contract or agreement may be amended while the',
28966:'contract or agreement is in effect. examples of amendments to lease contracts or agreements include changing the contract or agreement',
28967:'price, lengthening or shortening the lease term, and adding or removing an underlying asset. an amendment should be considered a',
28968:'lease modification unless the lessee’s right to use the underlying asset decreases, in which case the amendment should be considered',
28969:'a partial or full lease termination. by contrast, page 21 sffas 54 fasab handbook, version 20 06/21 sffas 54 exercising',
28970:'an existing option, such as an option to extend or terminate the lease as discussed in paragraphs 1519, is subject',
28971:'to the guidance for remeasurement. lease terminations 81. the lessee and lessor should account for an amendment during the reporting',
28972:'period resulting in a decrease in the lessee’s right to use the underlying asset for example, the lease term is',
28973:'shortened or the number of underlying assets is reduced as a partial or full lease termination. lessee treatment of lease',
28974:'terminations 82. alessee generally should accountfor thepartial or fullleaseterminationby reducingthe carrying values of the lease asset and lease liability and',
28975:'recognizing a gain or loss for the difference. however, if the lease is terminated as a result of the lessee',
28976:'purchasing the underlying asset from the lessor, the lease asset should be reclassified to the appropriate class of owned asset.',
28977:'lessor treatment of lease terminations 83. alessor should accountforthefull or partialterminationofaleasebyreducingthecarrying values of the lease receivable and related deferred revenue',
28978:'and recognizing a gain or loss forthedifference. however, if the leaseisterminated asaresult of thelessee purchasing an underlying asset from the',
28979:'lessor, the carrying value of the underlying asset also should be derecognized and included in the calculation of any resulting',
28980:'gain or loss. lease modifications 84. the lessee and lessor should account for an amendment during the reporting period resulting',
28981:'in a modification to a lease contract or agreement as a separate lease that is, separate from the most recent',
28982:'lease contract or agreement before the modification if both of the following conditions are present: a. the lease modification gives',
28983:'the lessee an additional lease asset by adding one or more underlying assets that were not included in the original',
28984:'lease contract or agreement. b. the increase in lease payments for the additional lease asset does not appear to be',
28985:'unreasonable based on 1 the terms of the amended lease contract or agreement and 2 professional judgment, maximizing the use',
28986:'of observable information for example, using readily available observable standalone prices. page 22 sffas 54 fasab handbook, version 20 06/21',
28987:'sffas 54 lessee treatment of lease modifications 85. unlessamodificationisreportedasaseparateleaseasprovidedinparagraph84,alesseeshould account for a lease modification by remeasuring the lease liability. the',
28988:'lease asset should be adjusted by the difference between the remeasured liability and the liability immediately before the lease modification.',
28989:'however, if the change reduces the carrying value of the lease asset to zero, any remaining amount should be reported',
28990:'in the statement of net cost as a gain. lessor treatment of lease modifications 86. unless a modification is reported',
28991:'as a separate lease as provided in paragraph 84, a lessorshould account for a lease modification by remeasuring the lease',
28992:'receivable. the deferred revenue should be adjusted by the difference between the remeasured receivable and the receivable immediately before the',
28993:'lease modification. however, to the extent the change relates to payments for the current period, the change should be recognized',
28994:'as revenue or expense for the current period. subleases 87. asubleaseinvolves three parties:theoriginallessor,theoriginallesseewho alsois the lessorin the sublease, andthenew lessee.',
28995:'the originallessor should continue to applythe general lessor guidance. the federal entity that is the original lessee and becomes the',
28996:'lessor in the sublease should account for the original lease and the sublease as two separate transactions, as a lessee',
28997:'and a lessor, respectively. those two separate transactions should not be offset against one another. the new lessee should apply',
28998:'the general lessee guidance. 88. the original lessee and now the lessor in a sublease should include the sublease in',
28999:'its disclosure of the general description of lease arrangements. its lessor transactions related to subleases should be disclosed separately from',
29000:'its lessee transactions related to the original lease. saleleaseback transactions 89. saleleaseback transactions involve the sale of an underlying asset',
29001:'by the owner and a lease of the property back to the seller original owner. asaleleaseback should include a transaction',
29002:'that qualifies as a sale11 to be eligible for saleleaseback accounting. asale11 see sffas 7, accounting for revenue and other',
29003:'financing sources and concepts for reconciling budgetary and financial accounting, par. 295. page 23 sffas 54 fasab handbook, version 20',
29004:'06/21 sffas 54 leaseback transaction that does not include a transaction that qualifies as a sale should be accounted for',
29005:'as a borrowing by both the sellerlessee and the buyerlessor. 90. the sale and lease portions of a saleleaseback transaction',
29006:'should be accounted for as two separate transactions—a sale transaction and a lease transaction—except that the difference between the carrying',
29007:'value of the capital asset that was sold and the net proceeds from the sale should be reported asa deferred',
29008:'revenue ordeferred expense tobe recognized in the statement of net cost in a systematic and rational manner over the term',
29009:'of the lease. however, if the lease portion of the transaction qualifies as a shortterm lease, any difference between the',
29010:'carrying value of the capital asset that was sold and the net proceeds from the sale should be recognized immediately.',
29011:'91. asaleleasebacktransactionis consideredtohaveoffmarketterms ifthereis asignificant difference between a the sales price and the estimated fair value of the asset or',
29012:'b the present value of the contractual lease payments and the estimated present value of what the lease payments for',
29013:'that asset would be at a market price, whichever of the two differences is more readily determinable. the difference should',
29014:'be reported based on the substance of the transaction for example, as a borrowing, a nonexchange transaction, or an advance',
29015:'lease payment rather than as a part of the salesleaseback transaction. 92. asellerlesseeshoulddisclosethetermsandconditionsofsaleleasebacktransactions in addition to the disclosures required of',
29016:'a lessee par. 54. abuyerlessor should provide the disclosures required of a lessor par. 67. leaseleaseback transactions 93. in a',
29017:'leaseleaseback transaction, an asset is leased by one party first party to another party and then leased back to the',
29018:'first party. the leaseback may involve an additional asset such as leasing a building that hasbeen constructed by a developer',
29019:'on land owned by and leased back to a federal entity or only a portion of the original asset such',
29020:'as leasing back only one floor of a building to the owner. aleaseleaseback transaction should be accounted for as a',
29021:'net transaction. both parties to a leaseleaseback transaction should disclose the amounts of the lease and the leaseback separately. amendments',
29022:'to sffas 5, accounting for liabilities of the federal government, and sffas 6, accounting for property, plant, and equipment 94.',
29023:'thisstatementreplacesthemeasurementandreportingrequirementsforleaseaccounting established in sffas 5, accounting for liabilities of the federal government, paragraphs 43–46. therefore, the paragraphs marked below are',
29024:'rescinded. page 24 sffas 54 fasab handbook, version 20 06/21 sffas 54 sffas 5: accounting for liabilities of the federal',
29025:'government [43.] capital leases are leases that transfer substantially all the benefits and risks of ownership to the lessee. if,',
29026:'at its inception, a lease meets one or more of the following four criteria, the lease should be classified as',
29027:'a capital lease by the lessee: theleasetransfersownershipofthepropertytothelesseebytheendofthelease term. the lease contains an option to purchase the leased property at a',
29028:'bargain price. the lease term is e=qual to or greater than 75 percent of the estimated economic life of the',
29029:'leased property. the present value of rental and other minimum lease payments, excluding that portion of the payments representing executory',
29030:'cost, equals or exceeds 90 percent of the fair value of the leased property. the last two criteria are not',
29031:'applicable when the beginning of the lease term falls within the last 25 percentof thetotal estimatedeconomiclifeoftheleased property. ifa leasedoesnot meet',
29032:'at least one of the above criteria it should be classified as an operating lease. [44.] the amount to be',
29033:'recorded by the lessee as a liability under a capital lease is the present value of the rental and other',
29034:'minimum lease payments during the lease term, excluding that portion of the payments representing executory cost to be paid by',
29035:'the lessor. [footnote 20: “the cost of general property, plant, and equipment acquired under a capital lease shall be equal',
29036:'to the amount recognized as a liability for the capital lease at its inception. see sffas no. 6,accounting for property,',
29037:'plant, and equipment.] however, if the amountso determined exceedsthe fair valueof the leased propertyat the inceptionofthelease, theamount recorded asthe liabilityshouldbethe',
29038:'fair value. if the portion of the minimum lease payments representing executory cost is not determinable from the lease provisions,',
29039:'the amount should be estimated. [45.] the discount rate to be used in determining the present value of the minimum',
29040:'lease payments ordinarily would be the lessee’s incremental borrowing rate unless 1 it is practicable for the lessee to learn',
29041:'the implicit rate computed by the lessor and 2 the implicit rate computed by the lessor is less than the',
29042:'lessee’s incremental borrowing rate. if both these conditions are met, the lessee shall use the implicit rate. the lessee’s incremental',
29043:'borrowing rate shall be the treasury borrowing rate for securities of similar maturity to the term of the lease. [46.]',
29044:'during the lease term, each minimum lease payment should be allocated between a reduction of the obligation and interest expense',
29045:'so as to produce a constant periodic rate of interest on the remaining balance of the liability. [footnote 21:omb circular',
29046:'no. a11, “preparation and submission ofannual budget estimates,” explains the page 25 sffas 54 fasab handbook, version 20 06/21 sffas',
29047:'54 measurement of budget authority, outlays, and debt for the budget in the case of lease purchases and other capital',
29048:'leases. circulara94, “guidelines and discount rates for benefitcostanalysis of federal programs,” provides the requirements under which a leasepurchaseorothercapitalleasehastobejustifiedandtheanalyticalmethodsthat need to',
29049:'be followed.] 95. thisstatementreplacesthemeasurementandreportingrequirementsforleaseaccounting established in sffas 6, accounting for property, plant, and equipment, paragraphs 20 and 29. therefore, the',
29050:'paragraphs marked below are rescinded. sffas 6: accounting for property, plant, and equipment [20.] capital leases are leases that transfer',
29051:'substantially all the benefits and risks of ownership to the lessee. if, at its inception, a lease meets one or',
29052:'more of the following four criteria, [footnote21: note that the criteria for identifying capital leases for financial reporting purposes differ',
29053:'from omb criteria for budget scoring of leases. omb circular no. a11, preparation and submission of budget estimates, includes criteria',
29054:'for identifying operating leases inappendix b. omb provides four additional criteria which relate to the level of private sector riskinvolved',
29055:'in a leasepurchase agreement. this is necessary because, for budget purposes, there is a distinction between lease purchases with more',
29056:'or less risk. this distinction is not made in the financial reports and, therefore, fasabdoesnotincludethe four criteriarelatedtorisklevels.] thelease should be',
29057:'classified as a capital lease by the lessee. otherwise, it should be classified as an operating lease. [footnote 22: “operating',
29058:'leases” of pp&e are leases in which the federal entity does not assume the risks of ownership of the pp&e.',
29059:'multiyear service contracts and multi year purchase contracts for expendable commodities are not capital leases.] theleasetransfersownershipofthepropertytothelesseebytheendofthelease term. the lease contains',
29060:'an option to purchase the leased property at a bargain price. the lease term is equal to or greater than',
29061:'75 percent of the estimated economic life [footnote 23: “estimated economic life of leased property” is the estimated remaining period',
29062:'during which the property isexpected to be economically usable by one or more users, with normal repairs and maintenance, for',
29063:'the purpose for which it was intended at the inception of the lease, without limitation by the lease term.] of',
29064:'the leased property. the present value of rental and other minimum lease payments, excluding that portion of the payments representing',
29065:'executory cost, equals or exceeds 90 percent of the fair value [footnote 24: “fair value” is the price for which',
29066:'an asset could be bought or sold in an arm’slength transaction between unrelated parties page 26 sffas 54 fasab handbook,',
29067:'version 20 06/21 sffas 54 e.g., between a willing buyer and a willing seller. adapted from kohler’s dictionary foraccountants] of',
29068:'the leased property. the last twocriteria are not applicable when the beginning of the lease term fallswithin the last 25',
29069:'percent of the total estimated economic life of the leased property. [29.] the cost of general pp&e acquired under a',
29070:'capital lease shall be equal to the amount recognized as a liability for the capital lease at its inception i.e.,',
29071:'the net present value of the lease payments calculated as specified in the liability standard [footnote 35: see statement of',
29072:'recommendedaccounting standards no. 5, accounting for liabilities of the federal government.] unless the net present value exceeds the fair value',
29073:'of the asset. implementation 96. this statement requires that leases unexpired at the beginning of the reporting period in which',
29074:'the statement is implemented be recognized and measured using the facts and circumstances that exist at the beginning of the',
29075:'reporting period. therefore, in the period of implementation, a. the determination of the lease term would assume that the lease',
29076:'term began as of the beginning of the period of implementation and b. the lease liability and lease asset should',
29077:'initially be measured based on the remaining lease term and associated lease payments as of the beginning of the period',
29078:'of implementation. 97. the following implementation guidance addresses specific leasing circumstances. a. prospective implementation – entities should report the effect',
29079:'of implementing this statement on existing leasesprospectivelyin accordance with paragraph 13 of sffas 21, reporting correction of errors and changes',
29080:'in accounting principles, amendment of sffas 7, accounting for revenue and other financing sources.accordingly, any changes in assets or liabilities',
29081:'related to existing leases should be treated prospectively. thechange should be accounted forin the period of implementationand applicable future periods.',
29082:'no adjustments should be made to previously reported expenses or revenue. b. lease term – the lease term should be',
29083:'determined based on the provisions of this statement par. 1421. however, the lease term of an existing lease should be',
29084:'based on the number of years remaining in the lease contract or agreement as of the page 27 sffas 54',
29085:'fasab handbook, version 20 06/21 sffas 54 beginning of the period of implementation and not the number of years in',
29086:'the initial lease term. for example, if the initial lease term was 20 years, with no options to extend,atthebeginningof year20x1andtheentityimplementsthisstatementinyear',
29087:'20x7 six years into the lease at the beginning of year 20x7, the initial lease term upon implementation would be',
29088:'14 years. c. shorttermleases –ashorttermleasewouldbedeterminedbasedontheprovisions of this statement par. 22–24. however, if the remaining lease term of an existing lease',
29089:'meets the definition of a shortterm lease that lease should apply the shortterm lease guidance. for example, if the initial',
29090:'lease term was 60 months as of the beginning of year 20x1, with no options to extend, and the entity',
29091:'implements this statement in year 20x5 48 months into the lease at the beginning of year 20x5; the initial lease',
29092:'term at implementation would be 12 months and the lease would meet the definition of a shortterm lease. hence, the',
29093:'entity should account for the lease as a shortterm lease. effective date 98. the requirements of this statement are effective',
29094:'for reporting periods beginning after september 30, 2023. early adoption is not permitted. the provisions of this statement need not',
29095:'be applied to immaterial items. page 28 sffas 54 fasab handbook, version 20 06/21 sffas 54 appendixa: basis for conclusions',
29096:'this appendix discusses some factors considered significant by board members in reaching the conclusions in this statement. it includes the',
29097:'reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others. the',
29098:'standards enunciated in this statement—not the material in this appendix—should govern the accounting for specific transactions, events, or conditions. this',
29099:'statement may be affected by later statements. the fasab handbook is updated annually and includes a status section directing the',
29100:'reader to anysubsequent statements that amend this statement. within the text of the statements, the authoritative sections are updated for',
29101:'changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for conclusions',
29102:'of the amending statement for the rationale for each amendment. project history a1. thisstatementamendstheleaseaccountingstandardsinsffas5and6,whichhadbeen in effect since 1995. under sffas',
29103:'5 and 6, leases were classified as either capital or operating depending on whether the lease met any of four',
29104:'tests. a2. thefederalaccountingstandardsadvisoryboardfasabor “theboard” undertookthis project primarily because sffas 5 and 6 a. do not make meaningful distinctions between capital',
29105:'and operating leases based on the substance of lease transactions and b. are based on financialaccounting standards board fasb lease',
29106:'accounting standards, which have been amended. a3. lease accounting was first addressed by fasab during the development of sffas 5',
29107:'and 6.at that time, the board decided to use the highlevel language on lease accounting from fasb statement of financialaccounting',
29108:'standards sfas no. 13 accounting for leases [subsequently codified inaccounting standards codification asc – topic 840 leases]. this minimal lease',
29109:'guidance included the definition of a capital lease, the criteria for capital leases, and the measurement of a capital lease',
29110:'asset and liability. the board had plans to use this preliminary guidance as a placeholder until it was prepared to',
29111:'add lease accounting to its agenda as a separate project. lease accounting had been on the list of potential board',
29112:'agenda items each time the board has considered its agenda for new projects. page 29 sffas 54 fasab handbook, version',
29113:'20 06/21 sffas 54 a4. thereareseveralareasofleaseaccountingthatwerecoveredbythefasbstandardsthat were never specifically addressed in the fasab standards. some of those topics include leasehold',
29114:'improvements, lease terms, leveraged leases, and subleases. the federal community often stressed that the federal standards on lease accounting should',
29115:'be comprehensive to reduce confusion on whether fasb standards apply to federal entities when fasab’s are silent on a topic.',
29116:'a5. because fasb revised its standards, it was imperative for the board to revisit lease accounting. one alternative was for',
29117:'the board to issue detailed implementation guidanceon the existing standards. the board believed that the effort needed to issue such',
29118:'implementation guidance would be better used amending sffas 5 and 6. the board closely reviewed the lease proposals of four',
29119:'standards setters as stated in paragrapha8 to determine what underlying concepts, if any, would be applicable for federal financial reporting',
29120:'of leases. the board believes this statement offers the appropriate guidance for the accounting and financial reporting of leases for',
29121:'federal entities. a6. inaugust2011,fasabbeganaprojecttoreviseitscurrentstandardsonleaseaccounting. fasab staffformed ataskforcetoassistin developingthisstatement. taskforcemembers included accounting, budget, and subject matter experts from federal agencies and',
29122:'independent public accounting firms. a7. the task force met several times over the course of the project and also exchanged',
29123:'numerous ideas and recommendations electronically. staff sought the task force’s views and recommendations in developing and describing alternatives to present',
29124:'to the board. the task force’s assistance was essential and its views carefully considered by members during deliberations. the task',
29125:'force played an important role in the research and release ofthe exposure draft ed preceding this statement. a8. in evaluating',
29126:'an approach applicable to federal leases, the board considered the approaches used in the following documents: a. fasb’s sfas 13,',
29127:'accounting for leases [superseded by fasb’sasc 840, which was subsequently superseded byasc 842] b. governmentalaccountingstandards board’s gasbstatementno. 87, leases c.',
29128:'internationalaccountingstandardsboard’sinternationalaccountingstandard17, leases [superseded by international financial reporting standard 16] d. internationalpublic sectoraccountingstandards board’s internationalpublic sector accounting standard 13, leases a9.',
29129:'at the inception of the project, the board decided to coordinate with gasb on the leaseproject because of the similarities',
29130:'among governmental entities regarding lease activities and reporting objectives. staff worked closely with gasb staff during the development of page',
29131:'30 sffas 54 fasab handbook, version 20 06/21 sffas 54 this statement. in 2014, fasab and gasb met to discuss',
29132:'issues related to each of their ongoing lease accounting projects.as a result of this collaboration, similar wording may appear in',
29133:'some sections of the fasab and gasb standards.12 a10. this statement amends the lease accounting standards in sffas 5 and',
29134:'sffas 6. this statement also establishes distinct standards for intragovernmental leases. summary of outreach efforts and responses a11. fasab issued',
29135:'the ed, titled leases, on september 26, 2016, with comments requested by january 6, 2017. upon release of the ed,',
29136:'fasab provided notices and press releases to the fasab email listserv, the federal register, fasab news, the journal of accountancy,',
29137:'association of governmentaccountants topics, the cpa journal, government executive, the cpa letter, the chief financial officers council, the council of',
29138:'the inspectors general on integrity and efficiency, the financial statementaudit network, and committees of professional associations generally commenting on eds',
29139:'in the past for example, the greater washington society of cpas,association of governmentaccountants financial management standards board. a12. fasab followed',
29140:'up this broad announcement with direct mailings of the ed to the following relevant congressional committees: a. house committee on',
29141:'oversight and government reform b. house committee on transportation c. house committee on budget d. senate committee on homeland security',
29142:'and governmentalaffairs e. senate committee on budget f. senate committee on environment and public works a13. fasab received 25 responses',
29143:'from preparers, auditors, professional associations, and citizens. many respondents had concerns with the definition of leases and the scope of',
29144:'the statement. some respondents also identified certain issues that could be clarified within the statement or addressed in the basis',
29145:'for conclusions. 12the gasb material is copyrighted by the financialaccounting foundation, 401 merritt 7, norwalk, ct 06856, usa, and is',
29146:'used with permission. page 31 sffas 54 fasab handbook, version 20 06/21 sffas 54 a14. the board extended an invitation',
29147:'to the respondents of the leases ed to discuss with the board their comments on the ed and provide further',
29148:'clarification on their responses. in april 2017, five federal entities addressed the board to further elaborate on their written comments.',
29149:'a15. the board did not rely on the number in favor of or opposed to a given position. staff provides',
29150:'the board information about the respondents’ majority view only as a means of summarizing the comments. the board considered each',
29151:'response and weighed the merits of the points raised. considerations related to benefits and costs a16. throughout the course of',
29152:'developing this statement, the board sought to minimize the cost of improving the lease accounting requirements. the board’s assessment of',
29153:'the expected benefits and perceived costs of issuing new standards is often more qualitative than quantitative because it is difficult',
29154:'to accurately estimate the costs of implementing new standards. the board has made its assessments based on the available evidence',
29155:'of expected benefits and perceived costs with the goal of a balance between maximizing benefits and minimizing costs. benefits a17.',
29156:'this statement will improve upon the existing guidance in sffas 5 and 6 by providing a. relevant and meaningful financial',
29157:'information needed by federal financial statement users and b. comprehensive lease standards that appropriately address the various lease transactions/activities of',
29158:'the federal community. a18. one of the primary objectives of this statement is providing federal leasing information needed to meet',
29159:'the operating performance reporting objective.13 recognition of all pp&e leases,exceptforshorttermleasesandintragovernmentalleases,andtherelatedliabilities ensures the balance sheet informs users regarding the resources and',
29160:'obligations used to fulfill the entity’s programs and activities. additionally, this statement requires the recognition of the interest cost associated',
29161:'with the entity’s leases. this will ensure relevant 13sffac 1 establishes the operating performance objective and indicates that federal financial',
29162:'reporting should assist report users in evaluating the service efforts, costs, and accomplishments of the reporting entity; the manner in',
29163:'which these efforts and accomplishments have been financed; and the management of the entity’s assets and liabilities. page 32 sffas',
29164:'54 fasab handbook, version 20 06/21 sffas 54 and comparable information is available to assess the entity’s operating performance as',
29165:'well as to monitor the entity’s investment in pp&e and financing activities. a19. the board is aware that this statement',
29166:'will require entities to ensure all of their leases are appropriatelyidentifiedforevaluation,whichcanimproveaccountabilityofitsresourcesand obligations.as noted in statement of federal financialaccounting concepts sffac',
29167:'1, objectives of federal financial accounting, accounting can and should contribute to achieving and demonstrating several aspects of accountability, such',
29168:'as a. accountability for financial resources; b. accountability for faithful compliance or adherence to legal requirements and administrative policies; c.',
29169:'accountability for efficiency and economy in operations; and d. accountabilityfortheresultsofgovernmentprogramsandactivities,asreflectedin accomplishments, benefits, and effectiveness this statement contributes to each of',
29170:'these aspects of accountability but is most helpful in achieving accountability for efficiency and economy in operations. by removing somewhat',
29171:'arbitrary and brightline rulesbased criteria, a more complete and representationally faithful reporting of pp&e, liabilities, and costs will be provided',
29172:'as discussed in paragraph a21. a20. the board believes that in a lease transaction, a lessee receives the right to',
29173:'control the use of another entity’s pp&e the underlying asset—the asset that is subject to the lease, such as a',
29174:'vehicle or building for a period of time as specified in the contract or agreement. in exchange, the lessee promises',
29175:'to make payments over time for the right to control the use of that underlying asset. the guidance in sffas',
29176:'5 and 6 was based on the notion that some leases are essentially financed purchases of the underlying asset classified',
29177:'as capital leases and other leases classified as operating leases are not. the classification of a lease as capital or',
29178:'operating depended on whether the lease met any of four tests. those tests were intended to determine whether most of',
29179:'the risks and benefits of ownership of the underlying asset were transferred to the lessee. those tests have been criticized',
29180:'because they often resulted in similar leases being accounted for in different ways;making itchallengingtoidentifythetotalresourcesneededtosupport operationsand the related obligations. a21. the',
29181:'board believes that this statement increases the comparability among federal entities by recognizing those similar leases as lease assets and',
29182:'lease liabilities and disclosing key leasing information. this approach would replace brightline distinctions between capital and operating leases. the increased',
29183:'comparability will allow financial report users to make page 33 sffas 54 fasab handbook, version 20 06/21 sffas 54 lease',
29184:'liability and interest cost comparisons among federal entities. this statement also provides a clear definition of a lease that is',
29185:'intended to align with the concept of control established in sffac 5, definitions of elements and basic recognition criteria for',
29186:'accrual basis financial statements. the board believes that this lease definition will reduce opportunities for entities to structure leasing transactions',
29187:'to achieve a specific accounting outcome. such opportunitiescould result in misstated pp&e resources, related obligations, and costs. costs a22. the',
29188:'board understands that many federal entities—particularly those having a significant number of longterm leases with nonfederal entities—will incur additional costs',
29189:'as a result of this statement. based on feedback from the task force and ed responses, the initial costs to',
29190:'implement the revised standards will most likely result from reviewing existing lease agreements, ensuring all leases are appropriately identified, educating',
29191:'staff about how to apply the new requirements, implementing processes and controls to ensure all material leasing activityis captured going',
29192:'forward, and some system changes. those costs will vary based on the number of leases that an entity has and',
29193:'the complexity of those arrangements. for example, it may take more effort to account for a lease agreement with options',
29194:'to extend and multiple components than a lease without those elements. a23. respondentcomments relatedtocostsandbenefits raisedconcernsabouttheoveralleffort andresourcesneededtoimplementtheproposedguidance. somerespondentsalso raised concerns regarding',
29195:'limited resources to assess a significant volume of leases. overall, the evaluation and analysis needed to implement this statement is',
29196:'similar to the capital leases evaluation and analysis needed in sffas 5 and 6, which should help mitigate some of',
29197:'the costs of implementation. a24. once implementation of the statement is complete, the ongoing costs for many entities are unlikelyto',
29198:'besignificantlyhigherthanthecostsofcomplyingwiththe previousstandards. in the previous leases standards, entities were also required to identify leases, evaluate each lease to determine the',
29199:'applicable accounting model to apply capital or operating, and to subsequently account for each lease, including the ongoing disclosure requirements.',
29200:'this statement does not substantially change this level of effort and entities may be able to apply the requirements of',
29201:'this statement using similar systems and processes as those used in previous leases standards to meet those reporting and disclosure',
29202:'requirements. a25. additionally, the board made several decisions in the interest of reducing implementation costs. these include, but are not',
29203:'limited to, the provisions regarding: a. allowing a shortterm lease exception and not requiring disclosures related to short term leases',
29204:'by either lessees or lessors page 34 sffas 54 fasab handbook, version 20 06/21 sffas 54 b. not requiring a',
29205:'lessor to derecognize the underlying asset or calculate a residual value c. allocation of the contract price to multiple components',
29206:'of a lease that allows the stated contract prices to be used if they do not appear to be unreasonable',
29207:'d. allocation of the contract price to multiple components that allow best estimates to be used for allocation if no',
29208:'separate prices are included in the contract or if stated prices appear to be unreasonable e. the requirement to treat',
29209:'an entire multiplecomponent contract as a single lease unit if determining a best estimate is not practicable f. the exclusion',
29210:'of intragovernmental leases from balance sheet recognition and measurement as a lease asset and corresponding liability g. the extension of',
29211:'the effective date until fiscal year 2021 which allows more time to prepare and reduces the number of existing leases',
29212:'to be evaluated a26. for many federal entities, the board’s decisions relating to intragovernmental leases will reduce the preparer’s level',
29213:'of effort in comparison to the current lease accounting and financial reporting standards. the majority of federal entities engage primarily',
29214:'in intragovernmental leases. consistent simplified treatment of intragovernmental leases will also reduce the cost of intragovernmental eliminations. these cost reductions',
29215:'were considered carefully by the board. a27. this statement requires that leases unexpired at the beginning of the reporting period',
29216:'in which the statement is implemented be recognized and measured using the facts and circumstances thatexist at the beginning of',
29217:'the reporting period. the board concluded that this approach to transition, as opposed to a retrospective approach, provides an appropriate',
29218:'balance between minimizing costs of transition and providing users of financial statements with comparable financial information. this implementation approach should',
29219:'further significantly reduce the costs associated with transitioning to the new lease requirements. scope a28. for purposes of applying this',
29220:'statement, a lease is defined as a contract or agreement whereby one entity lessor conveys the right to control the',
29221:'use of pp&e the underlying asset to another entity lessee for a period of time as specified in the contract',
29222:'or agreement in exchange for consideration. leases include contracts or agreements that, although not explicitly identified as leases, meet the',
29223:'definition of a lease which reflects the substanceofalease.thisdefinitiondoesnot includecontractsor agreementsforservices, page 35 sffas 54 fasab handbook, version 20 06/21 sffas',
29224:'54 except those contracts or agreements that contain both a lease component and a service component.aservice contract is a contract',
29225:'that directly engages the time and effort of a contractor whose primary purpose is to perform an identifiable task rather',
29226:'than to provide a tangible asset. service contracts include maintenance of equipment or real property, advisory services, communications services, transportation',
29227:'services, and research and development. a29. thisstatement does notapply to leases ofassetsunderconstructionorleases licensesof internal use software. a30. gasb’s leases statementno.',
29228:'87 specifically excludes “contractsthatmeet thedefinitionof a service concession arrangement in paragraph 4 of statement no. 60, accounting and financial reporting',
29229:'for service concession arrangements scas.” currently, fasab standards are silent on scas. through its discussions, the task force identified several',
29230:'federal entities that have scas,and there was a concern that the proposed lease definition could inadvertently include scas. the board',
29231:'considered specifically excluding scas from this statement. to accomplish this, the board considered adopting gasb’s definition of scafrom statement no.',
29232:'60 because there is no federal definition. a31. the board eventually decided that specifically excluding scas from the standards would',
29233:'raise more questions. furthermore, scas are expected to be addressed in the public private partnership recognition and measurement project; therefore,',
29234:'the board agreed to remain silent on scas in this statement until such guidance is issued. the board believes the',
29235:'generally accepted accounting principles hierarchy will continue to guide preparers and auditors in accounting for scas. definitions a32. in this',
29236:'statement, aleaseis defined as “acontract oragreement wherebyoneentity lessor conveys the right to control the use of pp&e the underlying asset',
29237:'to another entity lessee for a period of time as specified in the contract or agreement in exchange for consideration.”',
29238:'in the early stages of the project, the board deliberated over the use of “contract” or “agreement” in the definition',
29239:'of a lease. the board considered gasb’s approach—where the term contract is more precise and limiting and requires that a',
29240:'lease be legally enforceable. because legal enforceability is not the primary driver in intragovernmental leasing transactions, although legal enforceability is',
29241:'a primary driver for the nonintragovernmental leases, the board decided to add “agreement” in addition to “contract” in the lease',
29242:'definition to alleviate ambiguity in its application. this should be especially relevant in the case of intragovernmental leases, which are',
29243:'often referred to as “lease agreements.” page 36 sffas 54 fasab handbook, version 20 06/21 sffas 54 a33. the board',
29244:'also reconsidered the broad scope of the lease definition, which included all nonfinancial assets not specifically excluded in the standards.',
29245:'during deliberations after receiving comment letters, the board determined that the broader lease definition would necessitate the development of a',
29246:'definition of “nonmonetary assets” and “intangibles,” plus the inclusion of a more developed list of excluded transactions. also, several respondents',
29247:'and task force members advocated a more narrow definition of leases. in an effort to reduce preparer burden, the board',
29248:'reconsidered its decision and reevaluated the benefits of a narrower lease definition. the board decided to narrow the scope of',
29249:'the definition to only include pp&e. lease term – options to extend or terminate a34. federal leases often include lessee',
29250:'options to extend or terminate a lease. due to federal budget scoring rules and the availability of funds, many federal',
29251:'leases include relatively shortnoncancelableperiods.the board concludedthatthe leasetermusedtomeasurethe lease liability should not be limited to the noncancelable lease periods, but it',
29252:'should include certain options to extend or terminate so that the lease term reflects how long the lease is expected',
29253:'to be in effect. a35. the board considered several potential probability thresholds for including options to extend or terminate the',
29254:'lease in the lease term. the board considered its own definition of probable, gasb’s definition of probable, and fasb’s probability',
29255:'threshold “reasonably certain.” fasab’s probable definition equates to more likely than not 50% probability. gasb’s probable definition equates to likely',
29256:'to occur and has a higher threshold of probability than more likely than not. fasb’s reasonably certain probability has an',
29257:'even higher threshold than likely to occur. the board agreed to retain its definition of probable because it is more',
29258:'clearly understood with the federal reporting community and there seemed to be no compelling reason to introduce a new term',
29259:'for the sake of a higher threshold. a36. during deliberations after receiving comment letters, the board considered additional ways to',
29260:'reduce the preparer’s burden and agreed on the following points: a. the “noncancelable period” language should be clarified. b. both',
29261:'the lessee and the lessor’s options to extend or terminate the lease contract or agreement, if probable, should be included',
29262:'in the lease term at its commencement. c. when the lessee or lessor is assessing its own options to extend',
29263:'or terminate the contract or agreement, the level of probability is at the probable threshold; however, when the lessee or',
29264:'lessor is assessing the other party’s options to extend or terminate page 37 sffas 54 fasab handbook, version 20 06/21',
29265:'sffas 54 the contract or agreement, the level of probability is at a higher threshold, like reasonably certain, and should',
29266:'be based on significant evidence. remeasurement a37. this statement requires that when a lease liability is remeasured, the corresponding lease',
29267:'asset be adjusted by the same dollar amount except in cases of impairment and in cases inwhich the adjustment would',
29268:'cause the asset to be reported asa negative amount. while acknowledging that adjusting the lease asset for a change in',
29269:'the lease liability resultsin the lease asset no longer being measured at adjusted historical cost, the board believes that such',
29270:'an adjustment is practical. shortterm leases a38. the board considered the shortterm lease exception gasb proposed, which requires governments to',
29271:'recognize leases with useful lives or maturities of less than one year. the board decided to align the shortterm lease',
29272:'exception with the pp&e standards, which define pp&e as a tangible asset with an estimated useful life of 24 months',
29273:'or more. the reporting of shortterm leases in this statement is intended to reduce the cost to federal entities implementing',
29274:'these standards. this shortterm exception eliminates the need for preparers to calculate amounts for shortterm lease assets and liabilities. this',
29275:'exception requireslesseesandlessorstorecognizethoseleaseswithusefullivesormaturitiesof less than two years as expense and revenue based on the payment provisions of those lease contracts or',
29276:'agreements and those standards regarding recognition of accruals. this measurementapproach isnotcashbasisrecognition, asfederalentities are stillrequiredto recognize receivables and payables for lease',
29277:'payments paid or received before or after the period to which they apply. intragovernmental leases a39. during the research phase',
29278:'of the project, the general services administration gsa provided an educational session to the board where gsarepresentatives explained in depth',
29279:'gsa’s role in federal leasing. based primarily on that discussion, the board agreed that intragovernmental leases should be accounted for',
29280:'differently than leases between federal entities and nonfederal entities. the board agreed that a simplified approach for recognizing intragovernmental leases',
29281:'would be pragmatic and cost efficient. a40. this statement provides the overall recognition, measurement, and disclosure requirements for intragovernmental leases.',
29282:'an intragovernmental lease is a contract or agreement occurring within a consolidation entity or between two or more consolidation entities',
29283:'asdefined under sffas 47 wherebyone entity lessor conveys the right to control page 38 sffas 54 fasab handbook, version 20',
29284:'06/21 sffas 54 the use of pp&e the underlying asset to another entity lessee for a period of time as',
29285:'specified in the contract or agreement in exchange for consideration. alessee would not recognize a lease asset and a corresponding',
29286:'liability for an intragovernmental lease. accordingly,a lessee would not recognize amortization expense related to a lease asset or interest expense',
29287:'on a lease liability. a41. the terms “intragovernmental” and “interentity” have been used interchangeably. earlier fasab standards predominately used “interentity.”',
29288:'however, governmentwide usage of “intragovernmental” has become more common; therefore, the board used intragovernmental in this statement to describe leases',
29289:'occurring within a consolidation entity or between two or more consolidation entities as defined under sffas 47. leases other than',
29290:'shortterm leases, contracts oragreements that transfer ownership, and intragovernmental leases recognition and measurement for lessees – lease liability a42 sffac',
29291:'5, defines a liability as a “present obligation of the federal government to provide assets or services to another entity',
29292:'at a determinable date, when a specified event occurs, or on demand.” the board believes that the lessee taking possession',
29293:'of the underlying asset or gaining access to control the use of the underlying asset is an event that creates',
29294:'such an obligation until the end of the lease term. a43. the board believes the present value of future lease',
29295:'payments to be made for the lease term, which represent the obligations of the lessee under the lease contract or',
29296:'agreement, is the appropriate measurement of the liability. such a calculation is consistent with the premise that a lease is',
29297:'a financing transaction and supports recognition of the cost of the financing. recognition and measurement for lessees – leaseasset a44.',
29298:'an assetis defined in sffac 5as “a resource that embodies economic benefits or services that the federal government controls.” lessees',
29299:'should recognize a lease asset to correspondwith thelease liability.at thebeginning of alease,thelesseeobtainsthe right to control the use of another entity’s',
29300:'pp&e the underlying asset, and that right is a resource embodying economic benefits. the board believes this right meets the',
29301:'definition of an asset. because the lease liability represents the amount to be paid for the lease asset, the board',
29302:'concluded that the initial measurement of the lease asset should be based on the measurement of the associated lease liability.',
29303:'pp&e assets generally are measured at historical cost, which is the amount paid for those assets. therefore, measuring the lease',
29304:'asset based on the lease liability is consistent with historical cost accounting applicable to pp&e. page 39 sffas 54 fasab',
29305:'handbook, version 20 06/21 sffas 54 recognition and measurement for lessors a45. symmetry between the lessee and lessor accounting models',
29306:'is important in establishing accounting andfinancialreportingstandards. theboardbelievesthatfederalentitylessees and lessors should account for the shared transaction in a way that mirrors',
29307:'how the other party accounts for it. a46. the leasecontract or agreement gives the lessor the right to receivepayments in',
29308:'exchange forthelessee’srighttocontroltheuse of the underlyingasset. theboardbelievesthat right meets the definition of an asset in sffac 5. the right to receive',
29309:'payments is a resource that can be drawn upon, and the lessor presently controls that right. boardapproval a47. this statement',
29310:'was approved unanimously. written ballots are available for public inspection at fasab’s offices. page 40 sffas 54 fasab handbook, version',
29311:'20 06/21 sffas 54 appendix b:abbreviations asc accounting standards codification ed exposure draft fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board gasb governmentalaccountingstandards',
29312:'board gsa generalservicesadministration omb office of management and budget pp&e property, plant, and equipment sca serviceconcessionarrangement sfas statementoffinancialaccountingstandards fasb sffac',
29313:'statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards page 41 sffas 54 fasab handbook, version 20 06/21 statement of federal financialaccounting standards 55: amending interentity',
29314:'cost provisions status issued may 31, 2018 effective date for periods beginning after september 30, 2018. earlier implementation is permitted.',
29315:'affects sffas 4, paragraphs 110, 111, and 113a are amended. sffas 30 is rescinded. interpretation 6 is rescinded. affected by',
29316:'none. related guidance tr 8, clarification of standards relating to interentity costs summary statement of federal financialaccounting standards sffas 4,',
29317:'managerial cost accounting standards and concepts including interpretation 6, accounting for imputed intradepartmental costs: an interpretation of sffas no. 4,',
29318:'required reporting entities to recognize the full costs of services received from other federal reporting entities even if there was',
29319:'no requirement to reimburse the providing reporting entity for the full cost of such services. thisstatement revisessffas 4to provide forthecontinued',
29320:'recognition of significant interentity costs by businesstype activities and rescinds the following: a. sffas 30, interentity cost implementation: amending sffas',
29321:'4, managerial cost accounting standards and concepts1 b. interpretation 6, accounting for imputed intradepartmental costs: an interpretation of sffas no.',
29322:'4 withthe rescissionof sffas 30, paragraphs110 and111 of sffas 4, asamended, arerestored to their original language prior to the issuance',
29323:'of sffas 30. however, the federalaccounting standardsadvisoryboardadjustedthe standardstorequire businesstypeactivitiestorecognize interentity costs. recognition of interentity costs by activities that are not',
29324:'businesstype activities is not required with the exception of interentity costs for personnel benefits and the treasury judgment fund settlements',
29325:'unless otherwise directed by the office of management and budget. notwithstanding the absence of a requirement, nonbusinesstype activities may 1conforming',
29326:'amendments willbe made to technicalrelease 8, clarification of standards relating to inter entity costs, to acknowledge the rescission of sffas',
29327:'30. page 1 sffas 55 fasab handbook, version 20 06/21 sffas 55 elect to recognize imputed cost and corresponding imputed',
29328:'financing for other types of inter entity costs. materiality the provisions of this statement need not be applied to immaterial',
29329:'items. the determination of whether an item is material depends on the degree to which omitting or misstating information about',
29330:'the item makes it probable that the judgment of a reasonable person relying on the information would have been changed',
29331:'or influenced by the omission or the misstatement. . page 2 sffas 55 fasab handbook, version 20 06/21 sffas 55',
29332:'table of contents summary 1 standards 4 scope 4 rescission of sffas 30, interentity cost implementation: amending sffas 4, managerial',
29333:'4 cost accounting standards and concepts amendments tosffas 4,managerialcostaccountingstandards andconcepts 4 rescission of interpretation 6, accounting for imputed intradepartmental costs:',
29334:'an 7 interpretation of sffas no. 4 effective date 7 appendixa:basis for conclusions 8 page 3 sffas 55 fasab handbook,',
29335:'version 20 06/21 sffas 55 standards scope 1. this statement applies when a reporting entity is presenting general purpose federal',
29336:'financial reports gpffrs, including the consolidated financial report of the u.s. government cfr, in conformance with generally accepted accounting principles',
29337:'gaap as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy of generally',
29338:'accepted accounting principles, including the application of standards issued by the financial accounting standards board. rescission of sffas 30, interentity',
29339:'cost implementation: amendingsffas 4, managerial cost accounting standards and concepts 2. this paragraph rescinds sffas 30, interentity cost implementation: amending',
29340:'sffas 4, managerial cost accounting standards and concepts, in its entirety. in doing so, this removes the broad requirement to',
29341:'recognize certain interentity costs. amendments to sffas 4, managerial cost accounting standards and concepts 3. with the rescission of sffas',
29342:'30, paragraphs 110 and 111 of sffas 4, managerial cost accounting standards and concepts, are restored to their original language',
29343:'prior to the issuance of sffas 30. 4. this paragraph amends2 sffas 4, paragraphs 110 and 111 by a. revising',
29344:'the subtitle for this section and moving it before paragraph 110 b. revisingtheparagraphstoprovideforrecognitionofinterentitycostsbybusinesstype activities and recognition of interentity costs for',
29345:'nonbusiness type activities that elect to do so and 2the amendments are shown with strikethrough deletions of existing text and',
29346:'underlined additions. page 4 sffas 55 fasab handbook, version 20 06/21 sffas 55 c. providing for other minor updates. recognition',
29347:'110. implementation of this standard on interentity costing should be accomplished in a practical and consistent manner by the various',
29348:'federal entities. therefore, t the office of management and budget, with assistance from the fasab staff, should may issue guidance',
29349:'identifying the specific additional interentity costs for entities to should recognize. begin recognizing. omb shouldthenissueguidance identifying these costs these particular',
29350:'interentity costs should be specified in accordance with this standard including the recognition criteria presented in paragraphs 111 through 113',
29351:'below. the omb should consider information and advice from treasury, gao, and other agencies in developing the implementation guidance. it',
29352:'is anticipated that the largest and most important interentity costs will be identified first. as entities gain experience in the',
29353:'application of the standard, recognition of other interentity costs may be specified in future guidance or required by future standards.',
29354:'recognition criteria 111. recognition of ideally, all significant interentity costs should be recognized. this is especially important when those costs',
29355:'constitute inputs to government goods or services provided to nonfederal entities for a fee or user charge. generally, tthe fees',
29356:'and user charges should recover the full costs of those goods and services. [footnote 33] thus, the cost of interentity',
29357:'goods or services needs to be recognized by the receiving entity in order to determine fees or user charges for',
29358:'goods and services sold outside by the federal government. recognition of interentity costs supporting businesstype activities [footnote 33a] and recognition',
29359:'of interentity costs for nonbusiness type activities that elect to do so such recognition, however, should be made in accordance',
29360:'with the implementation guidance provided by fasab through one or more technical releases. [footnote 33b] issued by omb as discussed',
29361:'above. activities that are not businesstype activities are not required to recognize interentity costs other than interentity costs for personnel',
29362:'benefits and the treasury judgment fund settlements unless otherwise directed by omb. notwithstanding the absence of a requirement, nonbusinesstype activities',
29363:'may elect to recognize imputed cost and corresponding imputed financing for other types of interentity costs. [footnote 33: omb circulara25',
29364:'addresses user charges by federal entities.] [footnote 33a: businesstype activity is defined as a significantly selfsustaining activity which finances its',
29365:'continuing cycle of operations through collection of exchange revenue as defined in sffas 7,accounting for revenue and other financing sources',
29366:'and concepts for reconciling budgetary and financialaccounting. see also sffas 6,accounting for property, plant, and equipment, footnote 27.] page 5',
29367:'sffas 55 fasab handbook, version 20 06/21 sffas 55 [footnote 33b: technical release tr 8, clarification of standards relating to',
29368:'interentity costs provides implementation guidance. additional trs may be provided by fasab if needed.] 5. this paragraph amends the subtitle',
29369:'accounting and implementation guidance of sffas 4 that precedes paragraphs 108 109 by adding a reference to the recognition paragraphs',
29370:'in sffas 4. it does not amend the language contained within those paragraphs. accounting and implementation guidance [footnote 31a] [footnote',
29371:'31a: these paragraphs should be read in conjunction with recognition paragraphs110113 to providea completeunderstandingof theimplementationofstandard on interentity costing due to',
29372:'different recognition requirements for certain types of activities.] 6. this paragraph amends sffas 4 by adding a new subtitle component',
29373:'reporting entity disclosures following paragraph 113 and adding paragraph 113a. component reporting entity disclosures 113a. component reporting entities should disclose',
29374:'that only certain interentity costs are recognized for goods and services that are received from other federal entities at no',
29375:'cost or at a cost less than the full cost. an example disclosure includes: goods and services are received from',
29376:'other federal entities at no cost or at a cost less than the full cost to the providing federal entity.',
29377:'consistent with accounting standards, certain costs of the providing entity that are not fully reimbursed [by the component reporting entity]',
29378:'are recognized as imputed cost [in the statement of net cost], andare offset byimputed revenue [inthe statement of changesin net',
29379:'position]. such imputed costsand revenuesrelate tobusinesstype activitiesif applicable, employeebenefits, and claims to be settled by the treasury judgment fund.3 however,',
29380:'unreimbursed costs of goods and services other than those identified above are not included in our financial statements. 7. as',
29381:'a result of the above changes, businesstype activities are still required to recognize interentity costs. although recognition of interentity costs',
29382:'by activities that are not businesstype activities is not required with the exception of interentity costs for personnel 3 for',
29383:'simplicity, the illustration addresses only the unreimbursed costs required to be imputed by accounting standards. component reporting entities should identify',
29384:'the general nature of other imputed costs recognized in their financial statements. page 6 sffas 55 fasab handbook, version 20',
29385:'06/21 sffas 55 benefits and the treasury judgment fund settlements unless otherwise directed by omb, nonbusinesstype activities may elect to',
29386:'recognize imputed cost and corresponding imputed financing for other types of interentity costs. rescission of interpretation 6, accounting for imputed',
29387:'intradepartmental costs: an interpretation of sffas 4 8. this paragraph rescinds interpretation 6, accounting for imputed intradepartmental costs: an interpretation',
29388:'of sffas 4, in its entirety. effective date 9. the requirements of this statement are effective for reporting periods beginning',
29389:'after september 30, 2018. earlier implementation is permitted. the provisions of this statement need not be applied to immaterial items.',
29390:'page 7 sffas 55 fasab handbook, version 20 06/21 sffas 55 appendixa: basis for conclusions this appendix discusses some factors',
29391:'considered significant by board members in reaching the conclusions in this statement. it includes the reasons for accepting certain approaches',
29392:'and rejecting others. individual members gave greater weight to some factors than to others. the standards enunciated in this statementnot',
29393:'the material in this appendixshould govern the accounting for specific transactions, events, or conditions. this statement may be affected by',
29394:'later statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent statements that',
29395:'amend this statement. within the text of the statements, the authoritative sections are updated for changes. however, this appendix will',
29396:'not be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for',
29397:'the rationale for each amendment. project history department of defense implementation guidance request project a1. since2014,the departmentofdefense dodhas requestedthe federalaccounting',
29398:'standardsadvisory boards fasab or the board consideration of several financial reporting areas of concern and related audit challenges. while dod',
29399:'continues its efforts to comply with the chief financial officersact of 1990 as amended, it has noted certain challenges in',
29400:'satisfying existing standards including sffas 4. through its goals to associate costs with the related operating activities, sffas 4 creates',
29401:'special challenges to large, complex and matrixed organizations such as dod. a2. there are many complex relationships among the components',
29402:'of dod, such as the military services, as well as between dod and other related departments, such as the u.s.',
29403:'coast guard. many specialized components provide services to other components of dod. generally, dod operates in a matrixed environment. it',
29404:'shares resources, such as employees and assets, across subcomponents that have different functional disciplines to accomplish a shared assignment or',
29405:'mission. often this is done without removing the resources and associated cost from the subcomponent. because of the extensive sharing',
29406:'ofresources,implementingtheinterentitycosting requirementswouldbemorechallenging and costly to dod than other departments. a3. for example, the defense security services dss mission includes a',
29407:'variety of security functions for dod. while it may be obvious that the security functions are for the benefit of',
29408:'all dod reporting entities, congress appropriates the funding to dss and the cost is page 8 sffas 55 fasab handbook,',
29409:'version 20 06/21 sffas 55 primarily but not always assumed by dss. financial accounting requirements seek to associate the costs',
29410:'of security functions with the activities that benefit from them. for example, the military services request security services but may',
29411:'not be required by law or management practices to fund those security services. under prior accounting standards, the cost of',
29412:'services would have been associated with each military service through an imputed cost. however, given the complexity of dods components',
29413:'and operations, it may not be cost effective to impute costs for such services. in addition, the benefit of doing',
29414:'so may be reduced at dod in comparison to other federal departments and agencies due to the challenge of identifying',
29415:'outputs and associating outputs with a single reporting entity. generally acceptedaccounting principles history a4. fasab issued sffas 4 in july',
29416:'of 1995, and it became effective in fiscal year fy 1998. however, the requirement for imputing interentity costs that are',
29417:'not reimbursed or are underreimbursed wasnotimmediatelyeffectivein fy1998. the board explained thisin the sffas 4 basis for conclusions as follows: 248.',
29418:'as discussed above, the board realizes that there may be problems in implementing the standard on interentity costing. recognition of',
29419:'nonreimbursed or underreimbursed interentity costs is a new concept to federal entities and involves a new way of thinking about',
29420:'costs. there is concern that application of the standard may be inconsistent among federal entities. in addition, there could be',
29421:'problems, particularly at first, in developing estimates of costs; in revising accounting systems and procedures to accommodate these requirements; and',
29422:'in training personnel to accomplish the task. furthermore, the board recognizes the concern that some have about the elimination of',
29423:'interentity cost transactions for consolidated reporting since the accounting procedures may be complicated. 249.asa result of these problems and concerns,',
29424:'the board has expressed the need to take a measured, stepbystep, practical approach to implementation of this standard. therefore, the',
29425:'board has decided that, in implementing the standard, it recommends that omb, with assistance fromthe fasab staff, should identify the',
29426:'specific interentity costs for entities to begin recognizing and omb should then issue guidance identifying those costs. omb should consider',
29427:'the requirements of the standard including the recognition criteria in developing the guidance and it should also consider suggestions and',
29428:'information provided by treasury, gao, and other agencies. the board anticipates the largest and most important interentity costs will be',
29429:'identified first, followed by others as entities gain experience in the application of the standard. this approach is seen as',
29430:'a practical way to ensure uniformity in the application and implementation of the standard and to provide time and experience',
29431:'in overcoming any other practical problems which may arise. also, the board may recommend specific interentity costs for recognition in',
29432:'possible future recommended standards. page 9 sffas 55 fasab handbook, version 20 06/21 sffas 55 a5. inapril2003, theboardissuedinterpretation6 requiringimplementationofinterentity costing',
29433:'for costs between reporting entitiesthat are part of the same department of a larger reporting entity. the requirement was effective',
29434:'for fy 2005. a6. inaugust2005,theboardissuedsffas30,requiringfullimplementationoftheinterentity cost provision in fy 2009. sffas 30 followed extensive research on interentity costs by anaccounting',
29435:'andauditing policy committee aapc task force. the results were described in the in sffas 30 as follows: theaapc interentity cost',
29436:'task force task force was formed and initial research was conducted beginning in july 2000. the task force reported its',
29437:'research findings and recommendations to theaapc at its may 2003 meeting. the task force noted that the current limitation in',
29438:'recognizing interentity costs was an impediment to progress towards full costing. the task force did not recommend changes to the',
29439:'current limitationsin theapplicationofsffas4 interentitycostsprovisions. however,thetask force did not find material nonreimbursed or underreimbursed interentity costs for which governmentwide guidance was',
29440:'warranted. the task force report is available on theaapc website at http://files.fasab.gov/pdffiles/aapciectfreport.pdf. a7. as provided in paragraphs 2830 of the',
29441:'basis for conclusions in sffas 30, half the respondents disagreed with the proposal that led to sffas 30: 28. approximately',
29442:'onehalf of the respondents agreed with the boards proposal that theinterentitycost provisionsof sffas 4shouldbefullyimplemented. in otherwords, approximately onehalf of the',
29443:'respondents disagreed with the boards proposal and agreed with the alternative view proposal to implement the interentity cost provisions by',
29444:'identifying specific costs to be recognized on a stepbystep basis. 29. approximately onehalf of the respondents believed that there were',
29445:'non reimbursed or underreimbursed interentity costs meeting the recognition criteria in sffas 4. additionally, a majority of respondents believed that',
29446:'federal entities would seek additional reimbursable agreements or modify existing agreements e.g., by increasing fees because nonreimbursed or underreimbursed interentity',
29447:'costs may be recognized. 30. approximately onehalf of the respondents believed that additional guidance was neededto applythe factorsin determining whether',
29448:'an interentitycost ismaterialtothe receiving entity and that additional guidance was needed to apply the broad and general support exception. a8.',
29449:'in summary, in its due process of sffas 30, the board determined the main concerns identifiedbyrespondentsincluded1the lackofimplementationguidanceand2costsnot page 10 sffas',
29450:'55 fasab handbook, version 20 06/21 sffas 55 being recognized consistently across agencies. these concerns also supported the task force',
29451:'findings. therefore, the board determined that there was a need for additional guidance, which led to the development of technical',
29452:'release tr 8, clarification of standards relating to interentity costs. the board concluded that the standards, along with the issuance',
29453:'oftr 8, balanced the concerns expressed by the task force and the ultimate goals of sffas 4. the majority of',
29454:'the board determined sffas 30 was essential to attain the full cost accounting envisioned by sffas 4. existing practices current',
29455:'sffas 4 imputed costs a9. the goal of sffas 4, as amended, to identify full cost is critical to improving',
29456:'performance measurement. thisboard understandsthe previous boards reasonsfor issuing sffas 30 because paragraphs 3436 of sffas 4 explain the following: 34.',
29457:'measuring performance is a means of improving program efficiency, effectiveness, and program results. one of the stated purposes of the',
29458:'gpraof 1993 is to improve the confidence of theamerican people in the capability of the federal government, by systematically holding',
29459:'federal agencies accountable for achieving program results. 35. measuring costs is an integral part of measuring performance in terms of',
29460:'efficiency and costeffectiveness. efficiency is measured by relating outputs to inputs. it is often expressed by the cost per unit',
29461:'of output. while effectiveness in itself is measured by the outcome or the degree to which a predetermined objective is',
29462:'met, it is commonlycombined with cost information to show costeffectiveness. thus, the service efforts and accomplishments of a government entity',
29463:'can be evaluated with the following measures: 1 measures of service efforts which include the costs of resources used to',
29464:'provide the services and nonfinancial measures; 2 measures of accomplishments which are outputs the quantity of services provided and outcomes',
29465:'the results of those services; and 3 measures that relate efforts to accomplishments, such as cost per unit of output',
29466:'or costeffectiveness. emphasis added 36. thus … performance measurement requires both financial and nonfinancial measures. cost is a necessary element',
29467:'for performance measurement, but is not the only element. emphasis added a10. currently, the interentity cost provisions have been implemented',
29468:'as envisioned by most agencies. however, the effect of interentity costs other than those associated with personnel benefits and treasury',
29469:'judgment fund activities has been significantly less than one percent of gross costs at most agencies, calling into question the',
29470:'cost benefit of the original statement. fasab received additional feedback about imputed costs from page 11 sffas 55 fasab handbook,',
29471:'version 20 06/21 sffas 55 representatives of the largest agencies at roundtables on streamlining financial reporting. the comments were consistent',
29472:'with the results that imputed costs are often immaterial at the departmental level. in addition, feedback was consistent that where',
29473:'the outcome of operations requires many subcomponents to work together in a matrixed environment notonly for dod but other departments',
29474:'such as health and human services, relating cost to performance of each subcomponent is challenging. a11. in addition, ongoing implementation',
29475:'efforts at dod are expected to be very costly given the complex operating relationships among the subcomponents of dod. consideration',
29476:'of dods implementation challenges and the experiences of other federal reporting entities described above led to the boards reconsideration of',
29477:'the requirements contained within sffas 4 and sffas 30 under fasabs evaluation of existing standards project so that any changes',
29478:'would be applicable governmentwide. a12. board members agree interentity cost must be imputed for those reporting entities conducting businesstype activities',
29479:'because the information is directly tied to rates. however, there are certain reporting entities or departments where the operating environment',
29480:'does not lend itself to full cost. for example, there are large, complexdepartmentsthatmayhavesubcomponentsthatarenotdistinctforperformancepurposes. therefore, the ability to relate cost to',
29481:'performance is more challenging for certain organizations than for others. a13. for example, within dod, under existing accounting standards, the',
29482:'full cost of interentityservices would be associated with each military service through an imputed cost. however, given the complexity of',
29483:'dods components and operations, it may not be cost effective to impute costs for such services. in addition, the benefit',
29484:'of doing so may be reduced due to the challenge of identifying outputs and associating outputs with a single reporting',
29485:'entity such as a military service. a14. based on a governmentwide review of unaudited percentages of gross cost attributable to',
29486:'imputed costs other than those for personnel benefits and treasury judgment fund settlements, the board observed the imputed costs are',
29487:'often immaterial at the department level. personnel benefits and treasury judgment fund settlements are required to beimputed by gaap standards',
29488:'other than sffas 4, and those standards ensure they continuetobeimputed.4the modificationsherein restoretheoptionforfuturerecognitionof other interentity costs if omb decides to do',
29489:'so. 4see 1 paragraphs 9395 of sffas 4, managerial cost accounting standards and concepts, for the costs of employees’ benefits,',
29490:'2 paragraphs 7476 of sffas 5, accounting for liabilities of the federal government, for the pension’scostssubset forpersonnel benefits, and 3',
29491:'interpretation 2, accounting for treasury judgment fund transactions: an interpretation of sffas 4 and sffas 5, for treasury judgment fund',
29492:'settlements. page 12 sffas 55 fasab handbook, version 20 06/21 sffas 55 a15. the board carefully considered the cost benefits,',
29493:'operating environments, current reporting, and what must be accomplished for those reporting entities that had not implemented the requirements.after careful',
29494:'consideration, the board concluded that the standard will not have negative consequences to reporting entities and that its benefits will',
29495:'clearly exceed its costs for reporting entities that had not implemented interentity cost requirements as well as reduce the reporting',
29496:'burden for agencies that have been imputing such costs. therefore, based on research and the current costs to comply with',
29497:'existing standards, the board decided to amend existing standards by requiring the reporting of interentity costs other than those associated',
29498:'with personnel benefits and the treasury judgment fund settlement, which is required for all entities to businesstype activities. summary of',
29499:'outreach a16. fasab issued the exposure draft ed amending interentity cost provisions on september 1, 2017, with comments requested by',
29500:'november 30, 2017. a17. upon release of the ed, fasab provided notices and press releases to the fasab subscription email',
29501:'list, the federal register, fasab news, the journal of accountancy, association of governmentaccountants topics, the cpa journal, government executive, the',
29502:'cpa letter, the chief financial officers council, the council of the inspectors general on integrity and efficiency, and committees of',
29503:'professional associations generally commenting on edsin the past for example, the greater washington societyof cpas and theassociation of governmentaccountants financial',
29504:'management standards board. a18. fasab received 16 responses from preparers, auditors, users of federal financial information, and professional associations. the',
29505:'board did not rely on the number of respondents in favor of or opposed to a given position. information about',
29506:'the respondents majority view is provided only as a means of summarizing the comments. the board considered each response and',
29507:'weighed the merits of the points raised. the respondents comments are summarized below. the respondents identified certain issues that could',
29508:'be clarified within the statement or addressed in the basis for conclusions. a19. the majority of respondents agreed with the',
29509:'proposal to revise sffas 4 to provide for recognition of interentity costs by businesstype activities and to rescind sffas 30',
29510:'and interpretation 6. page 13 sffas 55 fasab handbook, version 20 06/21 sffas 55 a20. one respondent the department ofagriculture',
29511:'disagreed because it believed recognition of interentity costs that are not fully reimbursed should not be limited to businesstype activities.',
29512:'the respondent explained that the commodity credit corporation ccc has no employees5 or facilities, and the imputed costs are roughly',
29513:'10% of operating costs. with further evaluation and consideration of the scenario, the board determined it may be appropriate to',
29514:'revise the proposed language to remove the word limit and allow nonbusiness type activities the election to recognize other imputed',
29515:'costs. a21. based on certain responses, there appeared to be confusion regarding the recognition of interentity costs by activities that',
29516:'are not businesstype activities. the board clarified the summary, standards, and basis for conclusions to ensure the language regarding recognition',
29517:'of interentity costs by activities that are not businesstype activities was explicit. a22. the language explained that with the rescission',
29518:'of sffas 30, paragraphs 110 and 111 of sffas 4, as amended are restored to their original language. however, fasab',
29519:'adjusted thestandardstorequire businesstype activitiesto recognize interentity costs. recognition of interentity costs by activities that are not businesstype activities is not',
29520:'required with the exception of personnel benefits and the treasury judgment fund settlements unless otherwise directed by omb. notwithstanding the',
29521:'absence of a requirement, nonbusinesstype activities may elect to recognize imputed costs and corresponding imputed financing for other types of',
29522:'interentity costs. a23. with the amendments presented in this statement, the revised paragraphs 110111 of sffas 4 are as follows:',
29523:'recognition 110. implementation of this standard on interentity costing should be accomplished in a practical and consistent manner by federal',
29524:'entities. the office of management and budget may issue guidance identifying additional interentity costs entities should recognize. the interentity costs',
29525:'should be specified in accordance with this standard including the recognition criteria presented in paragraphs 111 through 113. 5the commodity',
29526:'credit corporation ccc is a governmentowned and operated entity that was created to stabilize, support, and protect farmincome andprices. cccalso',
29527:'helps maintain balanced andadequate supplies of agricultural commodities and aids in their orderly distribution. … ccc has no operating personnel.',
29528:'its price support, storage, and reserve programs, and its domestic acquisition and disposal activities are carried out primarily through the',
29529:'personnel and facilities of the farm service agency fsa. https://www.fsa.usda.gov/aboutfsa/structureandorganization/commoditycreditcorporation/index page 14 sffas 55 fasab handbook, version 20 06/21 sffas',
29530:'55 111. recognition of all significant interentity costs is important when those costs constitute inputs to government goods or services',
29531:'provided for a fee or user charge. generally, the fees and user charges should recover the full costs of those',
29532:'goods and services. [footnote 33] thus, the cost of interentity goods or services needs to be recognized by the receiving',
29533:'entity in order to determine fees or user charges for goods and services sold by the federal government. recognition of',
29534:'interentity costs supporting businesstype activities [footnote 33a] and recognition of interentity costs for nonbusiness type activities that elect to do',
29535:'so should be made in accordance with implementation guidance provided by fasab through one or more technical releases. [footnote 33b]activities',
29536:'that are not businesstype activities are not required to recognize interentity costs other than interentity costs for personnel benefits and',
29537:'the treasury judgment fund settlements unless otherwise directed by omb. notwithstanding the absence of a requirement, nonbusinesstype activitiesmay elect to',
29538:'recognize imputed cost and corresponding imputed financing for other types of interentity costs. [footnote 33: omb circulara25 addresses user charges',
29539:'by federal entities.] [footnote 33a: businesstype activity is defined as a significantly selfsustaining activitywhichfinancesitscontinuingcycle of operationsthroughcollection of exchange revenueasdefined in',
29540:'sffas 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting. see also sffas',
29541:'6,accounting for property, plant, and equipment, footnote 27.] [footnote 33b: technical release tr 8, clarification of standards relating to inter',
29542:'entity costs provides implementation guidance. additional trs may be provided by fasab if needed.] a24. while agreeing with the proposal,',
29543:'one respondent suggested certain provisions of the proposed statement appear to be in conflict. the respondent noted sffas 4 appears',
29544:'to require all reporting entities to recognize the full costs of services received from other federalreportingentitieseven if there isnorequirementto reimbursethe',
29545:'providing entityfor the full cost. this respondent believed that certain elements of the proposal appear to contradict certain portions of',
29546:'sffas 4. the board acknowledges the ambiguity created by the interrelation of the full cost and interentity standards contained in',
29547:'different sections of sffas 4. this ambiguity is further complicated if particular paragraphs or sentences of sffas 4 are read',
29548:'in isolation. a25. the focus of this statement is narrow and the board did not undertake a review ofsffas4 in',
29549:'its entirety. the board addressed the ambiguity by adding clarifying language where appropriate, which included anew footnote toan earliersection withinthe',
29550:'sffas. the new footnote explains the recognition paragraphs par. 110113 should be considered in conjunction with other sections to provide',
29551:'a complete understanding regarding the page 15 sffas 55 fasab handbook, version 20 06/21 sffas 55 implementation of interentity costing',
29552:'due to different recognition requirements for different types of activities. a26. the majority of respondents generally agreed that component reporting',
29553:'entities should provide a concise statement to acknowledge that significant services were received for which no cost is recognized. however,',
29554:'certain respondents suggested additional explanation and clarification regarding the disclosure. the respondents believed providing clarity in these areas would ensure',
29555:'consistency and reduce costs associated with preparation and audit. certain respondents also suggested sample wording of the disclosure. a27. the',
29556:'board believed the comments indicated concern regarding the costs of determining whether unreimbursed interentity costs are significant and whether the',
29557:'proposed disclosure, without details of specific costs excluded, provided a meaningful distinction between entities with and without significant interentity costs.',
29558:'based on the comments, theboard determined thedisclosure requirementsshould be revised. component reporting entities should disclose that only certain interentity costs',
29559:'are recognized for goods and services thatare received from other federalentitiesat no cost or at a cost less than the',
29560:'full cost. in addition, the board included sample wording for the disclosure in the statement. the board believed the sample',
29561:'wording would provide the minimum disclosure and that if the reporting entity recognized other imputed costs, that fact should be',
29562:'disclosed as well. a28. althoughtheboardconcludedthattheproposedstatementwillreducethereportingburden for agencies, it recognizes that any change in standards may require time to implement. therefore,',
29563:'the board changed the effective date to be effective for reporting periods beginning after september 30, 2018, with earlier implementation',
29564:'permitted. a29. as explained inparagraph12of sffas 21, reporting corrections of errors and changes in accounting principles, amendment of sffas 7,accounting',
29565:'for revenue and other financing sources, for the purposes of this standard, changes in accounting principles also include those occasioned',
29566:'by the adoption of new federal financial accounting standards. therefore,reporting entities followthe guidance in sffas 21 paragraph 13.a. 13.c. for',
29567:'all changes in accounting principles: a. the cumulative effect of the change on prior periods should be reported as a',
29568:'change in accounting principle. the adjustment should be made to the beginning balance of cumulative results of operations in the',
29569:'statement of changes in net position for the period that the change is made. b. prior period financial statements presented',
29570:'for comparative purposes should be presented as previously reported. page 16 sffas 55 fasab handbook, version 20 06/21 sffas 55',
29571:'c. the nature of the changes in accounting principle and its effect on relevant balances should be disclosed in the',
29572:'current period. financial statements of subsequent periods need not repeat the disclosure. boardapproval a30. this statement was approved unanimously. written',
29573:'ballots are available for public inspection at fasabs offices. page 17 sffas 55 fasab handbook, version 20 06/21 statement of',
29574:'federal financialaccounting standards 56: classifiedactivities status issued october 4, 2018 effective date for periods beginning after september 30, 2018. affects',
29575:'none. affected by none. related guidance interpretation 8 summary the objective of thisstatement isto balance the need forfinancialreportstobepubliclyavailable with the',
29576:'need to prevent the disclosure of classified national security information or activities in publicly issued general purpose federal financial reports',
29577:'gpffrs. this statement allows financial presentation and disclosure to accommodate user needs in a manner that does not impede national',
29578:'security. thisstatementpermitsmodificationsthatdonotaffectnet resultsofoperationsornet position. in addition, this statement allows a component reporting entity to be excluded from one reporting entity',
29579:'and consolidated into another reporting entity, and the effect of the modification may change the net results of operations and/or',
29580:'net position. further, interpretations of this statement, which may themselves contain classified information, will address the requirements of this and',
29581:'other standards and permit other modifications when needed to prevent the disclosure of classified information. modifications permitted by this statement',
29582:'and future interpretations may affect the net results of operations and/or net position of those entities applying the interpretations. the',
29583:'provisions of this statement need not be applied to immaterial items. the determination of whether an item is material depends',
29584:'on the degree to which omitting or misstating information about the item makes it probable that the judgment of a',
29585:'reasonable person relying on the information would have been changed or influenced by the omission or the misstatement. page 1',
29586:'sffas 56 fasab handbook, version 20 06/21 sffas 56 table of contents summary 1 standards 3 scope 3 definitions 3',
29587:'application of standards and disclosures 4 presentation and disclosure modifications 5 consolidation modifications 5 interpretations 5 component reporting entity disclosures',
29588:'6 financial report of the u.s. government disclosures 6 effective date 6 appendixa:basis for conclusions 7 page 2 sffas 56',
29589:'fasab handbook, version 20 06/21 sffas 56 standards scope 1. this statement applies to federal entities that issue unclassified general',
29590:'purpose federal financial reports gpffrs, including the consolidated financial report of the u.s. government cfr, in conformance with generally accepted',
29591:'accounting principles gaap, as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy',
29592:'of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board. 2. this statement',
29593:'does not apply to the reporting of financial information within the gpffr in the classified environment and only applies when',
29594:'the information is presented in the unclassified environment, such as publicly available component reporting entity gpffrs. this statement does not',
29595:'apply to classified gpffrs provided to cleared personnel, including elected officials. this does not relieve reporting entities from their requirements',
29596:'and responsibilities to comply with other accounting standards in the appropriate classified environment. definitions 3. classified national security information, also',
29597:'known as classified information, is any information that has been determined pursuant to executive order eo 13526, as amended; or',
29598:'any successor orders, to require protection against unauthorized disclosure and is marked to indicate its classified status. information may be',
29599:'classified at one of the following three levels: a. top secret, which is applied to information, the unauthorized disclosure of',
29600:'which reasonably could be expected to cause exceptionally grave damage to the national security that the original classification authority is',
29601:'able to identify or describe; b. secret, which is applied to information, the unauthorized disclosure of which reasonably could be',
29602:'expected to cause serious damage to the national security that the original classification authority is able to identify or describe;',
29603:'and c. confidential, which is applied to information, the unauthorized disclosure of which reasonably could be expected to cause damage',
29604:'to the national security that the original classification authority is able to identify or describe. page 3 sffas 56 fasab',
29605:'handbook, version 20 06/21 sffas 56 4. original classification authority is an individual authorized in writing, either by the president,',
29606:'the vice president, or by agency heads or other officials designated by the president, to classify information in the first',
29607:'instance. 5. derivative classification is incorporating, paraphrasing, restating, or generating in new form information that is already classified, and marking',
29608:'the newly developed material consistent with the classification markings of the source of the information. derivative classificationincludes theclassification ofinformation based',
29609:'on classification guidance. the duplication or reproduction of existing classified information is not derivative classification. application of standards and disclosures',
29610:'6. classified information is prohibited from public release. classified information is determined by an original classificationauthority oca or by applying',
29611:'derivative classification. 7. reporting entities are expected to comply with other accounting standards in the appropriate classified environment. reporting entities',
29612:'should apply this statement when an ocaconcludes, or others determine by applying derivative classification, that the information is classified and,',
29613:'therefore, cannot be presented without modification in unclassified gpffrs. component reporting entities have the discretion to apply this statement at',
29614:'the program or transaction level. 8. this statement permits certain modifications to prevent the disclosure of classified information in an',
29615:'unclassified gpffr. this statement permits the following: a. an entity may modify information required by other standards if the effect',
29616:'of the modification does not change the net results of operations or net position. b. acomponent reportingentityis allowedtobeexcludedfrom onereportingentityand consolidated',
29617:'into another reporting entity. the effect of the modifications may change the net results of operations and/or net position. c.',
29618:'an entity may apply interpretations of this statement that allow other modifications to information required by other standards, and the',
29619:'effect of the modifications may change the net results of operations and/or net position. the above modifications allowed by this',
29620:'statement are discussed in more detail in paragraphs 911 below. page 4 sffas 56 fasab handbook, version 20 06/21 sffas',
29621:'56 presentation and disclosure modifications 9. the entity should modify unclassified financial statement presentations, disclosures, required supplementary information rsi, and',
29622:'required supplementary stewardship information rssi required by other statements to prevent the disclosure of classified information if the effect of',
29623:'the modification does not change the net results of operations or net position. in this context, modify means: a. presenting',
29624:'amounts associated with one financial statement line item in another financial statement line item but not presenting narrative explaining the',
29625:'modification. b. omitting required disclosures, rsi, or rssi that would otherwise reveal classified information. consolidation modifications 10. an organization may',
29626:'be excluded from a particular reporting entity to prevent the disclosure of classified information and consolidated into another reporting entity.',
29627:'according to sffas 47, reporting entity, there are organizations1 that should be included in a particular component reporting entitys gpffr.',
29628:'such organizations may be excluded from the particular component reporting entitys gpffr to prevent the disclosure of classified information and',
29629:'consolidated into another reporting entity.2 if a reporting entity consolidates an organization that is excluded from another reporting entitys gpffr',
29630:'to prevent the disclosure of classified information, that consolidation modification may affect one or both reporting entities net results of',
29631:'operations and/or net position. interpretations 11. the board may issue interpretations of this statement that affect other statements. such interpretations',
29632:'may permit other unclassified gpffr presentation and disclosure 1decisions to exclude an organization from a particular component reporting entity to',
29633:'prevent the disclosure of classified information may be evidenced by, for example, approval or concurrence from an oversight organization, such',
29634:'as the office of management and budget. 2sffas 47, reporting entity, provides the framework for determining what organizations for example,',
29635:'component reporting entities or subcomponents should be included in the reporting entitys gpffrs for financial accountability purposes. areporting entity may',
29636:'be the government as a whole, another component entity, or a subcomponent reporting entity. page 5 sffas 56 fasab handbook,',
29637:'version 20 06/21 sffas 56 modification options, as needed. these modification options would prevent unauthorized disclosure in an unclassified gpffr.',
29638:'modifications that affect the entitys net results of operations and/or net position may be allowed by interpretations of this statement.',
29639:'component reporting entity disclosures 12. all federal component reporting entities must include the following in the summary of significant accounting',
29640:'policies. accounting standards require all reporting entities to disclose that accounting standards allow certain presentations and disclosures to be modified,',
29641:'if needed, to prevent the disclosure of classified information. component reporting entities must not disclose application of this statement, including',
29642:'any interpretations of this statement. financial report of the u.s. government disclosures 13. thefinancialreportoftheu.s. governmentgovernmentwidefinancialreportmustinclude the following in the governmentwide',
29643:'summary of significant accounting policies. accounting standardsallow certain presentationsand disclosuresto be modified, if needed, to prevent the disclosure of classified',
29644:'information. accordingly, modifications may have been made to certain presentations and disclosures. the governmentwide financial report must not disclose specific',
29645:'interpretationsof thisstatement that may have been applied. effective date 14 this statement is effective upon issuance. the provisions of this',
29646:'statement need not be applied to immaterial items. page 6 sffas 56 fasab handbook, version 20 06/21 sffas 56 appendixa:',
29647:'basis for conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in this statement.',
29648:'it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than',
29649:'to others. the standards enunciated in this statementnot the material in this appendixshould govern the accounting for specific transactions, events,',
29650:'or conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes a status',
29651:'section directing the reader to anysubsequent statements that amend this statement. the authoritative sections of the statements are updated for',
29652:'changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for conclusions',
29653:'of the amending statement for the rationale for each amendment. project history a1. inaugust2016,thedepartment ofdefensedodorthedepartmentidentifiedseveral areas for the federalaccounting standardsadvisory',
29654:'boards consideration where the application of general accepted accounting principles would result in the exposure of classified information.as the dod',
29655:'was preparing to commence fullscope financial statement audits, it identified specific accounting standard requirements that would conflict with its responsibility',
29656:'to prevent the unauthorized disclosure of information in accordance with executive order eo 13526 of december 29, 2009, classified national',
29657:'security information. a2. specifically,eo13526recognizes, ourdemocratic principles requirethattheamerican people be informed of the activities of their government. also, our nations progress',
29658:'depends on the free flow of information both within the government and theamerican people. nevertheless, throughout our history, the national',
29659:'defense hasrequired that certain information be maintained in confidence in order to protect our citizens, our democratic institutions, our homeland',
29660:'security, and our interactions with foreign nations. protecting information critical to our nations security and demonstrating our commitment to open',
29661:'government through accurate and accountable application of classification standards and routine, secure, and effective declassification are equally important priorities. a3.',
29662:'executive order 13526, sec 1.4 authorizes classification of information regarding the following types: military plans, weapons systems, or operations; foreign',
29663:'government information; page 7 sffas 56 fasab handbook, version 20 06/21 sffas 56 intelligence activities including covert actions, intelligence sources',
29664:'or methods, or cryptology; foreign relations or foreign activities of the united states, including confidential sources; scientific, technological, or economic',
29665:'matters relating to the national security; united states government programs for safeguarding nuclear materials or facilities; vulnerabilities or capabilities of',
29666:'systems, installations, infrastructures, projects, plans, or protection services relating to the national security; or the development, production, or use of',
29667:'weapons of mass destruction. unauthorized disclosure of classified information is prohibited by title 18 u.s. code, section 798. summary of',
29668:'outreach efforts and responses a4. fasab issued the ed, titled classified activities on december 14, 2017, with comments requested by',
29669:'march 16, 2018. upon release of the ed, fasab provided notices and press release to the fasab email listserv, the',
29670:'federal register, fasab news, the journal of accountancy, association of government accountants topics, the cpa journal, government executive, the cpa',
29671:'letter, the chief financial officers council, the council of the inspectors general on integrity and efficiency, the financial statementaudit network,',
29672:'and committees of professional associations generally commenting on eds in the past for example, the greater washington society of cpas,association',
29673:'of government accountants financial management standards board. a5. fasab followed up this broad announcement with direct mailings of the ed',
29674:'to the following relevant congressional committees: a. house homeland security committee: full committee b. house homeland security committee: subcommittee on',
29675:'oversight and management efficiency c. house homeland security committee: subcommittee on counterterrorism and intelligence d. senate select committee on intelligence',
29676:'e. house permanent select committee on intelligence f. senate armed services committee page 8 sffas 56 fasab handbook, version 20',
29677:'06/21 sffas 56 g. housearmedservices committee h. house oversight and government reform committee i. senate homelandsecurity andgovernmentalaffairscommittee j. senateappropriations committee',
29678:'k. houseappropriationscommittee a6. fasab received 17 responses from preparers, auditors, and professional associations. many respondents had concerns with how to',
29679:'inform readers of gpffrs regarding the potential modifications given the classified nature of the modifications themselves. the board has revised',
29680:'the disclosure requirements to address the respondents concerns. the board has also incorporated revisions proposed by some respondents to clarify',
29681:'this statement or address issues in the basis for conclusions. a7. the board did not rely on the number in',
29682:'favor of or opposed to a given position. staff provides the board information about the respondents majority view only as',
29683:'a means of summarizing the comments. the board considered each response and weighed the merits of the points raised. standards',
29684:'on classifiedactivities a8. there are many component reporting entities engaged in classified activities. in the recent past, information regarding the',
29685:'total amount budgeted for such classified activities was not publicly disclosed. however, in the last decade, changes were made so',
29686:'that highly aggregated budget numbers for such activities would be made available. details remain classified including the amount of funding',
29687:'for particular components within the intelligence community and other departments or agencies. disclosure of the disaggregated funding details would harm',
29688:'national security interests. a9. similarly, disaggregated detailed financial reporting could also harm national security interests. to address the issue of',
29689:'classified information being revealed by applying the requirements of sffas 47, reporting entity, this statement permits certain modifications and disclosures',
29690:'at both the component reporting entity level and at the governmentwide level. a10. the board had several discussions with national',
29691:'security experts and stakeholders that allowedthe boardthe opportunityto evaluate the availableoptionsfor presentingclassified information in unclassified gpffrs without jeopardizing national security,',
29692:'including the page 9 sffas 56 fasab handbook, version 20 06/21 sffas 56 specific options suggested by respondents. the board',
29693:'determined that options other than those permitted in this statement may not always adequately resolve national security concerns. therefore, based',
29694:'on the evaluation of the options, the board concluded that this statement and future related interpretations provide theoptimalsolution. this option',
29695:'would allow reporting entities to issue unclassified, publicly available financial statements that comply with accounting standards. without this statement, there',
29696:'is a risk that reporting entities may need to classify their entire financial statements to comply with existing accounting standards,',
29697:'which would likely result in the need to classifya large portion of the governmentwide financial statements. a11. some respondents suggested',
29698:'that the board require component reporting entities to only disclose that certain presentation and disclosure modifications have been made when',
29699:'the entity has applied this statement to prevent the disclosure of classified information. the board, in consultation with national security',
29700:'stakeholders, concluded that the identification by a component reporting entity that this statement has been applied would reveal classified information.',
29701:'doing so would allow gpffr users to identify component reporting entities with and without modifications. further, users could identify changes',
29702:'among component reporting entities over time if modifications are disclosed in some reporting periods but not others. therefore, the board',
29703:'is requiring a more neutral disclosure for component reporting entities and the governmentwide entity to prevent specific identification of component',
29704:'reporting entities applying this statement. this neutral disclosure a. protects the identity of those component reporting entities that have made',
29705:'modifications to prevent the disclosure of classified information, and b. avoids implying that a component reporting entity has made a',
29706:'modification when they have not. a12. this statement and future interpretations would be applied as needed based on an assessment',
29707:'of the need to prevent the disclosure of classified information or to assist other departments and agencies by including an',
29708:'organization as described in paragraph 10. during the audit, the preparer would inform the properly cleared auditor whether and how',
29709:'this statement and related interpretations were applied. gpffr modified pursuant to this statement and related interpretations would be considered in',
29710:'accordance with generally accepted accounting principles. a13. some respondents questioned the proposal to require documentation retained in the appropriate environment',
29711:'to adequately support classified information and modifications. such documentation was intended to allow recorded amounts modified to prevent the disclosure',
29712:'of classified information to reconcile in aggregate to unmodified schedules or other documentation subject to audit. upon review, members noted',
29713:'that the proposed page 10 sffas 56 fasab handbook, version 20 06/21 sffas 56 requirement related to systems, controls, and',
29714:'audit procedures. this proposed level of detail regarding documentation exceeded that of other financial accounting standards. a14. the board believes',
29715:'that standards regarding the underlying documentation of modifications are unnecessary and has removed the proposed requirement. the board expects that',
29716:'as with other aspects of financial statements the preparer will maintain sufficient documentation to support modifications. such documentation is an',
29717:'important aspect of managementcontrolover financialreporting. the documentation will be available during the audit but in an environment appropriate to classified',
29718:'information. a15. modificationsmaynotbeneededtopreventthedisclosureofcertainclassifiedinformation. therefore, this statement permits, rather than requires, modifications on a casebycase basis. process for future classified interpretations',
29719:'a16. the board anticipates issuing classified interpretations of this statement to address specific issues raised by affected component reporting entities.',
29720:'the board has established a process to engage cleared stakeholders in due process regarding classified interpretations of this statement. the',
29721:'process will engage users of information related to classified activities. a17. the sixstep process established in the memorandum of understanding',
29722:'among the governmentaccountability office, the department of the treasury, and the office of management and budget, on federal governmentaccounting standards',
29723:'and a federal accounting standardsadvisory board will be followed in developing classified interpretations.appropriate protections will be applied to classified information,',
29724:'consistent with federal law applicable to federal advisory committees and their activities involving information classified pursuant to executive order. the',
29725:'sixstep process for classified interpretations and related protections are described below. a. identification of accounting issues and agenda decisions i.',
29726:'the board will carry out this step by consulting with cleared stakeholders in secure facilities. stakeholders including preparers, auditors, and',
29727:'users of classified information will be informed regarding the process for raising issues for board consideration. b. preliminary deliberations i.',
29728:'preliminary deliberations will engage all members of the board. deliberations will occur during closed meetings. closed meetings will be approved',
29729:'and page 11 sffas 56 fasab handbook, version 20 06/21 sffas 56 announced in the federal register consistent with the',
29730:'process established in the federaladvisory committeeact. c. preparation of initial documents issues papers and/or discussion memoranda i. we expect that',
29731:'all initial documents will contain classified information and will therefore be subject to federal requirements pertaining to classified information. initial',
29732:'documents will be prepared by cleared individuals of fasab staff and representatives of affected organizations who have original or derived',
29733:'classification authority.3 such documents will be shared with members in a setting appropriate to the classification level of the documents.',
29734:'members will be afforded adequate time to review the materials, ask questions, and deliberate over the materials before making decisions',
29735:'regarding the issues raised. d. release of documents to the public, public hearings, and consideration of comments i. members of',
29736:'the public will have an opportunity to comment on the proposed statement. the public will be able to comment on',
29737:'the general subject matter discussed in the proposed statement and the existence of classified interpretations. the board will consider all',
29738:'comments provided. ii. also, because we expect that all documents related to interpretations will contain classifiedinformation, release willbelimited to cleared',
29739:'individualsand organizations that have signed a nondisclosure agreement and have a need toknow, in accordance with federal requirements pertaining to',
29740:'classified information. theboardwill ensurea representative group of stakeholderswith varied perspectives and appropriate clearances are engaged. the board expectsto seekinput fromelected',
29741:'representativesof the publicand appointed government officials to ensure the needs of citizens are balanced against national security interests. the board',
29742:'will consider all comments and input received from the representative group of stakeholders. e. further deliberations, exposure draft, and consideration',
29743:'of comments i. this step will occur in closed sessions as noted above. the board will seek input from cleared',
29744:'individuals, including elected and appointed officials, and organizations to the greatest extent possible given the classified nature of the 3the',
29745:'board does not have specific original classification authority. the classification level of all work products will be determined by those',
29746:'with that authority. page 12 sffas 56 fasab handbook, version 20 06/21 sffas 56 materials and deliberations. the board will',
29747:'consider all comments and input received from the representative group of stakeholders. f. vote to approve proposed interpretations i. consistent',
29748:'with the boards established procedures for consideration of proposedinterpretations,finalclassifiedinterpretationswillbe thoseapproved by a majority of the members and not objected to',
29749:'by a member representing thecomptrollergeneral, thesecretaryofthetreasury, orthedirectorof omb during a 45day review period. final classified interpretations will be maintained byfasab.',
29750:'component reporting entitiesshould contact fasabto arrangeaccesstotheclassifiedinterpretationsasneeded. fasabwillprovide access to any relevant interpretations following appropriate security procedures. a18. this approach balances',
29751:'the publics interest in financial information with the need to prevent the disclosure of classified information. the boards role in',
29752:'promulgating classified interpretations is to appropriately guide the modifications used in preventing the disclosure of classified information. a19. the board',
29753:'may issue interpretations and implementation guidance in the classified environment. the issuance of classified interpretations and guidance by the board',
29754:'will be publicly announced in the federal register and on the fasab website. the public will be made aware of',
29755:'the guidances existence and the unclassified title of the guidance. all classified guidance will be made available only to those',
29756:'individuals who have been designated as having a need to know and who hold the proper clearances. boardapproval a20. this',
29757:'statement was approved unanimously. written ballots are available for public inspection at fasabs offices. page 13 sffas 56 fasab handbook,',
29758:'version 20 06/21 statement of federal financialaccounting standards 57: omnibusamendments 2019 status issued september 27, 2019 effective date paragraphs 9',
29759:'and 10 are effective upon issuance. paragraph 2 is effective for reporting periods beginning after september 30, 2019. early adoption',
29760:'is not permitted. paragraphs 3 through 8, 11, and 12 are effective for reporting periods beginning after september 30, 2023.',
29761:'early adoption is not permitted. affects sffas 5, par. 15 sffas 6, par. 18, 26 sffas 8 is rescinded. sffas',
29762:'49, par. 15.b, footnote 7 affected by sffas 58 amends the effective date in par. 15. summary the objective of',
29763:'this statement is to address consistency issues and other improvements that have been identified during implementation and application of certain',
29764:'fasab statements. this statement: eliminates the required supplementary stewardship information rssi category by rescindingstatementoffederalfinancialaccountingstandardssffas8, supplementary stewardship reporting, updates references to',
29765:'leases in sffas 5, accounting for liabilities of the federal government, sffas 6,accounting for property, plant, and equipment, and sffas',
29766:'49, publicprivate partnerships: disclosure requirements, and makes a minor change to sffas 6. page 1 sffas 57 fasab handbook, version',
29767:'20 06/21 sffas 57 table of contents summary 1 standards 3 scope 3 eliminating the required supplementary stewardship information category',
29768:'3 amendments to sffas 5, 6, and sffas 49 3 effective date 7 appendixa: basis for conclusions 8 appendix b:abbreviations',
29769:'12 page 2 sffas 57 fasab handbook, version 20 06/21 sffas 57 standards scope 1. this statement applies to federal',
29770:'entities that present general purpose federal financial reports gpffrs, including the consolidated financial report of the u.s. government cfr, inconformancewithgenerallyacceptedaccountingprinciplesgaap,asdefinedby',
29771:'paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy of generally accepted accounting principles, including',
29772:'the application of standards issued by the financial accounting standards board. eliminating the required supplementary stewardship information category 2. this',
29773:'paragraph rescinds sffas 8, supplementary stewardship reporting, in its entirety, including the requirement for reporting information in the required supplementary',
29774:'stewardship information rssi category. amendments to sffas 5, 6, and sffas 49 [paragraphs 3 12 below will become effective when',
29775:'sffas 54, leases: an amendment of statement of federal financial accounting standards sffas 5, accounting for liabilities of the federal',
29776:'government, and sffas 6, accounting for property, plant, and equipment becomes effective for reporting periods beginning after september 30, 2023.',
29777:'early adoption is not permitted.] 3. sffas 54, leases: an amendment of statement of federal financial accounting standards sffas 5,',
29778:'accounting for liabilities of the federal government, and sffas 6, accounting for property, plant, and equipment, amended the lease standards',
29779:'in sffas 5 and6. thisstatement amendscertain referencesto leasesaffectedbysffas54aswellas other minor changes to improve clarity of existing statements. 4. specifically, this',
29780:'statement amends the following documents: sffas 5, accounting for liabilities of the federal government sffas 6, accounting for property, plant,',
29781:'and equipment sffas 49, publicprivate partnerships: disclosure requirements page 3 sffas 57 fasab handbook, version 20 06/21 sffas 57 5.',
29782:'this paragraph amends paragraph 15 of sffas 5 to remove a reference to capital leases: 15. this section presents a',
29783:'definition and criteria for recognizing a liability and related disclosure requirements. it also provides specific standards for contingencies, capital leases,',
29784:'federal debt, pensions, other postemployment and retirement benefits, and insurance other than social insurance and guarantees. 6. the revised paragraph',
29785:'15 of sffas 5 is as follows: 15. this section presents a definition and criteria for recognizing a liability and',
29786:'related disclosure requirements. it also provides specific standards for contingencies, federal debt, pensions, other postemployment and retirement benefits, and insurance',
29787:'other than social insurance and guarantees. 7. this paragraph amends paragraph 18 of sffas 6 by revising the first bullet',
29788:'to remove a reference to capital leases: 18. property, plant, and equipment also includes: assets acquired through capital recognized as',
29789:'a result of leases see sffas 54: leases, for guidance regarding leases and leasehold improvements to be recognized as pp&e',
29790:'assets see paragraph 20, including leasehold improvements; property owned by the reporting entity in the hands of others e.g., state',
29791:'and local governments, colleges and universities, or federal contractors; and land rights. [footnote omitted] 8. the revised paragraph 18 of',
29792:'sffas 6 is as follows: 18. property, plant, and equipment also includes: assets recognized as a result of leases see',
29793:'sffas 54: leases, for guidance regarding leases and leasehold improvements to be recognized as pp&e assets; property owned by the',
29794:'reporting entity in the hands of others e.g., state and local governments, colleges and universities, or federal contractors; and land',
29795:'rights. [footnote omitted] 9. this paragraph amends paragraph 26 of sffas 6 by revising the final bullet to remove a',
29796:'reference to material amounts; materiality applies to all of the bulleted items 26.all general pp&e shall be recorded at cost.although',
29797:'the measurement basis for valuing general pp&e remains historical cost, reasonable estimates may be used to establish the page 4',
29798:'sffas 57 fasab handbook, version 20 06/21 sffas 57 historical cost of general pp&e, in accordance with the asset recognition',
29799:'and measurement provisions herein. cost shall include all costs incurred to bring the pp&e to a form and location suitable',
29800:'for its intended use. for example, the cost of acquiring property, plant, and equipment may include: amounts paid to vendors;',
29801:'transportation charges to the point of initial use; handling and storage costs; labor and other direct or indirect production costs',
29802:'for assets produced or constructed; engineering, architectural, and other outside services for designs, plans, specifications, and surveys; acquisition and preparation',
29803:'costs of buildings and other facilities; an appropriate share of the cost of the equipment and facilities used in construction',
29804:'work; fixedequipmentandrelatedinstallationcostsrequiredforactivitiesinabuildingor facility; directcostsofinspection,supervision,andadministrationofconstructioncontracts and construction work; legal and recording fees and damage claims; fair value of facilities and equipment',
29805:'donated to the government; and material amounts of interest costs paid. [footnoteomitted] 10. the revised paragraph 26 of sffas 6',
29806:'is as follows: 26.all general pp&e shall be recorded at cost.although the measurement basis for valuing general pp&e remains historical',
29807:'cost, reasonable estimates may be used to establish the historical cost of general pp&e, in accordance with the asset recognition',
29808:'and measurement provisions herein. cost shall include all costs incurred to bring the pp&e to a form and location suitable',
29809:'for its intended use. for example, the cost of acquiring property, plant, and equipment may include: amounts paid to vendors;',
29810:'transportation charges to the point of initial use; handling and storage costs; labor and other direct or indirect production costs',
29811:'for assets produced or constructed; engineering, architectural, and other outside services for designs, plans, specifications, and surveys; acquisition and preparation',
29812:'costs of buildings and other facilities; an appropriate share of the cost of the equipment and facilities used in construction',
29813:'work; page 5 sffas 57 fasab handbook, version 20 06/21 sffas 57 fixedequipmentandrelatedinstallationcostsrequiredforactivitiesinabuildingor facility; directcostsofinspection,supervision,andadministrationofconstructioncontracts and construction work; legal and',
29814:'recording fees and damage claims; fair value of facilities and equipment donated to the government; and interest costs paid. [footnote',
29815:'omitted] 11. this paragraph amends footnote 7 of paragraph 15.b in sffas 49 by revising the footnote to remove the',
29816:'reference to capital and operating leases: 15. the following arrangements and transactions are not subject to the provisions of this',
29817:'statement: a. nonleaseacquisitionsofproperty,plant,andequipmentpp&ethataresubjecttothe federalacquisition regulations far and the private entity is not directly financing, operating, or maintaining the pp&e as',
29818:'part of an overall risksharing arrangement or transaction b. leases7 that are not bundled8 and are entered into using general',
29819:'services administration gsadelegated authority this statement does not amend existing standards applicable to leases and those standards remain applicable to',
29820:'all such arrangements/transactions. fn 7 – the term leases, as defined under fasab standards, includes enhanced use leases and both',
29821:'capital and operating leases, as defined under current fasab standards. fn8 – abundled lease typically ariseswhen partiestoa leasing arrangement agree',
29822:'to include additional products or services in the leasing arrangement, some of which might be related or tied directly to',
29823:'the underlying leased product or services for example, software product updates or maintenance.although these additional products or services are not',
29824:'always expressly identified in the underlying lease agreement and may be documented in other agreements, they are nonetheless considered bundled',
29825:'with the underlying lease agreement. 12. the revised footnote 7 of paragraph 15.b in sffas 49 is as follows: 15.',
29826:'the following arrangements and transactions are not subject to the provisions of this statement: page 6 sffas 57 fasab handbook,',
29827:'version 20 06/21 sffas 57 a. nonleaseacquisitionsofproperty,plant,andequipmentpp&ethataresubjecttothe federalacquisition regulations far and the private entity is not directly financing, operating, or',
29828:'maintaining the pp&e as part of an overall risksharing arrangement or transaction b. leases7thatarenotbundled8and areenteredintousinggeneralservices administration gsadelegated authority this statement',
29829:'does not amend existing standards applicable to leases and those standards remain applicable to all such arrangements/transactions. fn 7 the',
29830:'term leases, as defined under fasab standards, includes enhanced use leases. fn 8 abundled lease typically arises when parties to',
29831:'a leasing arrangement agree to include additional products or services in the leasing arrangement, some of which might be related',
29832:'or tied directly to the underlying leased product or services for example, product updates or maintenance. although these additional products',
29833:'or services are not always expressly identified in the underlying lease agreement and may be documented in other agreements, they',
29834:'are nonetheless considered bundled with the underlying lease agreement. effective date 13. paragraphs 9 and 10 of this statement are',
29835:'effective upon issuance. 14. paragraph 2 of this statement is effective for reporting periods beginning after september 30, 2019. early',
29836:'adoption is not permitted. 15. paragraphs 3 through 8, 11, and 12 of this statement are effective for reporting periods',
29837:'beginning after september 30, 2023. early adoption is not permitted. the provisions of this statement need not be applied to',
29838:'immaterial items. page 7 sffas 57 fasab handbook, version 20 06/21 sffas 57 appendixa: basis for conclusions this appendix discusses',
29839:'some factors considered significant by board members in reaching the conclusions in this statement. it includes the reasons for accepting',
29840:'certain approaches and rejecting others. individual members gave greater weight to some factors than to others. the standards enunciated in',
29841:'this statementnot the material in this appendixshould govern the accounting for specific transactions, events, or conditions. this statement may be',
29842:'affected by later statements. the fasab handbook is updated annually and includes a status section directing the reader to anysubsequent',
29843:'statements that amend this statement. the authoritative sections of the statements are updated for changes. however, this appendix will not',
29844:'be updated to reflect future changes. the reader can review the basis for conclusions of the amending statement for the',
29845:'rationale for each amendment. project history required supplementary stewardship information a1. sffas 8 established the rssi category to distinguish information',
29846:'about the governments stewardship from basic financial statements and required supplementary information rsi. the federalaccounting standardsadvisory board fasab or the',
29847:'board reasoned that information about the governments stewardship may include nonfinancial data, may be based on projections or assumptions, and',
29848:'may not articulate with basic financial statements.1 in addition, the importance of stewardship information needed to be highlighted2 and receive',
29849:'more audit scrutiny than rsi.3 a2. audit guidance for rssi, however, was never developed. the board consequently began eliminating the',
29850:'category by reclassifying most of the rssi elements to the basic financial statementsorrsi. onlythestewardshipinvestmentsinformationremained inrssiand this statement eliminates the requirement',
29851:'to present stewardship investments trend information as rssi. 1sffas 8, par. 20. 2sffas 8, par. 111. 3sffas 8, par. 114.',
29852:'page 8 sffas 57 fasab handbook, version 20 06/21 sffas 57 a3. while the board questioned whether the rssi category',
29853:'should be eliminated, stewardship investment informationin someformcan helpusersassesswhethergovernmentoperations have contributed to the nations current and future wellbeing. stewardship investments include',
29854:'expenses incurred for nonfederal physical property, such as highways and bridges; expenses incurred to increase or maintain national economic productive',
29855:'capacity, such as investments in human capital; and expenses incurred for research and development that are intendedtoprovidefuturebenefitsorreturns. however,outreachregardingthisproposal revealed that',
29856:'users may define investment more broadly than sffas 8 and prefer cash basis data that the office of management and',
29857:'budget reports annually. leases a4. the board believes it is appropriate to amend the necessary standards to eliminate references to',
29858:'capital and operating leases used prior to the issuance of sffas 54. the terms capital and operating leases were eliminated',
29859:'with the issuance of sffas 54. this proposal provides conforming amendments to the following statements: sffas 5, accounting for liabilities',
29860:'of the federal government sffas 6, accounting for property, plant, and equipment sffas 49, publicprivate partnerships: disclosure requirements clarityamendments a5.',
29861:'paragraph 26 of sffas 6 provides examples of costs that may be included as capitalized cost of acquiring pp&e. one',
29862:'example references material amounts of interest cost paid. some found it confusing to qualify only one of the examples as',
29863:'material, but not the others. the board believes removing the reference to material amounts will not change existing practice while',
29864:'improving the clarity of existing standards. summary of outreach efforts and responses a6. fasab issued the exposure draft ed on',
29865:'february 22, 2019 with comments requested by april23, 2019. uponreleaseof theed,noticesandpressreleaseswenttothefollowing:the federal register, fasab news, the journal of accountancy, aga',
29866:'today, the cpajournal, government executive and the cpa letter, the cfo council, the council of the inspectors general on integrity',
29867:'and efficiency cigie, the financial statementaudit network; and committees of professional associations generally commenting on eds in the past. page',
29868:'9 sffas 57 fasab handbook, version 20 06/21 sffas 57 a7. fasab received a total of 11 responses from preparers,',
29869:'auditors, and professional associations. the majority of respondents generally agreed with the boards proposal to eliminate the rssi category by',
29870:'rescinding sffas 8. respondents noted that the proposal would remove a reporting requirement that users, in their observation, have not',
29871:'relied upon or utilized. . a8. respondents that did not agree with the proposal to eliminate the rssi category noted',
29872:'that a separate category highlights the importance of the stewardship information and distinguishes it from other information. stewardship information also',
29873:'informs users on the extent of investments that provide longterm benefits for the nation. a9. eliminating the rssi category does',
29874:'not preclude preparers from reporting investment information in managements discussion and analysis md&a, other information, or both. also, preparers have',
29875:'the discretion to employ the technology they deem appropriate for assisting users in locating the information within their gpffr and',
29876:'among other reporting that may provide more detailed information. a10.stewardship investments may be significant for some reporting entities and warrant',
29877:'discussion in the md&a. sffas 15, managements discussion andanalysis, states that md&ashould provide a clear and concise description of the',
29878:'reporting entity and its mission, activities, program and financial performance, systems, controls, legal compliance, financial position, and financial condition.4 a11.given',
29879:'the boards decision to eliminate the rssi category, the majority of respondents agreed that guidance on reporting stewardship investment information',
29880:'in md&awould be needed. guidance would help ensure that reporting entities consistently provide the information that would be most beneficial',
29881:'to users. the board is conducting a project on improving md&a, and the project will consider the respondents concernsand suggestions.',
29882:'a12.regarding the clarity amendments, all of the respondents agreed with the proposal to update references to leases in sffas 5,',
29883:'sffas 6, and sffas 49, and make a minor change for clarity. based on a suggestion from a respondent, the',
29884:'board edited proposed language to clarify a reference to leasehold improvements. also, respondents suggested additional changes to sffas 6 and',
29885:'other requirements. the board will review those additional respondent suggestions in future omnibus amendments or during the evaluation of existing',
29886:'standards. a13.the board did not rely on the number in favor of or opposed to a given position. information about',
29887:'the respondents majority view is provided only as a means of summarizing the 4sffas 15, par. 1. page 10 sffas',
29888:'57 fasab handbook, version 20 06/21 sffas 57 comments. the board considered each response and weighed the merits of the',
29889:'points raised. boardapproval a14.this statement was approved for issuance by all members of the board. ballots are available for inspection',
29890:'at the boards offices. page 11 sffas 57 fasab handbook, version 20 06/21 sffas 57 appendix b:abbreviations ed exposure draft',
29891:'fasab federalaccounting standardsadvisory board gpffr general purpose federal financial report md&a managements discussion and analysis rsi required supplementary information rssi',
29892:'required supplementary stewardship information sffas statement of federal financialaccounting standards page 12 sffas 57 fasab handbook, version 20 06/21 statement',
29893:'of federal financialaccounting standards 58: deferral of the effective date of sffas 54, leases status issued effective date affects affected',
29894:'by june 19, 2020 upon issuance sffas 54, par. 98 sffas 57, par. 15 none. summary thisstatementdeferstheeffectivedateforstatementoffederalfinancialaccountingstandards sffas 54, leases:',
29895:'an amendment of sffas 5, accounting for liabilities of the federal government, and sffas 6, accounting for property, plant, and',
29896:'equipment, for three years. the requirements of sffas 54 will now become effective for reporting periods beginning after september 30,',
29897:'2023. early adoption of sffas 54 is not permitted. most federal reporting entities should continue their current lease accounting practices',
29898:'until sffas 54 becomeseffective; theyshould not follow the financialaccounting standardsboards fasb new lease standards accounting standards codification leases topic 842',
29899:'nor should they follow the governmentalaccounting standards boards gasb new lease standards gasb statement no. 87, leases.1 rather, reporting entities',
29900:'should continue to follow the current fasab guidance that addresses lease transactions. this comprises paragraphs 4346 of sffas 5 and',
29901:'paragraphs20 and 29 of sffas 6. these paragraphs are not rescinded by sffas 54 until it becomes effective. previouslyexisting fasb',
29902:'guidance under accounting standards codification leases topic 840 should continue to be used when the accounting treatment for a lease',
29903:'transaction or event is not specified by paragraphs 4346 of sffas 5 and paragraphs 20 and 29 of sffas 6.',
29904:'1except for a limited number of reporting entities permitted to follow fasb generally accepted accounting principles see sffas 34, par.',
29905:'912. those entities will adopt new lease accounting standards promulgated by fasb as appropriate. page 1 sffas 58 fasab handbook,',
29906:'version 20 06/21 sffas 58 table of contents summary 1 standards 3 scope 3 amendment to sffas 54 3 amendment',
29907:'to sffas 57 3 effective date 4 appendixa: basis for conclusions 5 appendix b:abbreviations 9 page 2 sffas 58 fasab',
29908:'handbook, version 20 06/21 sffas 58 standards scope 1. this statement applies to federal entities that present general purpose federal',
29909:'financial reports gpffr, including the consolidated financial report of the u.s. government cfr, in conformance with generally accepted accounting principles',
29910:'gaap, as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy of generally',
29911:'accepted accounting principles, including the application of standards issued by the financial accounting standards board. 2. this statement amends sffas',
29912:'54, leases: an amendment of sffas 5, accounting for liabilities of the federal government, and sffas 6, accounting for property,',
29913:'plant, and equipment, to defer the effective date of implementation by three years. 3. this statement also amends sffas 57,',
29914:'omnibus amendments 2019,to defer the effective date of certain conforming amendments contained therein related to sffas 54. amendment to sffas',
29915:'54 4. paragraph 98 of sffas 54 is amended as follows: 98. the requirements of this statement are effective for',
29916:'reporting periods beginning after september 30, 2020 2023. early adoption is not permitted. amendment to sffas 57 5. paragraph 15',
29917:'of sffas 57 is amended as follows: 15. paragraphs 3 through 8, 11, and 12 of this statement are effective',
29918:'for reporting periods beginning after september 30, 2020 2023. early adoption is not permitted. page 3 sffas 58 fasab handbook,',
29919:'version 20 06/21 sffas 58 effective date 6. the requirements of this statement are effective upon issuance. theprovisions ofthisstatementneednotbeappliedtoinformationif theeffect',
29920:'of applyingthe provisions is immaterial. refer to statement of federal financialaccounting concepts 1, objectives of federal financial reporting, chapter 7,',
29921:'titled materiality, for a detailed discussion of the materiality concepts. page 4 sffas 58 fasab handbook, version 20 06/21 sffas',
29922:'58 appendixa: basis for conclusions this appendix discusses some factors considered significant by board members in reaching the conclusions in',
29923:'this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some',
29924:'factors than to others. the standards enunciated in this statementnot the material in this appendixshould govern the accounting for specific',
29925:'transactions, events, or conditions. this statement may be affected by later statements. the fasab handbook is updated annually and includes',
29926:'a status section directing the reader to anysubsequent statements that amend this statement. the authoritative sections of the statements are',
29927:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
29928:'for conclusions of the amending statement for the rationale for each amendment. project history a1. inapril2018,thefederalaccountingstandardsadvisoryboardfasabor theboard issued sffas 54.',
29929:'sffas 54 provides a comprehensive set of lease accounting standards to recognize federal lease activities in the reporting entitys gpffrand',
29930:'include appropriate disclosures. such standards were set to go into effect for reporting periods beginning after september 30, 2020. a2.',
29931:'sincetheissuanceofsffas54,theaccountingandauditingpolicycommitteeaapc initiated a project to develop implementation guidance for the federal financial accounting and reporting community on applying the requirements',
29932:'of sffas 54.1as part of this effort, the board andaapc engaged a task force to obtain feedback from stakeholders and',
29933:'constituents and monitor implementation efforts across the federal government. summary of outreach and responses a3. the board believes that sffas',
29934:'54 offers appropriate guidance for the accounting and financial reporting of leases for federal entities and maintains the views expressed',
29935:'in the basis for conclusions to sffas 54 regarding costs and benefits. implementation of sffas 1theaapc is apermanent committeeestablishedby the',
29936:'boardtoassist thefederal government inimproving financial reporting by timely identifying, discussing, and recommending solutions to accounting issues within the framework of',
29937:'existing authoritative literature. theaapc works under the general oversight of the board. page 5 sffas 58 fasab handbook, version 20',
29938:'06/21 sffas 58 54 will ensure that gpffr users receive useful information regarding the resources and obligations that support federal',
29939:'programs and activities and can monitor federal investments in property, plant, and equipment, and lease financing activities. a4. notwithstandingsuchbenefits,theboardbelievesathreeyeardeferraloftheeffectivedate of',
29940:'sffas 54 is a prudent response commensurate to the identified implementation challenges, costs, and constraints and will allow reporting entities',
29941:'to reliably implement sffas 54. a5. the boardreviewedanddiscussedimplementationissues inaugust andoctoberof2019 by reviewing board and task force briefing materials and receiving',
29942:'feedback and status reports from task force panelists and technical staff. a6. through these efforts, the board gained an understanding',
29943:'of the nature and magnitude of implementation challenges encountered by federal reporting entities. the board found that challenges were significant',
29944:'for reporting entities with large lease portfolios. a7. the following factors not allinclusive are examples of significant challenges encountered when',
29945:'implementing sffas 54: a. the need to develop and acquire information technology, data elements, core systems requirements, and internal controls',
29946:'at the governmentwide and component reporting entity levels b. resource limitations, coupled with extensive preparation activities necessary for implementation c.',
29947:'the need for the federal financial accounting and reporting community to receive, understand, and apply forthcoming implementation guidance due to',
29948:'the extensive complexity and breadth of implementation issues identified by the leases implementation guidance task force a8. based on the',
29949:'initial feedback obtained by the board and its sffas 54 implementation monitoring activities, the board agreed that proposing a twoyear',
29950:'deferral of the effective date of sffas 54 in its exposure draft ed deferral of the effective date of sffas',
29951:'54, leases, was appropriate. in the proposal, the board noted that it expected to issue additional sffas 54 implementation guidance',
29952:'during fiscal year 2021. a9. fasab issued the ed on december 18, 2019, with comments requested by january 31, 2020.',
29953:'uponreleaseofthe ed,noticesandpressreleaseswenttothe following:the federal register, the fasab newsletter, journal of accountancy, accounting today, the chief financial officerscouncil,the councilofthe inspectorsgeneral on',
29954:'integrityand efficiency, page 6 sffas 58 fasab handbook, version 20 06/21 sffas 58 committees of professional associations generally commenting on',
29955:'eds in the past for example, the greater washington society of cpas and theassociation of government accountants financial management standards',
29956:'board, and the roster ofaapc leases implementation task force members and observers. a10. twentytwo comment letters were received from preparers,',
29957:'auditors, professional associations,andusersoffederalfinancialinformation. the boardconsideredresponsesto the ed at itsapril 2020 meeting. the board did not rely on the number in',
29958:'favor of or opposed to a given position. the board considered each response and weighed the merits of the points',
29959:'raised. the respondents comments are summarized below. a11. all respondents agreed that a deferral was necessary. twentyone of 22 indicated',
29960:'agreement with the twoyear deferral, while one of 22 stated that two years would not provide sufficient time to consider',
29961:'forthcoming implementation guidance in conducting implementation preparation activities. a12. several respondents agreed with the proposal while expressing concerns about the',
29962:'complexity and breadth of implementation challenges. respondents also expressed a desire to have sufficient time to consider and integrate forthcoming',
29963:'implementation guidance.afew respondents indicated that ongoing systems development efforts and implementation preparationactivitiesare likelytobeaffectedbysuchguidance. some were concerned about risks and costs',
29964:'incurred as a result of compressed timeframes for considering the guidance, once finalized and issued. a13. based on the feedback',
29965:'obtained through the leases implementation task force, staff research and outreach, and public comments, the board concluded that a threeyear',
29966:'deferral was appropriate. a14. most federal reporting entities will continue their current lease accounting practices until sffas 54 becomes effective;',
29967:'they should not follow the financialaccounting standards boards fasb new lease standards accounting standards codification leases topic 842 nor should',
29968:'they follow the governmentalaccounting standards boards gasb new lease standards gasb statement no. 87, leases.2 a15. rather, reporting entities should',
29969:'continue to follow the current fasab guidance that addresses lease transactions. this comprises paragraphs 4346 of sffas 5 and paragraphs',
29970:'20 and 29 of sffas 6. these paragraphs are not rescinded by sffas 54 until 2except for a limited number',
29971:'of reporting entities permitted to follow fasb generally accepted accounting principles see sffas 34, par. 912. those entities will adopt',
29972:'new lease accounting standards promulgated by fasb as appropriate. page 7 sffas 58 fasab handbook, version 20 06/21 sffas 58',
29973:'it becomes effective. previouslyexisting fasb guidance underaccounting standards codification leases topic 840 should continue to be used when the accounting',
29974:'treatment for a lease transaction or event is not specified by paragraphs 4346 of sffas 5 and paragraphs 20 and',
29975:'29 of sffas 6. boardapproval a16. this statement was approved for issuance by all members of the board. page 8',
29976:'sffas 58 fasab handbook, version 20 06/21 sffas 58 appendix b:abbreviations aapc accounting and auditing policy committee cfr consolidated financial',
29977:'report of the u.s. government ed exposure draft fasab federalaccounting standardsadvisory board fasb financialaccounting standards board gaap generallyaccepted accounting principles',
29978:'gasb governmentalaccounting standards board gpffr general purpose federal financial report sffas statement of federal financialaccounting standard page 9 sffas 58',
29979:'fasab handbook, version 20 06/21 statement of federal financialaccounting standards 59: accounting and reporting of government land status issued july',
29980:'30, 2021 effective date par. 13: scope for periods beginning after september 30, 2021. earlier adoption is not permitted. par.',
29981:'612: rsi presentation for periods beginning after september 30, 2021 through periods beginning after september 2024. earlier adoption is not',
29982:'permitted. par. 4 14: basic presentation for periods beginning afterseptember 30, 2025. earlier adoptionisnotpermitted. affects sffas 6, paragraphs 25,26,35,40,44,45 sffas',
29983:'7, paragraphs 62,258,259,296,345,346,358,361 sffas 29 paragraphs 33,35,39,40,42 sffas 32 paragraph 23 sffas 42 paragraphs 13,15 affected by none. summary the',
29984:'objective of this statement is to ensure consistent accounting treatment and reporting for federal land. this statement sets forth the',
29985:'federalaccounting standardsadvisory boards fasab or the board agreement with those in the financial reporting community who noted the importance of',
29986:'having accounting standards that provide relevant, reliable, and consistent information concerning federal land. the board determined that the vast holdings',
29987:'and uses of federal land cannot adequately be conveyed to the public through monetary measurements. specifically, limitations inherent in valuations',
29988:'such as passage of time and inflation make historical cost less relevant to users. alternative methods needed to routinely appraise',
29989:'or corroborate over 622 million acres of land are impractical and cost prohibitive. instead, the board concluded that, consistent with',
29990:'its conceptual framework, reporting estimated acres increases transparency, comparability, consistency, and reliability of land information while either avoiding or at',
29991:'least significantly minimizing burden and costs that would otherwise be borne if monetary measures were used to recognize land on',
29992:'the balance sheet. prior to the issuance of this statement, federal accounting standards required the capitalization of the historical cost',
29993:'of general property, plant, and equipment gpp&e land and disclosures regarding restrictions on the use or convertibility of gpp&e to',
29994:'include gpp&e land. similarly, prior to this statement federal accounting standards required the expensing of stewardship land page 1 sffas',
29995:'59 fasab handbook, version 20 06/21 sffas 59 sl for the period in which the acquisition cost was incurred and',
29996:'disclosures on the relationship between sl and the entitys mission, the entitys sl polices, major categories of sluse, and physical',
29997:'units of sl. this statements principal requirements include: reclassifying gpp&e land and permanent land rights as a noncapitalized asset referencinganoteonthebalancesheetthatdisclosesinformationaboutgpp&elandand',
29998:'permanent land rights without an asset dollar amount reporting estimated acres of gpp&e land and sl using three predominant use',
29999:'subcategories conservation and preservation land operational land commercial use land reporting estimated acres of land held for disposal or exchange',
30000:'reporting land rights information, whether such rights are permanent or temporary, and amounts paid during the year to maintain such',
30001:'rights materiality the provisions of this statement need not be applied to information if the effect of applying the provisions',
30002:'is immaterial.1amisstatement, including omission of information, is material if, in light of surrounding facts and circumstances, it could reasonably be',
30003:'expected that the judgment of a reasonable user relying on the information would change or be influenced by the correction',
30004:'or inclusion of the information. materiality should be evaluated in the context of the specific reporting entity. determining materiality requires',
30005:'appropriate and reasonable judgment in considering the specific facts, circumstances, size, and nature of the misstatement. consequently, after quantitative and',
30006:'qualitative factors are considered, materiality may vary by financial statement, line item, or group of line items within an entity.',
30007:'1refer tostatement of federal financialaccountingconcepts 1, objectives of federal financial reporting, chapter 7, titled materiality, for a detailed discussion of',
30008:'the materiality concepts. page 2 sffas 59 fasab handbook, version 20 06/21 sffas 59 page 3 sffas 59 fasab handbook,',
30009:'version 20 06/21 sffas 59 table of contents summary 1 materiality 2 standards 4 scope 4 amendments to sffas 6',
30010:'5 amendments to sffas 29 12 amendments to sffas 32 19 amendments to sffas 7 20 amendments to sffas 42',
30011:'23 effective date 23 appendixa: basis for conclusions 25 appendix b: illustrations 49 appendix c:abbreviations 57 page 4 sffas 59',
30012:'fasab handbook, version 20 06/21 sffas 59 standards scope 1. this statement applies to federal entities that present general purpose',
30013:'federal financial reports, including the consolidated financial report of the u.s. government cfr, in conformance with generally accepted accounting principles,',
30014:'as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy of generally accepted',
30015:'accounting principles, including the application of standards issued by the financial accounting standards board. 2. this statement amends the following',
30016:'guidance:2 a. sffas6,accountingfor property,plant,andequipment b. sffas29, heritageassetsandstewardshipland c. sffas 32, consolidated financial report of the united states government requirements: implementing',
30017:'statement of federal financialaccounting concepts 4 intendedaudience and qualitative characteristics for the consolidated financial report of the united states government',
30018:'d. sffas7,accountingfor revenueandotherfinancingsourcesandconceptsfor reconciling budgetary and financialaccounting e. sffas42, deferredmaintenanceandrepairs:amendingstatementsoffederal financialaccounting standards 6, 14, 29, and 32 f. sffas 50,',
30019:'establishing opening balances for general property, plant, and equipment:amending sffas 6, sffas 10, sffas 23, and rescinding sffas 353 3.',
30020:'this statement does not change existing standards addressing tribal land and land rights other than permanent land rights. in addition,',
30021:'this statement does not apply to: 2amendments to each of the statements include, where applicable, 1 strikethrough deletions of existing',
30022:'text and 2 red, underlined additions. in some amendments, red underlining has been omitted for reading ease 3amendments to sffas',
30023:'50, a statement which amended sffas 6, will be incorporated by reference as reflected in the sffas 6 amendments contained',
30024:'herein. page 5 sffas 59 fasab handbook, version 20 06/21 sffas 59 a. land held in trust or administered on',
30025:'behalf of indian tribal governments or individual indian land, b. the outer continental shelf ocs.4 amendments to sffas 6,accounting for',
30026:'property, plant, and equipment 4. this paragraph amends sffas 6 to clarify that land and permanent land rights are to',
30027:'remain in the general property, plant, and equipment gpp&e category but are not to be capitalized. a. paragraph 25 is',
30028:'amended as follows: 25. land and permanent land rights28.1 acquired for or in connection with other general pp&e29 shallbeincluded in',
30029:'areconsidered general pp&ebut are not tobe capitalized on the balance sheet. general pp&e land shall exclude 1 withdrawn public lands29.1',
30030:'or 2 land restricted for conservation, preservation, historical, or other like restrictions. such land shall remain categorized as stewardship land',
30031:'sl. unless the reporting entity made the election to implement the provisions of paragraph 40.f.i in some instances, general pp&e',
30032:'may be built on existing federal lands. in this case, the land cost would often not be identifiable. in these',
30033:'instances, general pp&e shall include onlyland and land rightswith an identifiable cost that wasspecificallyacquired foror in connection with construction of',
30034:'general pp&e. fn 28.1 land rights, such as easements or rightsofway, that are for an unspecified period of time or',
30035:'unlimited duration are considered permanent land rights. temporary land rights are those land rights that are for a specified period',
30036:'of time or limited duration. fn 29 acquired for or in connection with other general pp&e is defined as land',
30037:'acquired with the intent to construct general pp&e and land acquired in combination with general pp&e, including not only land',
30038:'used as the foundation, but also adjacent land considered to be the general pp&es common grounds. fn 29.1 to the',
30039:'extent consistent with statutory authorities, an entity may withdraw public lands from the public domain for specific uses. for example,',
30040:'4the term ocs refers to the seabed, subsoil and energy or mineral resources derived therefrom. page 6 sffas 59 fasab',
30041:'handbook, version 20 06/21 sffas 59 anentitymaywithdrawpubliclandfromsale,settlement, orrecreationaluseto expand buffer zones for security or training needs. b. paragraph 26 is',
30042:'amended as follows: 26. all g general pp&e, other than land and permanent land rights, shall be recognized as an',
30043:'asset on the balance sheet and recorded at cost. although the measurement basis for valuing general pp&e remains historical cost,',
30044:'reasonable estimates may be used to establish the historical cost of general pp&e, in accordance with the asset recognition and',
30045:'measurement provisions herein. cost shall include all costs incurred to bring the pp&e to a form and location suitable for',
30046:'its intended use. for example, the cost of acquiring property, plant, and equipment may include: [no changes to the list',
30047:'that follows] c. aparagraphandfootnoteisinsertedfollowingtheheading expenserecognition and before existing paragraph 35 as follows: 34a. the cost of acquiring general pp&e land',
30048:'and permanent land rights shall be recognized on the statement of netcost fortheperiod in which the cost isincurred. the cost',
30049:'shall include all costs to prepare general pp&e land or a permanent land right for its intended use for example,',
30050:'razing a building. in some cases, land may be acquired along with existing structures. if the structure is to be',
30051:'used in operations, the amount related to the structure shall be estimated and capitalized while the amount related to the',
30052:'land shall be expensed. if acquisition of the structure is incidental to the acquisition of the land and the structure',
30053:'is not intended to be used in operations, the cost of the entire acquisition shall be expensed. no amounts for',
30054:'general pp&e land or permanent land rights acquired through donation, devise,40.1 or judicial process shall be capitalized. fn 40.1 acquisition',
30055:'of general pp&e can also occur due to legal devise or instrument, suchasawilloraclausewithinawillthatbequeathspropertytoanentity. d. paragraph 35 is amended as follows:',
30056:'35. depreciation expense is calculated through the systematic and rational allocation of the cost of general pp&e, less its estimated',
30057:'salvage/residual value, over the estimated useful life of the general pp&e. depreciation expense shall be recognized on all general pp&e,41',
30058:'except land and permanent land rights, shall be expensed as incurred of unlimited duration.42 [no changes to the list that',
30059:'follows] fn 41 software [see sffas 10 for standards regarding internally developed software] and temporary land [see sffas 10 for',
30060:'standard regarding internally page 7 sffas 59 fasab handbook, version 20 06/21 sffas 59 developed software] rights, while associated with',
30061:'tangible assets, may be classified as intangible assets by some entities. in this event, they would be subject to amortization',
30062:'rather than depreciation. amortization is applied to intangible assets in the same manner that depreciation is applied to general pp&etangible',
30063:'assets. fn 42 temporary lland rights, such as easements or rightsofway, that are for a specified period of time or',
30064:'limited duration shall be depreciated or amortized over that time period. e. footnote 46 of paragraph 44 provides examples of',
30065:'major classes of assets. footnote 46 is amended as follows: fn 46 major classes of general pp&e shall be determined',
30066:'by the entity. examples of major classes that are depreciated/amortized include buildings and structures, furniture and fixtures, equipment, and vehicles,',
30067:'and land. 5. this paragraph amends paragraph 40 by providing guidance for establishing opening balances consistent with the amended reporting',
30068:'requirements for gpp&e land. because sffas 50 first amended this paragraph in sffas 6, sffas 50, paragraph 13 is also',
30069:'amended to conform to amended paragraph 40 shown below. there are no changes to paragraph 40.a40.e.ii, 40.g, 40.h.i, and 40.i.i.',
30070:'40.f. alternative methods for land and temporary land rights. areporting entity should choose among the following alternative methods for establishing',
30071:'an opening balance for land and temporary land rights. because a reporting entity may have multiple component or subcomponent reporting',
30072:'entities selecting different alternative methods, areporting entityshouldestablish an opening balancebased on one, or acombination, of these alternative methods. however, application',
30073:'of a particular alternative method must be consistent within each individual subcomponent reporting entity prior to consolidation into the larger',
30074:'component reporting or reporting entity. 40.f.i. the reporting entity may exclude land and temporary land rights from the opening balance',
30075:'of general pp&e. if this alternative method is was applied, the reporting entity should prospectively capitalize and depreciate or amortize',
30076:'expense future land and temporary land rights acquisitionsacquired, beginning in fiscal year 2026. 40.f.ii. temporary lland and land rights may',
30077:'be recognized in opening balancesbasedon theprovisionsofthe alternativevaluationmethod deemed cost provided in paragraph 40.d. page 8 sffas 59 fasab handbook, version',
30078:'20 06/21 sffas 59 40.h.ii. acomponent reporting entity electing to apply the provisions of paragraph 40.f.i. to land and temporary',
30079:'land rights should disclose this fact anddescribethe alternative methodsused inthe firstreportingperiodin which the reporting entity makes an unreserved assertion that',
30080:'its financial statements, or one or more line items, are presented fairly in accordance with gaap. acomponent reporting entity electing',
30081:'to exclude land and land rights from its general pp&e opening balances must disclose, with a reference on the balance',
30082:'sheet to the related disclosure, the number of acres held at the beginning of each reporting period, the number of',
30083:'acres added during the period, the number of acres disposed of during the period, and the number of acres held',
30084:'at the end of each reporting period. areporting entity electing to exclude land and land rights from its general pp&e',
30085:'opening balance should continue to exclude future land and land rights acquisition amounts and provide the disclosures. in the event',
30086:'different alternative methods are applied to land and land rights as permitted by paragraph 40.f. by subcomponent reporting entities consolidated',
30087:'into a larger reporting entity, the alternative method adopted by each significant subcomponent should be disclosed. 40.i.ii. when a component',
30088:'reporting entity elects to apply the provisions of paragraph 40.f.i. to land and temporary land rights, the u. s. governmentwide',
30089:'financial statements should disclose this fact, the number of acres held at the end of each reporting period, an explanation',
30090:'of the election, the identity of the component reporting entity, and a reference to the component reporting entitys financial report.',
30091:'6. this paragraph amends sffas 6 disclosure requirements. a. two paragraphs that add disclosure requirements applicable to gpp&e land are',
30092:'inserted immediately following paragraph 45: 45a. the following disclosures46.1 should be provided regarding gpp&e land and permanent land rights: a.',
30093:'aconcisestatementdefininganentitysfederalland,andexplaininghow land relates to the mission of the entity. b. abriefdescriptionoftheentityspolicies forland. policiesforland arethe goals and principles the entity established',
30094:'to guide its acquisition, maintenance,use,anddisposaloflandconsistentwithstatutoryrequirements, prohibitions, and limitations governing the entity and the land. page 9 sffas 59 fasab handbook,',
30095:'version 20 06/21 sffas 59 c. land and permanent land rights should be assigned to one of three subcategories based',
30096:'on predominant use461.a and reported in estimated acres of land. the three subcategories are commercial use land; conservation and preservation',
30097:'land; and operational land. where land and permanent land rights have more than one use, the predominant use of the',
30098:'land should be used to subcategorize the land461.b . the following information should be presented by subcategory of land use:',
30099:'i. acres of land. the estimated number of acres at the beginning of each reporting period among the three subcategoriesand',
30100:'the estimated number of acres at the end of each reporting period for land and permanent land rights should be',
30101:'provided. d. if applicable, the amount of estimated acres held for disposal or exchange and their predominant use. for purposes',
30102:'of thisstatement, land isconsidered held for disposal or exchange when the entity has satisfied the statutory disposal authority requirements specific',
30103:'to the land in question. e. landrightsinformationshouldincludeageneraldescriptionofthedifferent types of rights acquired by the entity, whether such rights are permanent or',
30104:'temporary, and amounts paid during the year to maintain such rights. fn 46.1 unless otherwise noted, disclosure requirements are limited',
30105:'to the gpp&e land category and are not required for each of the three subcategories of conservation and preservation land;',
30106:'operational land; and commercial use land. fn 46.1a predominant use of land. predominant use is the major or primary current',
30107:'use of an asset during the reporting period and does not include incidental or infrequent uses of the asset. moreover,',
30108:'predominant use can change between reporting periods. an assets predominant use should be consistent with the entitys authorizing legislation but',
30109:'may not always be consistent with the original intent or reason why the asset was initially acquired. fn46.1b aggregationand assignment',
30110:'of land. thelevelof aggregation of land and permanent land rights used to determine predominant use should be determined by the',
30111:'preparer considering the entitys mission, types of land use and how it manages the assets. 45b. the financial statement balance',
30112:'sheet should reference a note that discloses information required at paragraph 45aa through e about gpp&e page 10 sffas 59',
30113:'fasab handbook, version 20 06/21 sffas 59 land and permanent land rights but no asset dollar amount should be shown.',
30114:'existing display and disclosures46.2 should continue during the transition period through fiscal year 2025 and cease in fiscal year 2026',
30115:'when superseded by the transition of the rsi information to note disclosures. if general pp&e land and stewardship land are',
30116:'presented in separate notes to the financial statements, include cross references between the notes. fn 46.2 for gpp&e land and',
30117:'land rights, existing disclosures are those that are in effect prior to the amendments contained in paragraph 45a. they include',
30118:'disclosures required by paragraph 40.h for those entities electing an alternative method for land and land rights and, if applicable,',
30119:'the minimum gpp&e disclosure requirements as required by paragraph 45. b. the disclosure requirements for the governmentwide financial statements at',
30120:'paragraph 45 are amended as follows: 45. [no change to the list that precedes this text. ]the above listed disclosure',
30121:'requirements for gpp&e and gpp&e land are not applicable to the u.s. governmentwidefinancialstatements. sffas32providesfordisclosureapplicable to the u.s. governmentwide financial statements',
30122:'for these activities. 7. this paragraph amends sffas 6 by inserting additional definitions immediately after paragraph 20 as follows: 20a.',
30123:'acres of land held for disposal or exchange include land for which the entity has satisfied the statutory disposal authority',
30124:'requirements specific to the land in question.24.1 disposal includes conveyances of federal land to nonfederal entities not limited to sale,',
30125:'transfer, exchange, lease, publicprivate partnership, and donation or any combination thereof. fn24.1 entitydecisionstoidentifyand classifylandasheld fordisposalor exchangeoften require public participation and',
30126:'diverse clearances, such as environmental and economic impact studies, surveys, and appraisals. 20b. commercialuse land subcategory includesland or land rights',
30127:'that are predominantly used to generate inflows of resources such inflows may be derived from the land itself or activities',
30128:'performed on the land and regardless of whether the use or activity is intended to produce a profitfromnonfederalthird parties,usuallythroughspecialusepermits,rightofwaygrants, and',
30129:'leases. suchinflowsmayarisefromexchangeor nonexchange activitiesandmayormaynot be considered dedicated collections. examples include revenue or inflows derived from concession arrangements; page 11 sffas',
30130:'59 fasab handbook, version 20 06/21 sffas 59 grants for a specific project such as electric transmission lines, communication sites,',
30131:'roads, trails, fiber optic lines, canals, air rights, flumes, pipelines, reservoirs and dams; and sales or land exchanges; leases; permits',
30132:'for public use such as commercial filming and photography, advertising displays, agriculture, recreation residences and camping, recreation facilities, temporary use',
30133:'permits for construction equipment storage and assembly yards, well pumps, and other such uses; forest product sales such as timber,',
30134:'or sales arising from national forests and grasslands; and/or publicprivate partnerships. 20c. conservation and preservation land subcategory includes land or',
30135:'land rights that are predominantly used for conservation or preservation purposes. conservation and preservation, although closely linked, are distinct terms.',
30136:'each term involves a certain type or degree of protection. specifically, conservation is generally associated with the protection and proper',
30137:'use of naturalresources, whereas preservation isassociated with the protection of buildings, objects, and landscapes from use. examples of land conserved',
30138:'or preserved for significant natural, historic, scenic, cultural, and recreational resources include the following: national parks geological resource sites wildlife',
30139:'and plant life refuges archeological resource sites localnativeamericanor ethnicculturalsites 20d. operational land subcategory includes land or land rights predominantly used',
30140:'for general or administrative purposes. for example, the following functions performed by entities would be included in this subcategory: military',
30141:'functions include preparing for the effective pursuit of war and military operations short of war; conducting combat, peacekeeping, and humanitarian',
30142:'military operations; and supporting civilian authorities during civil emergencies. scientific functions include conducting and managing research, experimentation, exploration, and operations',
30143:'including the development of commercial capabilities. broad scientific fields of study generally include 1 physical sciences physics, astronomy, chemistry, geology,',
30144:'metallurgy, 2 biological sciences zoology, botany, genetics, paleontology,molecularbiology,physiology,and3socialsciencespsychology,sociology, anthropology, economics. nuclear functions include managing or regulating the use of nuclear',
30145:'energy, power plants, radioactive materials, radioactive material shipments, nuclear storage, and nuclear reactor decommissioning. page 12 sffas 59 fasab handbook,',
30146:'version 20 06/21 sffas 59 other related functions include those that are administrative or other mission related in nature. for',
30147:'example, land used for readiness and training, office building locations, storage, or vacant properties fall under this category. amendments to',
30148:'sffas 29, heritageassets and stewardship land 8. this paragraph amends sffas 29 to clarify the definition of sl and references',
30149:'to general pp&e. a. paragraph 33 is amended as follows: 33. stewardship land is includes both public domain14.1 and acquired',
30150:'land and land rights15 ownedbythefederalgovernment intendedtobeheldindefinitely. butnotacquiredfororin connection with16 items of general pp&e. examples of stewardship land include land reserved,managed,planned,',
30151:'used, or acquiredfor16 asforestsandparks, and landusedfor wildlife and grazing. a. forests and parks; b. recreation and conservation; c. wildlife habitat',
30152:'and grazing; d. historic landmarks and/or the preservation of prehistoric and historic structures those listed on or eligible for listing',
30153:'on the national register of historic places; e. multiple purpose ancillary revenue generating activity for example, special use permits, mineral',
30154:'development activities, and timber production; and/or f. buffer zones for security, flood management, and noise and view sheds. fn 14.1',
30155:'public domain land is land that was originally ceded to the united states by treaty, purchase, or conquest in contrast',
30156:'to acquired lands, which have been purchased by, given to, exchanged with, or transferred through condemnation proceedings to the federal',
30157:'government. fn 15 land rights are interests and privileges held by the entity in land owned by others, such as',
30158:'leaseholds, easements, water and water powerrights, diversion rights, submersion rights, rightsofway, mineral rights, and other like interests in land. land',
30159:'rights such as easements or rightsofway that are for an unspecified period of time or page 13 sffas 59 fasab',
30160:'handbook, version 20 06/21 sffas 59 unlimited duration are considered permanent land rights. temporary land rights are those land rights',
30161:'that are for a specified period of time or limited duration. a. fn 16 acquired for or in connection with',
30162:'is defined as including land acquired with the intent to construct general pp&e and land acquired in combination with general',
30163:'pp&e, including not only land used as the foundation, but also adjacent land considered to be the general pp&escommon grounds.',
30164:'landusedoracquired fororin connection with items of general pp&e but meeting the definition of stewardship land should be classified as stewardship',
30165:'land. b. paragraph 35 is amended as follows: 35. land and land rights owned by the federal government and acquired',
30166:'for or in connection with items of meeting the definition of general pp&e established in sffas 6, as amended, should',
30167:'be accounted for in accordance with sffas6,asamended. and reported as general pp&e. c. paragraph 39 is amended and footnote 20',
30168:'rescinded as follows: 39. transfers of stewardship land from one federal entity to another, doesnot affect the net cost of',
30169:'operations or net position of either entity. however, in some cases, land included in general pp&e maybe transferred to an',
30170:'entityfor use as stewardship land. inthisinstance, t the transferring and recipient entity entities should properly adjust for estimated acres of',
30171:'land information recognize a transferout of capitalized assets.20 a. fn20 footnote rescindedbysffas. sffa7s,accountingforrevenueand other financing sources, par. 74 and par.',
30172:'345346. 9. this paragraph amends sffas 29 by rescinding paragraph 40.a40.d.3 and replacing it with the disclosure requirements to require',
30173:'estimated acres of land and clarify the sub categorization and reporting of land use. subcategorization should be based on predominant',
30174:'use using three new subcategories. further, disclosures should provide information regarding land held for disposal and transfers of land.5 paragraph',
30175:'40 is amended and a new paragraph 40ais added as follows: 40. entitieswith stewardship land should reference a note21 on',
30176:'the balance sheet that discloses information about stewardship land, but no asset dollar amount should be 5unless otherwise noted, disclosure',
30177:'requirements are limited to the gpp&e land category and are not required for each of the three subcategories of conservation',
30178:'and preservation land; operational; and commercial use land. page 14 sffas 59 fasab handbook, version 20 06/21 sffas 59 shown.',
30179:'the note disclosure related to stewardship land should provide the following: the following disclosures2121.1 should be provided for stewardship land',
30180:'and permanent land rights: a. aconcisestatementexplaininghow itrelatestothe mission oftheentity. b. abriefdescriptionofthe entitysstewardshippolicies for stewardshipland. stewardship policies for stewardship land are',
30181:'the goals and principles the entity established to guide its acquisition, maintenance, use, and disposal of stewardship land consistent with',
30182:'statutory requirements, prohibitions, and limitations governing the entity and the stewardship land. c. aconcisedescriptionofeachmajor category of stewardshiplanduse. whereparcels of land',
30183:'havemore thanone use, the predominant useof the landshould be considered the major use. in cases where land has multiple uses,',
30184:'none of which is predominant, a description of the multiple uses should be presented. the appropriate level of categorization of',
30185:'stewardship land use should be meaningful and determined by the preparer based on the entitys mission, types of stewardship land',
30186:'use, and how it manages the assets. d. stewardship land should be quantified in terms of physical units. the appropriate',
30187:'level of aggregation and physical units of measure for each major category of stewardship land use should be meaningful and',
30188:'determined by the preparer based on the entitys mission, types of stewardship land use, and how it manages the assets.',
30189:'for each major category of stewardship land use the following should be reported: 1. the number of physical units by',
30190:'major category of stewardship land use for which the entity is the steward as of the end of the reporting',
30191:'period; 2. the number of physical units by major category of stewardship land use that were acquired and the number',
30192:'of physical units by major category of stewardship land use that were withdrawn during the reporting period; and 3. adescriptionofthemajor',
30193:'methodsofacquisitionandwithdrawal ofstewardship land during the reporting period. this should include disclosure of physical units by major category of stewardship land',
30194:'use of transfers of stewardship land between federal entities and the number of physical units by major category of stewardship',
30195:'land use of stewardship land acquired through donation or devise, if material. in addition, the fair value of stewardship land',
30196:'acquired through donation or devise during the reporting period should be disclosed, if known and material page 15 sffas 59',
30197:'fasab handbook, version 20 06/21 sffas 59 a. aconcisestatement defining anentitysfederalland,andexplaininghowstewardship land relates to the mission of the entity.21.2 b.',
30198:'abriefdescriptionofthe entityspolicies for stewardshipland. policiesfor land are the goals and principles the entity established to guide its acquisition, maintenance, use,',
30199:'and disposal of land consistent with statutory requirements, prohibitions, and limitations governing the entity and the land. c. information of',
30200:'land use by subcategory. stewardship land and permanent land rights should be assigned to one of three subcategories based on',
30201:'predominant use21.1a and reported in estimated acres of land. the three subcategories are commercial use land; conservation and preservation land;',
30202:'and operational land. where stewardship land and permanent land rights have more than one use, the predominant use of the',
30203:'land should be used to subcategorize the land21.1b. 1. acres of land. the estimated number of acres at the beginning',
30204:'of each reporting period among the three subcategories and the estimated number of acres at the end of each reporting',
30205:'period for land and permanent land rights. d. if applicable, the amount of estimated acres of land held for disposal',
30206:'or exchange and their predominant use. for purposes of thisstatement, stewardship land is considered held for disposal or exchange when',
30207:'the entity has satisfied the statutory disposal authority requirements specific to the land in question. e. stewardshiplandrightsinformationshouldincludeageneraldescriptionofthedifferent types of rights',
30208:'acquired by the entity, whether such rights are permanent or temporary, and amounts paid during the year to maintain such',
30209:'rights. fn 21 this standard does not prescribe a specific reference or line item entitled stewardship land asit may be',
30210:'included with other items for which no dollar amounts are recognized such as heritage assets and other items that in',
30211:'the future may require similar nonfinancial disclosure for presentation. instead, the standard allows entities flexibility in determining the best presentation.',
30212:'fn 21.1 unless otherwise noted, disclosure requirements are limited to the stewardship land category and are not required for each',
30213:'of the three subcategories of conservation and preservation land; operational land; and commercial use land. fn 21.1a predominant use of',
30214:'land. predominant use is the major or primary current use of an asset during the reporting period and does not',
30215:'include incidental or infrequent uses of the asset. moreover, predominant use can change between reporting periods. an assets predominant use',
30216:'should be consistent with the entitys page 16 sffas 59 fasab handbook, version 20 06/21 sffas 59 authorizing legislation but',
30217:'may not always be consistent with the original intent or reason why the asset was initially acquired. fn 21.1b aggregation',
30218:'and assignment of land. the level of aggregation of land and permanentlandrightsusedtodeterminepredominantuseshouldbedeterminedbythe preparer considering the entitys mission, types of land',
30219:'use and how it manages the assets. 40a. the financial statement balance sheet should reference a note that discloses information',
30220:'required at paragraph 40 a through e about stewardship land and permanent land rights but no asset dollar amount should',
30221:'be shown. existing disclosures21.2 should continue during the transition period through fiscal year 2025 and cease in fiscal year 2026',
30222:'when superseded by the transition of the rsi information to note disclosures. if stewardship land and general pp&e land are',
30223:'presented in separate notes to the financial statements, include cross references between the notes. fn 21.2 for stewardship land, existing',
30224:'disclosures are those required by paragraph 40, titled disclosures and required supplementary information that are being rescinded 40.a through 40.d.3',
30225:'effective fiscal year 2026. to the extent practical, duplication of information, such as statementsexplaining howstewardship land relates to the entitys',
30226:'mission or its slpolicies and procedures, should be avoided and should remain as basic note disclosure during the transitional period.',
30227:'10. this paragraph amends sffas 29 by inserting additional definitions immediately after paragraph 36 as follows: 36a. acres of land',
30228:'held for disposal or exchange include land for which the entity has satisfied thestatutorydisposalauthorityrequirementsspecifictothe landin question.17.1 disposalincludes conveyances of federal',
30229:'land to nonfederal entities not limited to sale, transfer, exchange, lease, publicprivate partnership, and donation, or any combination thereof. fn',
30230:'17.1 entity decisions to identify and classify land as held for disposal or exchange often require public participation and diverse',
30231:'clearances, such as environmental and economic impact studies, surveys, and appraisals. 36b. commercialuse land subcategory includesland or land rights that',
30232:'are predominantly used to generate inflows of resources such inflows may be derived from the land itself or activities performed',
30233:'on the land and regardless of whether the use or activity is intended to produce a profitfromnonfederalthird parties,usuallythroughspecialusepermits,rightofwaygrants, and leases.',
30234:'suchinflowsmayarisefromexchangeor nonexchange activitiesandmayormaynot be considered dedicated collections. examples include revenue or inflows derived from page 17 sffas 59 fasab handbook,',
30235:'version 20 06/21 sffas 59 a. concession arrangements; b. grants for a specific project such as electric transmission lines, communication',
30236:'sites, roads, trails, fiber optic lines, canals, air rights, flumes, pipelines, reservoirs and dams; c. land sales or land exchanges;',
30237:'d. leases; e. permits for public use such as commercial filming and photography, advertising displays, agriculture, recreation residences and camping,',
30238:'recreation facilities, temporary use permits for construction equipment storage and assembly yards, well pumps, and other such uses; f. forest',
30239:'product sales such as timber, or sales arising from national forests and grasslands; and/or g. publicprivate partnerships. 36c. conservation and',
30240:'preservation land subcategory includes land or land rights that are predominantly used for conservation or preservation purposes. conservation and preservation,',
30241:'although closely linked, are distinct terms. each term involves a certain type or degree of protection. specifically, conservation is generally',
30242:'associated with the protection and proper use of naturalresources, whereas preservation isassociated with the protection of buildings, objects, and landscapes',
30243:'from use. examples of land conserved or preserved for significant natural, historic, scenic, cultural, and recreational resources include the following:',
30244:'national parks geological resource sites wildlife and plant life refuges archeological resource sites localnativeamericanor ethnicculturalsites 36d. operational land subcategory includes',
30245:'land or land rights predominantly used for general or administrative purposes. for example, the following functions performed by entities would',
30246:'be included in this subcategory: a. military functions include preparing for the effective pursuit of war and military operations short',
30247:'of war; conducting combat, peacekeeping, and humanitarian military operations; and supporting civilian authorities during civil emergencies. page 18 sffas 59',
30248:'fasab handbook, version 20 06/21 sffas 59 b. scientific functions include conducting and managing research, experimentation, exploration, and operations including',
30249:'the development of commercial capabilities. broad scientific fields of study generally include 1 physical sciences physics, astronomy, chemistry, geology, metallurgy,',
30250:'2 biological sciences zoology, botany, genetics, paleontology, molecular biology, physiology, and 3 social sciences psychology, sociology, anthropology, economics. c. nuclear',
30251:'functions include managing or regulating the use of nuclear energy, power plants, radioactive materials, radioactive material shipments, nuclear storage, and',
30252:'nuclear reactor decommissioning. d. other related functions include those that are administrative or other mission related in nature. for example,',
30253:'land used for readiness and training, office building locations, storage, or vacant properties fall under this category. 11. this paragraph',
30254:'amends paragraph 42 of sffas 29, which addresses the u.s. government wide financial statement disclosures. amendments will now require presentation',
30255:'of estimatedacresof land by category. paragraph 42 isamendedand paragraph 42aisadded as follows: 42. the u.s. governmentwide financial statement should include',
30256:'the following information: reference a note on the balance sheet that discloses information about stewardship land, but no asset dollar',
30257:'amount should be shown. the note disclosure related to stewardship land should provide the following: a. aconcisestatementincluding ageneraldescriptionofthefederalgovernmentsland explaining how',
30258:'its federal land it relates to the mission of the federal government. b. adescription disclosureofthe estimatedacresoflandby predominant usesubcategories and estimated',
30259:'acres of land held for disposal or exchange by of the stewardship land of the federal government. c. ageneral referencetoagencyreportsfor',
30260:'additionalinformationabout stewardship land, suchasagencystewardship policiesforstewardshipland,andestimatedacresof land, and physical units by major categories of stewardship land use. 42a. the u.s. governmentwide',
30261:'financial statement balance sheet should reference a note that discloses the information about stewardship land and land rights required by',
30262:'paragraph 42, but no asset dollar amounts should be shown. existing disclosures25.1 should continue during the transition period through fiscal',
30263:'year 2025 and cease in fiscal year 2026 when superseded by the transition of the rsi information to note disclosures.',
30264:'if stewardship land and general pp&e land page 19 sffas 59 fasab handbook, version 20 06/21 sffas 59 are presented',
30265:'in separate notes to the financial statements, include cross references between the notes. fn 25.1 existing disclosures at paragraph 42',
30266:'are those which are in effect for reporting entities prior to the amendments contained at paragraphs 42 and 42a. to',
30267:'the extent practical, duplication of information, such as statements explaining how stewardship land relates to the entitys mission or its',
30268:'sl policies and procedures, should be avoided and should remain as basic note disclosure during the transitional period. amendments to',
30269:'sffas 32, consolidated financial report of the united states government requirements: implementing statement of federal financialaccounting concepts 4 intendedaudience and',
30270:'qualitative characteristics for the consolidated financial report of the united states government 12. this paragraph amends sffas 32 to revise',
30271:'the governmentwide disclosure requirements for property, plant, and equipment. paragraph 23 is amended and paragraph 23ais added as follows: 23.',
30272:'the u.s. governmentwide financial statements should include the following disclosures: a. aa broad description of pp&e, b. for general pp&e',
30273:'land i. a note on the balance sheet that discloses information fn1 about general pp&e land and permanent land rights',
30274:'which includes: 1. aconcise statement including a general description of the federal governments land explaining how its federal land relates',
30275:'to the mission of the federal government. 2. adisclosure of estimated acres by predominant use subcategories and estimated acres of',
30276:'land held for disposal or exchange by the federal government c. b. tthe cost excluding land and permanent land rights,',
30277:'associated accumulated depreciation, and book value by major class, and page 20 sffas 59 fasab handbook, version 20 06/21 sffas',
30278:'59 d. c. aageneralreferenceto agency componententity reports for additionalinformation about general pp&e and general pp&e land. 23a. the balance sheet',
30279:'should reference a note that discloses the information2.1 about general pp&e land and permanent land rights required by paragraph 23,',
30280:'but no asset dollar amounts should be shown. existing display and disclosures2.2 should continue during the transition period through fiscal',
30281:'year 2025 and cease in fiscal year 2026 when superseded by the transition of the rsi information to note disclosures.',
30282:'if general pp&e land and stewardship land are presented in separate notes to the financial statements, include cross references between',
30283:'the notes. fn2.1 additionally, such information mayincludea descriptionofthedifferent usesof land managed bythe entity, its predominant activities, condition information, and policy',
30284:'initiatives in effect during the reporting period. fn 2.2 existing disclosures at paragraph 23 are those which are in effect',
30285:'for governmentwide reporting prior to the amendments contained at paragraph 23a. amendments to sffas 7,accounting for revenue and other financingsources',
30286:'and concepts for reconciling budgetary and financialaccounting 13. this paragraph amends sffas 7 to clarify guidance regarding transfers and donations',
30287:'of land. a. footnote 14 at paragraph 62, which discusses revenue arising from donations, should include a reference to the',
30288:'amended sffas 6, paragraph 34aunder the heading expense recognition. footnote 14 is amended as follows: fn14 for the recognition criteria',
30289:'for donated property, plant, and equipment, see sffas no. 6, accounting for property, plant, and equipment, para. 30, 34a, 62,',
30290:'and 71. b. paragraph 258 discusses nonexchange transactions with the public, specifically donations. this should include gpp&e land. paragraph 258',
30291:'is amended as follows: 258. donations: except types of property, plant, and equipment that are expensed.donations are contributions to the',
30292:'government, i.e., voluntary gifts of resources to a government entity by a nonfederal entity.51 the government does not give anything',
30293:'of value to the donor, and the donor receives only personal satisfaction. the donation of cash, other financial resources, or',
30294:'nonfinancial resources except general pp&e land, permanent land rights, and stewardship property, plant, and equipment is therefore a nonexchange revenue.',
30295:'page 21 sffas 59 fasab handbook, version 20 06/21 sffas 59 c. paragraph 259 discusses nonexchange transactions with the public,',
30296:'specifically donations. thisshould include gpp&eland. in addition, this paragraph isamended to conform to paragraph 9.d. of sffas 23, eliminating the',
30297:'category national defense property, plant, and equipment, which rescinded the category federal mission property, plant, and equipment. paragraph 259 is',
30298:'amended as follows: 259. the exceptions are for donations of assets that are expensed rather than capitalized. these include general',
30299:'pp&e land and permanent land rights, stewardship pp&e, consists of federalmissionpp&e,heritage assets,andstewardshipland. such pp&e is expensed if purchased, but no',
30300:'amount is recognized if it is received as a donation.52 correspondingly, no revenue is recognized for such donations. d. paragraph',
30301:'296 and footnote 62 discuss sales of property, plant, and equipment. this should include gpp&e land and permanent land rights.',
30302:'in addition, footnote 62 is amended to conform to sffas 23, paragraph 9.d, which rescinded the category federal mission property,',
30303:'plant, and equipment. paragraph 296 and footnote 62 are amended as follows: 296. the entire sales price is a gain',
30304:'if the book value of the asset is zero. the book value is zero a if the asset is general',
30305:'property, plant, and equipment pp&e that is fully depreciated or writtenoff or b if the asset is general pp&e land,',
30306:'permanent land rights, or stewardship pp&e, for which the entire cost is expensed when the asset is purchased.62 fn 62',
30307:'sffas no. 6,accounting for property, plant, and equipment, has divided property, plant, and equipment pp&e into two basic categories: general',
30308:'pp&e and stewardship pp&e which consists of federal mission pp&e, heritage assets, and stewardship land. general pp&e other than land',
30309:'andpermanent land rights iscapitalized andrecognizedonthe balancesheet; general pp&e land, permanent land rights, and stewardship pp&e is are expensed and thus',
30310:'has have no book value. stewardship pp&e is presented in a stewardship statement. e. paragraph 345 discusses intragovernmental transfers of',
30311:'pp&e. this should include gpp& e land in the requirement. paragraph 345 is amended as follows: 345. transfer of property,',
30312:'plant, and equipment without reimbursement: types that are expensed.property, plant, and equipment pp&e of types that are expensed i.ee.g., general',
30313:'pp&e land and stewardship pp&e may be transferred from one government entity to another. if the asset was classified as',
30314:'either general pp&e land including permanent land rights or stewardship pp&e in its entirety by both the transferring entity and',
30315:'the recipient entity, the transfer does not affect the net cost of operations or page 22 sffas 59 fasab handbook,',
30316:'version 20 06/21 sffas 59 net position of either entity and, therefore, in such a case it is not a',
30317:'revenue, a gain or loss, or other financing source. f. paragraph 346 discusses intragovernmental transfers of pp&e classified as gpp&e',
30318:'by the transferor but as slby the recipient. this should not include the derecognition requirement for gpp&e land and permanent',
30319:'land rights. paragraph 346 is amended as follows: 346. however, if the asset that is transferred was classified as general',
30320:'pp&e excluding noncapitalized general pp&e land and permanent land rights for the transferring entity but stewardship pp&e for the recipient',
30321:'entity, it is recognized as a transferout a negative otherfinancingsource of capitalizedassetsbythetransferring entity. g. paragraph 358 discusses transfers of pp&e.',
30322:'this should include gpp&e. paragraph 358 is amended as follows: 358. transfer of property, plant, and equipment without reimbursement: types',
30323:'that are expensed. property, plant, and equipment pp&e of types that are expensed i.e., general pp&e land [including permanent land',
30324:'rights] and stewardship pp&e may be transferred from one government entityto another. if the asset wasclassified as either general pp&e',
30325:'land including permanent land rights or stewardship pp&e in its entirety by both the transferring entity and the recipient entity,',
30326:'the transfer does not affect the net cost of operations or net position of either entity and therefore in such',
30327:'a case it is not a revenue, a gain or loss, or other financing source. h. paragraph 361 discusses donations',
30328:'of pp&e. this should include gpp&e. in addition, this paragraph is amended to conform to sffas 23, paragraph 9.d, which',
30329:'rescinded the category federal mission property, plant, and equipment. paragraph 361 is amended as follows: 361. donation of property, plant,',
30330:'and equipment: types that are expensed.the acquisition costs of general pp&e land including permanent land rights, heritage assets, and stewardship',
30331:'land property, plant, and equipmentpp&e is are recognized as a cost when incurred. such pp&e consists of federal mission pp&e,',
30332:'heritage assets, and stewardship land. when such pp&e is donated to the government, however, no amount isrecognized as a cost.81',
30333:'since the donation of such pp&e does notaffect thenet cost ornet position of the recipient entity,itisnot arevenue,a gain, or an',
30334:'other financing source. page 23 sffas 59 fasab handbook, version 20 06/21 sffas 59 amendments to sffas 42, deferred maintenance',
30335:'and repairs:amendingstatements of federal financialaccounting standards 6, 14, 29,and 32 14. paragraphs 13, 15.d, and 15.e are amended to ensure',
30336:'that deferred maintenance and repair dm&r information is reported in noncapitalized gpp&e land. a. paragraph 13 is amended as follows:',
30337:'13. dm&r should be measured and reported for capitalized general pp&e, non capitalized general pp&e land to include permanent land',
30338:'rights, and stewardship pp&e. dm&r also may be measured and reported for general pp&e other than land and permanent land',
30339:'rights that is noncapitalized or fully depreciated general pp&e. dm&r should include funded maintenance and repairs m&r that have been',
30340:'delayed for a future period as well as unfunded m&r. dm&r on inactive and/or excess pp&e should be included to',
30341:'the extent that it is required to maintain inactive or excess pp&e in acceptable condition. for example, inactive pp&e may',
30342:'be maintained or repaired either to comply with existing laws and regulations, or to preserve the value of pp&e pending',
30343:'disposal. b. paragraph 15 is amended as follows: 15. at a minimum, the following information should be presented as required',
30344:'supplementary information rsi for all pp&e each category established in sffas 6, as amended, should be included regardless of the',
30345:'measurement method chosen. qualitative no edits for items 15.a15.c or 15.f15.g. d. whether dm&r relates solely to capitalized general pp&e',
30346:'and noncapitalized general pp&e land, stewardship pp&e, or also to amounts relating to non capitalized or fully depreciated general pp&e',
30347:'e. capitalized and noncapitalized general pp&e, and noncapitalized heritage assets, and stewardship land for which management does not measure and/or',
30348:'report dm&r and the rationale for the exclusion effective date 15. the scope of this statement paragraphs 13 is effective',
30349:'for reporting periods beginning after september 30, 2021. the information required at paragraphs 6 and 7 gpp&e land, paragraphs 810',
30350:'stewardship land, paragraph 11 governmentwide stewardship land, page 24 sffas 59 fasab handbook, version 20 06/21 sffas 59 and paragraph',
30351:'12 governmentwide gpp&e land should be presented as rsi for fiscal years 2022 through 2025 and transition to note disclosures',
30352:'in fiscal year 2026. asset dollar amounts for gpp&e land and permanent land rights should remain on the balance sheet',
30353:'along with existing disclosures through fiscal year 2025 and cease in fiscal year 2026 when supersededbythe transition of the rsi',
30354:'information tonote disclosuresandparagraphs4,5, 13, and 14 become effective. existing display and disclosure balance sheet reference for stewardship land should continue',
30355:'through fiscal year 2025 until they are superseded by the requirements at paragraphs 810 beginning in fiscal year 2026. 16.',
30356:'itis thefederalaccountingstandardsadvisoryboardsfasabor theboardintentthat the information required by this statement transition to basic information in fiscal year 2026 after being reported',
30357:'asrsi for a period of four years. prior totheconclusion of thefouryear rsi period, the board plansto make anynecessaryadjustmentstofacilitatethe transition to',
30358:'basic information. early adoption is not permitted. the provisions of thisstatement need notbe applied to information if the effect of',
30359:'applying the provisions is immaterial. refer to statement of federal financialaccounting concepts 1, objectives of federal financial reporting, chapter 7,',
30360:'titled materiality, for a detailed discussion of the materiality concepts. page 25 sffas 59 fasab handbook, version 20 06/21 sffas',
30361:'59 appendixa: basis for conclusions this appendix discusses the factors considered significant by board members in reaching the conclusions in',
30362:'this statement. it includes the reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some',
30363:'factors than to others. the standards enunciated in this statement and not the material in this appendix should govern the',
30364:'accounting for specific transactions, events, or conditions. this statement may be affected by later statements. the fasab handbook is updated',
30365:'annually and includes a status section directing the reader to anysubsequent statements that amend this statement. the authoritative sections of',
30366:'the statements are updated for changes. however, this appendix will not be updated to reflect future changes. the reader can',
30367:'review the basis for conclusions of the amending statement for the rationale for each amendment. the ensuing paragraphs, beginning witha1',
30368:'project history, discuss in detail the boards basis for conclusions and agreement with those in the financial reporting community, who',
30369:'expressed the need for uniform accounting guidance that addressed the lack of relevant, reliable, and consistent historical cost information and',
30370:'the application of inconsistent measurement approaches. prior to the issuance of this statement, federal accounting standards required the capitalization of',
30371:'the historical cost of gpp&e land and disclosures regarding restrictions on the use or convertibility of gpp&e to include gpp&e',
30372:'land. similarly, prior to this statement federal accounting standards required the expensing of sl for the period in which the',
30373:'acquisition cost wasincurred and disclosureson the relationship betweenslandtheentitys mission, the entitys sl policies, major categories of sl use, and physical',
30374:'units of sl. the board determined that the vast holdings and uses of federal land cannot adequately be conveyed to',
30375:'the public through monetary measurements. specifically, limitations inherent in valuations such as passage of time and inflation make historical cost',
30376:'less relevant to users. alternative methods needed to routinely appraise or corroborate over 622 million acres of land are impractical',
30377:'and cost prohibitive. instead, the board concluded that, consistent with its conceptual framework, reporting acres increases transparency, comparability, consistency, and',
30378:'reliability of land information while either avoiding or at least significantly minimizing burden and costs that would otherwise be borne',
30379:'if monetary measurements were used to recognize land on the balance sheet. page 26 sffas 59 fasab handbook, version 20',
30380:'06/21 sffas 59 project history a1. the board added the accounting and reporting of government land project in february 2016',
30381:'during itsthreeyear plan review. the board agreed that the project wasnecessary to address significant differences in accounting treatment and implementation',
30382:'issues arising fromsffas6;sffas7;6 sffas29;andsffas50,. theboardsmostnotableconcerns included the following: a. there is limited value in historical/acquisition cost information for capitalized land,',
30383:'given that such information may lose relevance over time due to general inflation, general land appreciation, and environmental harm. b.',
30384:'thereisinconsistentreportingofgpp&elandarisingfromdifferencesinhowopening balancesare valued, aspermitted bysffas50. thatis,reportingentitiesmayexclude land and land rights from opening balances. c. there is incomplete reporting on land',
30385:'where neither the total cost of land nor the total physical quantity of land is consistently reported. d. some information',
30386:'that is currently reported does not adequately satisfy fasabs reportingobjectivesandqualitativecharacteristics. forexample, physicalunitgrouping such as number of parks is not contributing',
30387:'to either the operating performance or stewardship objectives. e. thereareinconsistencies betweenreportingofslandgpp&eland. a2. sffas6requiresthatlandandlandrightsacquiredfororinconnectionwithothergpp&e be capitalized at the cost incurred to',
30388:'bring the assets to a form and condition suitable for use. acquired for or in connection with other gpp&e is',
30389:'defined asland acquired with the intent to construct gpp&e. it also includes land acquired in combination with general pp&e, including',
30390:'not only land used as the foundation, but also adjacent land considered to be the gpp&es common grounds. a3. bycontrast,sffas29defines',
30391:'stewardshipland aslandincludinglandrightsotherthan land acquired for or in connection with other gpp&e. it does not require balance sheet recognition but, instead,',
30392:'requires expensing the land cost when acquired and disclosures regarding policies for land management, categories of land, and physical unit',
30393:'information. 6sffas 7 requires that donations made to the government by a nonfederal entity, to include nonfinancial resources such as',
30394:'land or buildings, be recognized for those inflows of resources that meet recognition criteria for assets and measured at the',
30395:'estimated fair value of the contribution. page 27 sffas 59 fasab handbook, version 20 06/21 sffas 59 a4. most recently,',
30396:'sffas 50 allows reporting entities to apply alternative methods in establishing opening balances for gpp&e. concerning land, the alternative methods',
30397:'include using deemed cost to establish opening balances of gpp&e land and land rights or excluding them from opening balances',
30398:'with disclosure of acresof land and expensing of future acquisitions. a5. theabove requirementsforbothgpp&elandandslresultinsignificantdifferencesin accounting treatment for federal land. specifically, land',
30399:'acquired during the nations formation may be used in connection with other general pp&e, but it may not 1 have',
30400:'identifiable acquisition costs, 2 be valued at all, or 3 be valued in a way that is similar to gpp&eland',
30401:'andlandrightsacquired forsimilarpurposes. gpp&eonlyincludesland and land rights with an identifiable cost that was specifically acquired for or in connection with construction',
30402:'of general pp&e. the result is disparate treatment of gpp&e land. furthermore, sl, which accounts for an estimated 97 percent',
30403:'of all land managed by the federal government, is expensed when acquired, not capitalized, leading to yet another significant difference',
30404:'in land treatment. a6. to the extent practical, members requested that future guidance consistently treat all federal land the same',
30405:'regardless of its gpp&e land or sldistinction. the board directed staff to identify available options, along with associated benefits and',
30406:'drawbacks. in particular, the board asked staff to 1 consider user information needs; 2 explore and identify the informationagenciesuse tomanage',
30407:'land; 3 identifytypesof information, such as acres of land, that would help demonstrate the governments stewardship and accountability over federal',
30408:'land; 4 address whether land held for disposal for example, sale, publicprivate partnerships, donated to state and local governments should',
30409:'be valued; and 5 consider whether a uniform land accounting policy is a viable option given initial agency and task',
30410:'force feedback that current land categorizations of sland gpp&e land be retained. a7. to assist in evaluating options for enhancing',
30411:'the consistency7 among existing accounting standards, entitytoentity comparability, and relevance of information regarding land, the board established a task force',
30412:'consisting of representation from federal agencies, the commercial sector, and citizen users.8 the task force held meetings between june 2016',
30413:'andapril 2017. participants came from diverse disciplines, such as accounting, auditing, civil engineering, financial reporting, business consulting, and program management.',
30414:'the 7criticism over consistency has arisen because current standards differ in how entities report land and land rights; for example,',
30415:'gpp&e land is capitalized, whereas slis not.as such, some believe that inconsistent accounting standards lead to reporting that is not',
30416:'comparable and obscures how a user can assess an entitys performance over land management. 8please refer toappendix e for the',
30417:'identification of task force participants. page 28 sffas 59 fasab handbook, version 20 06/21 sffas 59 majority of participants agreed',
30418:'that, among federal report preparers and users, there is significant interest in how agencies manage land on behalf of the',
30419:'public and how this information is communicated in financial statements. a8. due to the divergent views among task force participants,',
30420:'principally between preparers and users, reaching consensus on the major issues proved challenging. to best meet the projectgoalsandobjectives,staff,in additiontoengagingin taskforce',
30421:'discussions,initiated factfinding meetings with three landholding agencies: the department of defense, the department of energy, and the department of the',
30422:'interior. notably, retaining the current land categorizations of sland gpp&e land was the one area in which preparers and users',
30423:'unanimously agreed. development of the exposure draft ed a9. the board considered its conceptual framework and the divergent task force',
30424:'views in developing its proposal for reporting on land. the board considered financial and non financial information nfi land reporting',
30425:'options in light of the reporting objectives, qualitative characteristics, costbenefit considerations, and presentation formats basic or required supplementary information [rsi].',
30426:'it is important to note that a major consideration throughout the boards deliberations was theguidancein statement of federalfinancialaccountingconceptssffac5, definitions of',
30427:'elements and basic recognition criteria for accrualbasis financial statements. specifically, paragraph 9 states: an item that meets the appropriate definition',
30428:'of an element is an asset, liability, revenue, or expense, even if it is not recognized in the accrualbasis financial',
30429:'statements because, for example, it is not measurable or its amount is not material. unrecognized elements are candidates for disclosure',
30430:'in the notes to financial statements or as supplementary information. members agreed with those in the financial reporting community who',
30431:'noted the importance of havingconsistentaccounting standardsand agreedthat therewere limitationsinherent in historical cost valuations. alternative methods needed to routinely appraise or',
30432:'corroborate over 622 million acres of land are impractical and cost prohibitive. instead, the board concluded that, consistent with its',
30433:'conceptual framework, reporting acres increases transparency, comparability, consistency, and reliability of land information while either avoiding or at least significantly',
30434:'minimizing burden and costs that would otherwise be borne if monetary measures were used to recognize land on the balance',
30435:'sheet. to address this, the board decided to remove such amounts from the balance sheet, expense future acquisitions of land',
30436:'and permanent land rights, treat temporary land rights page 29 sffas 59 fasab handbook, version 20 06/21 sffas 59 similarly',
30437:'to leases, and require nfi number of acres disclosures. the sffas 29 requirement to exclusively use nfi to report federal',
30438:'sl provides a precedent for this approach. atask force analysis noted that approximately 97.0% or 603.7 million acres of all',
30439:'land managed by the federal government is sl, which, under sffas 29 is reported as nfi. furthermore, the board notes',
30440:'that a portion of the remaining 3.0% 19.6 million acresof landcurrentlyclassifiedasgpp&elandiswithdrawnland fromthe publicdomain. had this land not been withdrawn, it',
30441:'would be classified as sl and been subject to the sffas 29 requirements for nonrecognition and disclosure as nfi. due',
30442:'to concerns that the stewardship and operating performance reporting objectives and qualitative characteristics, such as relevance and comparability, were not',
30443:'being met, the board proposed expensing land and permanent land rights and disclosing acres in a note. additional key conceptual',
30444:'points leading to the boards proposal include: a. historical cost of land and permanent land rights is not useful to',
30445:'the majority of users for assessing stewardship9 or entity operating performance primarily due to the static natureofthereporteddollarsthatis,notaccountingforinflationorchangesinvalue.10 in addition, historical',
30446:'cost of land and permanent land rights isnot relevant for decision makers.11 i. havingconsideredtheinputofthetaskforce,exposuredraftedrespondents,and subject matter experts, the board also',
30447:'concluded that, although historical cost information of gpp&e land may be reliable for certain agencies, such information is not reliableat',
30448:'the governmentwidelevel. this is because some agency historical cost records are incomplete or nonexistent. ii. increasingtheusefulnessandrelevanceofinformationcanbeachievedthroughthe selective use of a',
30449:'measurement attribute basis that best reflects the measurable characteristic of an asset or liability. measurement attributes that are commonly used',
30450:'to assign monetary amounts to financial statement elements, such as assets and liabilities, like land include: fair value, settlement amount,',
30451:'replacement cost, value in use, and fulfillment cost. however, alternative measurement approaches, such as those that are nonfinancial in nature,',
30452:'can be used to best reflect an elementscharacteristics. tothat end, during deliberations of sffas29andsffas 9sffac 1, objectives of federal financial',
30453:'reporting, par. 134145. 10sffac 1, par. 122133. 11sffac 1, par. 161 and sffac 7, measurement of the elements of accrualbasis',
30454:'financial statements in periods after initial recording, par.7. page 30 sffas 59 fasab handbook, version 20 06/21 sffas 59 50,',
30455:'the board concluded that number of acres best reflects and communicates lands measurable characteristic, increasing relevance and information usefulness. b.',
30456:'prior analysis of user needs, as confirmed by the land task force, revealed that presenting the historical cost of land',
30457:'in the financial statements is of limited value to users. although users would often obtain information from other publicly available',
30458:'sources, theseothersourcesdonotreflect audited orverifiedinformation. theneed for audited information was identified by the majority of task force participants.12 i. in addressing',
30459:'this limitation, the board concluded that reclassifying gpp&e land and permanent land rights as a noncapitalized asset, expensing future acquisitions,',
30460:'and increasing disclosure requirements of nonfinancial land information is more informative to users and best satisfies the boards stewardship and',
30461:'operating performance reporting objectives. this decision is consistent with sffas 50, which permits reporting entities to not capitalize gpp&e land',
30462:'and land rights under certain conditions. ii. the board also concluded that if the reporting entity believes that information about',
30463:'the cost of gpp&e land and permanent land rights is critical to the understanding of the financial statements, such information',
30464:'may be presented in the note disclosure at the reporting entitys discretion without explicit guidance to do so. c. fair',
30465:'value reporting is not costbeneficial given the vast holdings of land. this is primarily due to the impracticalities associated with',
30466:'valuing land, absent conditions such as demographically comparable sales, active markets or willing buyers, and estimations of the environmental liabilities',
30467:'associated with certain federal land.13 i. citizen users on the task force and some ed respondents noted the benefit of',
30468:'fair value estimates of government federal land. they generally noted that, to assess an entitys stewardship and operating performance, fair',
30469:'value estimates of land parcels would help users assess whether such land should be either sold or transferred to state/local',
30470:'governments. however, the board concluded that fair valuing land parcels would be prohibitive given the impracticalities and costs. the board',
30471:'concluded, instead, that number of acres would be more informative to the general public, congress, and agency management. 12sffac 1,',
30472:'par. 158159. 13sffac 2, entity and display, par. 73e.g. and sffac 5, par. 7. page 31 sffas 59 fasab handbook,',
30473:'version 20 06/21 sffas 59 d. acres provide a transparent, understandable, and comparable measure across the federal government and allow',
30474:'users to consider how much land was held for particular purposesoperatingperformance andhowthe amount of land heldchangedovertime stewardship.14 i. the board',
30475:'realizes that some respondents believe the use of nfi, such as number of acres, to satisfy reporting objectives is relatively',
30476:'unprecedented. however, as previously noted, sffas 29 adopted the use of nfi that is physical unit reporting to satisfy both',
30477:'reporting objectives and the qualitative characteristics of information in federal reporting. the board further notes that to address any potential',
30478:'audit challenges related to nfi, the requirements of this statement are subject to a phased implementation schedule. this will enable',
30479:'the board to evaluate implementation and identify and address any issues as they arise. e. asdiscussedinparagrapha9.a.ii,bymovingalllandtothemeasurementofacres,the board concluded that financial',
30480:'statement reporting will better achieve the qualitative characteristics of consistency and comparability. additionally, moving away from the current mixed measurement',
30481:'attribute model to a uniform acre model increases the qualitative characteristic of understandability. finally, advancements in geospatial technology facilitate measuring',
30482:'acres more accurately, which contributes to the qualitative characteristic of reliability. the board concluded that such advancements, assisted by an',
30483:'rsi transition period, will facilitate development of reliable acre information suitable for presentation as basic information. f. thenfirelatestoasignificantassetanelementoffinancialreportingthatinterestsa wide audience.',
30484:'furthermore, it has a high degree of importance and criteria for reliably and consistently measuring acres, making the information appropriate',
30485:'for note disclosure.15 i. as previously noted, gpp&e land represents approximately 3.0% 19.6 million acres of landsome of which has',
30486:'been withdrawn from the public domain. as such, were it not withdrawn, such land would have to comply with the',
30487:'sffas 29 requirements of nonrecognition and use of nfi. 14sffac 1, par 156, sffac 2, par. 73e.e., and sffac 4,',
30488:'intended audience and qualitative characteristics for the consolidated financial report of the united states government, par. 9 15sffac 2, par.',
30489:'73e. page 32 sffas 59 fasab handbook, version 20 06/21 sffas 59 g. the selection of an appropriate measurement attribute',
30490:'in specific circumstances should be based on the reporting objectives, qualitative characteristics, and cost benefit constraints applicable to the financial',
30491:'information in question.16 i. theboardconcludedthatattemptingto applya monetarymeasurementattributeto the governments vast holdings of land would fail to meet costbenefit considerations, as',
30492:'well as such key qualitative characteristics as understandability, relevance, and comparability. the board concluded that reclassifying previously capitalized gpp&e land',
30493:'costs as expenses accompanied by disclosure of acres would best meet the reporting objectives and qualitative characteristics in a cost',
30494:'beneficial manner. h. in conclusion, the board determined that the vast holdings and uses of federal land cannot adequately be',
30495:'conveyed to the public through monetary measurements. specifically, limitations inherent in valuations, such as passage of time and inflation, changes',
30496:'in economics for example, base closures, government relocations, demographic or population shifts for example, shifting veteran populations, rural development activities,',
30497:'and even climate related issues for example, coastal floods and forest fires, make it impractical and cost prohibitive to annually',
30498:'corroborate or appraise over 622 million acres. instead, the board concluded that, consistent with its conceptual framework, reporting acres increases',
30499:'transparency while either avoiding or at least significantly minimizing burden and reporting costs that would otherwise be borne if traditional',
30500:'that is, monetary based valuation methods were used for balance sheet recognition. summary of outreach efforts and responses a10. theedwasissuedapril30,2018,',
30501:'withcomments requestedbyjuly30,2018. upon release of the ed, notices and press releases went to the following: the federal register, fasab newsletter,',
30502:'the journal of accountancy, aga today, the cpa journal, government executive, and the cpa letter, the cfo council, the council',
30503:'of the inspectors general on integrity and efficiency, the financial statementaudit network, members of both the federal real property council',
30504:'and federal facilities council, and committees of professional associations generally commenting on eds in the past. a11. this broad announcement',
30505:'was followed by electronic mailings of the ed to the following relevant congressional committees: senate energy and natural resources and',
30506:'house natural resources. 16sffac 5, par. 8. page 33 sffas 59 fasab handbook, version 20 06/21 sffas 59 a12. fasab',
30507:'received a total of 18 responses, which are summarized in the following table by respondenttype.themajorityof respondentsgenerallyagreedwith theboardsproposalto reclassify gpp&e land',
30508:'and permanent land rights as a noncapitalized asset and to issue related disclosure requirements. however, some respondents 1 expressed concerns',
30509:'with what they viewed as a departure from universally accepted accounting principles and 2 identified certain issues that could be',
30510:'clarified within the statement or addressed in the basis for conclusions. summary of respondent types to the ed respondent type',
30511:'federal internal nonfederal external total preparers and financial managers 13 013 users, academics, others 03 3 auditors 1 1 2',
30512:'total 14 4 18 a13. attheaugust2018boardmeeting,theboarddecidedtoextendaninvitationto1theed respondents to discuss with the board their comments on the ed and provide clarification',
30513:'of their responses and 2 additional subject matter experts comprising federal land managers, the audit community, and other interested parties',
30514:'to share their expert perspectives regarding land reporting. eight ed respondents accepted the boards invitation and clarified their comments at',
30515:'the october 2018 board meeting. five subject matter experts shared their views at the october 2018 board meeting on a',
30516:'variety of matters related to the land ed. a14. theboarddidnotrelyonthenumberinfavoroforopposedtoagivenposition. theboard considered each response and weighed the merits of the',
30517:'points raised. a15. respondents who agreed with the boards proposal to reclassify gpp&e land and permanent land rights noted: page',
30518:'34 sffas 59 fasab handbook, version 20 06/21 sffas 59 a. the geographic information system gis can be readily adopted',
30519:'to comply with the reporting requirements for acres and satisfy most auditor concerns. b. valuation of land is too costly',
30520:'and questionable in light of environmental liabilities. c. there will be little financial statement impact to expensing future acquisitions of',
30521:'gpp& e land and permanent land rights. d. however, respondents who agreed with reclassifying gpp&e land and permanent land rights',
30522:'also raised key concerns: 1 the incomparability of physical units creates the potential for inconsistent application within agencies, 2 not',
30523:'all agencies have consistent gis policies throughout their bureaus, and 3 system changes to policies and information technology databases/applications will',
30524:'require additional time and effort to implement. a16. respondents who disagreed with reclassifying gpp&e land and permanent land rights noted',
30525:'the following concerns: a. gpp&e land is an asset that should remain on the balance sheet so as not to',
30526:'distort financial reporting. b. the boards proposal veers from its conceptual framework by overemphasizing one asset category over all the',
30527:'others. c. separating a land value from a building value is complicated, d. the ed leads to duplicative reporting because',
30528:'gpp&e acres are presented in the federal real property profile as well as in performance reports. e. audit precision and',
30529:'related burdens are problematic because there are no internal controls over acre information systems. f. the effect of expensing gpp&e',
30530:'acquisitions in the statement of net cost will be significant. g. physical units are not meaningful, and the information already',
30531:'exists in other reports. h. many implementation issues will necessitate additional implementation guidance. i. some ratesetting entities use and require',
30532:'historical cost information concerning land. page 35 sffas 59 fasab handbook, version 20 06/21 sffas 59 j. some agency gis',
30533:'personnel have existing backlogs that take precedent, such as land disputes that will not allow them to satisfactorily support reporting',
30534:'and audit initiatives. a17. subject matter experts provided their views on the proposed land ed, which are summarized as follows:',
30535:'comments opposing the ed include the following: data collection should be commensurate with user needs. in this case, the cost',
30536:'of aggregating land information, given the decentralized manner in which it is stored, may be cost prohibitive. using the existing',
30537:'public land statistics report for financial reporting purposes, as contemplated by the ed, would require a potentially costprohibitive investment of',
30538:'additional resources. the public land statistics are designed for the general public, not financial reporting purposes. sffas 50 providessufficient reporting',
30539:'flexibilities, making the ed unnecessary. because land benefits future periods, it should remain on the balance sheet; excluding it will',
30540:'understate the financial position. it is unclear how this proposal would improve financial management, which is the intent behind the',
30541:'cfoact and the federal financial management improvementact. comments that were neither in support of nor opposed to the ed include',
30542:'the following: physical unit information, such as acres, needs context to be useful. interior bureaus are working to improve the',
30543:'protectedarea database of the united states and the surface managementarea data. agencies should be allowed flexibility to explain their unique',
30544:'missions and land responsibilities. without clearer materiality guidance, acres or other nfi may be more suitable for rsi. consideration should',
30545:'be given to presentation formats other than disclosures. the use of agreed upon procedures, rather than audits, should be considered',
30546:'for land information. the preparer transition period should not be underestimated; it could take multiple years for auditors to gain',
30547:'comfort. performance information, which is not contemplated by the ed, when combined with cost information would allow an assessment of',
30548:'effectiveness and efficiency and would be valuable to users. a18. regarding the concern that expensing land and permanent land rights',
30549:'would distort financial reporting, the board notes that presentation options exist that could mitigate potential distortions to an entitys operating',
30550:'costs brought about by expensing land and permanent land rights acquisitions. for example, material acquisitions might be presented separatelyasa major',
30551:'program or ascosts not assigned to programs. nevertheless in its re deliberations of the land ed, the board concluded that',
30552:'the respondent comments and subject matter expert viewsindicateda need to reconsider certaindisclosure requirements, the proposed implementation approach, and the related',
30553:'timeline. as a result, the following changes were made to the proposed land ed requirements: a. deleting the physical unit',
30554:'disclosure requirements page 36 sffas 59 fasab handbook, version 20 06/21 sffas 59 b. deleting the requirement to reference dm&r',
30555:'rsi presentations c. limiting the first two disclosure requirements that is, how land relates to the entitys mission and an',
30556:'entitys policies over land to the primary categories of sland gpp&e land and not to the subcategories d. simplifying the',
30557:'estimated acres reporting requirement by only requiring that beginning and ending balances be provided e. clarifying that acres of land',
30558:'held for disposal or exchange applies only to land conveyed to nonfederal entities f. clarifying the type of information to',
30559:'be disclosed at the governmentwide level a19. concerning the proposed implementation approach and related timeline, the board agreed that the',
30560:'final statement should 1 require a specific transition date from rsi to note disclosure, 2 extend the time required for',
30561:'the transition so that the board would have an opportunity to modify guidance if necessary, and 3 not permit early',
30562:'implementation. user needs a20. respondents generally agreed that providing estimated acres of land would help ensure that user needs are',
30563:'met. one respondent noted that the information should be first designated as rsi and not moved to basic information until',
30564:'there is sufficient confidence in its reliability. some respondents noted that to focus only on nfi may not be appropriate',
30565:'unless there is some financial information to which nfi relates. a21. as the board noted in its ed, users want',
30566:'understandable financial information that is verified or audited so that they can participate in the democratic process and engage in',
30567:'discussions about the nations finances. specific to land, users desire transparency for example, fairvalue estimatesorland measured by parcel sizeoracre overhow',
30568:'much land an entity manages and its uses. as such, the board concluded that user needs are best met with',
30569:'information that is relevant, reliable, and understandable while meeting cost benefit considerations. to that end, the board maintains its position',
30570:'that historical cost information, although reliable in most cases, is not relevant to most users. given the cost benefit constraints,',
30571:'number of estimated acres is best suited in meeting user needs. a22. moreover, to increase the reliability of the reporting',
30572:'of acres, the board agrees with those respondents supporting that 1 acreage be treated as basic information note disclosure and',
30573:'2 an rsi transition period be established prior to transitioning to basic note disclosure. concerning inclusion of financial information with',
30574:'which acres should relate, the board notes that entities are free to disclose the cost of gpp&e land and permanent',
30575:'land page 37 sffas 59 fasab handbook, version 20 06/21 sffas 59 rights in the notes. nevertheless, consistent with sl',
30576:'requirements, the board has modified its proposal to now require entities with gpp&e land and permanent land rights to reference',
30577:'a note on the balance sheet that discloses information about gpp&e land and permanent land rights, but no asset dollar',
30578:'amount should be shown. retaining property, plant, and equipment pp&e categories a23. the majority of respondents agreed with the boards',
30579:'proposal to retain the gpp&e land andslcategories.17 sffas6establishes threecategories ofpp&e:1gpp&e,2 heritage assets, and 3 sl. it is important to note',
30580:'that categorizing land in accordance with sffas 6 is predicated on an entitys intended use of the land at acquisition',
30581:'and not necessarily how the land is actually used during the reporting period. due to concerns over inconsistent accounting and',
30582:'reporting of federal land, the board established three subcategoriesbased on how entities in fact use the land they manage. the',
30583:'three landuse subcategories are 1 conservation and preservation land; 2 operational land; and 3 commercial use land. refer toappendix b',
30584:'for illustrations concerning the three subcategories. therefore, users are provided with both the entitys intended use of the land and',
30585:'permanent land rights that is, primary categories of sl or gpp&e land as well as their actual use predicated on',
30586:'predominant use by subcategory during the reporting period. land use categorizing and subcategorizing land consistently a24. toimprovethecomparabilityofreportingfederallandandtheuniformityofdisclosures,the board proposed three',
30587:'subcategories predicated on land use for both gpp&e land and sl: 1 conservation and preservation land; 2 operational land; and',
30588:'3 commercial use land. concerning the subcategories, respondents noted that 1 the entity should determine in which subcategory the acres',
30589:'are placed and should not be required to apportion among the subcategories and 2 the three subcategorydefinitions appear after the',
30590:'proposed definitionof acresofland heldfor disposal orexchange, makingit appearthat there are four unique subcategories rather than three. a25. the board notes',
30591:'that the ed explicitly stated that the subcategorizations would be predicated on predominant use. predominant use is not a new',
30592:'requirement and was first introduced in sffas 29, which was issued on july 7, 2005. furthermore, concerning g 17the board',
30593:'proposed retaining these two categories primarily because 1 gpp&e land and stewardship land are acquired for two separate, distinct purposes,',
30594:'2 these two land types are often maintained and used in completely different ways, 3 keeping the two types of',
30595:'land separate promotes transparency, consistency, and understandability and 4 eliminating the distinction between the two land types could have adverse',
30596:'consequences to legislative requirements and/or budget appropriations. page 38 sffas 59 fasab handbook, version 20 06/21 sffas 59 pp&e land,',
30597:'the general serviceadministrations federal real property council has established predominant use reporting definitions and requirements since 2005. a26. it is',
30598:'important to note that this statement continues the practice in sffas 29 that provides entities with flexibility in determining predominant',
30599:'use. for example, in cases where land, including permanent land rights,hasmultipleuses, none of which ispredominant, theentity may attempt to subcategorize',
30600:'such land. in so doing, entities may find it practicable to apportion the estimated acres among the subcategories. paragrapha35 provides',
30601:'additional information on determining the level of aggregation and assignment of land and permanent land rights used to determine predominant',
30602:'use to be considered a predominant use, land activities or uses are generally not incidental but are normal and recurring',
30603:'in connection to the entitys mission. nevertheless, the board recognizes that future guidance concerning predominant use may be required. a27.',
30604:'regarding acres of land held for disposal or exchange, defined at paragraph 20.a., the board notes that 1 it did',
30605:'not intend to create a fourth subcategory and that narrative presentation or disclosure of said acres is sufficient to meet',
30606:'the statements requirements, 2 entities are free to develop graphical or tabular illustrations, and 3 examples found at appendix b',
30607:'are intended to aid in the application of these key provisions and not illustrate compliance with all of the proposed',
30608:'disclosure requirements. developing uniform land disclosure requirements a28. although the majority of respondents agreed with the boards proposed disclosure requirements,',
30609:'some respondents noted that preparer burden and audit efforts would increase. examples cited include: a. financial reporting systems are not',
30610:'currently designed to capture the newly required information. acreage information is not expected to be recorded in transactionbased financial accounting',
30611:'and reporting systems. moreover, this statement does not require entities to integrate or link property land management systems to financial',
30612:'systems solely for the purpose of applying these standards. b. agencies have spent considerable resources to ensure compliance and auditability;',
30613:'adding more data elements to the reporting requirements contributes to disclosure overload and exacerbates the existing cost burden. c. however,somerespondentsalsobelievedthatincreasestopreparerburdenandaudit',
30614:'efforts after initial implementation would be temporary. in response to the boards implementation timeline, more fully discussed below, the governmentaccountability',
30615:'office may issue auditor guidance and the office of management and budget will update its audit bulletin, as necessary. page',
30616:'39 sffas 59 fasab handbook, version 20 06/21 sffas 59 a29. in connection with the boards position to reclassify gpp&e',
30617:'land and permanent land rights as a noncapitalized asset, the board concluded that developing uniform accounting and reporting requirements across',
30618:'all land categories not only satisfactorily addresses longstanding issues concerning the reporting over land, but also increases informational value to',
30619:'users. many of the disclosure requirements have been taken from existing requirements contained in sffas 29 for example, disclosure of',
30620:'how land relates to an entitys mission and its policies over land. moreover, the board considered respondent commentsaswell asinterestedpartyviewsin developingthe',
30621:'finaldisclosurerequirements. as a result, the revised disclosure requirements reflect the following changes: a. eliminating physical unit disclosure requirements b. eliminating',
30622:'the dm&r reference requirement c. limitingthe firsttwodisclosurerequirements thatis,how landrelatestotheentitys mission and an entitys policiesover land to the primarycategoriesof sland gpp&e',
30623:'land and not to the subcategories d. simplifying the requirement to report estimated number of acres by only requiring the',
30624:'beginning and ending balances be presented e. clarifying that acres of land held for disposal or exchange applies only to',
30625:'land satisfying legislative disposal authority requirements intended to be conveyed to non federal entities f. clarifyingthattheboarddoes not requirethereportingoftriballandheldintrust. as an',
30626:'amending statement, the board considered inclusion of lands held in trust but elected to continue the longstanding exclusion of such',
30627:'lands due to their fiduciary nature. g. clarifying that the board does not require the reporting of the outer continental',
30628:'shelf ocs18 lands because they do not meet fasabs definition of land as contained in its handbook, atappendix e. the',
30629:'definition reads as follows: land is the solid part of the surface of the earth. excluded from the definition of',
30630:'land are the natural resources that is, depletable resources such as mineraldepositsand petroleum; renewable resources such as timber, and the',
30631:'outercontinental shelf resources related to land. 18the board notes that it interprets the term ocs to include the seabed, subsoil',
30632:'and energy or mineral resources derived therefrom. page 40 sffas 59 fasab handbook, version 20 06/21 sffas 59 nevertheless, if',
30633:'an entity manages material amounts of ocs acreage, the board believes that this fact should be disclosed. h. clarifying the',
30634:'type of information to be disclosed at the governmentwide level the board believes that the revised disclosure requirements coupled with',
30635:'a graduated phasein approach satisfactorily addresses concerns related to preparer burden and audit effort. definitions a30. themajorityofrespondentsagreedwiththeproposeddefinitions.aspreviouslynoted,the task force recommended',
30636:'that the current land categorizations of sland gpp&e land be retained. pursuant to respondent comments, the board clarified that acres',
30637:'of land held for disposal or exchange applies only to land satisfying legislative disposal authority requirements intended to be conveyed',
30638:'to nonfederal entities. concerning land held for disposal or exchange, disposal authorities are generally designed to permit entities to dispose',
30639:'of or exchange land that is no longer required for a federal purpose. disposal authority might authorize an entity to',
30640:'sell or lease federal land to a state or municipal government or nonprofit entity for educational or community development purposes.',
30641:'additionally, disposal authority might authorize an entity to exchange federal land for non federal land. disposal includes conveyances of federal',
30642:'land not limited to sale, transfer, exchange, lease, publicprivate partnership, and donation or any combination thereof. land rights a31. prior',
30643:'to issuing its ed, the board concluded that temporary land rights that is, other than permanent landrights wouldnot be subjectto',
30644:'thenewrequirementsofthisstatement. the rationale for excluding temporary land rights was based on the boards belief that 1 such land rights are',
30645:'intangible assets and should be addressed in an intangibles project and 2 the cost of separating such land rights from',
30646:'the underlying asset would be prohibitive. therefore, in sffas 6 the board provided for the recognition of land rights based',
30647:'on the expected service life of the land rights. specifically, where land rights are for a limited or finite periodoftime',
30648:'that is, temporary, theboard providedforamortization/depreciation of the cost to acquire and maintain such rights. the land rights considered permanent are',
30649:'capitalized along with land. sffas 50 provided alternative methods for establishing opening balances. specifically, paragraph 13 which amended par. 40',
30650:'of sffas 6 provides reporting entities that met the sffas 50 criteria to apply the option to either 1 exclude',
30651:'both land and all land rights from the opening balance of gpp&e or 2 recognize land and land rights in',
30652:'opening balances based on the provisions of the alternative valuation method deemed cost. page 41 sffas 59 fasab handbook, version',
30653:'20 06/21 sffas 59 a32. in its ed, the board proposed to treat land rights with an unlimited or infinite',
30654:'period of time that is, permanent consistent with the proposed requirements regarding land acquisitions that is, expensing and to continue',
30655:'treating those temporary land rights consistent with sffas 6. during redeliberations and considering respondent comments specific to land rights, the',
30656:'board reconsidered its proposed amendment allowing entities electing to exclude land and land rights from the opening balance of gpp&e',
30657:'pursuant to sffas 50 to expense future acquisitions of temporary land rights. as a result, the board concluded that those',
30658:'entities electing to exclude land and land rights from their opening balances should capitalize and depreciate/amortize temporary land rights prospectively.',
30659:'the board concluded that this aforementioned requirement increases comparability and consistency byprovidingauniformaccounting practice relativetoalllandrights. furthermore, theboard notes that, unlike permanent',
30660:'land rights, temporary land rights are limited in duration and have a definite useful service life or economic life. as',
30661:'such, the board believes that accrual basedfinancialstatementsbenefitfromtheallocationofcostsbetweenaccountingperiods. requests for exceptions to derecognition a33. several respondents noted particular circumstances or cases',
30662:'for example, ratesetting entities that would require them to continue capitalizing gpp&e land and permanent land rights. others also noted',
30663:'the inability to separate the cost of land from an infrastructure or investment holdings overall cost. as a result, some',
30664:'of these respondents asked for an exception to the derecognition requirement. the board reviewed each of the cited instances. it',
30665:'notes that exceptions are not warranted because entities are free to include disclosuresofthe cost of gpp&e landandpermanent landrightsattheirdiscretionwithout explicit guidance',
30666:'to do so. additionally, it would be confusing to have some entities reporting gpp&e land and permanent land rights on',
30667:'the face of the financial statements while other entities exclude land and permanent land rights. additionally, if the reporting entity',
30668:'believes the cost of gpp&e land and permanent land rights are critical to the users of financial statements, such information',
30669:'can be presented in the note disclosure. concerning inseparable land costs, the board believes that reasonable estimates can be made',
30670:'to identify infrastructure costs apart from land costs to ensure appropriate accounting and reporting. for example, estimates can be derived',
30671:'from 1 public land records such as property tax assessments or ownership documents, 2 comparable market analyses or appraisals, and',
30672:'3 comparable or similarly recorded real property holdings or investments. balance sheet references a34. in providing the note disclosure information',
30673:'required for gpp&e land and permanent land rights at sffas 6, par. 45a and slat sffas 29, par. 40, entities',
30674:'may combine the displayand/ordisclosureforgpp&e landandpermanentland rightsand sl. however,the page 42 sffas 59 fasab handbook, version 20 06/21 sffas 59 category',
30675:'distinctions should remain evident to the reader. that is, although the board has established uniform disclosure requirements to increase informational',
30676:'value, the existing distinction between gpp&e land and slhas been retained. disclosure requirements for the cfr contained at sffas 32,',
30677:'par. 23 and sffas 29, par. 42 may also combine the display and/or disclosure for gpp&e land and permanent land',
30678:'rights and sl and permanent land rights. in such cases and to the extent possible, direct references to agency reports',
30679:'for additional category information about gpp&e land and permanent land rights and sland permanent land rights should be made. supporting',
30680:'documentation a35. the board has continually noted the concerns associated with providing corroborating documentation on historical assets includingland. in thebasis',
30681:'forconclusionstosffas 29 par. 8688, the board briefly discussed the fundamental issues associated with historical assets and sl. in addition, technical',
30682:'release tr 9, implementation guide for statement of federal financial accounting standards 29: heritage assets and stewardship land, addressesthisdifficultybyspecificallynotingthecomplexitiesregarding land.',
30683:'forexample, federal land was acquired through 1 ceded territory by the original thirteen colonies, 2 territorial annexations, 3 purchases, and',
30684:'4 treaties. acquisitions and disposals of land werenot documented likemodern landtransactions. tr9makesthepoint that recordsand detailed listings from these periodsgenerally do',
30685:'not exist.as a result, the board concluded that managements assertion concerning land ownership and its related estimates of acres of',
30686:'land and permanent land rights must be based on nontraditional supporting documentation and reasonable acre estimates, respectively. consistent with the',
30687:'boards views on sffas 29 and tr 9, for this standard, an entity may estimate acreage based on different underlying',
30688:'sources of data to include traditional and/or geospatial mapping, historical records, surveys, plats, etc., or any combination thereof. additionally, given',
30689:'the diverse nature of how land has been acquired into the public domain, information from different vintages or timeperiods would',
30690:'be expected to affect acreage estimation methods and/or techniques.additionally, an entity is not expected to adjust its acreage estimates for',
30691:'insignificant amounts of: inholdings,19 intraagency shared lands, or acquisitions or disposal of land. entity estimates can be based on different',
30692:'underlying sources of data applying different measurement and/or mapping methods and can be deemed reasonable within industry accepted tolerance levels',
30693:'applied at an aggregation level e.g., by national park or reserve, regional/district office, topography/land cover, etc. as defined by 19inholdings',
30694:'an inholding is privately owned land inside the boundary of a national park, national forest, state park, or similar publicly',
30695:'owned, protected area. generally, inholdings result from private ownership of lands prior to the designation of the protected park or',
30696:'forest area, which then end up grandfathered within the legally designated boundary. page 43 sffas 59 fasab handbook, version 20',
30697:'06/21 sffas 59 management. that is, the level of aggregation and assignment of land and permanent land rights used to',
30698:'determine predominant use may be determined by the preparer considering the entitysmission, typesof landuseandhowitmanagestheassetse.g., bynationalpark or reserve, bureau, regional/district office,',
30699:'topography/land cover, etc.. for example, the reporting entity may determine that predominant use is determined by national park or forest.',
30700:'further, the entity may determine that the predominant use of a national park or forest is conservation and preservation even',
30701:'though some uses of the national park or forest are for operational or commercial use, but are not predominant uses.appendix',
30702:'b provides illustrative examples of what subcategories or activities could be included within each land use subcategory. some respondents raised',
30703:'the issue that land and permanent land rights may have multiple uses and it may be difficult to subcategorize its',
30704:'predominant use into one of the three predominant use subcategories. the board considered whether there should be an additional use',
30705:'subcategory if preparers encountered challenges in subcategorizing land and permanent land rights into one of the three subcategories. the board',
30706:'believes that providing the preparer and entity management with a predominant use definition and flexibility in determining the level of',
30707:'aggregation of land used to determine predominant use, would improve the ability of reporting entities to determine predominant use. further,',
30708:'appendix b provides an illustration of what subcategories or activities could be included within each land use subcategory. nevertheless, the',
30709:'board also recognizes that these are new subcategories and that unforeseen implementation issues may be encountered. consequently, during the implementation',
30710:'phase fys 20222025 of this standard, the boardencouragesreportingentitiestocommunicate anychallengesaswellassuggestions in subcategorizing land use reporting to the land implementation task force.',
30711:'a36. theboardnotesthatit1doesnotseekexactprecisionindeterminingestimatedacresor predominant use assessments and 2 does not intend to direct or prescribe the use of any particular approach.',
30712:'a37. the board concluded that it can facilitate effective reporting on land by 1 providing implementation guidance incorporating aspects of',
30713:'tr 9 and 2 reminding readers that, because most federal land was acquired in a variety of ways and over',
30714:'the nations early settlement and formation, it is not unreasonable that supporting documentation will be developed using alternative methods and/or',
30715:'take on different forms of corroboration as foreseen bytr 9. for example, ownership can be evidenced by public law, treaties,',
30716:'entity certifications, maintenance or renovation contracts, historical maintenance records, a history of payment of invoices, minutes of meetings, historical databases,',
30717:'initial surveys of land, a history of past/historical practices for example, the length of time an entity controls the land',
30718:'establishing de facto ownership, or other relevant sources of information. these alternatives mayprovide acceptable evidence of government ownership. entitiescould use',
30719:'the above forms of supporting documentation to reasonably estimate acres or rely on page 44 sffas 59 fasab handbook, version',
30720:'20 06/21 sffas 59 management tools such as geospatial information. the board expects preparersto apply a variety of documented methods',
30721:'and techniques in arriving at estimates. application of this statement a38. reporting entities are subject to the reporting requirements under',
30722:'paragraph 13 of sffas 21, reporting corrections of errors and changes in accounting principles, amendment of sffas 7, accounting for',
30723:'revenue and other financing sources. specifically,paragraph12 of sffas 21 states, for the purposes of this standard, changes in accounting principles',
30724:'also include those occasioned by the adoption of new federal financial accounting standards. therefore, reporting entities with gpp&e land deemed',
30725:'to be material should follow the guidance in sffas 21, paragraph 13.a13.c. for all changes in accounting principles: a. the',
30726:'cumulative effect of the change on prior periods should be reported as a change in accounting principle. the adjustment should',
30727:'be made to the beginning balance of cumulative results of operations in the statement of changes in net position for',
30728:'the period that the change is made. b. prior period financial statements presented for comparative purposes should be presented as',
30729:'previously reported. c. the nature of the changes in accounting principle and its effect on relevant balances should be disclosed',
30730:'in the current period. financial statements of subsequent periods need not repeat the disclosure. sffas 21 provides that the adjustment',
30731:'should be made to the beginning balance of cumulative results of operations in the statement of changes in net position',
30732:'for the period that the change is made. thus, no change would be made to the ending net position of',
30733:'the previous year. the disclosures should be at a high level and briefly describe the effect on beginning net position.',
30734:'implementation and effective date a39. theboardproposedintheexposuredraftissuedonapril30,2018,thatthe disclosure requirements would begin in fiscal year 2021 as rsi and transition to note',
30735:'disclosures with removal of gpp&e land and permanent land rights from the balance sheet in fiscal year 2024. the board',
30736:'considered respondent comments to the exposure draft and interested party views, noting the time needed for reporting entities to: 1',
30737:'develop and implement related policies and procedures, page 45 sffas 59 fasab handbook, version 20 06/21 sffas 59 2 establishestimatesofacresandacresbypredominantusesubcategoryasofthe',
30738:'beginning of the first year of implementation, 3 develop and maintain supporting documentation, 4 develop and implement systems and processes',
30739:'for capturing and recording acreage information balances and transactions during the year by predominant use subcategory, design and implement appropriate',
30740:'internal controls, and update such systems, processes, and controls as necessary for any updated guidance, and 5 validate that the',
30741:'required information is independently verifiable or auditable. additionally, the board considered the time needed for: the board to consider implementation',
30742:'issues e.g. preparation and audit challenges, updated preparation and audit cost information, and through board deliberations, determine how to best',
30743:'respond to those issues, and developing and issuing preparer and audit guidance relative to nonfinancial information. the board considered concerns',
30744:'from several respondents and members with respect to the uncertaintyof costsassociated with preparing and auditingthenonfinancialinformation, and the need to obtain',
30745:'better information on implementation challenges and costs. the board also considered the potential impacts of the covid19 pandemic on agencies',
30746:'ability to implement this statement. in light of the considerations noted above, the board recognized that additional implementation time was',
30747:'needed to present information in rsi and before transitioning the rsi requirements to the notes. therefore, the board extended the',
30748:'presentation in rsi to fiscal year 2022 and the transition of rsi requirements to the notes and the removalof gpp&e',
30749:'land and permanent land rights from the balance sheet from fiscal year 2024, as proposed in the ed, to fiscal',
30750:'year 2026. the board believes that the extension should allow adequate time to identify and address implementation challenges, including anycostbenefit',
30751:'considerations, while it is reported as rsi. given the potential implementation challenges related to this statement, the board agreed to',
30752:'include a separate project on its technical agenda to monitor implementation challenges, and to assess the need, as appropriate, for',
30753:'actionsto address those challengesprior to transition of the rsi requirements to the notes. consistent with board principles and practice, such',
30754:'actions may include, among other things, staff guidance,aapc guidance, interpretations, or additional standards, as determined appropriate based on board deliberations.',
30755:'the board intends to page 46 sffas 59 fasab handbook, version 20 06/21 sffas 59 establish working groups, comprising stakeholders,',
30756:'including major landholding agencies and users to conduct these assessment and research activities. in addition, the board discussed the following',
30757:'proposed timetable, including actions to be taken bypreparersand auditorsand potentialactionstobetakenbythe board aswellasotherentities, as appropriate: fiscal years 2022 and 2023: presentation',
30758:'of total acreage and acreage by predominant use subcategories as rsi, as well as identification of implementation issues and, as',
30759:'appropriate, board actions to address them. fiscal years 2022 and 2023: gao plans to develop and issue audit guidance, in',
30760:'cooperation with the council of the inspectors general on integrity and efficiency cigie, for auditing total acreage and acreage by',
30761:'predominant use subcategories. fiscal years 2023 and 2024: presentation of total acreage and acreage by predominant use subcategories as rsi,',
30762:'application of audit procedures to rsi and identification of preparation and audit challenges, and as appropriate, board actions to address',
30763:'them. fiscal year 2025: the board plans to complete its assessment of remaining implementation issues associated with preparation and audit',
30764:'of the rsi both total acreage and predominant use subcategories, and, as appropriate, take actions to address them, before the',
30765:'rsi requirements transition to the notes. boardapproval a40. this statement was approved with a vote of 7 members in favor',
30766:'of its issuance. ms. kearney and mr. bell dissented to the issuance of this statement. their dissents are presented below.',
30767:'written ballots are available for public inspection at fasabs offices. a41. ms. kearney dissents to the issuance of this statement.',
30768:'she agrees with the goal of the statement, which is to promote transparency into and accountability for the use of',
30769:'government land. however, ms. kearneysharesconcerns expressedbymajorlandholding agencies in response to the exposure draft and in subsequent discussions with the board.',
30770:'ms. kearneys concerns are that this statement does not include an option to classify land acreage as having multiple uses',
30771:'and that this statement would require reporting and auditing that has not been demonstrated to be costbeneficial. page 47 sffas',
30772:'59 fasab handbook, version 20 06/21 sffas 59 over two thirds of all of the governments land20 is required by',
30773:'law21 to be managed under principles of multiple use. requiring agencies to specify a single predominant use for multi use',
30774:'land would put large land management agencies in the untenable position of having to identifyand report a predominant use for',
30775:'land that is inconsistent with the use of the land as specified in statute. at anyparticular time, land acreage may',
30776:'have multiple uses. it may be used simultaneously for ranching or logging commercial, a wildlife habitat preservation/conservation, and a staff',
30777:'office operational. in addition, one or more of these uses can change over time, especiallyfollowing catastrophicevents, suchaswildfiresor hurricanes. requiring agencies',
30778:'to assign a single predominant use to multiuse land would seem to frustrate rather than further the goals of transparency',
30779:'and accountability. ms. kearney appreciates that the board intends to monitor implementation of this statement, including the ability to classify',
30780:'land according to a single predominant use. ms. kearney also appreciates that the board intends to assess the need for',
30781:'further guidance to address any implementation challenges that may arise prior to transitioning the reporting from rsi to basic information.',
30782:'however, ms. kearney shares concerns expressed by major landholding agencies that the intended transition from rsi to basic reporting together',
30783:'with the challenges associated with assigning a single predominant use would create a burden on agencies that does not fully',
30784:'justify the cost of collecting, reporting, and auditing the information. ms. kearney shares these concerns particularly in light of: 1',
30785:'the availability to the public of reliable government land information e.g., the bureau of land managements official federal land records',
30786:'website and the u.s. geological surveys protectedareas database and 2 the broad range of financial information that is currently reported',
30787:'as rsi under existing fasab standards, including information about natural resources and deferred maintenance and repairs. a42. mr. bell dissents',
30788:'to the issuance of this statement. mr. bell commends fasab for its thorough examination of the issue, which encompassed several',
30789:'years. in particular, mr. bell acknowledges and appreciates that the board intends to include a separate project on its technical',
30790:'agenda to monitor implementation challenges, and to assess the need, as appropriate, for actions to address those challenges prior to',
30791:'transition of the rsi requirements to basic reporting as note disclosure. 20see, federal land ownership: overview and data, the congressional',
30792:'research service, february 21, 2020, which provides information about land acreage managed by the department of interiors bureau of land',
30793:'management and the department ofagricultures forest service, https://crsreports.congress.gov/product/pdf/r/r42346. 21see, for example, the federal land management and policyact of 1976 and',
30794:'the multiple use and sustained yield act of 1960. page 48 sffas 59 fasab handbook, version 20 06/21 sffas 59',
30795:'mr. bell supports enhanced transparency in financial reporting, whether such transparencytakestheformoffinancialornonfinancialinformation. however,mr. bell sharesconcernsexpressedbysome agenciesin response tothe exposuredraft andin subsequent',
30796:'discussions with the board that the disclosures required by this statement could potentially create a burden that does not fully',
30797:'justify the cost required to collect, analyze, report, and audit the information needed to comply with this statement. of particular',
30798:'concern among these agencies is that this statement does not include an option to classify land acreage for which a',
30799:'single predominant use cannot practically be: 1 determined or 2 distinguished from other, simultaneous predominant uses across multiple categories multiuse.',
30800:'certain agencies indicated that substantial acres of federallyowned land are or can be subject to multiple, concurrent uses for different',
30801:'purposes, on both perpetual and periodic bases. as such, in these cases, complying with this statements requirement to assign a',
30802:'single predominant use could be costprohibitive, precipitate undue preparation burden, and result in reporting that is not reasonably reflective of',
30803:'the lands actual use. page 49 sffas 59 fasab handbook, version 20 06/21 sffas 59 appendix b: illustrations subcategorizing land',
30804:'predicated on predominant landuse this appendix illustrates the application of certain key provisions of this statement to assist in clarifying',
30805:'their meaning. the following partial sample illustrations atappendices b1 through b2 are intendedto aid in the application of these key',
30806:'provisionsand not illustrate compliance with all of the disclosure requirements. the board has noted the potential need to have additional',
30807:'subcategories predicated on predominant landuse to complement the land categories currently in use: sland gpp&e land. illustrations demonstrating how the',
30808:'board envisions the subcategories complementing the existing requirements follow:illustrations demonstrating how the board envisions the subcategories complementing the existing requirements',
30809:'follow: page 50 sffas 59 fasab handbook, version 20 06/21 sffas 59 page 51 sffas 59 fasab handbook, version 20',
30810:'06/21 sffas 59 conservation and preservation land use subcategories the following illustration shows what subcategories or activities could be included',
30811:'within the conservation and preservation land use subcategory. page 52 sffas 59 fasab handbook, version 20 06/21 sffas 59 operational',
30812:'land use subcategories the following illustration shows what subcategories or activities could be included within the operational land use subcategory.',
30813:'page 53 sffas 59 fasab handbook, version 20 06/21 sffas 59 commercial use land use subcategories the following illustration shows',
30814:'what subcategories or activities could be included within the commercial use land use subcategory. page 54 sffas 59 fasab handbook,',
30815:'version 20 06/21 sffas 59 page 55 sffas 59 fasab handbook, version 20 06/21 sffas 59 page 56 sffas 59',
30816:'fasab handbook, version 20 06/21 sffas 59 illustration: sffas 59, accounting and reporting of government land implementation timeline effective date:',
30817:'sffas 59, par. 15 16 the scope of this statement paragraphs 13 is effective for reporting periods beginning after september',
30818:'30, 2021. the information required at paragraphs 6 and 7 gpp&e land, paragraphs 810 stewardship land, paragraph 11 governmentwide stewardship',
30819:'land, and paragraph 12 governmentwide gpp&e land should be presented as rsi for fiscal years 2022 through 2025 and transition',
30820:'to note disclosures in fiscal year 2026. asset dollar amounts for gpp& e land and permanent land rights should remain',
30821:'on the balance sheet along with existing disclosures through fiscal year 2025 and cease in fiscal year 2026 when superseded',
30822:'by the transition of the rsi information to note disclosures and paragraphs 4, 5, 13, and 14 become effective. existing',
30823:'display and disclosure balance sheet reference for stewardship land should page 57 sffas 59 fasab handbook, version 20 06/21 sffas',
30824:'59 continue through fiscal year 2025 until they are superseded by the requirements at paragraphs 810 beginning in fiscal year',
30825:'2026. sffas 59 par. effective fy 2022 2025 effective fy 2026 par. 1 3: scope yes the statement does not',
30826:'apply to: a. land held in trust or administered on behalf of indian tribal governments or individual indian land yes',
30827:'the statement does not apply to: a. land held in trust or administered on behalf of indian tribal governments or',
30828:'individual indian land b. the outer continental shelf ocs b. the outer continental shelf ocs par 4: no yes amendments',
30829:'to sffas 6, thisparagraphamendssffas this paragraph amends accounting for property, 6 to clarify that land and sffas 6 to clarify',
30830:'that land plant, and equipment permanent land rights are to and permanent land rights remain in the general property, are',
30831:'to remain in the general plant,and equipmentgpp&e property, plant, and category but are not to be equipment gpp&e capitalized. category',
30832:'but are not to be capitalized. par. 5: no yes amendments to sffas 6, this paragraph amends this paragraph amends',
30833:'accounting for property, paragraph 40 by providing paragraph 40 by providing plant, and equipment guidance for establishing opening balances consistent',
30834:'with the amended reporting requirements for gpp&e land. guidance for establishing openingbalancesconsistent with the amended reporting requirements for gpp&e land',
30835:'page 58 sffas 59 fasab handbook, version 20 06/21 sffas 59 sffas 59 par. effective fy 2022 2025 effective fy',
30836:'2026 par. 6: this paragraph amends sffas 6 disclosure requirements. yes information is presented as rsi yes information converts to',
30837:'basic note disclosureand gpp&e land is derecognized par. 7: this paragraph amends sffas 6 by inserting additional definitions. yes information',
30838:'is presented as rsi yes information converts to basic note disclosureand gpp&e land is derecognized par. 8: this paragraph amends',
30839:'sffas 29 to clarify the definition of sl and references to general pp&e. yes information is presented as rsi yes',
30840:'information converts to basic note disclosureand gpp&e land is derecognized par. 9: this sffas 29 paragraph is amended to require',
30841:'estimated acres of land and the subcategorization of land use. yes information is presented as rsi yes information converts to',
30842:'basic note disclosureand gpp&e land is derecognized par. 10: this paragraph amends sffas 29 by inserting additional definitions. yes information',
30843:'is presented as rsi yes information converts to basic note disclosureand gpp&e land is derecognized page 59 sffas 59 fasab',
30844:'handbook, version 20 06/21 sffas 59 sffas 59 par. effective fy 2022 2025 effective fy 2026 par. 11: this paragraph',
30845:'amends paragraph42ofsffas29, addressing the u.s. governmentwide financial statement disclosures. yes information is presented as rsi yes information converts to basic',
30846:'note disclosureandgpp&e land is derecognized par. 12: this paragraph amends sffas 32 to revise the governmentwide disclosurerequirementsfor property, plant, and',
30847:'equipment. yes information is presented as rsi yes information converts to basic note disclosureandgpp&e land is derecognized par. 13: amendments',
30848:'to sffas 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting. no thisparagraphamendssffas',
30849:'7 to clarify guidance regarding transfers and donations of land. yes this paragraph amends sffas 7 to clarify guidanceregarding transfers',
30850:'and donations of land. par. 14: amendments to sffas 42, deferred maintenance and repairs. no sffas 42 is amended to',
30851:'ensure that deferred maintenance and repair dm&r information is reported in noncapitalized gpp&e land. yes sffas 42 is amended to',
30852:'ensure that deferred maintenance and repairdm&r information isreported in noncapitalizedgpp&e land. page 60 sffas 59 fasab handbook, version 20 06/21',
30853:'sffas 59 appendix c:abbreviations cfr consolidated financial report of the u.s. government dm&r deferred maintenance and repairs ed exposure draft',
30854:'fasab federalaccounting standardsadvisory board gpp&e general property, plant, and equipment gis geographic information system m&r maintenance and repairs nfi nonfinancial',
30855:'information ocs outer continental shelf pp&e property, plant, and equipment rsi required supplementary information sffac statement of federal financialaccounting concepts',
30856:'sffas statement of federal financialaccounting standards sl stewardship land tr technical release page 61 sffas 59 fasab handbook, version 20',
30857:'06/21 interpretation of federal financialaccounting standards 1: reporting on indian trust funds in general purposefinancial reports of the department of',
30858:'the interior and in the consolidated financial statements of the united states government:an interpretation of sffas 7 rescinded status issued',
30859:'march 12, 1997 effective date for fiscal periods beginning after september 30, 1997 affects none. affected by sffas 31 rescinded',
30860:'interpretation 1 in its entirety. sffas 31, accounting for fiduciary activities par. 36 rescinded interpretation 1. page 1 interpretation 1',
30861:'fasab handbook, version 20 06/21 interpretation of federal financialaccounting standards 2: accounting for treasury judgment fund transactions:aninterpretation of sffas 4',
30862:'and sffas 5 status issued march 12, 1997 effective date for fiscal periods beginning after september 30, 1996 affects none.',
30863:'affected by sffas 12 affects interpretation 2 paragraphs 3 and 8 related guidance tr no. 1, audit legal representation letter',
30864:'guidance summary the federal entity’s management, as advised by the justice department, must determine whether it is probable that a',
30865:'legal claim will end in a loss for the federal entity and the loss is estimable. if the loss is',
30866:'probable and estimable, the entity would recognize an expense and liability for the full amount of the expected loss. the',
30867:'expense and liability would be adjusted periodically, as necessary, based on any changes in the estimated loss. the federal entity',
30868:'involved in the litigations shall discuss in a footnote to the financial statements the judgment fund’s role in the payment',
30869:'of a possible loss. once the claim is either settled or a court judgment is assessed against the federal entity',
30870:'and the judgment fund is determined to be the appropriate source for the payment of the claim, the liabilityshouldberemovedfromthefinancialstatementsof theentitythatincurredtheliabilityand',
30871:'an “other financing source” amount which represents the amount to be paid by the judgment fund would be recognized. if',
30872:'the judgment fund is responsible for only a portion of the claim or settlement, the imputed financing source amount would',
30873:'reflect only that amount to be paid by the judgment fund on behalf of the federal entity. once the claim',
30874:'is either settled or a court judgment is assessed and the judgment fund is determined to be the appropriate source',
30875:'for payment of theclaim, thejudgment fund would recognize an expense and anaccountspayable or a cash outlay for the full cost',
30876:'of the loss. page 1 interpretation 2 fasab handbook, version 20 06/21 interpretation 2 table of contents page summary 1',
30877:'introduction 3 interpretation 3 accounting by the federal entity 3 accountingbythetreasuryjudgementfund 4 effective date 4 appendixa: basis for conclusions 5',
30878:'appendix b: illustrative journal entries 6 page 2 interpretation 2 fasab handbook, version 20 06/21 interpretation 2 introduction 1. thefederalaccountingstandardsadvisoryboardfasabhasbeenaskedto',
30879:'clarify federal accounting standards as they relate to the treasury judgment fund. the treasury judgment fund was established by congress',
30880:'in the 1950’s to pay in whole or in part the courtjudgmentsandsettlementagreementsnegotiatedbythejusticedepartmentonbehalf of agencies, as well as certain types of',
30881:'administrative awards. the congress established the judgment fund as a permanent, indefinite appropriation. 2. the clarification addresses 1 how federal',
30882:'entities should report the costs and liabilities arising from claims to be paid by the treasury judgment fund and 2',
30883:'how the judgment fund should account for the amountsthat it isrequired to payon behalf of federal entities. this interpretation has',
30884:'been prepared on the basis of the following three accounting standards: statementoffederalfinancialaccountingstandards sffas number 4, managerial cost accounting concepts and',
30885:'standards for the federal government statementoffederalfinancialaccountingstandards number 5, accounting for liabilities of the federal government statementoffederalfinancialaccountingstandards number 7, accounting for',
30886:'revenue and other financing sources and concepts for reconciling budgetary and financial accounting. the provisions of this interpretation need not',
30887:'be applied to immaterial items. interpretation accounting by the federal entity 3. sffas no. 5 states that a contingent liability',
30888:'should be recognized when a past event or exchange transaction has occurred; a future outflow or other sacrifice of resources',
30889:'is probable;andthefutureoutfloworsacrificeofresourcesismeasurable.thefederalentity’s management, as advised by the justice department, must determine whether it is probable that a legal claim willend',
30890:'in a lossfor the federal entity and the loss is estimable. if the loss is probable and estimable, the entity',
30891:'would recognize an expense and liability for the full page 3 interpretation 2 fasab handbook, version 20 06/21 interpretation 2',
30892:'amount of the expected loss1.the expense and liability would be adjusted periodically, as necessary, based on any changes in the',
30893:'estimated loss. the federal entity involved in the litigationsshall discuss in a footnote to the financial statementsthe judgment fund’s role',
30894:'in the payment of a possible loss. 4. once the claim is either settled or a court judgment is assessed',
30895:'against the federal entity and the judgment fund is determined to be the appropriate source for the payment of the',
30896:'claim,theliabilityshouldberemovedfromthe financial statementsof the entitythatincurred the liability and an “other financing source”2 amount which represents the amount to be paid',
30897:'by the judgment fund would be recognized. if the judgment fund is responsible for only a portion of the claim',
30898:'or settlement, the imputed financing source amount would reflect only that amount to be paid by the judgment fund on',
30899:'behalf of the federal entity. accounting by the treasury judgment fund 5. once the claim is either settled or a',
30900:'court judgment is assessed and the judgment fund is determinedtobetheappropriate source forpaymentof theclaim,thejudgment fund would recognize an expense and an',
30901:'accounts payable or a cash outlay for the full cost of the loss. according to sffas 4, the imputed financing',
30902:'source amount recognized by the federal entity and the expense recognized by the judgment fund would be eliminated at the',
30903:'federal consolidated financial report level. effective date 6. thisinterpretationiseffectiveuponimplementationofsffas4&5,whichbecomeeffective for fiscal periods beginning after september 30, 1996. 1see paragraph 39',
30904:'in sffas 5 for the complete discussion on “estimating contingent liabilities.” 2see paragraph 73 in sffas 7 for the complete',
30905:'discussion on “financing imputed for cost subsidies.” page 4 interpretation 2 fasab handbook, version 20 06/21 interpretation 2 appendixa: basis',
30906:'for conclusions 7. this interpretation is primarily based on the principles of sffas 5 and sffas 4. the following brief',
30907:'discussion explains the basis for the interpretation in terms of those standards which are the foundation for the interpretation. 8.',
30908:'in accordance with the general principles of the liability standard sffas 5, once a legal claim is filed against a',
30909:'federal entity, the entity’s management should determine the likelihood that the federal entity will incur a loss related to the',
30910:'claim3, regardless of the fact that the payment may be paid in full or in part by the judgment fund.',
30911:'the contingencies4 section of sffas 5 states that if the likelihood of the contingent loss is remote no reporting is',
30912:'necessary; if the likelihood of the loss is reasonably possible and the amount is measurable the estimated loss should be',
30913:'disclosed; and, if the likelihood of loss is probable more likely than not which is a greater than 50% chance',
30914:'of occurrence and estimable, the estimated loss must be recognized as a liability. if the probability of the loss is',
30915:'changed at any time prior to payment of the claim, the proper adjustments should be recognized [e.g., from disclosure reasonably',
30916:'possibleto recognition probable]. ifatanytime the estimated loss amount changes, the liability and expense should be adjusted to reflect the change.5',
30917:'9. in accordance with the principles of sffas 46, a federal entity incurring a loss or expense must recognize the',
30918:'full cost of the loss [claim], regardless of who is actually paying the [settlement or judgment] amount. the standard requires',
30919:'the federal entity incurring a loss or expense to use an estimate of the cost if the actual cost information',
30920:'is not provided. the estimate must be reasonable and should be aimed at determining realistic losses expected. 3in most cases',
30921:'this determination involves the u.s. department of justice. 4acontingency is an existing condition, situation or set of circumstances involving uncertainty',
30922:'as to possible gain or loss to an entity. the uncertainty will ultimately be resolved when one or more future',
30923:'events occur or fail to occur. resolution of the uncertainty may confirm a gain or loss. 5see paragraphs 35 42',
30924:'in sffas 5 for the complete discussion on “contingencies.” 6see paragraphs 89 104 and 105 115 in sffas 4 for',
30925:'the complete discussion on “full cost” and “interentity costs”, respectively. page 5 interpretation 2 fasab handbook, version 20 06/21 interpretation',
30926:'2 appendix b: illustrative journal entries based on the above noted accounting standards and the generalized events described below, the',
30927:'conceptual journal entries7 should be as follows: federal entity entries: the federal entity’s management, through the advisement of the justice',
30928:'department, has determined that the probability of the legal claim ending in a loss against the federal entity is probable',
30929:'and thelossisestimable. theentitywould recognizeanexpense andliabilityforthefull amountoftheexpected loss. the expense andliabilitywould be adjusted asnecessarybasedon any changes in the estimated loss. entry',
30930:'1: dr. expense cr. liability—legal claims once the claim is either settled or a court judgment is assessed against the',
30931:'federal entity and the judgment fund is determined to be the appropriate source for payment of the claim, the liability',
30932:'should be removed and an other financing source recognized. if the judgment fund is responsible for only a portion of',
30933:'the claim or settlement, the imputed financing source amount would only reflect that amount paid by the judgment fund on',
30934:'behalf of the federal entity. entry 2: dr. liability—legal claims cr. imputed financing source—expenses paid by other entities treasury judgment',
30935:'fund entries: the claimiseithersettledora court judgment isassessed andthejudgment fund is determined to be the appropriate source for payment. entry 3:',
30936:'dr. expenses paid for other entities cr. cash or fund balance with treasury accordingtothecostaccountingstandard,theimputedfinancingsource and expensespaidforother entities amounts would be',
30937:'eliminated at the consolidation level. 7actual journal entries are under the authority of the standard general ledger. page 6 interpretation',
30938:'2 fasab handbook, version 20 06/21 interpretation of federal financialaccounting standards 3: measurement date for pension and retirement health care',
30939:'liabilities rescinded status issued august 29, 1997 effective date for fiscal periods beginning on or after september 30, 1997 affects',
30940:'none. affected by sffas 33 rescinded interpretation 3 in its entirety. sffas33, pensions, other retirement benefits, and other postemployment benefits:',
30941:'reporting the gains and losses from changes in assumptions and selecting discount rates and valuation dates rescinded interpretation 3. page',
30942:'1 interpretation 3 fasab handbook, version 20 06/21 interpretation of federal financialaccounting standards 4: accounting for pension payments in excess',
30943:'of pension expense status issued december 19, 1997 effective date for fiscal periods beginning on or after september 30, 1997',
30944:'affects none. affected by none. summary changes in normalcosts due to reestimatesof demographicand economic assumptionsshould be accounted for by the',
30945:'administrative entity as a change in accounting estimate. the effect of the change should be recognized in current and future',
30946:'years. when the employer entity’stotal payment forfers and csrs exceeds the related total pension expense as defined in sffas no.',
30947:'5, the entity should account for the excess payment as a transferout. the entityshould include the transferout when determining results',
30948:'of operationson its statement of changes in net position. any fersrelated payment that exceeds the fersrelated pension expense should be',
30949:'offset against any imputed financing resulting from a csrsrelated payment being less than csrs related pension expense in calculating the',
30950:'amount of the transfer out. only when the total pension payment exceeds total pension expense would a transferout be recognized.',
30951:'page 1 interpretation 4 fasab handbook, version 20 06/21 interpretation 4 table of contents page summary 1 introduction 3 interpretation',
30952:'4 scope of interpretation 7 effective date 8 basis for conclusions 8 page 2 interpretation 4 fasab handbook, version 20',
30953:'06/21 interpretation 4 introduction 1. thefederalaccountingstandardsadvisoryboardfasab was askedfor guidance regarding accounting at the agency level for employer agencies’ payments to',
30954:'the pension trust fund when theyexceed pension expense basedonanallocationof thetotalservice [or “normal”] cost1 by the office of personnel management. this',
30955:'is a situation that was not contemplated in statement of federal financialaccounting standards sffas no. 5, accounting for liabilities of',
30956:'the federal government. 2. the objective of sffas no. 5 paras. 7178 is to have employer entities recognize the annual',
30957:'cost of their employees’ pensions pension expense as measured by the annual normal cost for their employees, less any amounts',
30958:'contributed by the employees para. 74. 3. the employer entity payment rates for the two major civilian pension systems—the federal',
30959:'employees retirement system fers and the civil service retirement system csrs— are provided in law and are not the same.',
30960:'for fers, the payment rate is the employer entity’s normal cost less the amount contributed by its employees; for fers,',
30961:'the payment rate and the pension expense rate under sffas no. 5 theoretically would be the same, since both would',
30962:'be based on the same principle: that pension expense and employer payments to the pension trust fund equal normal cost',
30963:'less the employees’ contribution. for most csrs, employerpaymentstothe pensiontrustfund are bylawset at seven percent of salaries which is substantially less',
30964:'than normal costs and therefore also less than pension expense based on normal cost. 4. sffas no. 5 explicitly provides',
30965:'the accounting for a situation in which pension expense is more than employer payments to the pension trust fund. the',
30966:'difference between the pension expense and the payment to the plan is to be accounted for by the employer entity',
30967:'as imputed financing. 5. however, due to 1 planning and operational requirements of budgetary administration and 2 recent legislation, the',
30968:'employer entity’s fers pension expense may be less than the fersrelated employer payments to the pension trust fund. 6. thepensionexpenserateusedbycivilianemployerentitiestocalculatepensionexpenseis',
30969:'supplied by the administrative entity — in the case of fers and csrs, the administrative entity is the office of',
30970:'personnel management opm. opm analyzes the demographic and 1“servicecost” and/or “normal costs”—the terms are used synonymously in sffas no. 5—are',
30971:'definedinsffas no. 5 as that portion of the actuarial present value of pension plan benefits and expenses that is allocated',
30972:'to a valuation year by the actuarial cost method. page 3 interpretation 4 fasab handbook, version 20 06/21 interpretation 4',
30973:'economic assumptions periodically and recalculates normal costs for both fers and csrs.2the recalculation was done during fy 1997 and resulted',
30974:'in a lower normal cost for both fers and csrs, and opm has issued a revised fy 1997 pension expense',
30975:'rate based thereon. however, regarding the rate for employer payments to the pension trust fund, opm allows time for employer',
30976:'entities to adopt the new rate for budgeting purposes during which the prior, higher payment rate will continue to be',
30977:'used by employer entities. 7. in addition,thebalancedbudgetact of1997bbaincreasesfersemployees’ withholding rate from 1999 through 2001 without correspondingly decreasing the employer entity’s',
30978:'payment rate. for example, if fers normal costswere $10,000 and the employees’ contributionwereraisedfrom$5,000ascalculatedabsent bbato$5,500 bythebba,then the employer’s expense according to',
30979:'sffas no. 5 should be $4,500 $10,000 $5,500. however, the bbadoes not allow the employer entity to reduce its payment,',
30980:'and therefore the employer pays what it would have paid without the bba, $5,000. the $500 difference between the $4,500',
30981:'sffas no. 5 pension expense and the $5,000 payment to the pension trust fund represents a payment in excess of',
30982:'pension expense. 8. for fy 1997, opm has indicated that employer entities are unlikely to report total payments to thetrust',
30983:'fundinexcessof totalpensionexpensebasedonnormalcostat theentitywide level, although it is possible, because the amount of the csrs contribution deficiency is more than the',
30984:'excess fers payment. however, opm believes that it is probable that total payments will exceed total pension expense based on',
30985:'normal cost less employee contributions in future years. interpretation 9. change in estimate changes in normal costs due to reestimates',
30986:'of demographic and economic assumptions should be accounted for by the administrative entity as a change in accounting estimate. the',
30987:'effect of the change should be recognized in current and future years. 10. payments in excess of pension expense when',
30988:'the employer entity’s total payment for fers and csrs exceedstherelatedtotalpensionexpense asdefinedinsffasno. 5, the entity should account for the excess payment',
30989:'as a transferout. the entity should include the transferout when determining results of operations on its statement of changes in',
30990:'net position. 2this is separatefrom opm’s annualrecalculationof theactuarialliability which can resultin actuarial gainsand losses the accounting for which is provided',
30991:'in sffas no. 5. page 4 interpretation 4 fasab handbook, version 20 06/21 interpretation 4 11. any fersrelated payment that',
30992:'exceeds the fersrelated pension expense should be offset againstanyimputed financing resultingfromacsrsrelatedpayment being lessthan csrsrelated pension expense in calculating the amount',
30993:'of the transfer out. only when the total pension payment exceeds total pension expense would a transferout be recognized. 12.',
30994:'example 1: i. if an employer entity calculates total pension expense as $635,000 reflecting a fers related pension expense of',
30995:'$535,000 and a csrsrelated pension expense of $100,000,3and ii. it makes a total pension payment to the trust fund —',
30996:'excluding its employees’ contribution — of $630,000 reflecting $570,000 for its fers employees and $60,000 for its csrs employees, iii.',
30997:'thenitwouldoffsetthe$35,000fersrelatedexcesspayment$570,000 $535,000 againstthe$40,000 csrsrelated underpayment $100,000 $60,000andrecognize the net $5,000 underpayment as an imputed financing as follows: dr. pension expense',
30998:'635,000 fers $535,000 + csrs $100,000 cr. funds with treasury 630,000 fers $570,000 + csrs $60,000 cr. imputed financing 5,000',
30999:'$40,000 $35,000 13. example 2:assumingthesamefacts as intheparagraphimmediately aboveexceptthat the employer entity makes a payment of $640,000 $580,000 fersrelated and $60,000',
31000:'csrsrelated instead of $630,000, thenthe entitywould recognizea net transferout of the amount that the fersrelated excess payment $580,000 $535,000 =',
31001:'$45,000 exceeded the csrsrelated under payment $100,000 $60,000 = $40,000 as follows: dr. pension expense 635,000 fers $535,000 + csrs',
31002:'$100,000 dr. transferout 5,000 $45,000 $40,000 cr. funds with treasury 640,000 fers $580,000 + csrs $60,000 3the amounts used for',
31003:'csrs are from the example in sffas no. 5, paragraph no. 78. page 5 interpretation 4 fasab handbook, version 20',
31004:'06/21 interpretation 4 14. administrative entity intragovernmental entries the administrative entity should account for funds received from employer entities in',
31005:'excess of the normal cost of pension expense as a transferin. the administrative entity should include the transferin when determining',
31006:'results of operations on its statement of changes in net position. 15. adjusting entries employer entities that recorded total fers',
31007:'payments as pension expense during fy 1997 will need to adjust their accounts. the following examples use the amounts from',
31008:'paragraphs 12 and 13 above. a. example 3 if the entity had originally recorded the following pension expense based on',
31009:'an earlier provided normal cost rate: dr. pension expense 670,000 fers $570,000 + csrs $100,000 cr. funds with treasury 630,000',
31010:'fers $570,000 + csrs $60,000 cr. imputed financing csrs 40,000 then, when the revised estimate is provided, the entry would',
31011:'recalculate pension expense as $635,000 fersrelated $535,000 + csrsrelated $100,000 and adjust the accounts accordingly by means of the following',
31012:'two simultaneous entries: 1 to reduce pension expense from $670,000 to $635,000 fers $535,000 + csrs $100,000: dr. transferout 35,000',
31013:'cr. pension expense 35,000 2 to offset the transferout against imputed financing: dr. imputed financing 35,000 cr. transferout 35,000 these',
31014:'entries adjust the accounts to the amounts that would have been entered had the original entry reflected the revised normal',
31015:'cost as shown in paragraph 12 above. page 6 interpretation 4 fasab handbook, version 20 06/21 interpretation 4 b. example',
31016:'4 also,iftheentity’saccountingresultedina nettransferout,an adjustment may be necessary. for example, using the illustration in paragraph 13 above, the entity may have',
31017:'originally recorded pension expense based on an earlier provided normal cost rate as follows. dr. pension expense 680,000 fers $580,000',
31018:'+ csrs $100,000 cr. imputed financing csrs 40,000 cr. funds with treasury 640,000 fers $580,000 + csrs $60,000 then the',
31019:'adjustments would be the following two simultaneous entries: 1 to reduce pension expense from $680,000 to $635,000 fers $535,000 +',
31020:'csrs $100,000: dr. transferout 45,000 fers $580,000 $535,000 = $45,000 2 cr. pension expense to offset the transferout against imputed',
31021:'financing: 45,000 dr. imputed financing csrs cr. pension expense 40,000 40,000 these entries adjust the accounts to the amounts that',
31022:'would have been entered had the original entry reflected the revised normal cost as shown in paragraph 13 above. scope',
31023:'of interpretation 16. thisinterpretationappliestoemployerentitypensionand,ifapplicable,toretirementhealth care expense, and to administrative entity’s receipt of funds from employer entities, accounted for in accordance',
31024:'with sffas no. 5. page 7 interpretation 4 fasab handbook, version 20 06/21 interpretation 4 effective date 17. this interpretation',
31025:'should be applied for reporting periods that end on or after september 30, 1997. the fasab has reviewed and agreed',
31026:'with this interpretation. after this interpretation is signed by the fasab members who represent the department of the treasury, the',
31027:'office of management and budget, and the generalaccounting office, it will be published by omb and will be effective. basis',
31028:'for conclusions 18. regarding changes in normal cost estimates, the prospective treatment called for in this interpretation reflects current practice,',
31029:'includingapb opinion no. 20, accounting for changes in accounting estimate, which provides that a change in accounting estimate should be',
31030:'accounted for in the period of change, if the change affects that period only, or in the period of change',
31031:'and future periods if the change affects both. 19. regardingemployerpaymentstothepensiontrustfundinexcessofpensionexpense,such payments are not an employer entity expense or an administrative',
31032:'entity revenue. such payments do not meet the definition of employer pension expense in sffas no. 5,4 as discussed above,',
31033:'nor do they meet the general definition of expense.5 the entity receiving the transfer—in this case an employer payment in',
31034:'excess of pension expense does not sacrifice anything of value to obtain the payment, and the transferring entity does not',
31035:'acquire anything of value beyond what it would have gotten had it contributed an amount equalling normal cost less the',
31036:'employees’ contribution. thus, such payments meet the description of “transferout” provided in sffas no. 7.6 4sffas no. 5, para. 74.',
31037:'5see statements of federal financialaccounting concepts and standards, original statements, “appendix e: consolidated glossary” on page 1, wherein expenses are',
31038:'defined as: outflows or other using up of assets or incurrences of liabilities or a combination of both during a',
31039:'period from providing goods, rendering services, or carrying out other activities related to an entity’s programs and missions, the benefits',
31040:'from which do not extend beyond the present operating period. 6for a description of transfersin/out, see paragraphs 74 and 344',
31041:'of sffas no. 7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting. page',
31042:'8 interpretation 4 fasab handbook, version 20 06/21 interpretation of federal financialaccounting standards 5: recognition by recipient entities of receivable',
31043:'nonexchange revenue:an interpretation of sffas 7 status issued december 1998 effective date upon implementation of sffas 7, accounting for revenue',
31044:'and other financing sources of the federal government and concepts for reconciling budgetary and financial accounting affects none. affected by',
31045:'none. summary entities that receive nonexchange revenue collected on their behalf by another entity should recognize the revenue based on',
31046:'the best available evidence at the time the financial report is prepared. this provision of paragraph 60 of sffas 7',
31047:'is intended to require recognition of the excise tax “true up” of the difference between amounts transferred to trust funds',
31048:'based on estimates by treasury’s office of taxanalysis and the actual amount subsequently determined by irs. irs certifies the third',
31049:'quarter actual amount in december. the intent of paragraph 60 is to recognizethis “true up” amountasareceivable or payable. the board',
31050:'did notintendtoimpose “push down” accounting that would require entities such as trust funds that receive taxes collected on their behalf',
31051:'to recognize a portion of irs’s net taxes receivable. page 1 intrepretation 5 fasab handbook, version 20 06/21 intrepretation 5',
31052:'table of contents page summary 1 introduction 3 interpretation 3 effective date 3 appendix: basis for conclusions 4 page 2',
31053:'intrepretation 5 fasab handbook, version 20 06/21 intrepretation 5 introduction 1. paragraph60ofsffas7,accountingforrevenueandotherfinancingsources,requires entities that receive nonexchange revenue collected for them',
31054:'by other entities to recognize “. . . the net change in any related interentity balances between collecting and receiving',
31055:'entities.” the internal revenue service irs is the primary collecting entity for the united statesgovernment,althoughcustomsandotherentitiesalsocollectsubstantialamountsof nonexchange revenue on behalf of',
31056:'the general fund and other federal entities. some of those involved with preparing and auditing irs’s financial statements have asked',
31057:'whether this should be interpreted to require entities such as trust funds that receive taxes collected on their behalf to',
31058:'recognize a portion of irs’s net taxes receivable. this is sometimes described as “push down” accounting. the board did not',
31059:'intend to impose “push down” accounting, as is further explained by this interpretation. interpretation 2. entitiesthatreceivenonexchangerevenuecollectedontheirbehalfbyanotherentityshould recognize the revenue based',
31060:'on the best available evidence at the time the financial report is prepared. this provision of paragraph 60 of sffas',
31061:'7 is intended to require recognition of the excise tax “true up” of the difference between amounts transferred to trust',
31062:'funds based on estimates by treasury’s office of taxanalysis and the actual amount subsequently determined by irs. irs certifies the',
31063:'third quarter actual amount in december. the intent of paragraph 60 is to recognize this “true up” amount as a',
31064:'receivable or payable.1 effective date 3. the interpretation is effective upon implementation of sffas 7. 1certificationoftheactualamountfor the fourth quarterisnotcurrently available',
31065:'fromirs untilthe endof march,which is too late to be included in the financial statements for the prior fiscal year. page',
31066:'3 intrepretation 5 fasab handbook, version 20 06/21 intrepretation 5 appendix: basis for conclusions 4. the board understood, when it',
31067:'recommended the standards contained in sffas 7, that the information available to irs and its information systems do not presently',
31068:'permit “push down” accounting as described above. it was not the board’s intent to establish a standard in this regard',
31069:'that recipient entities could not comply with because of factors outside their control. the recognition, measurement, and disclosure standards in',
31070:'sffas 7 for collecting entities such as irs were designed to provide for accountability and useful information regardingtaxrevenuesfromthecollectingentities. therefore,asnotedabove,thisprovision of',
31071:'sffas 7 is intended only to require recognition of the most recent available “true up” of the difference between amounts',
31072:'of nonexchange revenue transferred to recipient entities based on estimates by treasury’s office of taxanalysis and the actual amount subsequently',
31073:'determined by irs. 5. oneboardmembernotesthatitisnotpossibletoaccruesomethingthatisnotmeasurable. he believes that, if the fourth quarter is not measurable, no accrual can be made,',
31074:'and no interpretation is needed. if any entity can “true up” a given tax revenue number, that should be done.',
31075:'that is, it should report the best available information. from this perspective, the standard does not call for more than',
31076:'the best estimate that is possible for a given revenue. this member believes that if someone needs clarification, it should',
31077:'be provided, but the clarification need not be elevated to an interpretation. 6. the board concluded that, because there is',
31078:'confusion, and because this issue could affect more than one entity, an interpretation would be appropriate to assure that the',
31079:'guidance is readily available to all who need it. page 4 intrepretation 5 fasab handbook, version 20 06/21 interpretation of',
31080:'federal financialaccounting standards 6: accounting for imputed intradepartmental costs: an interpretation of sffas no. 4 rescinded status issued april 18,',
31081:'2003 effective date for periods beginning after september 30, 2004 affects sffas 4, managerial cost accounting standards and concepts affected',
31082:'by sffas 30, interentity cost implementation. sffas 30 rescinds par. 110 of sffas 4 sffas 55 rescinded interpretation 6 in',
31083:'its entirety, sffas 55, amending interentity cost provisions rescinded interpretation 6 in its entirety. page 1 interpretation 6 fasab handbook,',
31084:'version 20 06/21 interpretation of federal financialaccounting standards 7: items held for remanufacture status issued effective date affects affected by',
31085:'march 16, 2007 effective upon issuance. sffas 3 none. page 1 interpretation 7 fasab handbook, version 20 06/21 interpretation 7',
31086:'table of contents page introduction 3 purpose 3 scope 3 exclusion 3 materiality 3 effective date 4 interpretation 4 definitions',
31087:'4 recognition and measurement 5 disclosure requirements 6 appendixa:basis for conclusions 7 appendix b: glossary 11 appendix c: relevant citations',
31088:'of current standards 12 appendix d: letter from department of defense deputy chief financial officer 15 page 2 interpretation 7',
31089:'fasab handbook, version 20 06/21 interpretation 7 introduction purpose 1. current standards do not provide specific guidance to assist preparers',
31090:'and auditors in the classification, valuation and reporting of items that are in the process of major overhaul or remanufacture',
31091:'for sale or for internal use. this interpretation identifies acceptable options for classification, valuation and reporting by applying existing standards,',
31092:'in particular statement of federal financialaccounting standards sffas 3, accounting for inventory and related property. scope 2. this interpretation applies',
31093:'to reparable parts and subassemblies that are in the process of or awaiting inspection, disassembly, evaluation, cleaning, rebuilding, refurbishing and/or',
31094:'restoration to serviceable or technologically updated/upgraded condition. this interpretation addresses remanufacturing activity for items intended for sale or for internal',
31095:'use. itemsheldforremanufacturemayconsistofdirectmaterialsincludingrepairableparts and subassemblies, also referred to as “carcasses” at the department of defense dod, and workinprocess where products are',
31096:'restored to serviceable condition and/or improved/upgraded condition for sale or internal use. 3. longlasting spare parts were not specifically addressed',
31097:'in sffas 3. it is not the intent of this interpretation to imply that longterm spare parts for issuance without',
31098:'reimbursement should or should not be classified as operating materials and supplies. exclusion 4. this interpretation does not apply to',
31099:'standalone items such as entire airplanes, ships, tanks, intercontinental ballistic missiles icbms or other higher assemblies that function independently. materiality',
31100:'5. the provisions of this interpretation need not be applied to immaterial items. page 3 interpretation 7 fasab handbook, version',
31101:'20 06/21 interpretation 7 effective date 6. this interpretation is effective upon issuance. interpretation definitions 7. items ”held for remanufacture”1',
31102:'are in the process of or awaiting inspection,2 disassembly, evaluation, cleaning, rebuilding, refurbishing and/or restoration to serviceable or technologically updated/upgraded',
31103:'condition. items held for remanufacture may consist of: direct materials, including repairable parts or subassemblies, also referred to as “carcasses“',
31104:'at the dod and workinprocess including labor costs related to the process of major overhaul, where products are restored to',
31105:'“goodasnew” condition and/or improved/upgraded condition. 8. “itemsheldforremanufacture” sharecharacteristicswith “itemsheldforrepair” anditemsin the process of production and may be aggregated with either',
31106:'class. management should use judgment to determine a reasonable, consistent and costeffective manner to classify processes as “repair” or “remanufacture.”',
31107:'9. items held for remanufacture may be intended for sale placed in inventory held for sale upon completion of remanufacture',
31108:'or for internal use issued to a user within the same reporting entity upon completion of remanufacture. 1terms appearing for',
31109:'the first time in bold are defined in the glossary,appendix d of this document. 2the process of inspection may include',
31110:'holding an item until an inspection can be done. page 4 interpretation 7 fasab handbook, version 20 06/21 interpretation 7',
31111:'recognition and measurement items intended for sale inventory 10. inventory items intended for sale that are held for remanufacture may',
31112:'be valued in accordance with either paragraphs 2022 or paragraphs 3233 of sffas 3.3 for example, paragraph 21 states that',
31113:'“historical cost shall include all appropriate purchase, transportation and production costs incurred to bring the itemsto their current condition and',
31114:'location.” applied to reparable parts and subassemblies returned for credit in the purchase of a serviceable item, historical cost would',
31115:'be the credit, if any, issued to the customer who returned the item to be repaired and any identifiable and',
31116:'chargeable transportation and handling costs. regardless of the method used, reparable items returned by customers should be initially valued at',
31117:'less than the value of new or fully remanufactured items with similar features and useful lives. as the inspection and',
31118:'remanufacture process takes place, appropriate “production costs” wouldinclude normal coststo bring the itemtoserviceable or upgraded condition. 11. “abnormal costs” to',
31119:'be excluded would include any costs that are in excess of the cost to purchaseandplaceinserviceanewitemwithsimilarfeaturesandusefullife. foritemsthat are no longer available',
31120:'on the open market, or which are being upgraded, management should use judgment in determining normal and reasonable costs to',
31121:'be capitalized. 12. inventory items held for remanufacture share characteristics with inventory held for repair and items in production for',
31122:'sale direct materials and workin process and may be aggregated with either class of items for reporting purposes. items not',
31123:'intended for sale operating materials and supplies 13. itemsheldforremanufacturethatmeetthedefinitionof operating materialsand supplies, if significant, may be recognized as a category',
31124:'of operating materials and supplies and valued in accordance with paragraphs 3233 or paragraphs 4244 of sffas 3. 14. items',
31125:'held for remanufacture that meet the definition of operating materials and supplies shouldbeinitiallyvaluedatlessthanthevalueofneworfullyremanufactureditems. asthe inspection and remanufacture process takes place,',
31126:'appropriate “production costs” would 3 the paragraphs of sffas 3 that are cited in this document are displayed inappendix c.',
31127:'page 5 interpretation 7 fasab handbook, version 20 06/21 interpretation 7 includenormalcoststobringtheitemtoserviceableorupgradedcondition. abnormalcosts to beexcluded would include anycostsin excessof the',
31128:'cost to obtain andplace in service a new item with similar features and useful life. the allowance or direct methods',
31129:'may also reasonably be applied to operating materials and supplies. disclosure requirements component entity report disclosures 15. the disclosures for',
31130:'inventory items held for remanufacture should conform with paragraph 35 of sffas 3. 16. the disclosures for items held for',
31131:'remanufacture that meet the definition of operating materials and supplies should be in accordance with the requirements of paragraph 50',
31132:'of sffas 3. if significant, operating materials and supplies held for remanufacture may be disclosed as a separate category. financial',
31133:'report of the u.s. government disclosures 17. for the financial report of the u.s. government, there is no provision for',
31134:'valuation or recognition that is different from requirements for the component level. the provisions of this interpretation need not be',
31135:'applied to immaterial items. page 6 interpretation 7 fasab handbook, version 20 06/21 interpretation 7 appendixa: basis for conclusions this',
31136:'appendix discusses some factors considered significant by members in reaching the conclusions in this interpretation. it includes reasons for accepting',
31137:'certain approaches and rejecting others. individual members gave greater weight to some factors than to others. project history a1. accounting',
31138:'for the federal government’s physical assets that are held as inventory or as operating materials and supplies is complex and',
31139:'has been addressed in numerous fasab standards.4 the board continues to address issues as they arise. in march of 2006,',
31140:'the department of defense dod deputy chief financial officer sent a letter to the board see appendix d requesting specific',
31141:'guidance for items held for remanufacture. a2. the dod requested that sffas 3 be amended to provide standards for inventory',
31142:'held for remanufacture. the dod noted that the category of inventory “held for repair” is not defined in the standards,',
31143:'and that the valuation methods for “held for repair” in paragraphs 3233 of sffas 3 are not cost effective to',
31144:'apply to items held for remanufacture within the moving average cost method, since the moving average cost of a serviceable',
31145:'item changes continually. outreachactivities a3. fasab published the ed on august 1, 2006. upon release of the ed, notices and/or',
31146:'press releases were provided to: the federal register, the fasab news, the journal of accountancy, aga today, the cpa journal,',
31147:'government executive, the cpa letter, government accounting and auditing update, the cfo council, the financial statement audit network, the federal',
31148:'financial managers council, and committees of professional associations generally commenting on exposure drafts in the past. during the comment period,',
31149:'fasab staff also contacted agencies that were likely to have remanufacturing activitytoensurethattheywereawareoftheed’sscopeandcommentperiod. fasabstaff also met with representatives of agencies with',
31150:'significant remanufacture activities. 4 inventory: see sffas 3; property plant & equipment: see sffas 6, amended by sffas 10, 14,',
31151:'16 and 23. page 7 interpretation 7 fasab handbook, version 20 06/21 interpretation 7 a4. six written comments were received',
31152:'from the following sources: source of comments federal internal nonfederal external users, academics, others 1 auditors 1 preparers and financial',
31153:'managers 4 a5. among the issues identified by respondents were: items meeting the definition of property, plant and equipment; inconsistent',
31154:'use of numerous acceptable methodologies within an agency; and the difficulty of distinguishing between routine maintenance and minor repair versus',
31155:'remanufacture. property, plant and equipment a6. paragraph 12 of the exposure draft stated that “parts and subassemblies held for remanufacture',
31156:'that are intended for use, rather than sale, and which meet the definition of property, plant and equipment, should be',
31157:'recognized as a category in property, plant and equipment and should be valued in accordance with sffas 6, as amended.”',
31158:'a7. more than one respondent objected to this paragraph, stating that it implied that such items should be classified and',
31159:'depreciated as property, plant and equipment and that it would be costly to change the accounting for such items. the',
31160:'respondents noted that the request for guidance focused on a the issue that existing fasab standards do not recognize the',
31161:'existence of operating materials and supplies held for repair or remanufacture, and b existing standards imply that only the direct',
31162:'or allowance methods, and not historical cost, are acceptable valuation methods. accordingly, the scope of the interpretation has been reduced',
31163:'to address only inventory and operating materials and supplies that are in the process of repair or remanufacture. inconsistent practice',
31164:'withinagencies a8. one respondent noted that there are inconsistent accounting practices within an agency, and that the proposed interpretation, which',
31165:'points out numerous acceptable options, might exacerbate this problem. page 8 interpretation 7 fasab handbook, version 20 06/21 interpretation 7',
31166:'a9. selecting among acceptable valuation methods and establishing uniformity throughout a reportingentityisamanagementresponsibility. thepurposeoftheinterpretationistopoint out acceptable methods, rather than to make',
31167:'selections on behalf of agencies. definition and exclusions a10.this interpretation is limited to reparable parts and subassemblies, which are not',
31168:'specifically addressed in current standards, and for which guidance has been requested by the dod. this interpretation does not apply',
31169:'to standalone items that function independently; such as entire airplanes, ships, tanks, icbms and other standalone items. such items are',
31170:'already addressed in sffas 3 and sffas 6, as amended. “repair” versus “remanufacture” a11.there is no “bright line” that distinguishes',
31171:'items held for remanufacture from items held for repair. aclearexampleofarepairmightbeaminororroutineservicingthatisperformedin the field or “on the shelf” for an item that',
31172:'is for sale. a clear example of remanufacture might be an item that is sent to a central depot for',
31173:'a total overhaul, or for an upgrade that results in the item being assigned a new national stock number to',
31174:'indicate the change in the nature of the item. for processes that involve more than the “repair” example above, but',
31175:'less than the “remanufacture” examples, management should use judgment to determine a reasonable, consistent and costeffective manner to classify processes',
31176:'as “repair” or “remanufacture.” inventory valuation a12.sffas 3 provides basic principles of inventory valuation applicable to both inventory in the',
31177:'process of production for sale and held for repair: historical cost valuation is to be applied to inventory sffas 3,',
31178:'paragraphs 20, 32, 33 and 42, historical cost includes all appropriate purchase, transportation and production costsincurred to bring the items',
31179:'to their current condition and location, sffas 3, paragraphs 21 and 43 and abnormalcostsshouldbeexpensedwhenincurredsffas3,paragraphs21and 43. page 9 interpretation 7 fasab',
31180:'handbook, version 20 06/21 interpretation 7 a13.given the common objectives described above for the two categories and the absence of',
31181:'clear distinctions between the two categories, the board does not believe that an amendment is needed. the board believes that',
31182:'in some circumstances the only thing that distinguishes the remanufacturing process from the production process is that the raw materials',
31183:'include items previously in service. a14.the board believes that the intent of paragraphs 1734 of sffas 3 is that an',
31184:'item held for remanufacture should be initially valued at less than the value of a new or serviceable item, and',
31185:'that as the work on the item progresses, the value of the item should be increased accordingly. the board believes',
31186:'that any of the three methods the allowance method or the direct method, described in paragraphs 3233 of sffas 3',
31187:'or the historical production cost method described in paragraphs 21 and 43 of sffas 3 would provide results that would',
31188:'meet this objective. operating materials and supplies held for repair or remanufacture a15.sffas 3 did not anticipate the existence of',
31189:'a significant category of operating materials and supplies held for repair or remanufacture. for example, reparable parts and subassemblies related',
31190:'to tactical munitions may meet the definition of operating materials and supplies. the board believes that any of the three',
31191:'valuation methods described for inventory in paragraphs a12a14 above may be reasonably applied to operating materials and supplies. effective date',
31192:'a16.interpretations do not have an effective date, as they carry the effective dates of the standards being interpreted. boardapproval a17.this',
31193:'interpretation was approved for issuance by all members of the board. page 10 interpretation 7 fasab handbook, version 20 06/21',
31194:'interpretation 7 appendix b: glossary [see consolidated glossary in appendix e of this document.] page 11 interpretation 7 fasab handbook,',
31195:'version 20 06/21 interpretation 7 appendix c: relevant citations of current standards sffas 3, accounting for inventory and related property',
31196:'[20] valuation. inventory shall be valued at either 1 historical cost or 2 latest acquisition cost. [21] 1historical cost shall',
31197:'include all appropriate purchase, transportation and production costs incurred to bring the items to their current condition and location. any',
31198:'abnormal costs, such as excessive handling or rework costs, shall be charged to operations of the period. donated inventory shall',
31199:'be valued at its fair value at the time of donation. inventory acquired through exchange of nonmonetary assets e.g., barter',
31200:'shall be valued at the fair value of the asset received at the time of the exchange. any difference between',
31201:'the recorded amount of the asset surrendered and the fair value of the asset received shall be recognized as a',
31202:'gain or a loss. [22] the firstin, firstout fifo; weighted average; or moving average cost flow assumptions may be applied',
31203:'in arriving at the historical cost of ending inventory and cost of goods sold. in addition, anyother valuation method may',
31204:'be used if the results reasonably approximate those of one of the above historical cost methods e.g., a standard cost',
31205:'system. [32] inventory held for repair. inventory held for repair may be treated in one of two ways: 1 the',
31206:'allowance method or 2 the direct method. 1 under the allowance method, inventory held for repair shall be valued at',
31207:'the same value as a serviceable item. however, an allowance for repairs contraasset account i.e., repair allowance shall be established.',
31208:'the annual or other period credits required to bring the repair allowance to the current estimated cost of repairs shall',
31209:'be recognized as current period operating expenses. as the repairs are made the cost of repairs shall be charged debited',
31210:'to the allowance for repairs account. [33] 2underthedirectmethod,inventoryheldforrepairshallbevaluedatthesamevalueasa serviceableitemlessthe estimatedrepaircosts. whentherepairisactuallymade,thecost of the repair shall be capitalized in the inventory',
31211:'account up to the value of a serviceable item. any difference between the initial estimated repair cost and the actual',
31212:'repair cost shall be either debited or credited to the repair expense account. [35] disclosure requirements. general composition of inventory.',
31213:'basis for determining inventory values; including the valuation method and any cost flow assumptions. changes from prior years accounting methods;',
31214:'if any. page 12 interpretation 7 fasab handbook, version 20 06/21 interpretation 7 balances for each of the following categories',
31215:'of inventory: inventory held for current sale, inventory held in reserve for future sale, excess, obsolete and unserviceable inventory, and',
31216:'inventory held for repair unless otherwise presented on the financial statements. restrictions on the sale of material. the decision criteria',
31217:'for identifying the category to which inventory is assigned. changes in the criteria for identifying the category to which inventory',
31218:'is assigned. operating materials and supplies [36] definition. operating materials and supplies consist of tangible personal property to be consumed',
31219:'in normal operations. excluded are 1 goods that have been acquired for use in constructing real property or in assembling',
31220:'equipment to be used by the entity, 2 stockpile materials, 3 goods held under price stabilization programs, 4 foreclosed property,',
31221:'5 seized and forfeited property, and 6 inventory. [37] operating materials and supplies shall be categorized as 1 operating materials',
31222:'and supplies held for use, 2 operating materials and supplies held in reserve for future use, or 3 excess, obsolete',
31223:'and unserviceable operating materials and supplies. these categories are defined in paragraphs 36, 45, and 47 respectively. [38] recognition. the',
31224:'consumption method of accounting for the recognition of expenses shall be applied for operating materials and supplies. operating materials and',
31225:'supplies shall be recognized and reported as assets when produced or purchased. purchased is defined as when title passes to',
31226:'the purchasing entity. if the contract between the buyer and the seller is silent regarding passage of title, title is',
31227:'assumed to pass upon delivery of the goods. delivery or constructive delivery shall be based on the terms of the',
31228:'contract regarding shipping and/or delivery. [39] the cost of goods shall be removed from operating materials and supplies i.e., the',
31229:'asset account and reported as an operating expense in the period they are issued to an end user for consumption',
31230:'in normal operations. [40] if 1 operating materials and supplies are not significant amounts, 2 they are in the hands',
31231:'of the end user for use in normal operations, or 3 it is not costbeneficial to apply the consumption method',
31232:'of accounting, then the purchases method may be applied to operating materialsand supplies. the purchasesmethodprovidesthat operating materialsand suppliesbe expensed when',
31233:'purchased. [41]an end user is any component of a reporting entity that obtains goods for direct use in the components',
31234:'normal operations. any component of a reporting entity, including contractors, that page 13 interpretation 7 fasab handbook, version 20 06/21',
31235:'interpretation 7 maintains or stocks operating materials and supplies for future issuance shall not be considered an end user. [42]',
31236:'valuation under the consumption method. operating materials and supplies shall be valued on the basis of historical cost. [43] historical',
31237:'cost shall include all appropriate purchase and production costs incurred to bring the items to their current condition and location.anyabnormalcosts,',
31238:'such asexcessivehandling or rework costs, shall be charged to operations of the period. donated operating materials and supplies shall be',
31239:'valued at their fair value at the time of donation. operating materials and supplies acquired through exchange of nonmonetary assets',
31240:'e.g., barter shall be valued at the fair value of the asset received at the time of the exchange.any difference',
31241:'between the recorded amount of theasset surrendered andthe fair valueoftheasset received shallbe recognized asa gain or a loss. [44] the',
31242:'firstin, firstout fifo; weighted average; or moving average cost flow assumptions shall be applied in arriving at the historical cost',
31243:'of ending operating materials and supplies and cost of goods consumed. in addition, any other valuation method may be used',
31244:'if the results reasonably approximate those of one of the above historical cost methods e.g., a standard cost or latest',
31245:'acquisition cost system. [50] disclosure requirements. general composition of operating materials and supplies. basis for determining operating materials and supplies',
31246:'values; including the valuation method and any cost flow assumptions. changes from prior years accounting methods; if any. balances for',
31247:'each of the categories of operating materials and supplies described above. restrictions on the use of material. the decision criteria',
31248:'for identifying the category to which operating materials and supplies are assigned. changes in the criteria for identifying the category',
31249:'to which operating materials and supplies are assigned. page 14 interpretation 7 fasab handbook, version 20 06/21 interpretation 7 appendix',
31250:'d: letter from department of defense deputy chief financial officer office of the under secretary of defense 1100defensepentagon washington,dc203011100 mar',
31251:'16 2006 ms. wendolyn comes executive director federalaccounting standardsadvisory board 441 g. street, n.w. washington, dc 20548 dear ms. comes:',
31252:'the department of defense dod is continuing to take steps to implement its financial management improvement plans and accounting processes.',
31253:'in the course of this process, we have taken a critical look at the departments business process for the repair',
31254:'of inventories, and the applicability of the statement of federal financialaccounting standard sffas no. 3 as it relates to inventory',
31255:'repair. in line with this review, we have also researched comparable commercial processes through available webbased literature as well as',
31256:'through direct contact with commercial firms. subsequent to consideration of all our findings, we have concluded that the departments repair',
31257:'process is directly comparable to the private sector process typically referred to as remanufacturing, and that our reparable carcassesreferred to',
31258:'as cores in the private sector acquired in exchange sales for reparable items are similar, if not the same, as',
31259:'raw materials orcomponentsused inthe remanufacturingprocess. more importantly, wehave come to believe that inventory repair suggests a misleading process when viewed',
31260:'in the context of rebuilding worn and used carcasses/cores for the primary purpose of providing rebuilt items for new sales.',
31261:'the following paragraphs elaborate on our findings and conclusions. based on commercial sourced information noted above, we found that the',
31262:'remanufacturing process had specific characteristics that were virtually parallel regardless of product or entity i.e., commercial or dod. both remanufacturing',
31263:'companies and the dod acquire worn carcasses/cores through exchange sales of remanufactured items or newly procured items with financial incentives',
31264:'or credit given for the exchanged cores. both inspect, disassemble, evaluate, clean, rebuild, refurbish, and restore products to goodasnew condition',
31265:'for inclusion as finished goods inventory and for sale to new customers. more importantly, both often enhance products with upgrades',
31266:'which incorporate new technologies, reduce obsolescence, extend useful life, increase safety, and improve reliability. page 15 interpretation 7 fasab handbook,',
31267:'version 20 06/21 interpretation 7 regardless of the technical processes, or the definition attached to the process, we believe that',
31268:'certain, fundamental attributes must be considered in the accounting solution when inventory items are repaired: first, inventory, by definition, is',
31269:'held for sale. since inventory held for sale is typically found on warehouse shelves, the repair of damaged items in',
31270:'current storage, and the return of those items to the warehouse is a rare or immaterial event. second,sinceitisrareforontheshelve,heldforsaleitemstoberepaired,wecan generallyconclude that',
31271:'any largescale inventoryitemrepair process, whether undertaken bycommercialfirmsor the dod, will alwaysbea sourceofsupply process which provides rebuilt or remanufactured items for',
31272:'new sales. third, it can also be concluded that rebuild processes for resale will always involve some form of marketbased',
31273:'or incentivebased business processwhich provide for the return of worn or used carcasses/cores for rebuild. carcasses/cores then become similar to',
31274:'raw material and, more importantly, should reflect the cost to obtain them. finally, regardless of the name attached to the',
31275:'refurbishment process, i.e., repair, rebuild, remanufacture, orother, afundamentalruleofaccounting statesthat all costs incurred to place assetsinto use, orto get inventory itemsreadyfor',
31276:'sale,should be capitalized into the cost of the asset. despite these attributes, paragraphs 32 and 33 inventory held for repair',
31277:'of sffas no. 3 provide that entities should charge or credit the difference between actual and estimated repair costs to',
31278:'current period expense. however, when the process its correctly viewed as a process undertaken with the intent of rebuilding returned',
31279:'worn and used cores for subsequent resale, we believe that limiting the application of capitalized repair to estimated repair is',
31280:'not only inappropriate but, in fact, distorts the matching of cost of sales and revenue at time of sale. reconciliation',
31281:'of the historical cost requirements in statement no. 3 with the requirements set forth in paragraphs 32 and 33 are',
31282:'problematic. the sffas no. 3 provides that entities value inventory held for sale at historical cost. paragraph 21 defines historical',
31283:'cost to “include all appropriatepurchase, transportationand productioncostsincurredto bringitemsto theircurrent condition and location. inaddition, commercial accounting principles for inventory cost have',
31284:'always been guided by a fundamental rule of capitalization as stated inaccounting research bulletin 43, chapter 4, paragraph 5, as',
31285:'follows: “the primary basis of accounting for inventories is cost, which has been defined generally as the price paid or',
31286:'consideration given to acquire an asset.” when applied to inventories, cost means, in principle, the sum of all applicable expenditures',
31287:'and charges directly or indirectly incurred in bringing an article to its existing condition and location. paragraphs 32 and 33',
31288:'of statement 3, however, impose restrictions on both cost capitalization and the value of carcasses. paragraphs 32 and 33 require',
31289:'that regardless of the level of effort or cost incurred to rebuild items for resale, rebuild costs must be expensed',
31290:'as period costs if they exceed estimated repair. secondly, paragraphs 32and33 dictatethat carcasscostsare not independent,but rather are a. function of',
31291:'the cost of related page 16 interpretation 7 fasab handbook, version 20 06/21 interpretation 7 serviceable items less estimated repair.',
31292:'this principle ties the value of carcasses to the procurement cost of serviceable items and thus, subjects carcasses to a',
31293:'continuing revaluation unrelated to their cost. eachyear,thedepartment,throughincentiveexchangesalesfromour revolvingfundsorthrough directed returns, processes thousands of reparable item returns i.e., carcasses for subsequent',
31294:'repair/rebuild. similarly, thousands of commercial firms obtain cores through exchange sales or through available market purchases for remanufacturing. the objectives',
31295:'of this business process in both instances are to: 1 establish an alternative source of supply that utilizes the main',
31296:'component of the items being rebuilt, and 2 repair/rebuild/remanufacture the carcasses or cores for subsequent resale. from an accounting perspective,',
31297:'we have to believe that commercial firms can only becapitalizing such costs into the cost of the products sold in',
31298:'lieu of period repair expense. it appears clear that reporting repair expenses for largescale remanufacturing and resale operations would be',
31299:'in conflict with accepted accounting principles, wouldunderstatetheirinventoryand cost of goodssold, and wouldmismatch costsandrevenue at the time of sale. based on',
31300:'these conclusions, andthose attributeswe summarized previously, the following and remaining paragraphs state our proposals for sffas no. 3 inventory repair',
31301:'principles. we propose that inventory held for repair be revisited in terms of the prevailing business process. as stated in',
31302:'our first and second attributes above, we believe that inventory repair per se is a rare event that, if viewed',
31303:'in terms of overall principles, will reveal sourceofsupply and resale objectives. we propose that repair expense be subjected to a',
31304:'critical and theoretical review in terms of inventory repair. textbook examples of repair expense versus repair capitalization typically make reference',
31305:'to real property and fixed assets. capitalized repair is matched to revenue through depreciation charges. since inventory is not depreciated,',
31306:'capitalized repair can, therefore, only match revenue as a part of cost of goods sold. we believe this is the',
31307:'correct answer; however, there is little, if any, accounting guidance in this area. if it is concluded that largescale inventory',
31308:'repair is undertaken primarily for the purpose of selling rebuilt/remanufactured items, we then propose that the question of cost capitalization',
31309:'be subjected to the generalrequirement to capitalize allcoststo bringinventory items to the point of sale. we believe this issue should',
31310:'also be subjected to the question of asset value or life added versus the objective of resale. that is, it',
31311:'can be argued that if repair does not add substantial value or life to an inventory item, then it should',
31312:'be expensed. we believe that the sale objective and the matching of cost of goods sold should be the prevailing',
31313:'factor. if it is concluded that inventory repair is a rebuild/resell process, we then propose that the valuation of carcasses/cores',
31314:'be independent of the cost of items held for sale. we believe that carcasses should be valued at cost. page',
31315:'17 interpretation 7 fasab handbook, version 20 06/21 interpretation 7 these proposals, depending on your consideration or conclusions, could bring',
31316:'to bear additional changes or findings. for example, recording carcasses at cost a and rebuilt itemsat fullcostcouldnegatetheneedfortheallowancemethodordirectmethodandpotentially revise the implementation',
31317:'adjustments currently stated in paragraph 34 i.e., reporting entities which accrued amounts for repair expense under previous standards based on',
31318:'estimated repair costs may be required to make subsequent adjustments for carcasses held at cost without an allowance. paragraph 173',
31319:'could be revised to include remanufactured components. in addition, it should be kept in mind that this letter addresses only',
31320:'inventory for sale or repaired for ultimate resale. there are variations of repair and spare parts management in some industries',
31321:'airlines for example that repair or rebuild items for internal recycling only. these items, we believe, are accounted for as',
31322:'depreciable assets. my staff will be pleased to work with you or anyone you deem to be appropriate on the',
31323:'fasab staff on this issue and will provide any assistance or information that you determine to be necessary. questions or',
31324:'requirements for additional information can be directed to my point of contact, mr. wayne hudson. mr. hudson can be reached',
31325:'by phone at 703 6978281 or by email at wayne.hudson@osd.mil. sincerely, teresa mckay deputy chief financial officer page 18 interpretation',
31326:'7 fasab handbook, version 20 06/21 interpretation of federal financialaccounting standards 8:an interpretation of statement of federal financialaccounting standards 56,',
31327:'classifiedactivities status issued effective date affects affected by march 15, 2019 effective upon issuance. sffas 56 none. summary the objective',
31328:'of sffas 56 is to balance the need for financial reports to be publicly available with the need to prevent',
31329:'the disclosure of classified national security information or activities in publicly issued general purpose federal financial reports gpffrs. sffas 56',
31330:'allows financial presentation and disclosure to accommodate user needs in a manner that does not impede national security. sffas 56',
31331:'permits modifications that do not affect net results of operations or net position. in addition, sffas 56 allows a component',
31332:'reporting entity to be excluded from one reporting entity and consolidated into another reporting entity, and the effect of the',
31333:'modification may change the net results of operations and/or net position. further, interpretations of sffas 56, which may themselves contain',
31334:'classified information, will address the requirements of this and other standards and permit other modifications when needed to prevent the',
31335:'disclosure of classified information. modifications permitted by sffas 56 and future interpretations may affect the net results of operations and/or',
31336:'net position of those entities applying the interpretations. interpretation 8 is the first classified interpretation of sffas 56 that allows',
31337:'modifications to information required by other standards, and the effect of the modifications may change the net results of operations',
31338:'and/or net position. interpretation 8 provides a decision chart see below illustrating the boards intended implementation of the interpretation. the',
31339:'interpretation does not relieve reporting entities from their requirements and responsibilities to comply with other accounting standards in the appropriate',
31340:'classified environment as it relates to nonpublic records and reports. interpretation 8 will be maintained by fasab. due to the',
31341:'classified nature of interpretation 8, contact fasab to arrange access to interpretation 8 as needed. fasab will provide access to',
31342:'the interpretation following appropriate security procedures. page 1 interpretation 8 fasab handbook, version 20 06/21 interpretation 8 application decision chart',
31343:'below is a decision chart illustrating the board’s intended implementation of sffas 56 and classified interpretation 8. this guidance does',
31344:'not relieve reporting entities from their requirements and responsibilities to comply with other accounting standards in the appropriate classified environment',
31345:'as it relates to nonpublic records and reports. this illustration is non authoritative and depicts the process described in the',
31346:'guidance. 1 the guidance may be applied at the program or transaction level. page 2 interpretation 8 fasab handbook, version',
31347:'20 06/21 interpretation of federal financialaccounting standards 9, cleanup cost liabilities involving multiple component reporting entities:an interpretation of sffas 5',
31348:'& sffas 6 status issued august 16, 2019 effective date for periods beginning after september 30, 2019. early implementation is',
31349:'permitted. affects this interpretation clarifies sffas 5 and sffas 6 regarding cleanup costs liabilities. affected by none. summary with the',
31350:'issuance of statement of federal financial accounting standards sffas 47, reporting entity, sffas 55, amending interentity cost provisions, and technical',
31351:'bulletin 20172, assigning assets to component reporting entities, there is a need for additional guidance to assist in the application',
31352:'of cleanup cost liabilitystandardsat thecomponent reporting entitylevel. this interpretation provides clarification and guidance regarding cleanup cost liabilities when the component',
31353:'reporting entity responsible for reporting on an asset during its useful life is different from the component reporting entity that',
31354:'will eventually be responsible for settling the liability for the cleanup cost of that asset. this interpretation facilitates reporting by',
31355:'component reporting entities by better aligning reporting with their operations. materiality the provisions of this interpretation need not be applied',
31356:'to immaterial items. the determination of whether an item is material depends on the degree to which omitting or misstating',
31357:'information about the item makes it probable that the judgment of a reasonable person relying on the information would have',
31358:'been changed or influenced by the omission or the misstatement page 1 interpretation 9 fasab handbook, version 20 06/21 interpretation',
31359:'9 table of contents page interpretation 3 scope 3 interpretation 3 effective date 6 appendixa:basis for conclusions 7 appendix b:abbreviations',
31360:'15 page 2 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 interpretation scope 1. thisinterpretationapplieswhenacomponentreportingentityispresentinggeneralpurpose federal financial reports gpffrs',
31361:'in conformance with generally accepted accounting principles gaap, as defined by paragraphs 5 through 8 of statement of federal financial',
31362:'accounting standards sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the financial',
31363:'accounting standards board. interpretation general principles for component reporting entities 2. sffas 5, accounting for liabilities of the federal government,',
31364:'paragraph 19 states, a liability for federal accounting purposes is a probable future outflow or other sacrifice of resources as',
31365:'a result of past transactions or events. 3. paragraphs5657ofsffas47, reporting entity, provide thatcomponentreporting entities gpffrs must include all consolidation and',
31366:'disclosure entities for which they are accountable so that both the component reportingentityand governmentwide gpffrsare complete. thegpffrforthegovernmentwidereportingentityconsolidatesthecomponent reporting entity gpffrs',
31367:'and includes information regarding disclosure entities. 56. the governmentwide reporting entity is the only federal reporting entity that is an',
31368:'independent economic entity[footnoteomitted] and the inclusion principles are expressed from the perspective of the federal government. however, gpffrs for the',
31369:'governmentwide reportingentityrepresenta consolidationofcomponent reportingentitygpffrs. therefore, component reporting entities must identify and include in their gpffrs all consolidation entities and disclosure',
31370:'entities for which they are accountable so that both the component reporting entity gpffrs and governmentwide gpffr are complete. 57.acomponent',
31371:'reporting entitys gpffr should include all organizations that would allow the users to hold the component reporting entitys management such',
31372:'as appointed officials or other agency heads accountable for implementation of public policy decisions. inclusion would also reveal the risks',
31373:'inherent in component reporting entity operations, and thereby page 3 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 enhance',
31374:'accountability to the public. each component reporting entity is accountable for all consolidation entities[footnote omitted] and disclosure entities administratively assigned',
31375:'to it. 4. sffas 47, paragraph 10 defines component reporting entity as follows: component reporting entitycomponent reporting entity is used',
31376:'broadly to refer to a reporting entity within a larger reporting entity.7 examples of component reporting entities include organizations such',
31377:'as executive departments, independent agencies, government corporations, legislative agencies, and federal courts. component reporting entities would also include subcomponents those',
31378:'components included in the gpffr of a larger component reporting entity that may themselves prepare gpffrs. one example is a',
31379:'bureau that is within a larger department that prepares its own standalone gpffr. fn 7 the larger reporting entity could',
31380:'be the governmentwide reporting entity or another component reporting entity. 5. in light of sffas 5 and sffas 47, the',
31381:'following general principles apply for component reporting entities: a. liabilities generally should be reported by the component reporting entity for',
31382:'which the future outflow or sacrifice of resources is probable and measurable. b. liabilities should be recognized by a component',
31383:'reporting entity before being consolidated into the governmentwide financial statements. guidance on cleanup costs 6. sffas 6, accounting for property,',
31384:'plant, and equipment, chapter 4: cleanup costs1 provides the definition of cleanup costs and provides that cleanup costs meet the',
31385:'definition and criteria for recognition of liabilities included in sffas 5. sffas 6, paragraph 91 explains that liabilities should be',
31386:'recognized when three conditions are met: a. apasttransaction oreventhasoccurred. b. afuture outfloworothersacrificeofresources is probable. c. the future outflow or sacrifice',
31387:'of resources is measurable. 1cleanup costs are the costs of removing, containing, and/or disposing of 1 hazardous waste from property,',
31388:'or 2 material and/or property that consists of hazardous waste at permanent or temporary closure or shutdown of associated pp&e.',
31389:'fasab handbook, appendix e: consolidated glossary page 4 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 7. sffas 6',
31390:'supplements sffas 52 by providing additional guidance regarding cleanup costs. sffas 6 associates the recognition of cleanup costs with the',
31391:'life of the related general property, plant, andequipmentpp&e. paragraph94providesforthe estimationofcleanup costswhentheassociatedgeneralpp&e isplacedinservice. paragraph97providesforthe recognition of a portion of the estimated',
31392:'total cleanup costs as an expense during each period that the general pp&e is in operation. 8. sffas 6 is',
31393:'based on the assumption that the cleanup cost and the associated general pp&e would be recognized by the same component',
31394:'reporting entity. however, this assumption may be contrary to actual practice. 9. some component reporting entities settle liabilities by transferring',
31395:'general pp&e to another component reporting entity designated by law, rule, or administrative regulation to fund the liabilities.3 in such',
31396:'cases,4 a component reporting entity that recognizes general pp&e during its useful life may differ from the component reporting entity',
31397:'that will eventually be responsible forthefutureoutflowsorothersacrificesof resourcesrequiredforcleanupcosts or funding the cleanup liability. instead, the component reporting entity receiving the asset',
31398:'upon its removal from service5 will be responsible for funding the cleanup cost. 10. when multiple component reporting entities have',
31399:'distinct responsibilities regarding general pp&e and related cleanup costs, information needed to monitor and update cleanup cost liabilities would typically',
31400:'be more readily available to the component reporting entity that reportsthegeneralpp&e. such component reporting entitiessettle the cleanupcost liability by transferring',
31401:'the general pp&e for cleanup. until the component reporting entity recognizing the general pp&e transfers the general pp&e, it should',
31402:'continue to recognize the liability. upon transferring the general pp&e, it should also transfer the associated liability. 2sffas 5 applies',
31403:'to all environmental liabilities not specifically covered in sffas 6, including cleanup resulting from accidents or when cleanup is an',
31404:'ongoing part of operations. 3component reportingentities designated by law, rule, or administrative regulation to fund liabilities are distinguishable from those',
31405:'component reporting entities that may receive excess property and are not responsible for settling the liability. 4this interpretation provides guidancewhen',
31406:'the cleanup costs and the associated liability are designated to a different component reporting entity than the component reporting entity',
31407:'reporting the general pp&e. 5technical release tr 14, implementation guidance on the accounting for the disposal of general property, plant,',
31408:'& equipment, provides guidance on the disposal, retirement, or removal from service of general pp&e as well as related cleanup',
31409:'costs. it differentiates between permanent and other than permanent removal from service of general pp&e anddelineateseventsthattriggerdiscontinuationofdepreciationandremovalof general pp&e from accounting',
31410:'records. page 5 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 11. the sffas 5 liability recognition criterion that',
31411:'a future outflow or other sacrifice of resources is probable should be considered met by the component reporting entity that',
31412:'recognizes the general pp&e during its useful life. in that case, the liability should be reported on the balance sheet',
31413:'of the component reporting entity recognizing the general pp&e untilthe generalpp&e and the associatedliabilityaretransferredto anotherentityfor cleanup. at that time, the',
31414:'general pp&e and the liability should be derecognized by the component reporting entity that recognized them during the general pp&es',
31415:'useful life and recognized by the component reporting entity that will liquidate the liability. derecognition and recognition of the general',
31416:'pp&e and liability should be performed in accordance with existing standards. effective date 12. the requirements of this interpretation are',
31417:'effective for reporting periods beginning after september 30, 2019. early implementation is permitted. the provisions of this interpretation need not',
31418:'be applied to immaterial items. page 6 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 appendixa: basis for conclusions',
31419:'this appendix discusses some factors considered significant by board members in reaching the conclusions in this interpretation. it includes the',
31420:'reasons for accepting certain approaches and rejecting others. individual members gave greater weight to some factors than to others. the',
31421:'standards enunciated in this interpretationnot the material in this appendixshould govern the accounting for specific transactions, events, or conditions. this',
31422:'interpretation may be affected by later statements or pronouncements. the fasab handbook is updated annually and includes a status section',
31423:'directing the reader to any subsequentpronouncementsthatamendthisinterpretation. withinthetextof thedocuments,the authoritative sections are updated for changes. however, this appendix will not be',
31424:'updated to reflect future changes. the reader can review the basis for conclusions of the amending statement or other pronouncement',
31425:'for the rationale for each amendment. background a1. thedepartmentofdefensedodaskedthefederalaccountingstandardsadvisoryboard fasab or the board for guidance regarding accounting for liabilities at',
31426:'the component reporting entity level. specifically, clarifications were requested about the recognition and measurement standardsrelated to contingent liabilities and cleanup',
31427:'costs. fasab provides the recognition and measurement standards in sffas 5 and sffas 6. a2. with the issuance of recent',
31428:'pronouncements sffas 47, sffas 55, amending interentity cost provisions, and technical bulletin tb 20172, assigning assets to component reporting entities,',
31429:'there is a need for additional guidance to assist in the application of the general liability standards and principles. this',
31430:'is especially needed when multiple component reporting entities are involved. a3. for example, with the issuance of sffas 55, sffas',
31431:'30, interentity cost implementation: amending sffas 4, managerial cost accounting standards and concepts, and interpretation 6, accounting for imputed intradepartmental',
31432:'costs: an interpretation of sffas no. 4, are rescinded; therefore, the requirement to impute costs for these activities is eliminated.',
31433:'further, the boards intent with tb 20172 is to provide flexibility with respect to asset assignment. sffas 47 recognizes the',
31434:'complex organizational structure of the federal government and provides a basis for determining which organizations should be included in the',
31435:'reporting entitys gpffrs. it also provides definitions for reporting entity, component reporting entities, and subcomponent reporting entities within the federal',
31436:'government. page 7 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 a4. entities requested clarification with respect to the',
31437:'accounting for contingent liabilities when oneormoresubcomponent reportingentitieswithina singlecomponent reportingentityare designated to manage litigation and pay any resulting liabilities on behalf',
31438:'of one or more other subcomponent reporting entities. a5. entities also requested guidance regarding cleanup cost liabilities when the component',
31439:'reporting entity responsible for reporting the general pp&e during its useful life is different fromthe componentreporting entitythatwilleventuallybe responsible to fund',
31440:'cleanupcosts upon disposal of that general pp&e. a6. these types of examples and the issuances of the new pronouncements warrant',
31441:'consideration of the need for guidance about how the general liability standards and principles should be applied. without additional guidance,',
31442:'these situations may lead to inconsistent application of the liability standards and principles. general principles for component reporting entities a7.',
31443:'paragraphs 5657 of sffas 47 provide that component reporting entities gpffrs must include all consolidation entities and disclosure entities for',
31444:'which they are accountable so that both the component reporting entity and governmentwide gpffrs are complete. the gpffr for the',
31445:'governmentwide reporting entity consolidates the component reporting entity gpffrs and includes information regarding disclosure entities. sffas 47 also provides the',
31446:'definition for component reporting entity. a8. in light of sffas 5 and sffas 47, this interpretation provides general principles that',
31447:'apply for component reporting entities. guidance on cleanup costs a9. sffas 6 provides guidance for recognizing liabilities for cleanup costs,',
31448:'and sffas 5 provides guidance for recognizing liabilities from governmentrelated events such as cleanup of environmental damage. fasab has provided',
31449:'guidance in this area through several technical releases trs, but additional guidance is necessary in light of recent pronouncements. a10.challenging',
31450:'issues exist in the application of general standards for large, complex departments, such as dod, that have numerous components and',
31451:'subcomponents. for example, assets may be owned by one component reporting entity but used or funded by anothercomponent reportingentity, andthecomponent',
31452:'reportingentityusingthe assetmay not be the component reporting entity responsible for funding cleanup costs. given the complexresponsibilitiesandrelationshipsamongthe componentsof large departments, the',
31453:'second condition of paragraph 91 in sffas 6 results in inconsistent application of the page 8 interpretation 9 fasab handbook,',
31454:'version 20 06/21 interpretation 9 standards. the condition requires that a future outflow or other sacrifice of resources is probable.',
31455:'a11.additionally, sffas 4, managerial cost accounting standards and concepts, addresses interentity costs. recognition of interentity costs by activities that are',
31456:'not businesstype activities is not required6 with the exception of interentity costs for personnel benefits and the treasury judgment fund',
31457:'settlements unless otherwise directed by the office of management and budget. further, tb 20172 provides flexibility so that assets may',
31458:'be assigned by a reporting entity to its component reporting entities on a rational and consistent basis. these new pronouncements',
31459:'provide additional flexibility when considered in conjunction with sffas 5 and sffas 6. a12.sffas 6 outlines the requirements for the',
31460:'disposal, retirement, or removal from service of general pp&e. paragraphs 9798 of sffas 6 outline the requirements for recognition and',
31461:'measurement of disposalrelated cleanup costs. tr 14, implementation guidance on the accounting for the disposal of general property, plant, &',
31462:'equipment, addresses implementation guidance that further clarifies existing sffas 6 requirements for the disposal, retirement, or removal from service of',
31463:'general pp&e as well as related cleanup costs. the guidance helps differentiate between permanent and other than permanent removal from',
31464:'service of pp&e assets. the guidance recognizes the many complexities involved in the disposal of pp&e and delineates events that',
31465:'trigger discontinuation of depreciation and removal of pp&e from financial reporting. a13.some general pp&e requiring cleanup is transferred to another',
31466:'component reporting entity after being removed from service. an example would be a military service responsible for reporting the general',
31467:'pp&e that will eventually be transferred to the defense logistics agency for cleanup. in such cases, the component reporting entity',
31468:'that recognized the general pp&e during its useful life may not be responsible for future outflows or other sacrifices of',
31469:'resources to settle the liability for cleanup costs. instead, the component reporting entity receiving the general pp&e for the cleanup',
31470:'has or assumes that responsibilitybecauseit wasdesignatedbylaw,rule,oradministrativeregulationtofundthe liability. thisdoesnot include component reportingentities that receive excesspropertyand are not responsible for settling the',
31471:'liability. a14.for the purpose of meeting the liability definition of cleanup costs at the component reporting entity level when multiple',
31472:'subcomponent reporting entities have distinct responsibilities for general pp&e and for settling the related liability, the condition to determine whether',
31473:'a future outflow or other sacrifice of resources is probable can be 6sffas 55 provides for the continued recognition of',
31474:'significant interentity costs by businesstype activities. non businesstype activities may elect to recognize other imputed costs. page 9 interpretation 9',
31475:'fasab handbook, version 20 06/21 interpretation 9 considered met as long as the liability is reported with the general pp&e',
31476:'until the general pp&e is removed, contained, or disposed of. at that time, the liability would be transferred with the',
31477:'related general pp&e to the component reporting entity responsible for the liability. the entity transferring the general pp&e should ensure',
31478:'supporting documentation for the estimated cleanup costs is provided to the receiving entity. a15.ageneral illustration for the entries7 to recognize',
31479:'the liability for the cleanup cost and subsequent transfer by the component reporting entity using the general pp&e follows. as',
31480:'provided in sffas 6, the component reporting entity using the general pp&e would recognize the cleanup cost and accrue the',
31481:'liability over time as the asset is used. dr. expense cr. liability upon cleanup, the component reporting entity transfers the',
31482:'liability and related general pp&e to the component reporting entity responsible for liquidating the liability. dr. liability dr. other financing',
31483:'source transfer out cr. general pp&e a16.ageneral illustration for the entry to recognize the general pp&e and the liability by',
31484:'the component reporting entity that will liquidate the liability follows. dr. general pp&e cr. other financing source transfer in cr.',
31485:'liability disclosures a17.although the interpretation may result in changes in reporting of cleanup costs when multiple component reporting entities are',
31486:'involved, existing gaap provides sufficient guidance to ensure proper disclosures regarding these changes in reporting. sffas 55 requires component reporting',
31487:'entities to disclose that only certain interentity costs are recognized forgoodsand servicesreceived fromother federal entitiesat nocost orat a cost lessthan',
31488:'thefullcost. component reportingentitiesshould identifythe costsoftheproviding 7thejournalentries arepresentedfor an understanding ofthe interpretation and do notaddress specific generalpp&e transactions or resulting ending',
31489:'balances. in addition, actual journal entries are under the authority of the standard general ledger. page 10 interpretation 9 fasab',
31490:'handbook, version 20 06/21 interpretation 9 entitythat are notfullyreimbursed andthe general nature of otherimputedcostsrecognized in their financial statements. statement of',
31491:'federal financialaccounting concepts 3, managements discussion and analysis, and sffas 15, managements discussions and analysis, also provide guidance on information',
31492:'to include in the managements discussion and analysis if deemed appropriate. a18.given the sufficiency of current disclosure standards and guidance,',
31493:'the board concluded it is not necessary to address disclosure in this interpretation.agencies should consider current standards in deciding whether',
31494:'to disclose the nature of changes in reporting resulting from this interpretation. other a19.because fasab provided the guidance regarding the',
31495:'application of cleanup cost standards through other pronouncements, such as tbs and trs, additional documents may require updating to ensure',
31496:'conformance andconsistencywith current gaap. therefore, fasab will make necessary updates to the appropriate documents. those updates are considered exclusive of',
31497:'the cleanup cost liability issue presented within this interpretation. further, those changes or updates must be made in separate gaap',
31498:'documents to ensure the appropriate level of guidance within the gaap hierarchy results. specifically, this pronouncement is an interpretation; tbs',
31499:'and trs can only be amended through other tbs and trs. summary of outreach efforts and responses a20.fasab issued the',
31500:'exposure draft ed, guidance on recognizing liabilities involving multiple component reporting entities: an interpretation of sffas 5 on october 17,',
31501:'2018, with comments requested by january 17, 2019. a21.upon release of the ed, fasab provided notices and press releases to',
31502:'the fasab subscription email list, the federal register, fasab news, the journal of accountancy, the chief financial officers council, the',
31503:'council of the inspectors general on integrity and efficiency, andcommitteesofprofessionalassociationsgenerallycommentingonedsinthe past for example, the greater washington society of cpas and',
31504:'theassociation of governmentaccountants financial management standards board. a22. in addition, to encourage responses, a reminder notice was provided to fasabs',
31505:'subscription email list on january 8, 2019. however, in light of the partial government shutdown during the comment period, some',
31506:'departments and agencies may not have been able to respond by the deadline; therefore, fasab extended the comment deadline to',
31507:'march 11, 2019. page 11 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 a23. fasab received 15 comment letters',
31508:'from preparers, auditors, professional associations, financial managers, and users of federal financial information. the board considered responsesto the edat itsapril',
31509:'2019 meeting. the board didnot rely on the number in favor of or opposed to a given position. the board',
31510:'considered each response and weighed the merits of the points raised. the respondents comments are summarized below. no need for',
31511:'contingent liability guidance a24.as noted in the background section, there had been a request for clarification and guidance regarding reporting',
31512:'contingent liabilities when multiple component reporting entities are involved. therefore, the ed had proposed clarification for contingent liabilities when one',
31513:'or more subcomponent reporting entities within a single component reporting entity are designated to manage litigation and/or pay any resulting',
31514:'liabilities on behalf of one or more other subcomponent reporting entities. a25.however, the majority of respondents disagreed with the proposal',
31515:'that the subcomponent reporting entity responsible for managing litigation would have the information needed to recognize contingent liabilities and should',
31516:'therefore report information in accordance with sffas 5. instead, the majority of the respondents believed that the subcomponent reporting entity',
31517:'whose actions gave rise to the litigation should report the information in accordance with sffas 5. a26.respondents that disagreed with',
31518:'the proposal regarding contingent liabilities provided substantial commentsand several different reasonsfor their disagreement. therewasnot a universal or common theme from',
31519:'the respondents, and responses were fairly general. a27.in addition to the general disagreement with the proposal, certain respondents noted concern',
31520:'about the effect on reporting for responsibility segments within their consolidated financial statements. the proposal was not intended to affect',
31521:'disaggregated information within a single audited financial statement for a component reporting entity with multiple responsibility segments. however, some stated',
31522:'the same principles would or should apply to assigning costs to responsibility segments. from the comments, it appeared that the',
31523:'proposed contingent liability guidance may not have provided the intended guidance but rather led to greater ambiguity and questions in',
31524:'implementation. a28.after further consultation with the agency that requested guidance in this area, the agency determined that the effect of',
31525:'receiving contingent liability guidance would be immaterial or minimal. inaddition, neitherthe agencynoranyotheragencycouldprovideothercontingent liability examples that should be considered by the',
31526:'board. a29.based on the comments and discussions with agency representatives, the board determined that there was no need for guidance',
31527:'in the contingent liability area. page 12 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 clarification of cleanup guidance',
31528:'a30.the majority of respondents agreed that the sffas 5 liability recognition criterion that a future outflow or other sacrifice of',
31529:'resources is probable, should be considered met by the component reporting entity that recognizes the general pp&e during its useful',
31530:'life. in that case, the liability should be reported on the balance sheet of the component reporting entity recognizing the',
31531:'general pp&e until the general pp&e and the associated liability are transferred to another entity designated by law, rule or',
31532:'administrative regulation to fund the cleanup liability. a31.one agency respondent disagreed with the proposal because it did not agree that',
31533:'the componentreportingentityreceivingthe asset forcleanup should be responsible for settling the cleanup cost liability. the agency believed it could be interpreted',
31534:'that an agency receiving excess property had assumed responsibility for the environmental liabilities when it accepts the report of excess',
31535:'property, even when it is not responsible for settling the liability. this was not the boards intent in issuing the',
31536:'interpretation. a32.the interpretation provides guidance in the specific case when the entity receiving the general pp&e is responsible for settling',
31537:'the liability. as explained in paragraph 10, it provides the following context for the guidance: some component reporting entities settle',
31538:'liabilities by transferring general pp&e to another component reporting entity a33.the board determined additional clarification may be required to ensure',
31539:'it is clear that the interpretation is not addressing cases when the entity transferring the general pp&e is still responsible',
31540:'for the liability. the interpretation provides guidance when the cleanup costs and the associated liabilityare designated to a different component',
31541:'reporting entitythan the component reporting entity reporting the general pp&e. therefore, the board added additional language and footnotes to the',
31542:'interpretation to clarify this point. a34.the board recognizes that, in some cases, the interpretation may cause a change in reporting',
31543:'of cleanup cost liabilities. however, the board concluded the interpretation will provide consistent application of sffass and resolve concerns that',
31544:'the community raised. a35.certain respondents provided additional suggestions and editorial comments related to this area. the board carefully considered respondents',
31545:'comments and several were adopted. other liability issues a36.the board recognizes the potential complexities in reporting and recognizing information in',
31546:'accordance with sffas 5 when multiple component reporting entities are involved. the board requested feedback on the possibility of other',
31547:'similar liability situations or scenarios for consideration and whether an additional general liability principle should be included to page 13',
31548:'interpretation 9 fasab handbook, version 20 06/21 interpretation 9 address multiple component reporting entities. respondents did not identify additional examples.',
31549:'therefore, theboard concluded it is not necessary to provide ageneralprinciple. a37.although the scope of this interpretation is only related to',
31550:'cleanup costs, the board recognizes the potential for other liability issues involving multiple component reporting entities to arise in the',
31551:'future. the board will consider other specific situations as they arise. boardapproval a38.this interpretation was approved for issuance by all',
31552:'members of the board. page 14 interpretation 9 fasab handbook, version 20 06/21 interpretation 9 appendix b:abbreviations dod department of',
31553:'defense ed exposure draft fasab federalaccountingstandardsadvisoryboard gaap generallyacceptedaccountingprinciples gpffr general purpose federal financial report pp&e property, plant, and equipment sffas',
31554:'statementoffederalfinancialaccountingstandards tb technical bulletin tr technical release page 15 interpretation 9 fasab handbook, version 20 06/21 interpretation of federal financialaccounting',
31555:'standards 10, clarification of nonfederal nonentity fbwt classificationsffas 1, paragraph 31:an interpretation of sffas 1 and sffas 31 status issued',
31556:'may 10, 2021 effective date effective upon issuance. affects this interpretation clarifies sffas 1, paragraph 31. affected by none. summary',
31557:'this interpretation clarifies the classification and presentation of nonfederal nonentity fund balance with treasury fbwt in paragraph 31 of statement',
31558:'of federal financialaccounting standards sffas 1, accounting for selected assets and liabilities. this guidance provides that amounts received in deposit',
31559:'funds from nonfederal sources in anticipation of an order that is,anadvanceshouldbe classifiedasintragovernmentaloncomponentreportingentityfinancial statements. sffas 1, paragraph31wasamendedbysffas31, accounting for fiduciary activities,toclarify',
31560:'the definition and reporting for fiduciary amounts on deposit in the u.s. treasury and to distinguish fiduciary fbwtfrom federal component',
31561:'reporting entities fbwt. while making this distinction, the amendment added the phrase other nonfederal nonentity fbwt. this interpretation clarifies the',
31562:'classification by explaining that the inclusion of other nonfederal nonentity fbwt in paragraph 31 of sffas 1 was intended to',
31563:'provide for similar treatment of activities comparable to fiduciary activities that sffas 31 had not identified specifically. this interpretation clarifies',
31564:'that the federalaccounting standardsadvisory board did not intend to require similar treatment for activities that were explicitly excluded from the',
31565:'provisions of sffas 31. although amounts received in deposit accounts may come from nonfederal nonentity sources for unfilled orders, these',
31566:'amounts do not qualify as fiduciary activity because sffas 31 specifically excludes unearned revenue from fiduciary activity reporting. therefore, it',
31567:'would be inconsistent to apply the phrase other nonfederal nonentity to unearned revenue, including amounts received from nonfederal sources for',
31568:'unfilled orders. hence, nonfederal nonentity amounts received for unfilled orders that are reflected in fbwt should be reported as an',
31569:'intragovernmental asset of the component reporting entity. page 1 interpretation 10 fasab handbook, version 20 06/21 interpretation 10 materiality the',
31570:'provisionsof thisinterpretation need notbeappliedtoinformation if theeffectof applyingthe provisions is immaterial.1amisstatement, including omission of information, is material if, in light of',
31571:'surrounding facts and circumstances, it could reasonably be expected that the judgment of a reasonable user relying on the information',
31572:'would change or be influenced by the correction or inclusion of the information. materiality should be evaluated in the context',
31573:'of the specific reporting entity. determining materiality requires appropriate and reasonable judgment in considering the specific facts, circumstances, size, and',
31574:'nature of the misstatement. consequently, after quantitative and qualitative factors are considered, materiality may vary by financial statement, line item,',
31575:'or group of line items within an entity. 1refer tostatement of federal financialaccountingconcepts 1, objectives of federal financial reporting, chapter',
31576:'7, titled materiality, for a detailed discussion of the materiality concepts. page 2 interpretation 10 fasab handbook, version 20 06/21',
31577:'interpretation 10 table of contents page summary 1 materiality 2 scope/interpretation 4 effective date 5 appendixa:basis for conclusions 7 appendix',
31578:'b:abbreviations 13 page 3 interpretation 10 fasab handbook, version 20 06/21 interpretation 10 interpretation scope 1. thisinterpretationapplieswhenacomponentreportingentityispresentinggeneralpurpose federal financial reports',
31579:'gpffrs in conformance with generally accepted accounting principles gaap, as defined by paragraphs 5 through 8 of statement of federal',
31580:'financial accounting standards sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the',
31581:'financial accounting standards board. interpretation 2. sffas1,accountingfor selectedassets andliabilities,paragraph31provides: afederal entitys fund balance with the treasury fbwt is the aggregate',
31582:'amount of funds intheentitysaccountswithtreasuryforwhichthe entityisauthorized to make expenditures and pay liabilities. fbwt is an intragovernmental item, except for fiduciary or',
31583:'other non federal nonentity fbwt. from the reporting entitys perspective, the reporting entitys fbwt is an asset because it represents',
31584:'the entitys claim to the federal governments resources. however, from the perspective of the federal government as a whole, it',
31585:'is not an asset; and while it represents a commitment to make resources available to federal departments, agencies, programs and',
31586:'other entities, it is not a liability. in contrast, fiduciary and other nonfederal nonentityfbwtis not intragovernmental, and it representsa liability',
31587:'of the appropriate treasury component and of the federal government as a whole to the nonfederal beneficiaries. 3. sffas 1,',
31588:'paragraph 31 was amended by sffas 31, accounting for fiduciary activities, to clarify the definition and reporting for fiduciary amounts',
31589:'on deposit in the u.s. treasury and to distinguish fiduciary fbwtfrom federal component reporting entities fbwt. while making this distinction,',
31590:'the amendment added the phrase other nonfederal nonentity fbwt. the federalaccounting standardsadvisory board fasab or the board acknowledges that the',
31591:'amendments did not define the phrase other nonfederal nonentity fbwt within sffas 31, and the added phrase may have led',
31592:'to a lack of clarity regarding classification and presentation of nonfederal nonentity fbwt. 4. sffas 31 amended paragraph 31 of',
31593:'sffas 1 as follows amendments are shown in bold and underscored: page 4 interpretation 10 fasab handbook, version 20 06/21',
31594:'interpretation 10 afederal entitys fund balance with the treasury fbwt is the aggregate amount of funds intheentitysaccountswithtreasuryforwhichthe entityisauthorized to make',
31595:'expenditures and pay liabilities. fbwt is an intragovernmental item, except for fiduciary or other non federal nonentity fbwt. from the',
31596:'reporting entitys perspective, the reporting entitys fbwt is an asset because it represents the entitys claim to the federal governments',
31597:'resources. however, from the perspective of the federal government as a whole, it is not an asset; and while it',
31598:'represents a commitment to make resources available to federal departments, agencies, programs and other entities, it is not a liability.',
31599:'in contrast, fiduciary and other nonfederal nonentity fbwt is not intragovernmental, and it represents a liability of the appropriate treasury',
31600:'component and of the federal government as a whole to the nonfederal beneficiaries. 5. sffas 1, paragraph 31 provides that',
31601:'fbwt is an intragovernmental item, except for fiduciary or other nonfederal nonentity fbwt. the standards do not define the phrase',
31602:'other nonfederal nonentity fbwt. this interpretation clarifies that the inclusion of other nonfederal nonentity fbwt in paragraph 31 of sffas',
31603:'1 was to provide for similar treatment of activities comparable to fiduciary activities that sffas 31 had not identified specifically.',
31604:'the board did not intend to require similar treatment for activities explicitly excluded from the provisions of sffas 31. 6.',
31605:'federal reporting entities often receive amounts in advance from customersboth federal and nonfederalfor unfilled orders including amounts a customer advances',
31606:'for orders that may be placed in the future or deposits made as part of a bid or settlement process.',
31607:'once received, the funds are deposited into the general fund of the u.s. government. although amounts received in deposit accounts',
31608:'may come from nonfederal nonentity sources for unfilled orders, these amounts do not qualify as fiduciary activity because sffas 31',
31609:'specifically excludes unearned revenue from fiduciary activity reporting see par. 13 of sffas 31. it would be inconsistent to apply',
31610:'the phrase other nonfederal nonentity to amounts received in deposit accounts from nonfederal sources for unfilled orders. 7. hence, nonfederal',
31611:'nonentity amounts received for unfilled orders including amounts a customeradvancesfor ordersthat maybe placedin the future or deposits madeaspart of a',
31612:'bid or settlement process and deposited into the general fund of the u.s. government should be reported as an intragovernmental',
31613:'asset by the component reporting entity. effective date 8. the requirements of this interpretation are effective upon issuance. page 5',
31614:'interpretation 10 fasab handbook, version 20 06/21 interpretation 10 the provisions of this interpretation need not be applied to information',
31615:'if the effect of applying the provisions is immaterial. refer to statement of federal financialaccounting concepts 1, objectives of federal',
31616:'financial reporting, chapter 7, titled materiality, for a detailed discussion of the materiality concepts. page 6 interpretation 10 fasab handbook,',
31617:'version 20 06/21 interpretation 10 appendixa: basis for conclusions this appendix discusses some factors considered significant by board members in',
31618:'reaching the conclusions in this interpretation. it includes the reasons for accepting certain approaches and rejecting others. individual members gave',
31619:'greater weight to some factors than to others. the standards enunciated in this interpretationnot the material in this appendixshould govern',
31620:'the accounting for specific transactions, events, or conditions. this interpretation may be affected by later statements or pronouncements. the fasab',
31621:'handbook is updated annually and includes a status section directing the reader to any subsequentpronouncementsthatamendthisinterpretation. withinthetextof thedocuments,the authoritative sections are',
31622:'updated for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis',
31623:'for conclusions of the amending statement or other pronouncement for the rationale for each amendment. background a1. stakeholders more than',
31624:'one federal reporting entity requested fasab to review paragraph 31 of sffas 1 and clarify the classification and presentation of',
31625:'fbwt. the request relates to how amounts received in deposit funds from nonfederal nonentity sources in anticipation of an order',
31626:'that is, an advance should be classified and presented on thefinancialstatements. thenonfederalnonentityfundsare depositedintothe general fund of the u.s. government. a2.',
31627:'there were questions regarding the presentation of the asset on the balance sheet. while the stakeholders and others agreed that',
31628:'it is a nonentity asset, there were differing views regarding whether it should be classified and presented as an intragovernmental',
31629:'asset fbwt or a nonfederal asset governmental on the balance sheet. as discussed under the section gaap guidance, the questions',
31630:'regarding classification came up after the issuance of sffas 31 and the resulting amendments to sffas 1. a3. the primary',
31631:'rationale for treating these advance payments as intragovernmental assets is based on the notion that these deposited amounts are owed',
31632:'by the general fund of the u.s. government fbwt to the entity responsible for the execution of the underlying agreement',
31633:'or transaction. as discussed in the subsequent sections, the proper classification of this line item is important to ensure there',
31634:'is no double counting of amounts at the governmentwide level. page 7 interpretation 10 fasab handbook, version 20 06/21 interpretation',
31635:'10 prevalent practice a4. most reporting entities even those that did not request guidance on the issue report the deposit',
31636:'funds as intragovernmental fbwt on the balance sheet and disclose the portion that is nonentity in the notes to the',
31637:'financial statements. this is consistent with requirements to show nonentity assets separately. paragraph 26 of sffas 1 provides, nonentityassetsrecognizedonanentitysbalancesheetshouldbesegregatedfromentity assets.',
31638:'an amount equal to nonentity assets should be recognized as a liability due to treasury or other entities recognized on',
31639:'the balance sheet. office of management and budget omb circulara136, financial reporting requirements, directs thatthedistinction be disclosed in the notes,',
31640:'not on the face of the balance sheet. a5. the department of the treasurys bureau of the fiscal service fiscal',
31641:'service is responsible for prescribing the accounting posting logic for the agencies through the treasury financial manual. fiscal service is',
31642:'also responsible for ensuring proper application of intragovernmental eliminations at the governmentwide financial reporting level. a6. fiscal service representatives agreed',
31643:'that nonfederal nonentity funds deposited into the general fund of the u.s. government should be reported as an intragovernmental asset',
31644:'because agencies are not holding the funds. the funds are being held by the general fund of the u.s. government.',
31645:'the general fund is now a standalone reporting entity in the government. as more fully discussed in the next paragraph,',
31646:'with the general funds reporting, the accounting model was made complete for the federal government. a7. simply put, a component',
31647:'reporting entitys fbwt is eliminated with the general funds liability for fbwt. as a result, the amount received is reported',
31648:'in the general funds financialstatements asan asset forthe government via the consolidationof the department of treasurys financial statements to the',
31649:'governmentwide financial statements. it is reported as cash and other monetaryassets. alternatively, if a reporting entity reported these amounts on',
31650:'a nonfederal line on the balance sheet, the asset would be double counted on the governmentwide financial statements. a8. if',
31651:'the activity was fiduciary in nature, the general fund identifies the fiduciary deposit funds and records a liability, ensuring that',
31652:'it is not eliminated and is, therefore, reported on the governmentwide financial statements. gaap guidance a9. as noted previously, sffas',
31653:'1, paragraph 31 provides: page 8 interpretation 10 fasab handbook, version 20 06/21 interpretation 10 afederal entitys fund balance with',
31654:'the treasury fbwt is the aggregate amount of funds intheentitysaccountswithtreasuryforwhichthe entityisauthorized to make expenditures and pay liabilities. fbwt is an',
31655:'intragovernmental item, except for fiduciary or other non federal nonentity fbwt. from the reporting entitys perspective, the reporting entitys fbwt',
31656:'is an asset because it represents the entitys claim to the federal governments resources. however, from the perspective of the',
31657:'federal government as a whole, it is not an asset; and while it represents a commitment to make resources available',
31658:'to federal departments, agencies, programs and other entities, it is not a liability. in contrast, fiduciary and other nonfederal nonentityfbwtis',
31659:'not intragovernmental, and it representsa liability of the appropriate treasury component and of the federal government as a whole to',
31660:'the nonfederal beneficiaries. a10.as noted, the issue relates to how amounts received in deposit funds from nonfederal sources in anticipation',
31661:'of an order should be classified and presented on the financial statements. the nonfederal nonentity funds are deposited into the',
31662:'general fund of the u.s. government. a11.the board acknowledges that the lack of clarity in sffas 1 is due to',
31663:'the amendments resulting from sffas 31. in addition, the standards do not define the phrase other non federal nonentity fbwt',
31664:'and the added phrase led to ambiguity regarding classification and presentation of nonfederal nonentity fbwt. a12.sffas 31 amended paragraph 31',
31665:'of sffas 1 as follows amendments are shown in bold and underscored:afederal entitys fund balance with the treasury fbwt is',
31666:'the aggregate amount of funds in the entitys accounts with treasury for which the entity is authorized to make expenditures',
31667:'and pay liabilities. fbwt is an intragovernmental item, except for fiduciary or other nonfederal nonentity fbwt. from the reporting entitys',
31668:'perspective, the reporting entitys fbwt is an asset because it represents the entitys claim to the federal governments resources. however,',
31669:'from the perspective of the federal government as a whole, it is not an asset; and while it represents a',
31670:'commitment to make resourcesavailabletofederaldepartments,agencies,programsandotherentities, itisnot a liability. in contrast, fiduciary and other nonfederal nonentity fbwt is not intragovernmental, and it',
31671:'represents a liability of the appropriate treasury component and of the federal government as a whole to the nonfederal beneficiaries.',
31672:'a13.regarding the intragovernmental classification, the differing views relate to the phrase or othernonfederalnonentityfbwt.the inclusion of othernonfederalnonentityfbwtin paragraph 31 of sffas',
31673:'1 was to provide for similar treatment of activities comparable to fiduciary activitiesthatsffas31hadnot identifiedspecifically. as evidentinprovidingfor specific exclusions in sffas',
31674:'31, the board did not want similar treatment for activities that were explicitly excluded from the provisions of sffas 31.',
31675:'page 9 interpretation 10 fasab handbook, version 20 06/21 interpretation 10 a14.sffas 31 provides for certain exclusions from the reporting',
31676:'requirements for fiduciary activities. for example, amounts related to unpaid payroll withholdings and garnishments are excluded from fiduciary reporting. in',
31677:'addition, unearned revenue should not be reported as fiduciary activity. a15.while the amounts received in deposit accounts by reporting entities',
31678:'that submitted the request for guidance are from a nonfederal fund source and deposited for unfilled orders, these amounts do',
31679:'not qualify as fiduciary activity because sffas 31 specifically excludes unearned revenue from fiduciary activity reporting par. 13 of sffas',
31680:'31. in this case, it would be inconsistent to apply the phrase other nonfederal nonentity deposit funds to thisactivity.as noted,',
31681:'paragraph13 of sffas 31 provides forthisexclusion and specifically states: unearned revenue should not be reported as fiduciary activity and should',
31682:'be recognized as a liability in accordance with existing standards.8assets collected or received by a federal entity that represent prepayments',
31683:'or advance payments for which the federal component entity is expected to provide goods or services should not be classified',
31684:'as fiduciary activity. this exclusion applies broadly and applies to amounts a customer advances for orders that may be placed',
31685:'in the future or deposits made as part of a bid or settlement process, even if these amounts are not',
31686:'specifically classified as unearned revenue by the entity due to uncertainty about the ultimate realization of the revenue. fn8 see',
31687:'sffas 1, paragraph 85 and sffas 7,accounting for revenue and other financing sources, paragraph 37. a16.paragraph 49, in the basis',
31688:'for conclusions of sffas 31, addresses the specific topic of advances: similarly, federal component entities may hold advances received from',
31689:'customers for future sales of goods or services. such advances represent unearned revenue. one federal agency, in its written response',
31690:'and oral testimony, noted that certain advances received appear to meet the definition of fiduciary activity. however, this standard excludes',
31691:'unearned revenue from the fiduciary reporting requirements because unearned revenue is a routine operational activity and the board believes that',
31692:'fiduciary reporting of unearned revenue is not warranted. a17.the board acknowledges that the amended wording may have led to the',
31693:'ambiguity that currently exists. however, this interpretation clarifies that the underlying goals as intended are consistent regarding fbwt. specifically, oneshouldconsiderhowfbwtisviewedfrom',
31694:'the component reporting entity and governmentwide perspective in considering how these relationships are intertwined. in this relationship, fbwt is an',
31695:'intragovernmental asset for the component reporting entity because it represents the entitys claim to the federal governments resources. from the',
31696:'perspective of the federal government as a whole, it is page 10 interpretation 10 fasab handbook, version 20 06/21 interpretation',
31697:'10 not an asset in that intragovernmental amounts are eliminated in consolidation, and thus, would not appear on the governmentwide',
31698:'balance sheet. clarification of nonfederal nonentity fbwt classification and presentation a18.the board acknowledges that the lack of clarity in sffas',
31699:'1 is due to the amendments resulting from sffas 31. the standards do not define the phrase other nonfederal nonentity',
31700:'fbwt and the added phrase led to ambiguity regarding classification and presentation of nonfederal nonentity fbwt. the board concluded this',
31701:'interpretation is the best vehicle to clarify the classification. a19.sffas 1, paragraph 31 describes a federal entitys fbwt as the',
31702:'aggregate amount of funds in the entitys accounts with treasury for which the entity is authorized to make expenditures and',
31703:'pay liabilities. the paragraph also states, fbwt is an intragovernmental item, except for fiduciary or other nonfederal nonentity fbwt. a20.this',
31704:'interpretation clarifies that the inclusion of other nonfederal nonentity fbwt in paragraph 31 of sffas 1 was intended to provide',
31705:'for similar treatment of activities that werecomparablewithfiduciaryactivitybut thathad notbeenidentifiedspecificallyin sffas 31. this interpretation clarifies that it was not intended to',
31706:'require similar treatment for activities that were explicitly excluded from the provisions of sffas 31. a21.federal reporting entities often receive',
31707:'amounts in advance from customersboth federal and nonfederalfor unfilled orders including amounts a customer advances for orders that may be',
31708:'placed in the future or deposits made as part of a bid or settlement process. although amounts received in deposit',
31709:'accounts may come from nonfederal nonentity sources for unfilled orders, these amounts do not qualify as fiduciary activity because sffas',
31710:'31specifically excludes unearned revenuefromfiduciaryactivityreporting see par. 13 of sffas 31. therefore, it would be inconsistent to apply the phrase other',
31711:'nonfederal nonentity tothisactivityor amountsreceivedindeposit accountsfromnonfederalsources for unfilled orders. a22.therefore, nonfederal nonentity amounts for unfilled customer orders deposited into the general',
31712:'fund of the u.s. government should be reported asan intragovernmentalasset by the component reporting entity. a23.fbwt is an intragovernmental aggregate',
31713:'account between federal agencies and the general fund of the u.s. government. it is where funds are recorded until needed',
31714:'to fulfil the nonentity orders. this presentation is also consistent with guidance provided by omb circulara136, financial reporting requirements. page',
31715:'11 interpretation 10 fasab handbook, version 20 06/21 interpretation 10 summary of outreach efforts and responses a24.fasab issued the exposure',
31716:'draft ed, clarification of nonfederal nonentity fbwt classification sffas 1, paragraph 31: an interpretation of sffas 1 and sffas 31,',
31717:'on october 29, 2020, with comments requested by january 6, 2021. a25.upon release of the ed, fasab provided notices and',
31718:'press releases to the fasab subscription email list, the federal register, fasab newsletter, the journal of accountancy, the chief financial',
31719:'officers council, and committees of professional associations generally commenting on eds in the past for example, the greater washington society',
31720:'of cpas and theassociation of governmentaccountants financial management standards board. a26.to encourage responses, a reminder notice was provided to fasabs',
31721:'subscription email list. a27.fasab received 16 comment letters from preparers, auditors, professional associations, and users of federal financial information. the',
31722:'board considered responses to the ed at its february 2021 meeting. the board did not rely on the number in',
31723:'favor of or opposed to a given position. the board considered each response and weighed the merits of the points',
31724:'raised. the respondents comments are summarized below. a28.respondents generally agreed with the interpretation. specifically, respondents generally agreed the interpretation clarified',
31725:'that nonfederal nonentity amounts received for unfilled orders that are reflected in fbwtshould be reported as an intragovernmental asset of',
31726:'the component reporting entity. certain respondents provided minor editorial clarifications that were carefully considered and adopted. a29.althoughtherespondentswereinagreement withtheproposal,two respondentssuggested defining',
31727:'other nonfederal nonentity fbwtand one respondent suggested providing examples. the board considered this beyond the scope of the interpretation. boardapproval',
31728:'a30.this interpretation was approved for issuance by all members of the board. page 12 interpretation 10 fasab handbook, version 20',
31729:'06/21 interpretation 10 appendix b:abbreviations fasab federalaccounting standardsadvisory board fbwt fund balance with treasury gaap generallyaccepted accounting principles omb office',
31730:'of management and budget sffas statement of federal financialaccounting standards page 13 interpretation 10 fasab handbook, version 20 06/21 technical',
31731:'bulletin 20001: purpose and scope of fasab technical bulletins and procedures for issuance status issued effective date affects affected by',
31732:'june 2000 june 2000 none. none. page 1 technical bulletin 20001 fasab handbook, version 20 06/21 technical bulletin 20001 table',
31733:'of contents contents page federal accounting standards advisory board 3 purpose and scope of fasab technical bulletins and procedures for',
31734:'issuance 3 page 2 technical bulletin 20001 fasab handbook, version 20 06/21 technical bulletin 20001 1. on october 19,1999, thecounciloftheamericaninstituteofcertifiedpublicaccountants',
31735:'aicpa adopted an amendment to rule 203 of theaicpa’s code of professional ethics. this amendment recognized accounting standards published by',
31736:'the federalaccounting standardsadvisory board as generally accepted accounting principles gaap for federal financial reporting entities. the amendment recognized fasab as',
31737:'the source of gaap for federalentities. consequently, thefederalaccountingstandardsadvisoryboardhas authorized its staff to prepare fasab technical bulletins to provide timely guidance',
31738:'on certain financial accounting and reporting problems of federal financial reporting entities. this bulletin describes the purpose and scope of',
31739:'fasab technical bulletins, the procedures for issuing them, and related background information. 2. the fasab anticipates that it will communicate',
31740:'primarily through the issuance of statements and interpretations. such pronouncements may require extensive due process, including appointing task forces and',
31741:'holding public hearings. the fasab also recognizes the need for providing timely guidance to financial statement preparers and attestors for',
31742:'both currently emerging and existing problems. 3. to provide timely guidance within the context of the standard fasab procedures, technical',
31743:'bulletin procedures provide for both due process more limited in scope and within a tighter minimum time frame than provided',
31744:'for statements and interpretations and review by fasab members. 4. fasab technical bulletins provide guidance for applying fasab statements and',
31745:'interpretations and resolving accounting issues not directly addressed by them. the following kinds of guidance may be provided in a',
31746:'technical bulletin: a. guidance to clarify, explain, or elaborate on an underlying statement or interpretation, b. guidance to address areas',
31747:'not directly covered by existing statements or interpretations, c. interim guidance on problems in applying an existing statement or interpretation',
31748:'currently under study by the fasab, or d. if applicable, guidance for applying fasb or gasb standards to federal activities.',
31749:'5. the fasab staff analyzes an accounting or reporting problem that comes to the fasabs attention to determine whether the',
31750:'problem may be resolved by issuing a fasab technical bulletin. generally, a technical bulletin can provide guidance if the problem',
31751:'can be resolved within the following guidelines: a. the guidance is not expected to cause a major change in accounting',
31752:'practice. page 3 technical bulletin 20001 fasab handbook, version 20 06/21 technical bulletin 20001 b. the administrative cost involved in',
31753:'implementing the guidance is not expected to be significant to most affected entities. c. the guidance does not conflict with',
31754:'a broad fundamental principle or create a novel accounting practice. generally, a fasab statement or interpretation is more appropriate than',
31755:'a technical bulletin if any of these guidelines is not met. 6. fasab members will be provided with copies of',
31756:'all draft technical bulletins before their release for comment by interested parties. within 15 days of sending the draft tb',
31757:'to fasab members, the executive director will review any member comments and consult with members on any issues identified. based',
31758:'on the comments and consultation, the executive director will determine if a majority of members do not object to the',
31759:'proposed technical bulletin. 7. if a majority of the fasab members do not object, the executive director will release the',
31760:'proposed technical bulletin to selected knowledgeable persons for comment. those persons include members of the cfo council, the president’s council',
31761:'on integrity and efficiency, the joint financial management improvement program, cpafirms, and others the executive director and members of fasab',
31762:'believe should be consulted. proposed bulletins will be publicized by electronic communication with interested parties and by posting to fasab’s',
31763:'world wide web site during an exposure period of at least 15 days.1 the fasab will maintain a public record',
31764:'of proposed bulletins and all written comments received. the public record will be available for inspection at the fasabs offices.',
31765:'8. all comments received on draft technical bulletins will be given to the board for its consideration at a public',
31766:'meeting before final issuance.abulletin will not be issued if a majority of the fasab members object either to the guidance',
31767:'in it or to communicating that guidance in a technical bulletin. 9. the fasab may support use of a technical',
31768:'bulletin because the nature of the accounting issue addressed and the guidance provided do not, in itsjudgment, warrant more extensive',
31769:'due process. if the appropriateness of issuing a technical bulletin is in doubt, the fasab may choose instead to issue',
31770:'a statement or interpretation or take other action as it deems appropriate. 1determination of the length of the exposure period',
31771:'will depend on the nature and urgency of the issue. the board generally prefers that exposure periods be longer than',
31772:'the minimum required and expects that normally exposure periods will be for at least 30 days. page 4 technical bulletin',
31773:'20001 fasab handbook, version 20 06/21 technical bulletin 20001 10. each technical bulletin will specify an effective date and transition',
31774:'provisions for initial application. while the fasab expects that most technical bulletins will be applied prospectively, technical bulletins may require',
31775:'retroactive application if appropriate in the circumstances. 11. thefasabmonitorstheproceduresforissuingfasabtechnicalbulletinsandmaymodify these procedures from time to time. any modification will be announced',
31776:'publicly. 12. fasab technical bulletins are generally in questionandanswer format and are published with this legend: the federalaccounting standardsadvisory board',
31777:'has authorized its staff to prepare fasab technical bulletins to provide timely guidance on certain financial accounting and reporting problems,',
31778:'in accordance with section iii. i. 5 of the board’s rules of procedure, as amended and restated through october 1,',
31779:'1999 and the procedures described in fasab technical bulletin 20001, purpose and scope of fasab technical bulletins and procedures for',
31780:'issuance. the provisions of technical bulletins need not be applied to immaterial items. the fasab hasreviewed thistechnical bulletin and a',
31781:'majority of its members donot object to its issuance. page 5 technical bulletin 20001 fasab handbook, version 20 06/21 technical',
31782:'bulletin 20021:assigning to component entitiescostsand liabilities thatresultfromlegal claimsagainstthefederal government status issued july 24, 2002 effective date for periods ending after',
31783:'september 30, 2001 affects none. affected by none. related guidance interpretation 2, accounting for treasury judgment fund transactions summary this',
31784:'technical bulletin is intended to clarify the required reporting of costs and liabilities resulting from legal claims i.e., judgments and',
31785:'settlements against the federal government. standards issued by fasab have precedence over other authoritative guidance for federal entities. this technical',
31786:'bulletin supplements any relevant federal standards, but is not a substitute for and does not take precedence over the standard.',
31787:'this technical bulletin requires that all liabilities and costs related to legal claims i.e., judgments and settlements must be attributed',
31788:'to the component entities responsible for the programs or activities that contributed to the claims, or to their successor component',
31789:'entities. this attribution follows the general principle that all transactions or events reported on the consolidated statements should be attributed',
31790:'to some federal component entity. page 1 technical bulletin 20021 fasab handbook, version 20 06/21 technical bulletin 20021 table of',
31791:'contents page summary 1 introduction 3 effective date 3 technical guidance 4 issue 4 general principles 4 implementation 5 appendixa:',
31792:'basis for conclusions 6 page 2 technical bulletin 20021 fasab handbook, version 20 06/21 technical bulletin 20021 introduction 3.a some',
31793:'federal entities have requested guidance on assigning costs and liabilities resulting from legal claims i.e., judgments and settlements against the',
31794:'federal government when one or more federal entities are involved in the litigation. general guidance for the accounting and reporting',
31795:'of costs and liabilities resulting from legal claims against the federal government is provided in statement of federal financialaccounting standards',
31796:'sffas number 4, managerial cost accounting concepts and standards for the federal government sffas 4 and statement of federal financialaccounting',
31797:'standards number 5, accounting for liabilities of the federal government sffas 5. effective date 4. this technical bulletin is effective',
31798:'for reporting periods beginning after september 30, 2001. background 5. this issue is based primarily on the provisions required in',
31799:'the following federal standards: sffas number 4, managerial cost accounting concepts and standards for the federal government and sffas number',
31800:'5, accounting for liabilities of the federal government. 6. sffas 4 provides a full cost standard that states: “reporting entities',
31801:'should report the full costsofoutputsingeneralpurposefinancialreports. thefullcostofanoutputproducedby a responsibility segment is the sum of 1 the costs of resources consumed by',
31802:'the segment that directly or indirectly contribute to the output, and 2 the costs of identifiable supporting services provided by',
31803:'other responsibility segments within the reporting entity and by other reporting entities.” sffas 4 also provides a costing methodology standard',
31804:'which states in part, “the full costs of resources that directly or indirectly contribute to the production of outputs should',
31805:'be assigned to outputs through costing methodologies or cost finding techniquesthataremostappropriatetothesegmentsoperatingenvironment andshouldbe followed consistently.” in discussing cost assignment, sffas 4',
31806:'provided the following principles in the order of preference: a. directly tracing costs wherever economically feasible; athe pronouncement begins with',
31807:'par. 3 because par. 1 and 2 were the executive summary in the exposure draft. page 3 technical bulletin 20021',
31808:'fasab handbook, version 20 06/21 technical bulletin 20021 b. assigning costs on a causeandeffect basis; and c. allocating costs on',
31809:'a reasonable and consistent basis. 7. sffas 5 requires that entities recognize a liability for a past event or exchange',
31810:'transaction that has occurred when a future outflow or other sacrifice of resources is probable and the future outflow or',
31811:'sacrifice of resources is measurable. probable refers to that which can reasonably be expected or is believed to be more',
31812:'likely than not on the basis of available evidence or logic, with the exception of pending or threatened litigation and',
31813:'unasserted claims. for pending or threatened litigation and unasserted claims, “probable” implies that the future confirming event oreventsarelikelyto occur. [asamended',
31814:'byparagraphs10and 11of sffas 12, recognition of contingent liabilities arising from litigation: an amendment of sffas 5, accounting for liabilities of',
31815:'the federal government]. sffas 5 also requires that contingent liabilities be recognized when probable and measurable. technical guidance issue 8.',
31816:'what reasonable cost assignment principles should be applied when it is not clear where the liability and cost related to',
31817:'legal claims i.e., judgments and settlements should be reported becausea the actions of federal component entities1 contribute to a legal',
31818:'claim having been filed against the federal government or b a federal component entity disputes that its actions contributed to',
31819:'the legal claim having been filed against the federal government? general principles 9. all liabilities and costs must be attributed',
31820:'to the component entities responsible for the programs or activities that contributed to the claims or to their successor component',
31821:'1theterm “component entity” is usedto distinguish between the u. s. federalgovernment and its components. the u. s. federal government is',
31822:'composed of organizations that manage resources and are responsible for operations, i.e., deliveringservices. theseincludemajordepartmentsandindependentagencies,whicharegenerallydividedintosub organizations, i.e., smaller organizational units with',
31823:'a wide variety of titles, including bureaus, administrations, agencies, and corporations. sffac no. 2, entity and display, paragraphs 1112 use',
31824:'of “component entity” in this technical bulletin is only intended to distinguish between the u.s. federal government’s consolidated financial statements',
31825:'and financial statements of its components. page 4 technical bulletin 20021 fasab handbook, version 20 06/21 technical bulletin 20021 entities.',
31826:'this attribution follows the general principle that all transactions or events reported on the consolidated statements should be attributed to',
31827:'some federal component entity. implementation 10. thefollowinghierarchyofcostassignmentprinciplesshouldbeappliedwhentheactionsof oneormorefederalcomponent entitiescontributetoa legal claimhavingbeenfiledagainst the federal government or when a federal component entity',
31828:'disputes that its actions contributed to the legal claim having been filed against the federal government and it is not',
31829:'clear where the liability and cost should be reported. a. the component entities should apply the cost methodology principles provided',
31830:'in sffas 4 in the following order of preference: 1 directly tracing costs wherever economically feasible; 2 assigning costs on',
31831:'a causeandeffect basis; and 3 allocating costs on a reasonable and consistent basis. the component entities should seek advice from',
31832:'the appropriate legal counsel office of the general counsel, department of justice, etc. about pertinent legal matters and other factors',
31833:'that could be relevant to assigning costs. the management of the component entities involved should work together to resolve the',
31834:'issues before moving on to step b. below. b. ifareasonablecostassignmentorallocationcannotbedetermined,asoutlinedinstep a. above, the component entities should seek guidance from omb’soffice',
31835:'of federal financial management or its successor division and recognize costs and liabilities as directed by omb. in addition, all',
31836:'component entities involved should disclose the information concerning the nature of the costs and/or liability2, the problems of assigning the',
31837:'costs to the component entities involved, and the estimated total liability among all the component entities involved. theprovisionsofthistechnicalbulletin neednot be',
31838:'applied to immaterial items. 2 see specific disclosure requirements in interpretation 2 paragraph 3 and sffas 5 paragraphs 4042. page',
31839:'5 technical bulletin 20021 fasab handbook, version 20 06/21 technical bulletin 20021 appendixa: basis for conclusions 11. this appendix summarizes',
31840:'some of the considerations deemed significant in reaching the conclusions in this technical bulletin. it includes the reasons for accepting',
31841:'certain approaches and rejecting others. some factors had greater weight than other factors. 12. the issue raised in this technical',
31842:'bulletin is: what reasonable cost assignment principles should be applied when it is not clear where the liability and cost',
31843:'related to legal claims i.e., judgments and settlements should be reported because i the actions federal component entities contribute to',
31844:'a legal claim having been filed against the federal government or ii a federal component entity disputes that its actions',
31845:'contributed to the legal claim having been filed against the federal government? 13. theaccountingandauditingpolicycommittee aapc offasab originallyproposedthat in those rare',
31846:'instances, when allocating to one or more specific entities does not appear to be appropriate, omb could allocate the costs',
31847:'directly to the consolidated financial statements of the u.s. government. however, a majority of the board did not agree with',
31848:'the aapc proposal and concluded that all costs and liabilities must be reported at the component level before flowing into',
31849:'the consolidated statements. thus, theaapc’s proposed guidance was not issued as a technical release. 14. this technical bulletin exposure draft',
31850:'was issued in march 2002. during the 30day comment period 12 comment letters were received. eight of the respondents either',
31851:'said they agreed with or had no comment on the proposed guidance. three other respondents commented on specific sections of',
31852:'the guidance and one additional respondent disagreed with the proposed guidance. the respondents’ comments are summarized below. the board does',
31853:'not simply rely on the number of respondents in favor of or opposed to a given position. theboardconsiderstheargumentsineachresponseandweighsthemeritsofthe points raised.',
31854:'information about respondent’s views is provided only as a means of summarizing the comments. federal nonfederal users, academics, and others',
31855:'2 1 auditors 6 preparers and financial managers 3 respondents made the following individual comments: page 6 technical bulletin 20021',
31856:'fasab handbook, version 20 06/21 technical bulletin 20021 a. the initial assessment of the probability of a legal liability should',
31857:'be made by the respective legal counsel but legal counsel should not make accounting decisions; b. the attribution of liabilities',
31858:'to existing agencies for the activities of longdefunct federal instrumentalities, like the wwii entities, will overstate the apparent cost associated',
31859:'with that agency or its programs. based on the respondent’s comment letters the board reiterated the following conclusions. with regard',
31860:'to the concern that legal counsel would not be in the position of offering accounting advice to agencies with respect',
31861:'to appropriate cost accounting methodology, the tb directs the component entities only to consult with legal counsel on information that',
31862:'may be relevant to determining the cost assignment. with regard to legal costs of longdefunct federal entities, the tb specifically',
31863:'states that component entities be responsible for their own claims as well as those of their successor component entities and',
31864:'that in those cases where the entities no longer exist, footnote disclosures are available for further explanations. 15. the board’s',
31865:'position is that all costs and liabilities must be attributed to component entities; that is, entities other than the u.',
31866:'s. federal government as a whole. in general, the board believes that the consolidated financial statements of the u. s.',
31867:'federal government are a summation of component entity financial statements with appropriate intragovernmental eliminations. 16. staff reviewed with the board',
31868:'the possibility of reporting those unassigned costs and liabilities on the treasury judgment fund tjf3 financial statements. staff and the',
31869:'board believe tjf should not bear the responsibility of recording all unassigned legal costs, as each component entity should accumulate',
31870:'and report the costs of its own activities. in addition, the tjf is merely the funding mechanism for many of',
31871:'the legal settlements and judgments against the federal government. 17. therefore, staff concluded that entities should first apply the cost',
31872:'methodology principles provided in sffas 4 and that all legal costs must be allocated to a component entity, whetherthosecostsarepaidbytheentityorbythetreasuryjudgmentfund. thisprincipal',
31873:'is consistent with those outlined in the interpretation 2, accounting for treasury judgment fund transactions. however, in instances when it',
31874:'is impossible for component entities to 3in 1956, congress enacted a permanent, indefinite appropriation the judgment fund for the payment',
31875:'of final judgments that were not otherwise provided for i.e. which cannot legally be paid from any existing appropriation or',
31876:'fund. payments from the judgment appropriations may be made only upon certification by financial management service, department of the treasury.',
31877:'treasurys role is to oversee the use of this appropriation. page 7 technical bulletin 20021 fasab handbook, version 20 06/21',
31878:'technical bulletin 20021 agree on a reasonable cost assignment or allocation basis, the entities should recognize costs and liabilities as',
31879:'directed by omb. in addition, the federal entities involved will be required to fully disclose all pertinent information related to',
31880:'the legal costs. page 8 technical bulletin 20021 fasab handbook, version 20 06/21 technical bulletin 20022: disclosures required byparagraph 79g',
31881:'of sffas 7accounting for revenueand other financing sources and concepts for reconciling budgetary and financialaccounting status issued september 19, 2002',
31882:'effective date immediate affects paragraph 79g of sffas 7 accounting for revenue and other financing sources and concepts for reconciling',
31883:'budgetary and financial accounting affected by none. page 1 technical bulletin 20022 fasab handbook, version 20 06/21 technical bulletin 20022',
31884:'table of contents page references 3 question 3 response 3 effective date 4 appendixa: basis for conclusions 5 page 2',
31885:'technical bulletin 20022 fasab handbook, version 20 06/21 technical bulletin 20022 references sffas 7, accounting for revenue and other financing',
31886:'sources and concepts for reconciling budgetary and financial accounting, paragraphs 7779. question 1. paragraph 77 of sffas 7 calls for',
31887:'presentation of certain material budgetary information by federal financial reporting entities “whose financing comes wholly or partially from the budget:',
31888:'a. total budgetary resources available to the reporting entity during the period; b. the status of those resources including ‘obligations',
31889:'incurred’; c. outlays.” 2. paragraph79gofsffas7callsfordisclosureof “explanationsofanymaterialdifferences between the information required by paragraph 77 and the amounts described as ‘actual’ in',
31890:'the budget of the united states government” also known as the “president’s budget”. 3. ifafederalfinancialreportingentityissuesfinancialstatementsforagivenfiscalyearbefore the president’s budget with actual',
31891:'numbers for the same fiscal year is published, what disclosure, if any, should the reporting entity make pursuant to paragraph',
31892:'79g of sffas 7? response 4. the reporting entity should disclose that the president’s budget with actual numbers for the',
31893:'fiscal year has not yet been published, explain when it is expected to be published, and indicatewhereitwillbeavailable. theinformationcalledforbyparagraph79gfortheprior fiscal year',
31894:'should be included in the current financial report unless it was included the entity’s prior report, as will be the',
31895:'case in the first year in which the financial report is published before the president’s budget. 5. for example, a',
31896:'department that issued its financial report for fy 2001 in march of 2002 would have included the information called for',
31897:'by paragraph 79g in that report, because page 3 technical bulletin 20022 fasab handbook, version 20 06/21 technical bulletin 20022',
31898:'the president’s budget with that information had been published before the department’s financialreportwaspublished. ifthedepartmentpublishesitsfinancialreportforfy2002in december 2002, the department would disclose',
31899:'that the president’s budget with actual numbers for the fiscal year had not yet been published, explain when it is',
31900:'expected to be published, and indicate where it will be available. there would be no need to disclose the information',
31901:'called for by paragraph 79g with respect to fy 2001, because that information had already been reported in the fy',
31902:'2001 report. if the department then publishes its financial report for fy 2003 in december 2003, that report would include',
31903:'the information called for by paragraph 79g with respect to fy 2002. effective date and transition 6. the provisions of',
31904:'this technical bulletin are effective immediately. the provisions of thistechnical bulletin need not be applied to immaterial items. page 4',
31905:'technical bulletin 20022 fasab handbook, version 20 06/21 technical bulletin 20022 appendixa: basis for conclusions 7. when sffas 7 was',
31906:'published in 1996, federal entities that published financial reports typically did so well after the budget of the united states',
31907:'government also known as “the president’s budget” was published. since 1996, several federal entities have improved their financial accounting and',
31908:'reporting practices to the point where they can publish financial reports before the president’s budget is available. most, if not',
31909:'all federal reporting entities are expected to do this in future years. 8. the disclosure called for by paragraph 79g',
31910:'is informative and addresses the objective of budgetary integrity, but it would be inappropriate to delay publication of the entire',
31911:'financial report until the presidents budget with actual numbers for the fiscal year is published. in such circumstances, the intent',
31912:'of paragraph 79g can best be accomplished as described in paragraph 4. 9. pursuant to fasab’s procedures for exposing a',
31913:'technical bulletin tb, the proposed tb was distributed by email to federal chief financial officers and inspectors general. the proposed',
31914:'tb was also posted on fasab’s world wide web site www.fasab.gov, and noticesweresenttoeveryoneonfasab’semaillist. fasabreceived18responses. most supported the proposed tb or',
31915:'expressed no comment. four suggested clarifying language or expressed concerns that implied a need for clarification. accordingly, paragraph 5 was',
31916:'added to illustrate the effect of applying the technical bulletin. 10. theboardreviewedtheproposedtbandthecomments atitsmeetingonaugust8,2002. the tb was revised as discussed in',
31917:'paragraph 9 and distributed to the board. fasab’s executive director determined that a majority of the fasab did not object',
31918:'to the tb as revised, and accordingly posted the tb to www.fasab.gov. page 5 technical bulletin 20022 fasab handbook, version',
31919:'20 06/21 technical bulletin 20031: certain questions and answers related to the homeland securityact of 2002 status issued june 13,',
31920:'2003 effective date for periods ending after september 30, 2002 affects none. affected by none. summary i. thistechnicalbulletinanswerscertainquestionsarisingfromthecreationofthedepartment of homeland',
31921:'security and other transfers of operations between federal entities directed by the homeland securityact of 2002. standards issued by the',
31922:'federalaccounting standards advisory board fasab have precedence over other sources of generally accepted accounting principles for federal entities. this technical',
31923:'bulletin supplements any relevant federal standards, but is not a substitute for and does not take precedence over standards and',
31924:'interpretations issued by fasab. ii. the primary effects of this technical bulletin are that: a. legacy entities will segregate the',
31925:'net costs of continuing and transferred operations, and recognize a transferout for assets and liabilities transferred. segregation of the net',
31926:'cost is required for both current and prior period net cost. b. transferred entities will segregate the net costs of',
31927:'continuing and transferred operations for components of the transferred entity that 1 were not transferred from the legacy entity or',
31928:'2 subsequent to the creation of the department of homeland security were no longer included in the transferred entity’s operations.',
31929:'transferred entitieswillrecognizeatransferoutforassetsand liabilitiestransferred. segregationof the net cost is required for both current and prior period net cost. c. department of',
31930:'homeland security and other receiving entities will recognize assets and liabilities received at book value1 and recognize a “transferin.” financial',
31931:'statementsbasedonthetransfersandactualoperationssubsequenttothe transferwill be presented. 1“book value” is the net amount at which an asset or liability is carried on the',
31932:'books of account also referred to as carrying value or amount. it equals the gross or nominal amount of any',
31933:'asset or liability minus any allowance or valuation amount. page 1 technical bulletin 20031 fasab handbook, version 20 06/21 technical',
31934:'bulletin 20031 iii. guidance on segregating the net costs of continuing and transferred operations is consistent with financialaccounting standard 144,',
31935:'accounting for the impairment or disposal of longlived assets. guidance on transfers of assets and liabilities is consistent with statement',
31936:'of federal financialaccounting standards 7, accounting for revenue and other financing sources. page 2 technical bulletin 20031 fasab handbook, version',
31937:'20 06/21 technical bulletin 20031 table of contents page summary 1 introduction 4 effective date 4 technical guidance 4 scope',
31938:'4 apb 20 is notapplicable 5 fas 144 isapplicable 5 appendixa: basis for conclusions 9 appendix b:accounting principles board opinion',
31939:'20 16 appendix c: excerpt from financial accounting standard 144, accounting for the impairment or 17 disposal of longlived assets',
31940:'page 3 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 introduction 1. thehomelandsecurityactof2002impacts manyfederal entities invaryingways. the',
31941:'purposeofthistechnicalbulletin istoprovideaccounting andreporting guidance forlegacy, transferred and receiving entities. the guidance is based largely on financialaccounting standard fas 144, accounting',
31942:'for the impairment or disposal of longlived assets, modified to fit the circumstances of federal entities. the objective is to',
31943:'provide comparable information for entities affected by the hsact to the extent feasible. effective date 2. this technical bulletin is',
31944:'effective for reporting periods beginning after september 30, 2002. technical guidance scope 3. what entities’ accounting practicesare addressed in thistechnicalbulletin?',
31945:'4. this guidance is limited to transfers of functions2, personnel, assets, and liabilities resulting from the homeland securityact of 2002',
31946:'hsact3. the following types of entities affected by the hsact are addressed: a. “receiving entity” refers to an entity to',
31947:'which functions are transferred. b. “legacy entity” refers to an entity from which a smaller entity or specific function is',
31948:'being transferred. 2 the hs act provides for the transfer of functions, personnel, assets, and liabilities. the term “functions” includes',
31949:'authorities, powers, rights, privileges, immunities, programs, projects, activities, duties, and responsibilities. the term “operations” is more commonly used in accounting',
31950:'literature and is sometimes used as a substitute for “functions” in this document. 3public law 107296, 116 stat. 2135, november',
31951:'25, 2002. page 4 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 c. “transferred entity” refers to',
31952:'an entity preparing standalone financial statements consolidated with a legacy entity’s financial statements prior to transfer and with a receiving',
31953:'entity’s financial statements after transfer.4 apb 20 is notapplicable 5. should receiving,legacy, and/ortransferred entitiesapplyaccounting principles bulletin apb 20 par. 12',
31954:'and 35 guidance for a change in entity? seeappendix b, page 21, for the relevant text ofapb 20 6. no.apb20shouldnotbeappliedtoanyofthechangesresultingfromtransfersoffunctions',
31955:'among federal entities due to the hsact. fas 144 isapplicable accounting by legacy entities 7. should legacy entities apply financial',
31956:'accounting standard fas 144, accounting for the impairment or disposal of longlived assets, 5 in accounting forand reporting on components',
31957:'oftheentity6transferred to receiving entities? seeappendixc,page 17, for the relevant text of fas 144 8. yes. fas 144 par. 41 to',
31958:'44 and 47a7 should be applied by legacy entities with the exception of par. 43 guidance requiring recognition of a',
31959:'gain or loss on disposal see par. 12 4 guidance is provided for transferred entities because it is possible that',
31960:'functions would be transferred back to the legacy entity. the office of management and budget omb plan for department of',
31961:'homeland security dhs specifically provides that “any functions of those entities that are not directly related to securing the homeland',
31962:'will continue to be allocated to the agencies and subdivisions in which they are currently incorporated.” 5 this technical bulletin',
31963:'addresses questions related to applying fas 144 to a federal reporting entity. while this technical bulletin discusses many aspects of',
31964:'applying fas 144, it does not provide a comprehensive illustration. 6 fas 144, par. 41 states that “a component of',
31965:'an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the',
31966:'rest of the entity.” 7 paragraph 47a requires the following disclosure:adescription of the facts and circumstances leading to the expecteddisposal,',
31967:'theexpectedmanner andtiming of that disposal, and, if not separately presented on the face of the statement, the carrying amounts of',
31968:'the major classes of assets and liabilities included as part of a disposal group. page 5 technical bulletin 20031 fasab',
31969:'handbook, version 20 06/21 technical bulletin 20031 through 14 below. while fas 144 uses the term “discontinued operations”, legacy entities',
31970:'should use the term “transferred operations” as appropriate.8 9. in reporting the “results of operations of the component” for current',
31971:'and prior periods as required by par. 43 of fas 144 see page 17, what information should the legacy entities',
31972:'report? 10. for all periods presented, legacy entities should report material amounts of gross cost, exchangerevenue,and net cost fortransferred ordiscontinuedcomponentsoftheentityas',
31973:'defined bypar. 41 offas 144 seepage17. in somecases,functionsmaybediscontinued or transferred but may not be “components of the entity” as defined',
31974:'in par. 41 of fas 144. if functions are not “components of the entity” there is no requirement to separately',
31975:'report the function’s results of operations under fas 144. 11. the statement of net cost should present a subtotal for',
31976:'“net cost of continuing operations” immediately before the presentation of amounts related to transferred and/or discontinued operations. all elements related',
31977:'to transferred and/or discontinued operations should be appropriately labeled. for example, for transferred operations: net cost of continuing operations $xx',
31978:'transferred operations: cost of transferred operations $ xx exchange revenue from transferred operations xx net cost of transferred operations xx',
31979:'net cost $xx 12. what amount should legacy entities report for the transfer of assets and liabilities? 8all affected entities',
31980:'are components of the federal government as a whole. thus, all statements should clearly distinguish between operations that are transferred',
31981:'versus truly “discontinued.” while the operations may be discontinued at one entity – they may be continued at another entity.',
31982:'thus, the term “transferred” may be more appropriate. page 6 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin',
31983:'20031 13. sffas7,par. 74,providesthattransfersbetweenentitieswithoutreimbursementshouldbe recognized as “transfersin9 or out” on the statement of changes in net position. the amount transferred',
31984:'is equivalent to the book value10 of all assets and liabilities transferred. 14. this sffas 7 guidance precludes application of',
31985:'fas 144’s requirement that gains and losses be included in the results of operations of discontinued or transferred operations fas',
31986:'144, par. 37 and 43. 15. does fas 144 require legacy entities to segregate the statements of budgetary resources and',
31987:'financing between continuing and transferred and/or discontinued operations? 16. no. there are no fas 144 requirements that would apply to',
31988:'the statements of budgetary resources and financing.11 accounting by transferred entities 17. should a transferred entity preparing its own financial',
31989:'statements apply fas 144 par. 41 through 44 and 47a to reporting on discontinued or transferred components of the entity?',
31990:'18. yes. if a transferred entity had material components as defined by fas 144 par. 41 that were not also',
31991:'transferred with the rest of the entity, the transferred entity should apply fas 144, par. 41 through 44 and 47a',
31992:'and par. 10 and 11 above and report separately the results of continuing and transferred operations.12 19. what additional disclosures',
31993:'should a transferred entity preparing freestanding entitylevel financial statements provide? 9it is possible to have a negative transferout at the',
31994:'legacy entity because liabilities transferred may exceed assets transferred. 10“book value” is the net amount at which an asset or',
31995:'liability is carried on the books of account also referred to as carrying value or amount. it equals the gross',
31996:'or nominal amount of any asset or liability minus any allowance or valuation amount. 11 while these statements may be',
31997:'affected by transactions related to the hs act, this technical bulletin provides guidance on application of fas 144 in light',
31998:'of existing federal guidance. fas 144 requirements relate primarily to exchange transactions as well as events associated with operations. thus,',
31999:'fas 144 requirements do not extend to these statements. 12 for example, an entity may transfer to dhs “except for”',
32000:'certain functions that remain with the legacy entity. if these untransferred functions are carriedout by a component of the entity',
32001:'as defined in fas 144 par. 41 and the associated amounts are material, the related revenues and costs would be',
32002:'reported under “transferred operations” per par. 11.” page 7 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031',
32003:'20. transferred entities should disclose: a. a description of the facts and circumstances leading to the transfer, b. the timing',
32004:'of the transfer, c. significant changes in its operations as a result of the transfer, and d. the net cost',
32005:'attributable to the transferred entity’s pretransfer operations this amount is equal to the amount the legacy entity would report as',
32006:'“net cost of discontinued or transferred operations” per par. 10 above. accounting by receiving entities 21. how will receiving entity',
32007:'financial statements report on the transfer of components and functions from legacy entities? 22. receivingentitieswillrecognize assets andliabilitiesbasedonthelegacy entities’ book values',
32008:'at the time of transfer. sffas 7, par. 74 provides guidance for transfersin and requires that transferred assets be recognized',
32009:'by the receiving entity at the legacy entity’s book value.13 23. the net effect of the assets and liabilities received',
32010:'will be recognized as a “transferin” on thereceiving entity’sstatement ofchangesinnet position. notethat it ispossible to havea negative transferin at the',
32011:'receiving entity because liabilities transferred may exceed assets transferred. 24. receiving entities will prepare financial statements based on the transfers',
32012:'and actual operations subsequent to the transfer. the provisions of this technical bulletin need not be applied to immaterial items.',
32013:'13 the net amount at which an asset or liability is carried on the books of account also referred to',
32014:'as carrying value or amount. it equals the gross or nominal amount of any asset or liability minus any allowance',
32015:'or valuation amount. page 8 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 appendixa: basis for conclusions',
32016:'25. thefederalaccountingstandardsadvisoryboardhasauthorizeditsstafftoprepare fasab technical bulletins to provide timely guidance on certain financial accounting and reporting problems, in accordance with section',
32017:'iii. i. 5 of the board’s rules of procedure, as amended and restated through october 1, 1999 and the procedures',
32018:'described in fasab technical bulletin 20001, purpose and scope of fasab technical bulletins and procedures for issuance. the provisions of',
32019:'technical bulletins need not be applied to immaterial items. 26. an exposure draft was issued march 21, 2003 and the',
32020:'board considered responses to the exposure draft at itsapril 24, 2003 public meeting. the fasab has reviewed thistechnical bulletin and',
32021:'a majority of its members do not object to its issuance. 27. this appendix discusses some factors considered significant by',
32022:'staff in reaching the conclusions in this technical bulletin. it includes the reasons for accepting certain approaches and rejecting others.',
32023:'some factors were given greater weight than other factors. the guidance enunciated in the technical guidance sectionnot the material in',
32024:'this appendixshould govern the accounting for specific transactions, events or conditions apb 20 is notapplicable 28. apb 20 defines a',
32025:'“change in entity” as: this type [of accounting change] is limited mainly to a presenting consolidated or combined statements in',
32026:'place of statements of individual companies, b changing specific subsidiariescomprising the group of companies for which consolidated financialstatements are presented,',
32027:'and c changing the companies included in combined financial statements. adifferent group of companies comprise the reporting entity after each',
32028:'change. financial accounting standards board, original pronouncements, change in reporting entity par. 12 29. apb 20 requires restatement when a',
32029:'“change in entity” occurs. restatement means the “recasting of apreviouslydetermined andpublishedbalancesheet or operatingstatement, and its republication where there has been',
32030:'a substantial change in accounting principles or policies.” kohler’s dictionary foraccountants for privatesector entities a complete set of comparable financial',
32031:'statements for an individual reporting entity is critical to lending and page 9 technical bulletin 20031 fasab handbook, version 20',
32032:'06/21 technical bulletin 20031 investing decisions.14 the current and prior period financial statements assist in discerning the earning power and',
32033:'creditworthiness of entities thus trends in assets, liabilities and results of operations are essential. 30. federalfinancialreportingobjectivesdonotfocusontheearningpowerorcreditworthiness of the component entities',
32034:'of the government. instead, federal financial reporting objectives focus on: a. compliance with laws and regulations governing the use of',
32035:'resources budgetary integrity; b. evaluating the service efforts and accomplishments of a reporting entity operating performance as well as the',
32036:'entity’s management of assets and liabilities; c. assessing the government’s financial position and changes in its financial position stewardship; and',
32037:'d. assuring that systems and controls support compliance with laws and regulations systems and controls. 31. restatementmayobscureinformationaboutthe changesdirectedbythehsactsince restatement would',
32038:'portray financial information as if the event occurred prior to its enactment and effective date. portraying the actual results of',
32039:'operations including actual transfersof assetsand liabilitiesforwhich an entityislegallyaccountable ismost consistent with federal reporting objectives. thus, staff does not believe restatement',
32040:'aids in meeting federal financial reporting objectives. 14 fasb concepts statement 1: objectives of financial reporting by business enterprises states',
32041:'that: —financial reporting should provide information that is useful to present and potential investors and creditors and other users in',
32042:'making rational investment, credit, and similar decisions. the information should be comprehensible to those who have a reasonable understanding of',
32043:'business and economic activities and are willing to study the information with reasonable diligence. —financial reporting should provide information to',
32044:'help present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash',
32045:'receipts from dividends or interest and the proceeds from the sale, redemption, or maturity of securities or loans. since investors',
32046:'and creditors cash flows are related to enterprise cash flows, financial reporting should provide information to help investors, creditors, and',
32047:'others assess the amounts, timing, and uncertainty of prospective net cash inflows to the related enterprise. —financial reporting should provide',
32048:'information about the economic resources of an enterprise, the claims to those resources obligations of the enterprise to transfer resources',
32049:'to other entities and owners equity, and the effects of transactions, events, and circumstances that change its resources and claims',
32050:'to those resources. page 10 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 32. further, staff does',
32051:'not believe that comparable financial statements for all affected entities could result from the restatement envisioned byapb 20. staff does',
32052:'not believe that the changes required by the hsact are “changes in entity” as defined inapb 20. apb 20 describes',
32053:'a change in entity as “changing specific subsidiaries for which consolidated financial statements are presented.” theapb 20 description does not',
32054:'fit all of the changes required by the hsact. the hsact requires concurrent changes within entities that are transferred as',
32055:'well as realignment of entities and operations that are part of a single larger entity both before and after the',
32056:'change. 33. respondentstothemarch21,2003exposuredraftsupportedthestaff’sassertionthatapb 20 is not applicable. some respondents suggested that the scope of the technical bulletin be expanded so',
32057:'thatapb 20 wouldnot beapplied toanyfuturechangesat the federallevel. staff has not incorporated this suggestion but has recommended that the board consider',
32058:'it when an opportunity to address new issues arises in the future. applicability of fas 144 34. fas 144 addresses',
32059:'discontinued operations and provides for separate reporting of the results of operations associated with discontinued operations. the standard provides a',
32060:'definition of “component of an entity” fas 144, par. 41, see page 17 as well as criteria for determining if',
32061:'the activity of the component has been discontinued fas 144, par. 42, see page 17. 35. underthe hsact,functions maybe discontinuedatthe',
32062:'legacy entity,but notdiscontinued by the governmentasawhole. therefore, the term “transferred” operations should be substituted for “discontinued” operations when appropriate. this',
32063:'will ensure that the reader does not conclude that the government has stopped performing certain functions.15 36. fas 144 provides',
32064:'guidance that – in the private sector – results in segregation of critical information directly linked to operations that are',
32065:'either continuing or discontinued. application of fas 144 to entities affected by the homeland securityact of 2002 will result in:',
32066:'a. legacy and transferred entities providing comparable financial information for continuing operations by separately identifying the net cost of continuing',
32067:'and transferred operations on the face of the statement of net cost for all periods presented; and 15 “discontinued operations”',
32068:'may be appropriate in the event that material functions are discontinued. page 11 technical bulletin 20031 fasab handbook, version 20',
32069:'06/21 technical bulletin 20031 b. receiving entities preparing statements of net cost based on the actual operations subsequent to the',
32070:'transfer. 37. this will result in the most useful presentation since it produces a consistent and understandable result across all',
32071:'entities. 38. respondents to the march 21, 2003 exposure draft supported the staff’s assertion that fas 144 is applicable. some',
32072:'respondents suggested that the scope of the technical bulletin be expanded so that fas 144 would be applied to any',
32073:'future changesat the federal level. staff has not incorporated this suggestion but has recommended that the board consider it when',
32074:'an opportunity to address new issues arises in the future. respondents’request for guidance on general pp&e transfers 39. some respondents',
32075:'asked for specific guidance on the transfer of general property, plant, and equipment pp&e. the questions posed were: a. should',
32076:'a capitalization threshold be applied to the book value upon transfer? b. should the acquisition date be adjusted to the',
32077:'transfer date? c. should the gross book and associated accumulated depreciation be recorded or should the pp&e be booked at',
32078:'“net”? 40. staff has not incorporated guidance on these questions in this technical bulletin. the questions posed are procedural in',
32079:'nature. staff believes management may determine the most effective procedures to accomplish the initial recognition of the book value of',
32080:'general pp&e and its depreciation during the operating period. respondents’request for guidance on the statements of custodialactivity and changes in',
32081:'net position 41. some respondents asked whether collections for which the collecting function was transferred should be separately disclosed on',
32082:'the face of or in notes to the statement of custodialactivity. staff has not included in thistechnical bulletin this requirement',
32083:'or expressed a preference for the suggested display. however, staff notes that there isnothing precluding the suggested treatment. staff did',
32084:'not believe the issue was controversial enough to suggest a proposed resolution. 42. some respondents suggested that the statement of',
32085:'changes in net position also should presentseparateamountsforcontinuingandtransferredordiscontinuedoperations. while thisproposalmaybe explored at a future time, staff does not believe it would',
32086:'be appropriate page 12 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 to impose this requirement through',
32087:'a technical bulletin. technical bulletins receive minimal dueprocess. thus, limitationsare placed on the typesofrequirementsthat maybe imposed in a technical bulletin.',
32088:'43. technical bulletin 20001 provides that staff may pursue an issue through a technical bulletin if: a. the guidance is',
32089:'not expected to cause a major change in accounting practice. tb 20001, par. 5a b. the administrative cost involved in',
32090:'implementing the guidance is not expected to be significant to most affected entities. tb 20001, par. 5b c. the guidance',
32091:'does not conflict with a broad fundamental principle or create a novel accounting practice. tb 20001, par. 5c 44. in',
32092:'this case, staff elected to rely on practices developed through full due process in other domains by searching gaap for',
32093:'nongovernmental entities for relevant requirements. fas 144 was found to be the best fit for this circumstance. in relating the',
32094:'fas 144 guidance to the federal reporting model, staff was mindful that fas 144 provisions are applicable to revenues, expenses,',
32095:'gains and losses resulting from exchange transactions and related events. staff found that the elements for which fas 144 requires',
32096:'segregation aligned with the elements presented on the statement of net cost. 45. staff does not believe that fas 144',
32097:'requirements extend logically to financing sources presented on the statement of changesin net position. thus, fas144 would not support a',
32098:'requirement that federal entities segregate continuing and transferred/discontinued financing sources. 46. in addition, the federal reporting model requires entities to',
32099:'report net cost by program while reporting financing sources for the entity as a whole. staff believes that requiring the',
32100:'statement of changes in net position to present information for a transferred/discontinued “component of an entity” is arguably a major',
32101:'change in practice from aggregated to disaggregated financing information. 47. therefore, staff believes segregation of the statement of changes in',
32102:'net position warrants greater due process than that provided through a technical bulletin and has not incorporated the respondents’ suggestions',
32103:'in this technical bulletin. page 13 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 statement of budgetary',
32104:'resources 48. as mentioned in par. 44, fas 144 does not require segregation of information beyond the results of continued',
32105:'and discontinued operations. since the statement of budgetary resources does not report the results of operations, fas 144 would not',
32106:'support a requirement that federal entities segregate elements of the statement of budgetary resources between continuing and transferred/discontinued budgetary and',
32107:'reconciling elements. for reasons similar to those provided in paragraphs 42 through 46, staff doesnot believe this technical bulletin should',
32108:'require segregation of the elements of this statement. 49. staffalsonotesthatthestatementofbudgetaryresourcespresentsinformationintendedto support the “budgetary integrity” reporting objective. this reporting objective provides',
32109:'that “federal financial reporting should assist in fulfilling the government’s duty to be publicly accountable for monies raised through taxes',
32110:'and other means and for their expenditure in accordance with the appropriations laws that establish the government’s budget for a',
32111:'particular fiscal year and related laws and regulations.”sffac 1, par. 112 50. thus, the information presented on the statement of',
32112:'budgetary resources relates to compliance with budgetary provisions including reporting on transfers of budgetary resources associated with the hsact. it',
32113:'also relates to the current availability of budgetary resources. it is less clear that the statement of budgetary resources is',
32114:'intended to provide information needed to determine whether financing sources will be “continuing.” in addition, sffas 7, par. 79 currently',
32115:'requires extensive disclosures relating to legislative actions affecting resources provided to entities. thus, staff does not believe that immediate changes',
32116:'to the statement of budgetary resources are needed to ensure that federal financial reporting objectives are met. 51. generally, staff',
32117:'believes that existing guidance in accounting standards, guidance from the office of management and budget regarding the statement of budgetary',
32118:'resources e.g., omb circulara11 which is referenced by sffas 7, par. 78, and other operational guidance will assist in resolving',
32119:'some of the other issues raised by respondents. statement of financing 52. sffas 7 indicates that the purpose of the',
32120:'statement of financing is: to explain how budgetary resources obligated during the period relate to the net cost of operations',
32121:'for that reporting entity. this information should be presented in a way that clarifies the relationship between the obligation basis',
32122:'of budgetary accounting and the accrual basis of financial i.e., proprietary accounting. by explaining this relationship through a reconciliation, the',
32123:'statement provides information necessary to understand how page 14 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031',
32124:'the budgetaryand some nonbudgetary resourcesfinance the cost of operationsand affect the assets and liabilities of the reporting entity. sffas 7,',
32125:'par. 95 53. staff does not believe that sffas 7 envisioned explanations of these relationships in greater detail than the',
32126:'“reporting entity” level. to impose a greater disaggregation would, in staff’s opinion, require greater due process than afforded for a',
32127:'technical bulletin. unique federal guidance sought by some respondents 54. some respondents agreed that the result of applying fas 144',
32128:'was desirable but asserted that standards tailored to the unique federal environment and reporting model should be developed. staff believesthistechnical',
32129:'bulletin provides important guidance in response to an immediate need. given the limited due process associated with technical bulletins, staff',
32130:'believes that – in this case – it was appropriate to rely on nonfederal accounting standards to support a solution',
32131:'that fits the circumstances and meets federal reporting objectives. effective date 55. the effective date of this technical bulletin for',
32132:'reporting periods beginning after september 30, 2002 – is necessary due to the timing of the hsact. staff does not',
32133:'routinely issue pronouncements that are effective in the period issued but must do so in this case to provide timely',
32134:'guidance. page 15 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 appendix b:accounting principles board opinion 20',
32135:'excerpt from fasb’s original pronouncements changes inaccounting principles change in reporting entity apb20 12. one special type of change in',
32136:'accounting principle results in financial statements which, in effect, are those of a different reporting entity. this type is limited',
32137:'mainly to a presenting consolidated or combined statements in place of statements of individual companies, b changing specific subsidiaries comprising',
32138:'the group of companies for which consolidated financial statements are presented, and c changing the companies included in combined financialstatements.adifferent',
32139:'group of companiescomprise the reporting entityaftereach change. 35. disclosure. the financial statements of the period of a change in the',
32140:'reporting entity should describe the nature of the change and the reason for it. in addition, the effect of the',
32141:'change onincomebeforeextraordinaryitems, netincome,andrelatedpershareamountsshouldbe disclosed for all periods presented. financial statements of subsequent periods need not repeat the disclosures. paragraphs 56',
32142:'to 65 and 93 to 96 ofapb opinion no. 16, business combinations, describe the manner of reporting and the disclosures',
32143:'required for a change in reporting entity that occurs because of a business combination. page 16 technical bulletin 20031 fasab',
32144:'handbook, version 20 06/21 technical bulletin 20031 appendix c: excerpt from financialaccounting standard 144, accounting for the impairment or disposal',
32145:'of longlived assets fas144 41. for purposes of this statement, a component of an entity comprises operations and cash flows',
32146:'that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. acomponent of an',
32147:'entity may be a reportable segment or an operating segment as those terms are defined in paragraph 10 of statement',
32148:'131, a reporting unit as that term is defined in statement 142, a subsidiary, or an asset group as that',
32149:'term is defined in paragraph 4. 42. the results of operations of a component of an entity that either has',
32150:'been disposed of or is classified as held for sale shall be reported in discontinued operations in accordance with paragraph',
32151:'43 ifboth of the following conditionsaremet:atheoperationsandcashflowsof thecomponent have beenorwillbeeliminatedfromthe ongoingoperationsof theentityas a result of the disposal transaction and b the',
32152:'entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. examples 1215',
32153:'ofappendixaillustrate disposal activities that do or do not qualify for reporting as discontinued operations. 43. in a period in which',
32154:'a component of an entity either has been disposed of or is classified as held for sale, the income statement',
32155:'of a business enterprise or statement of activities of a notforprofit organization for current and prior periods shall report the',
32156:'results of operations of the component, including anygain orloss recognized in accordancewith paragraph 37 [emphasis added], in discontinued operations. the',
32157:'results of operations of a component classified as held for sale shall be reported in discontinued operations in the periods',
32158:'in which they occur. the results of discontinued operations, less applicable income taxes benefit, shall be reported as a separate',
32159:'component of income before extraordinary items and the cumulative effect of accounting changes if applicable. for example, the results of',
32160:'discontinued operations may be reported in the income statement of a business enterprise as follows: page 17 technical bulletin 20031',
32161:'fasab handbook, version 20 06/21 technical bulletin 20031 income from continuing operations before income taxes $xxxx income taxes xxx income',
32162:'from continuing operations24 $xxxx discontinued operations note x loss from operations of discontinued component x including loss on disposal of',
32163:'$xxx xxxx income tax benefit xxxx loss on discontinued operations xxxx net income $xxxx 24this caption shall be modified appropriately',
32164:'when an entity reports an extraordinary item or the cumulative effect of a change in accounting principle orboth in accordance',
32165:'with opinion 20. if applicable, the presentation of pershare data will need similar modification. again or loss recognized on the',
32166:'disposal shall be disclosed either on the face of the income statement or in the notes to the financial statements',
32167:'paragraph 47b. 44. adjustments to amounts previously reported in discontinued operations that are directly related to the disposal of a',
32168:'component of an entity in a prior period shall be classified separately in the current period in discontinued operations. the',
32169:'nature and amount of such adjustments shall be disclosed. examples of circumstances in which those types of adjustments may arise',
32170:'include the following: a. the resolution of contingencies that arise pursuant to the terms of the disposal transaction, such as',
32171:'the resolution of purchase price adjustments and indemnification issues with the purchaser b. the resolution of contingencies that arise from',
32172:'and that are directly related to the operations of the component prior to its disposal, such as environmental and product',
32173:'warranty obligations retained by the seller c. the settlement of employee benefit plan obligations pension, postemployment benefits other than pensions,',
32174:'and other postemployment benefits, provided that the settlement is directly related to the disposal transaction.25 25paragraph 3 of fasb statement',
32175:'no. 88, employers’ accounting for settlements andcurtailments of defined benefit pension plans and for termination benefits, defines settlement as “a',
32176:'transaction that a is an irrevocable action, b relieves the employer or the plan of primary responsibility for a pension',
32177:'benefit obligation, and c eliminates significant risks related to the obligations and the assets used to effect the settlement.” asettlement',
32178:'is directly related to the disposal transaction if there is ademonstrated direct cause and effect relationship and the settlement occurs',
32179:'no later than one year following the disposal transaction, unless it is delayed by events or circumstances beyond an entity’s',
32180:'control refer to paragraph 31. page 18 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 reporting disposal',
32181:'gains or losses in continuing operations 45. againor lossrecognizedfor alonglivedassetdisposalgroup classifiedas heldfor sale that is not a component of an',
32182:'entity shall be included in income from continuing operations before income taxes in the income statement of a business enterprise',
32183:'and in income from continuing operations in the statement of activities of a notforprofit organization. if a subtotalsuchasincomefromoperations” ispresented,itshallincludetheamountsofthose gains',
32184:'or losses. reporting a longlivedasset or disposal group classified as held for sale 46. alonglivedassetclassifiedasheldfor saleshallbepresentedseparatelyinthestatement of financial position. the',
32185:'assets and liabilities of a disposal group classified as held for sale shall be presented separately in the asset and',
32186:'liability sections, respectively, of the statement of financial position. those assets and liabilities shall not be offset and presented as',
32187:'a single amount. the major classes of assets and liabilities classified as held for sale shall be separately disclosed either',
32188:'on the face of the statement of financial position or in the notes to financial statements paragraph 47a. disclosure 47.',
32189:'the following information shall be disclosed in the notes to the financial statements that cover the period in which a',
32190:'longlived asset disposal group either has been sold or is classified as held for sale: a. a description of the',
32191:'facts and circumstances leading to the expected disposal, the expected manner and timing of that disposal, and, if not separately',
32192:'presented on the face of the statement, the carrying amounts of the major classes of assets and liabilities included as',
32193:'part of a disposal group b. the gain or loss recognized in accordance with paragraph 37 and if not separately',
32194:'presented on the face of the income statement, the caption in the income statement or the statement of activities that',
32195:'includes that gain or loss c. if applicable, amounts of revenue and pretax profit or loss reported in discontinued operations',
32196:'d. if applicable, the segment in which the longlived asset disposal group is reported under statement 131. 48. if either',
32197:'paragraph 38 or paragraph 40 applies, a description of the facts and circumstances leading to the decision to change the',
32198:'plan to sell the longlived asset disposal group and page 19 technical bulletin 20031 fasab handbook, version 20 06/21 technical',
32199:'bulletin 20031 its effect on the results of operations for the period and any prior periods presented shall be disclosed',
32200:'in the notes to financial statements that include the period of that decision. examples 12–15—reporting discontinued operations a24.the results of',
32201:'operations of a component of an entity that either has been disposed of or is classified as held for sale',
32202:'shall be reported in discontinued operations if a the operations and cash flows of the component have been or will',
32203:'be eliminated from the ongoing operationsof the entity asa result of the disposal transaction and b the entity will not',
32204:'have any significant continuing involvement in the operations of the component after the disposal transaction paragraph 42. examples 12–15 illustrate',
32205:'disposal activities that do or do not qualify for reporting as discontinued operations. example 12 a25.an entity that manufactures and',
32206:'sells consumer products has several product groups, each with different product lines and brands. for that entity, a product group',
32207:'is the lowest level at which the operations and cash flows can be clearly distinguished, operationally and for financial reporting',
32208:'purposes, from the rest of the entity. therefore, each product group is a component of the entity. a26.theentityhasexperiencedlossesassociatedwithcertainbrandsinitsbeautycareproducts group. a.',
32209:'the entity decides to exit the beauty care business and commits to a plan to sell the product group with',
32210:'its operations. the product group is classified as held for sale at that date. the operations and cash flows of',
32211:'the product group will be eliminated from the ongoing operations of the entity as a result of the sale transaction,',
32212:'and the entity will not have any continuing involvement in the operations of the product group after it is sold.',
32213:'in that situation, the conditions in paragraph 42 for reporting in discontinued operations the operations of the product group while',
32214:'it is classified as held for sale would be met. b. the entity decides to remain in the beauty care',
32215:'business but will discontinue the brands with which the losses are associated. because the brands are part of a larger',
32216:'cashflowgenerating product group and, in the aggregate, do not represent a group that onitsown isacomponent of theentity, the conditionsin paragraph',
32217:'42 forreporting in discontinued operations the losses associated with the brands that are discontinued would not be met. page 20',
32218:'technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 example 13 a27.an entity that is a franchiser in',
32219:'the quickservice restaurant business also operates companyowned restaurants. for that entity, an individual companyowned restaurant is the lowest level at',
32220:'which the operations and cash flows can be clearly distinguished, operationally and for financial reporting purposes, from the rest of',
32221:'the entity. therefore, each companyowned restaurant is a component of the entity. a. the entity has experienced losses on its',
32222:'companyowned restaurants in one region. the entity decides to exit the quickservice restaurant business in that region and commits to',
32223:'a plan to sell the restaurants in that region. the restaurants are classified as held for sale at that date.',
32224:'the operations and cash flows of the restaurants in that regionwillbeeliminated fromthe ongoingoperationsof the entityasa resultofthesale transaction, and the entitywillnot',
32225:'have anycontinuinginvolvement in the operationsof the restaurants after they are sold. in that situation, the conditions in paragraph 42 for',
32226:'reporting in discontinued operations the operations of the restaurants while they are classified as held for sale would be met.',
32227:'b. based on its evaluation of the ownership mix of its systemwide restaurants in certain markets, the entity commits to',
32228:'a plan to sell its companyowned restaurants in one region to an existing franchisee. the restaurants are classified as held',
32229:'for sale at that date. although each companyowned restaurant, on its own, is a component of the entity, through the',
32230:'franchise agreement, the entity will 1 receive franchise fees determined, in part, based on the future revenues of the restaurants',
32231:'and 2 have significant continuing involvement in the operations of the restaurants after they are sold. in that situation, the',
32232:'conditions in paragraph 42 for reporting in discontinued operations the operations of the restaurants would not be met. example 14',
32233:'a28.an entity that manufactures sporting goods has a bicycle division that designs, manufactures, markets, and distributes bicycles. for that entity,',
32234:'the bicycle division is the lowest level at which the operations and cash flows can be clearly distinguished, operationally and',
32235:'for financial reporting purposes, from the rest of the entity. therefore, the bicycle division is a component of the entity.',
32236:'a29.the entity has experienced losses in its bicycle division resulting from an increase in manufacturing costs principally labor costs. a.',
32237:'theentitydecidestoexitthebicyclebusinessandcommitstoaplantosellthedivision with its operations. the bicycle division is classified as held for sale at that date. the operationsandcash flowsofthedivisionwillbeeliminatedfromtheongoingoperations page',
32238:'21 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20031 of the entity as a result of the',
32239:'sale transaction, and the entity will not have any continuing involvement in the operations of the division after it is',
32240:'sold. in that situation, the conditions in paragraph 42 for reporting in discontinued operations the operations of the division while',
32241:'it is classified as held for sale would be met. b. the entity decides to remain in the bicycle business',
32242:'but will outsource the manufacturing operations and commits to a plan to sell the related manufacturing facility. the facilityisclassifiedasheldforsaleatthat date.',
32243:'because the manufacturing facility is part of a larger cashflowgenerating group the bicycle division, and on its own is not',
32244:'a component of the entity, the conditions in paragraph 42 for reporting in discontinued operations the operations losses of the',
32245:'manufacturing facility would not be met. thoseconditionsalso would not be met if the manufacturing facilityon itsown was a component of',
32246:'the entity because the decision to outsource the manufacturing operationsofthedivisionwillnoteliminatethe operationsandcashflowsof thedivision [and its bicycle business] from the ongoing operations',
32247:'of the entity. example 15 a30.an entity owns and operates retail stores that sell household goods. for that entity, each',
32248:'store isthe lowest level at whichtheoperationsand cash flowscan be clearly distinguished, operationally and for financial reporting purposes, from the rest',
32249:'of the entity. therefore, each store is a component of the entity. a31.to expand its retail store operationsin one region,',
32250:'the entitydecides to close two of itsretail stores and open a new “superstore” in that region. the new superstore will',
32251:'continue to sell the household goods previously sold through the two retail stores as well as other related products not',
32252:'previously sold. although each retail store on its own is a component of the entity, the operations and cash flows',
32253:'from the sale of household goods previously sold throughthe tworetail storesinthat regionwillnot be eliminatedfromthe ongoing operations of the entity. in',
32254:'that situation, the conditions in paragraph 42 for reporting in discontinued operations the operations of the stores would not be',
32255:'met. page 22 technical bulletin 20031 fasab handbook, version 20 06/21 technical bulletin 20061: recognition and measurement ofasbestosrelated cleanup costs',
32256:'status issued september 28, 2006 effective date for fiscal periods beginning after september 30, 2012 affects none. affected by technical',
32257:'bulletin 20091, par. 2 and technical bulletin 20112, par. 2, amended the effective date in par. 50. summary i. this',
32258:'technical bulletin clarifies the required reporting of liabilities and related expenses arisingfromasbestosrelatedcleanupcosts. standardsissuedbyfasabhaveprecedence over other authoritative guidance for federal entities.',
32259:'this technical bulletin supplements anyrelevant federalstandards, butisnotasubstituteforanddoesnottakeprecedenceover standards and interpretations issued by fasab. ii. prior to this technical bulletin, most',
32260:'federal entities had recognized liabilities for the removal of asbestos that posed an immediate health threat i.e., friable asbestos, but',
32261:'many federal entities had not prepared an estimate of cleanup costs for the future removal of asbestos that did not',
32262:'pose an immediate health threat i.e., nonfriable asbestos. therefore, it was determined that additional guidance was needed to clarify that',
32263:'entities need to estimate all asbestosrelated cleanup costs and not just those costs related to asbestos that requires immediate cleanup.',
32264:'iii. the primary effects of this technical bulletin are that: a. federal entities will 1 estimate both friable and nonfriable',
32265:'asbestosrelated cleanup costs and 2 recognize a liability and related expense for those costs that are both probable and reasonably',
32266:'estimable, consistent with the current guidance in statement of federal financialaccounting standards sffas 5, accounting for liabilities of the federal',
32267:'government; sffas 6, accounting for property, plant, and equipment, chapter 4: cleanup costs; and technical release tr 2, determining probable',
32268:'and reasonably estimable for environmental liabilities in the federal government. b. federal entities will disclose information related to friable and',
32269:'nonfriable asbestos related cleanup costs that are probable but not reasonably estimable in a note to the financial statements, consistent',
32270:'with sffas 5, sffas 6, and tr 2. page 1 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin',
32271:'20061 table of contents summary 1 technical guidance 4 scope 4 note disclosures 11 effective date 12 appendixa:basis for conclusions',
32272:'13 appendix b:illustrationofasbestosrelatedcleanupcosts 19 appendix c:asbestoscontainingmaterials 24 appendix d: definitions 25 page 2 technical bulletin 20061 fasab handbook, version 20',
32273:'06/21 technical bulletin 20061 abbreviations caa cleanairact cercla comprehensiveenvironmentalresponsecompensationandliabilityact cfo chief financial officer cfr code of federal regulations epa environmentalprotectionagency',
32274:'fas financialaccountingstandardfasb fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board fin fasb interpretation number gaap generallyacceptedaccountingprinciples ipa independentpublicaccountant neshap nationalemissions standardsforhazardousairpollutants noa naturallyoccurringasbestos',
32275:'pp&e property, plant, and equipment rcra resourceconservationrecoveryact sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards tr technical release page 3 technical bulletin 20061 fasab',
32276:'handbook, version 20 06/21 technical bulletin 20061 introduction 1. the purpose of this technical bulletin is to clarify the responsibility',
32277:'of all federal entities to report liabilities and related expenses arising from asbestosrelated cleanup costs. this technical bulletin clarifies and',
32278:'elaborates on, but does not change, guidance previously providedinstatementoffederalfinancialaccountingstandardssffas5, accounting for liabilities of the federal government; sffas 6, accounting for',
32279:'property, plant, and equipment, chapter 4: cleanup costs; and technical release tr 2, determining probable and reasonably estimable for environmental',
32280:'liabilities in the federal government. technical guidance scope 2. what entities are affected by this technical bulletin? 3. thisguidanceaffectsallfederalentitiesthatownbuildings,facilities,ships,orothertangible property,',
32281:'plant, and equipment pp&e that contain any form of asbestos. 4. what accounting practices are addressed in this technical bulletin?',
32282:'5. this guidance clarifies the responsibility of all federal entities to report liabilities and expenses for asbestosrelated cleanup costs and',
32283:'to disclose related information in the notes. asbestosrelated cleanup costs include cleanup costs related to both friable and nonfriable asbestoscontaining',
32284:'material. 6. what is excluded from this technical bulletin? 7. this guidance regarding asbestosrelated cleanup costs does not include naturally',
32285:'occurringasbestos noathatcanbefoundinsoil,rocksandmines. noais containedin land, andlandis consideredtohaveanindefiniteusefullife. therefore, noawould appropriately be accounted for under the requirements of sffas 5. 8.',
32286:'this guidance does not pertain to contaminants or asset retirement obligations other than asbestos. page 4 technical bulletin 20061 fasab',
32287:'handbook, version 20 06/21 technical bulletin 20061 background 9. what is asbestos? 10. asbestos is a widely used, mineralbased material',
32288:'that is resistant to heat and corrosive chemicals see sample list of asbestoscontaining materials atappendix c:asbestos containing materials. typically, commercial',
32289:'asbestosappearsasa whitish, fibrousmaterial which may release fibers that range in texture from coarse to silky; however, airborne fibers that can',
32290:'cause health damage may be too small to see with the naked eye. 11. section112ofthecleanairactcaa requirestheu. s. environmentalprotectionagency epa to',
32291:'develop and enforce regulations to protect the general public from exposure to airbornecontaminantsthatareknowntobehazardoustohumanhealth. asbestoswasone of the first hazardous air pollutants',
32292:'regulated under section 112. on march 31, 1971, epa identified asbestos as a hazardous pollutant, and onapril 6, 1973, epafirst',
32293:'promulgated theasbestos national emissions standards for hazardousair pollutants neshap in 40 cfr part 61. the purpose of the asbestos neshap',
32294:'is to protect the public from asbestos emissions from certain sources. 12. under the asbestos neshap, asbestos is categorized as',
32295:'either friable any material containing more than 1 percent asbestos that, when dry, can be crumbled, pulverized, or reduced to',
32296:'powder by hand pressure or nonfriable any material containing more than 1 percent asbestos that, when dry, cannot be crumbled,',
32297:'pulverized, or reduced to powder by hand pressure. friable asbestos poses more of an immediate health risk than nonfriable, but',
32298:'both forms must be properly contained and disposed of during repair, renovation, demolition, or other disturbance of the property. the',
32299:'terms friable and nonfriable are further defined inappendixd: definitions. from this point on in the document, the term asbestos or',
32300:'asbestoscontaining materials will refer to both friable and nonfriable unless stated otherwise. 13. exposure to asbestos can cause asbestosis scarring',
32301:'of the lungs resulting in loss of lung functionthatoften progressestodisabilityand to death; mesotheliomacanceraffectingthe membranes lining the lungs and abdomen; lung',
32302:'cancer; and cancers of the esophagus, stomach, colon, and rectum. 14. what are cleanup costs? 15. cleanup costs are the',
32303:'costs of removing, containing, and/or disposing of 1 hazardous waste from property, or 2 material and/or property that consists of',
32304:'hazardous waste at permanent or temporary closure or shutdown of associated pp&e. sffas 6, par. 85 page 5 technical bulletin',
32305:'20061 fasab handbook, version 20 06/21 technical bulletin 20061 16. hazardouswasteisasolid,liquid,orgaseouswaste,orcombinationofthesewastes,which because of its quantity, concentration, or physical, chemical, or',
32306:'infectious characteristics may cause or significantly contribute to an increase in mortality or an increase in serious irreversible, or incapacitating',
32307:'reversible, illness or pose a substantial present or potential hazard to human health or the environment when improperly treated, stored,',
32308:'transported, disposed of, or otherwise managed. sffas 6, par. 86 17. cleanup may include, but is not limited to, decontamination,',
32309:'decommissioning, site restoration, site monitoring, closure, and postclosure costs. sffas 6, par. 87 18. what are asbestosrelated cleanup costs? 19.',
32310:'asbestosrelated cleanup costs are the costs of removing, containing, and/or disposing of 1 asbestoscontainingmaterialsfrom property, or 2materialand/or propertythat consists of',
32311:'asbestoscontaining material at permanent or temporary closure or shutdown of associated pp&e.1 20. while the term “hazardous waste” used in',
32312:'sffas 6, chapter 4, par. 86 was informed by consulting environmental laws such as the resource conservation recoveryact rcra, the',
32313:'general use of the term in federal accounting standards should not be construed as limiting the application of the standards',
32314:'solely to those materials meeting the definition of hazardous waste under rcra. while asbestos is not explicitly listed as “hazardous',
32315:'waste” under rcra, asbestos is listed asa hazardous airpollutant under the caaand as a hazardous substance under the comprehensive environmental',
32316:'response, compensation, andliabilityactcercla. therefore,theterm “hazardouswaste” as definedinsffas6 and referenced in paragraph 16 of this technical bulletin includes asbestos for purposes',
32317:'of proper accounting treatment. 21. why is this guidance being issued? 22. inmarch2006,representativesfromtwocfoactagenciesinformedfasabstaffthattheir independent public accountant ipa indicated that the',
32318:'agencies needed to reconsider their accounting for nonfriable asbestos for fiscal year 2006. the agencies noted that they had recognized',
32319:'an estimated liability for removal of asbestos posing an immediate health threat i.e., friable, but had not prepared an estimate',
32320:'for the future removal of asbestos that does not pose an immediate health threat i.e., nonfriable. the issue arose as',
32321:'a result of the financialaccounting standards board’s fasb issuance of fasb interpretation no. 47, accounting for conditional asset retirement obligations',
32322:'fin 47 in march 2005. prior to 1 temporary closure or shutdown would also include the scheduled closure or shutdown',
32323:'of pp&e in order to conduct cleanup activities. page 6 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin',
32324:'20061 fin 47, organizations following fasb standards did not consistently recognize liabilities for nonfriable asbestos. the agencies cited this inconsistency',
32325:'as well as the inconsistency among all federal agencies as the basis for not recognizing liabilities for nonfriable asbestos. 23.',
32326:'fin 47 clarifies that the term conditional asset retirement obligation as used in fasb statement no. 143, accounting for asset',
32327:'retirement obligations,refers to a legalobligation to perform an asset retirement activity in which the timing and or method of settlement',
32328:'are conditional on a future event that may or may not be within the control of the entity. fin 47',
32329:'provides that the obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and',
32330:'or method of settlement. accordingly, fin 47 requires that an entity recognize a liability for the fair value of a',
32331:'conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. 24. theissuanceoffin47promptedtheagencies’ ipatorevisittheguidancein sffas5; sffas',
32332:'6, chapter 4: cleanup costs; and tr 2. fasab staff conducted a conference call with several of the ipa’s representatives,',
32333:'during which time the ipa’s representatives communicated their concern that, under existing guidance in sffas 5, sffas 6, andtr 2,',
32334:'federal entities are not consistently reporting liabilities for asbestosrelated cleanup costs. federal entities should estimateasbestosrelated cleanup costs andrecognize a liability',
32335:'and related expense for those costs that are probable and reasonably estimable general pp&e cleanup cost estimates 25. should federal',
32336:'entities estimate asbestosrelated cleanup costs? 26. yes,federalentitiesshouldcontinuetofollowtheguidancecontainedinsffas5,sffas6, and tr 2 related to estimating obligations2 for cleanup costs. asbestosrelated cleanup costs,',
32337:'as defined in paragraph 19, shall be estimated when the associated pp&e is placed 2thetermobligationisusedinthisbulletinwithitsgeneralmeaningofadutyorresponsibilitytoactinacertainway. it does not mean that',
32338:'an obligation of budgetary resources is required for a liability to exist in accounting or financial reporting or that a',
32339:'liability in accounting or financial reporting is required to exist for budgetary resources to be obligated. page 7 technical bulletin',
32340:'20061 fasab handbook, version 20 06/21 technical bulletin 20061 in service. the estimate shall be included as part of the',
32341:'“estimated total cleanup cost.” sffas 6 par. 94 27. the estimate shall contemplate: a the cleanup plan, including level of',
32342:'restoration to be performed, current legal or regulatory requirements,3 and current technology; and b current cost which is the amount',
32343:'that would be paid if all equipment, facilities, and services included in the estimate were acquired during the current period.',
32344:'sffas 6 par. 95 28. estimates shall be revised periodically to account for material changes due to inflation or deflation',
32345:'and changes in regulations, plans and/or technology. new cost estimates should be provided if there is evidence that material changes',
32346:'have occurred; otherwise estimates may be revised through indexing. sffas 6 par. 96 29. are there any costs that may',
32347:'be excluded from the estimate of asbestosrelated cleanup costs? 30. yes, it is possible for certain types of nonfriable asbestoscontaining',
32348:'material to remain nonfriable indefinitely; therefore, the estimate does not need to include nonfriable asbestos containing roofing, flooring, siding, and',
32349:'other materials that when repaired, renovated, removed, contained, disposed of, or otherwise disturbed do not become friable and do not',
32350:'requireadditionalcostsaboveand beyond normalrepair,renovation, removal, containment, or disposal costs to prevent them from becoming friable. however, if there are additional costs',
32351:'incurred to prevent the nonfriable asbestoscontaining material from becoming friable or if it could potentially become friable as part of',
32352:'the repair, renovation, removal, containment, or disposal process, such costs should be included in the estimate of asbestosrelated cleanup costs.',
32353:'liabilities 31. should federal entities recognize a liability for asbestosrelated cleanup costs? 32. yes, federal entities should recognize a liability',
32354:'for asbestosrelated cleanup costs if the liability is deemed to be both probable4 and reasonably estimable. if the item is',
32355:'deemed to be probable, but not reasonably estimable, it should be disclosed in the notes to the financial statements, consistent',
32356:'with sffas 5, sffas 6, and tr 2. 3 laws and regulations approved as of the balance sheet date, regardless',
32357:'of the effective date of those laws and regulations, shall be considered. 4 per sffas 5, par. 33, probable is',
32358:'defined as “that which can reasonably beexpectedor is believed to be more likely than not on the basis of available',
32359:'evidence or logic.” page 8 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 33. for assets placed',
32360:'in service after implementation of this technical bulletin, accumulation of the liability shall begin on the date that the pp&e',
32361:'is placed into service, continue in each period that operation continues, and be completed when the pp&e ceases operation [either',
32362:'permanently or temporarily]. sffas 6 par. 98 34. as reestimates are made, the cumulative effect of changes in total estimated',
32363:'asbestos related cleanupcostsrelatedto current and past operationsshallberecognizedasexpense and the liability adjusted in the period of the change in estimate sffas',
32364:'6 par. 99. in certain scenarios, such as when cleanup costs have been fully expensed, the reestimate may result in',
32365:'a credit to expense for that year. 35. asasbestosrelatedcleanupcostsarepaid,paymentsshallberecognizedasareductionin the liability for asbestosrelated cleanup costs. these include the cost of',
32366:'pp&e or other assets acquired for use in cleanup activities. sffas 6 par. 100 expenses 36. should federal entities recognize',
32367:'the related expenses for asbestosrelated cleanup costs? 37. yes, a portion of estimated total asbestosrelated cleanup costs shall be recognized',
32368:'as expense during each period that general pp&e is in operation. this shall be accomplished in a systematic and rational',
32369:'mannerbased on use of the physical capacityof the associated pp&e whenever possible. if physical capacity is not applicable or estimable,',
32370:'the estimated useful life of the associated pp&e may serve as the basis for systematic and rational recognition of expense',
32371:'and accumulation of the liability. sffas 6 par. 97 38. for assets placed in service after the effective date of',
32372:'this technical bulletin, recognition of the expense shall begin on the date that the pp&e is placed into service, continue',
32373:'in each period that operation continues, and be completed when the pp&e ceases operation [either permanently or temporarily]. sffas 6',
32374:'par. 98 39. are federal entities required to account for liabilities related to general pp&e that are already in service',
32375:'at the date of implementation of this technical bulletin in the same manner as assets placed in service after implementation',
32376:'of this technical bulletin? 40. no, two implementation approaches have been provided for liabilities related to general pp&e that are',
32377:'already in service at the date of implementation of this technical bulletin: 1 aliability shall be recognized for the portion',
32378:'of the estimated total cleanup cost that is attributable to that portion of the physical capacity used or that portion',
32379:'of the estimated useful life that has passed since the pp&e was placed in service. the remaining cost shall be',
32380:'recognized in a systematic and rational manner based on use of the physical capacity of page 9 technical bulletin 20061',
32381:'fasab handbook, version 20 06/21 technical bulletin 20061 the associated pp&e, whenever possible. 2 in situations where the related pp&e',
32382:'has been in service for a substantial portion of its estimated useful life, management may insteadelect torecognizetheestimatedtotalcleanupcost asa liabilityupon implementation',
32383:'of this technical bulletin this approach may only be used if costs are not intended to be recovered primarily through',
32384:'user charges. sffas 6 pars. 104 and 97 41. the offsetting charge for any liability for asbestosrelated cleanup costs related',
32385:'to general pp&e in service at the date of implementation shall be made to net position of the entity. the',
32386:'amount of the adjustment shall be shown as a “change in accounting principle” in any statement of changes in net',
32387:'position that may be required. sffas 6 par. 105 and sffas 21, reporting correction of errors and changes in accounting',
32388:'principles, amendment of sffas 7, accounting for revenue and other financing sources, pars. 1213 stewardship pp&e heritageassets and stewardship land',
32389:'42. how should federal entities report asbestosrelated cleanup costs related to stewardship pp&e heritageassets and stewardship land? 43. consistentwiththetreatmentoftheacquisitioncostofstewardshippp&ei.e.,expensingin the',
32390:'period placed in service, the total estimated asbestosrelated cleanup costs shall be recognized as expense in the period that the',
32391:'stewardship asset is placed in service and a liability established. sffas 6 par. 101 44. the liability shall be adjusted',
32392:'when the estimated total asbestosrelated cleanup costs are reestimated. adjustments to the liability shall be recognized in expense as part',
32393:'of “changes in estimated cleanup costs from prior periods.” sffas 6 par. 102 in certain scenarios, such aswhen cleanup costs',
32394:'have been fully expensed, the reestimate mayresult in a credit to expense for that year. 45. asasbestosrelatedcleanupcostsarepaid,paymentsshallberecognizedasareductionin the liability for',
32395:'asbestosrelated cleanup costs. these include the cost of pp&e or other assets acquired for use in cleanup activities. sffas 6',
32396:'par. 103 46. for stewardship pp&e that are in service at the date of implementation of this technical bulletin, the',
32397:'liability for asbestosrelated cleanup costs shall be recognized and an adjustment made to the net position of the entity. the',
32398:'amount of the adjustment shall be shownasa “changeinaccounting principle” in anystatement of changesin net position that may be required. the',
32399:'amounts involved shall be disclosed. sffas 6 par. 106 and sffas 21 pars. 1213 page 10 technical bulletin 20061 fasab',
32400:'handbook, version 20 06/21 technical bulletin 20061 note disclosures 47. with regard to asbestosrelated cleanup costs, what should federal entities',
32401:'disclose in the notes to the financial statements? 48. entities should disclose the following: a. the sources applicable laws and',
32402:'regulations of asbestosrelated cleanup requirements. the u.s. governmentwide financial statements need not disclose the sources of cleanup requirements. sffas 6',
32403:'par. 107 and sffas 32, consolidated financial report of the united states government requirements: implementing statement of federal financial accounting',
32404:'concepts 4 “intended audience and qualitative characteristics for the consolidated financial report of the united states government,” par. 12d b.',
32405:'the method for assigning estimated total asbestosrelated cleanup costs to current operating periods e.g., physical capacity versus passage of time.',
32406:'the u.s. governmentwide financial statements need not disclose the method for assigning estimated cleanup costs to current operating periods. sffas',
32407:'6 par. 108 and sffas 32 par. 12e c. for asbestosrelated cleanup costs associated with general pp&e, the unrecognized portion',
32408:'of estimated total asbestosrelated cleanup costs i.e., the estimated total asbestosrelated cleanup costslessthe cumulative amounts charged to expense at the',
32409:'balance sheet date. sffas 32 provides for disclosure requirements for the u.s. governmentwide financial statements regarding the unrecognized portion of',
32410:'estimated total cleanup cost associated with general pp&e. sffas 6 par. 109 and sffas 32 pars. 12f and 25 d.',
32411:'material changes in total estimated asbestosrelated cleanup costs due to changes in laws, technology, or plans shall be disclosed. in',
32412:'addition, the portion of the change in estimate that relates to prior period operations shall be disclosed. the u.s. governmentwide',
32413:'financial statements need not disclose material changes in total estimated cleanup costs due to changes in laws, technology, plans, or',
32414:'the portion of the change in estimate that relates to prior period operations. sffas 6 par. 110 and sffas 32',
32415:'par. 12g e. the nature of estimates and the disclosure of information regarding possible changes due to inflation, deflation, technology,',
32416:'or applicable laws and regulations. the u.s. governmentwide financial statements need not disclose the nature of estimates and information regarding',
32417:'possible changes due to inflation, deflation, technology, or applicable laws and regulations. sffas 6 par. 111 and sffas 32 par.',
32418:'12h page 11 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 49. for asbestosrelated cleanup costs that',
32419:'are deemed to be probable but not reasonably estimable, the entity should disclose the presence of asbestos in its facilities',
32420:'and the inability to reasonably estimate an amount of the total cleanup costs.5 sffas 32, par. 25, provides for disclosure',
32421:'requirements related to cleanup costs for the u.s. governmentwide financial statements. effective date 50. thistechnicalbulletiniseffectiveforreportingperiodsbeginningafterseptember30,2012. earlier adoption is encouraged. the',
32422:'provisions of this technical bulletin need not be applied to immaterial items. 5 for example, asbestos may be contained within',
32423:'walls, flooring, or roofing and is inaccessible without destroying or weakening the existing structure or disturbing the asbestos, which would',
32424:'be undesirable. without experience with a similar site and/or conditions, it may not be possible for the entity to reasonably',
32425:'estimate the cost to remove and dispose of the asbestos contained therein. page 12 technical bulletin 20061 fasab handbook, version',
32426:'20 06/21 technical bulletin 20061 appendixa: basis for conclusions the federalaccounting standardsadvisory board has authorized its staff to prepare fasab',
32427:'technical bulletins to provide timely guidance on certain financial accounting and reporting problems, in accordance with the board’s rules of',
32428:'procedure, as amended and restated through december 2003, and the procedures described in fasab technical bulletin 20001, “purpose and scope',
32429:'of fasab technical bulletins and procedures for issuance.” the provisions of technical bulletins need not be applied to immaterial items.',
32430:'this appendixdiscusses some factors considered significant by staff in reaching the conclusions in this technical bulletin. it includes the reasons',
32431:'for accepting certain approaches and rejecting others. some factors were given greater weight than other factors. the guidance enunciated in',
32432:'the technical guidance section – not the materialin this appendix – should govern the accounting for specific transactions, events or',
32433:'conditions. a1. in march 2006, a representative from one of the cfo act agencies informed fasab staff that its ipa',
32434:'requested that the agency reconsider its accounting for nonfriable asbestos related cleanup costs for fiscal year 2006. the agency contacted',
32435:'fasab due to the extensive work that would be required to estimate its liability for nonfriable asbestosrelated cleanup costs and',
32436:'the implications for other federal agencies. the agency estimates that it has approximately 3,300 – 6,000 facilities that contain nonfriable',
32437:'asbestos that are not already included as part of its material environmental disposal liability calculation. a2. fasab staff was also',
32438:'contacted by a second cfo act agency regarding the same issue. this second agency, which utilizes the same ipa as',
32439:'the first agency, stated that it was planning to prepare an estimate of its fiscal year 2006 asbestos liability for',
32440:'both friable and nonfriable asbestosrelated cleanup costs absent guidance from the fasab to the contrary. a3. fasab staff contacted the',
32441:'ipa directly and spoke with its representatives about the rationale for requesting the agencies to estimate a liability for nonfriable',
32442:'asbestosrelated cleanup costs. the ipa representatives stated that the agencies had previously cited the inconsistency in reporting of these liabilities',
32443:'by federal entities and organizations that followed fasb standards as the basis for not recognizing a liability for nonfriable asbestos',
32444:'related cleanup costs. the ipa representatives also stated that the issuance of fasb interpretation no. 47, accounting for conditional asset',
32445:'retirement obligations fin 47, prompted it to revisit this obligation that federal entities have for future cleanup of asbestos because',
32446:'fin 47 eliminated some of the inconsistency that the agencies had cited and required entities that follow fasb standards to',
32447:'recognize a liability for nonfriable asbestos. page 13 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 in',
32448:'addition, the iparepresentatives questioned whether existing fasab pronouncements6 would already require that both friable and nonfriable costs be recognized in',
32449:'the financial statements. the iparepresentatives also statedthattheybelievethereis adivergencein practice across the federal government, with some agencies reporting a liability for',
32450:'both friable and nonfriable asbestosrelated cleanup costs in past years, while others have recognized only liabilities for friable cleanup costs.',
32451:'a4. the agencies and the ipa representatives requested that the fasab reconfirm existing guidance or issue new guidance on whether',
32452:'federal entities are required to recognize a liability for future cleanup of nonfriable asbestos. a5. fin 47, which was issued',
32453:'in march 2005, clarifies that the term conditional asset retirement obligation as used in fasb statement no. 143, accounting for',
32454:'asset retirement obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and or',
32455:'method of settlement are conditional on a future event that may or may not be within the control of the',
32456:'entity. fin 47 states that the obligation to perform the asset retirement activity is unconditional even though uncertainty exists about',
32457:'the timing and or methodofsettlement. accordingly,fin47requiresthatanentityrecognizealiabilityforthe fair value of a conditional asset retirement obligation if the fair value of the',
32458:'liability can be reasonably estimated. a6. fin 47 states that “uncertainty about whether performance will be required does not defer',
32459:'the recognition of an asset retirement obligationbecausea legalobligation to stand ready to perform the retirement activities still exists, and it',
32460:'does not prevent the determination of a reasonable estimate of fair value because the only uncertainty is whether performance will',
32461:'be required.”7 application of fin 47 clarifies that performance need not be probable and, therefore, may result in the recognition',
32462:'of more asset retirement obligations than if the determination were based on probability of performance. fin 47 is effective no',
32463:'later than the end of the fiscal year ending after december 15, 2005. a7. fin 47, appendix a, examples 3',
32464:'and 4, contain specific examples that apply to cleanup of asbestos. whetherthefacilitieswereacquiredbeforeoraftertheenvironmentalregulations were put into place, the underlying requirement is',
32465:'the same. with regard to asbestos, appendixa of fin47, states “although thetimingof theperformanceofthe asset retirement activity is conditional on the',
32466:'factory undergoing major renovations or being demolished, existing regulations create a duty or responsibility for the entity to remove and',
32467:'dispose of asbestos in a special manner, and the obligating event occurs when the regulations are put 6sffas 5, sffas',
32468:'6, andtr 2 7fin 47, par. 5a. page 14 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061',
32469:'in place [or the entity acquires the factory].” fin 47 specifically states, “although the entity may decide to abandon the',
32470:'factory and thereby defer settlement of the obligation for the foreseeablefuture,theability todefersettlementdoesnotrelievetheentityoftheobligation. the asbestos will eventually need to be removed',
32471:'and disposed of in a special manner, because no building will last forever.” a8. accountingforcleanupcostsisspecificallyaddressedinsffas6,chapter4,aswellastr 2. thestandardsforcleanupcostsinsffas6supplementtheaccountingrequirementsfor liabilities in sffas',
32472:'5, which requires that liabilities shall be recognized when three conditions are met: a past transaction has occurred, a future',
32473:'outflow or other sacrifice of resources is probable, and the future outflow or sacrifice of resources is measurable. sffas 6,',
32474:'chapter 4, requires that cleanup costs be estimated and charged to expense during each period that general property, plant, and',
32475:'equipment is in operation. tr 2 is intended to assist federal entities in determining probable and reasonably estimable liabilities related',
32476:'to their environmental cleanup responsibilities. a9. sffas 6 addresses cleanup costs from federal operations known to result in hazardous waste.',
32477:'sffas 6 provides guidance when cleanup occurs at the end of the useful life of the pp&eoratregularintervalsscheduledphasecleanupduringthatlife. sffas5appliesto all environmental',
32478:'liabilities not specifically covered in sffas 6, including cleanup resulting from accidents or where cleanup is an ongoing part of',
32479:'operations. tr 2 offers guidance on determiningprobableandreasonablyestimableforenvironmentalliabilities. theestimation of a liability for asbestosrelated cleanup costs is not explicitly addressed by',
32480:'sffas 5, sffas 6, or tr 2, but staff believes it is covered under the requirements of these pronouncements. a10.one',
32481:'keynotion contained in fin 47 that is not stated as explicitly in either sffas 6 or tr 2 is the',
32482:'notion that “no building will last forever”; it would be hard to support a claim that the federal government will',
32483:'be able to maintain a building forever without having to eventually cleanup the asbestos contained therein. the federal government is',
32484:'subject to the same laws and regulations regarding control and abatement of air pollution as nongovernmental entities.8 therefore, if one',
32485:'were to agree that the notion of probability of settlement applies to infinity rather than the foreseeable future, it is',
32486:'probable more likely than not that the federal government will be required to meet any legal obligations at some point',
32487:'in the future for the cleanup of asbestos in all of its facilities, whether they are sold, renovated, or demolished',
32488:'or collapse. based on sffas 5 and 6 and tr 2, the question then becomes whether the federal liability for',
32489:'cleanup of asbestos is reasonably estimable. 8 toxic substances controlact 15 usc 2619 and cleanairact 42 usc 7418 page 15',
32490:'technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 a11.tr 2, section 2, provides guidance on determining “reasonably',
32491:'estimable” environmental liabilities. this guidance recommends completion of a remedial investigation/feasibility study upon which to base an estimate and/or experience',
32492:'with similar site and/or conditions. estimated costs should be based on the cleanup plan, assuming current technology and current cost.',
32493:'these costs can include the costs to remove, contain, and/or dispose of the hazardouswasterequiringcleanup. thesffas5measurementattribute –settlementcost best represented by the',
32494:'current cost to cleanup – differs significantly from the fin 47 measurement attribute – fair value. fair value incorporates the',
32495:'effects of uncertainty. staff believes that settlement cost is more difficult to measure since it does not allow for different',
32496:'outcomes, each of which may be just as likely as the others. a12.in the case of estimating asbestosrelated cleanup costs',
32497:'in federal facilities, consideration needs to be given to the reasonable availability of relevant and reliable data upon which to',
32498:'base an estimate, the needs of the report users, the objective of reporting such information, and the materiality involved. a13.as',
32499:'noted in paragraph 5, asbestosrelated cleanup costs includes cleanup costs related to both friable and nonfriable asbestoscontaining material. under the',
32500:'asbestos neshap, friable asbestos is currently required by law to be removed, contained, and properly disposed of in the context',
32501:'of a demolition or renovation of a covered facility. there is no immediate requirement for the federal government to remove',
32502:'nonfriable asbestos in good condition that is not currently posing a health threat. however, the future repair, removal, renovation, demolition',
32503:'or other disturbance of asbestoscontaining material may cause the asbestos to become friable and, because of limitation on the life',
32504:'of pp&e other than land, it is inevitable that these actions will occur. thus, the event triggering the liability is',
32505:'the existence of asbestos in federal property, plant, and equipment, not a legal requirement to remove, contain, or dispose of',
32506:'the asbestos. therefore, the accounting treatment for asbestosprovided forin thistechnicalbulletin is based on the bestestimateof thecosts that will be incurred',
32507:'in the future for removal, containment, or disposal of asbestos that exists in federal property, plant, and equipment as of',
32508:'the reporting date. the ability of the federal government to sell the federal property, plant, and equipment or otherwise dispose',
32509:'of it in the future without incurring any asbestosrelated cleanup costs may affect measurement of the liability but does not',
32510:'negate the existence of the liability as of the reporting date. a14.it isimportant to note that therequirement to estimatea liability',
32511:'forasbestosrelated cleanup costs and the requirement to actually perform asbestosrelated cleanup are two completely separaterequirements. itisnotwithinthescopeortheintentofaccountingstandardsetters to establish what asbestosrelated',
32512:'cleanup will be required and when. this must be determined by reference to applicable law. furthermore, this technical bulletin does',
32513:'not intend to imply that recognizing a liability for asbestosrelated cleanup costs in any way reflectsa judgment aboutthelegalobligation of thefederalgovernment',
32514:'forasbestosrelated page 16 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 cleanup. the purpose of this technical',
32515:'bulletin is to provide guidance that will result in the more consistent and timely recognition of an accounting liability. a15.in',
32516:'the past, some federal entities have cited the inconsistency in reporting of asbestos related liabilities by federal entities and organizations',
32517:'that followed fasb standards as the basisfornotrecognizingaliabilityfornonfriableasbestosrelatedcleanupcosts. therefore, the effective date of this technical bulletin – for reporting periods beginning',
32518:'after september 30, 2009 – is established to allow federal entities the time to complete remedial investigation/feasibility studies or take',
32519:'similar steps in order to comply with this guidance. earlier adoption is encouraged. a16.a draft concepts statement, definition and recognition',
32520:'of elements of accrualbasis financial statements, is currently under consideration by the board and was issued as an exposuredraftinearlyjune2006. thisconceptsstatementproposesnewdefinitionsoffive',
32521:'elements of accrualbasis financial statements – asset, liability, revenue, expense, and net position. these new definitions, if issued as final,',
32522:'would be used as the building blocks for new standards issued by the board in the future. however, since the',
32523:'concepts statement will go through extensive due process before being finalized and subsequently used to develop new standards, this technical',
32524:'bulletin is being issued under the existing standards for the federal government. if changes are made to the cleanup standards',
32525:'in the future, the consideration of asbestosrelated cleanup costs would be incorporated into the new standards accordingly. a17.the exposure draft,',
32526:'technical bulletin 20061, recognition and measurement of asbestos related cleanup costs, was issued june 1, 2006 with comments requested by',
32527:'june 30, 2006. upon release of the exposure draft, notices and press releases were provided to the federal register, fasab',
32528:'news, the journal of accountancy, aga today, the cpa journal, government executive, the cpa letter, government accounting and auditing update,',
32529:'the cfo council, the presidents council on integrity and efficiency, financial statement audit network, the federal financial managers council, and',
32530:'committees of professional associations generally commenting on exposure drafts in the past. to encourage responses, reminder notices were provided to',
32531:'the fasablistserv on june 20th and june 29th. a18.eleven comment letters were received from the following sources: federal internal nonfederal',
32532:'external users, academics, others 1 3 auditors 0 1 preparers and financial managers 6 0 page 17 technical bulletin 20061',
32533:'fasab handbook, version 20 06/21 technical bulletin 20061 a19.in addition to the official count in paragraph a18, two federal agencies',
32534:'wrote that they had reviewed the exposure draft and determined that it required no changes or did not have a',
32535:'major impact to their current reporting practices. a20.the board considered responses to the exposure draft at its july 27, 2006',
32536:'board meeting. the majority of the respondents agreed with the proposed guidance. specific concerns raised by respondents related to asbestos',
32537:'being considered a hazardous waste, the lack of legal requirements to remove nonfriable asbestos in good condition, applicability of the',
32538:'technical bulletin to naturally occurring asbestos and other contaminants, and the issue of liability recognition versus note disclosure. most concerns',
32539:'raised by respondents related to definition and scope of the proposed guidance. clarifying language was added to address these concerns.',
32540:'a21.several respondents that were strongly opposed to the proposed guidance argued that because there isno legalrequirementtocleanupnonfriableasbestos,it is notappropriate to estimate',
32541:'a liability for nonfriable asbestos. the board has agreed that while legal enforceability may provide additional evidence that a liability',
32542:'exists, it is not a prerequisite. the guidance in this technical bulletin is requiring that the entity estimate the economic',
32543:'impactthattheexistenceofasbestoshasonthefinancialpositionoftheentity. therefore,if asbestos is present in any form in an entity’s pp&e at yearend, the entity is required to estimate',
32544:'the costs that will be incurred at any point in the future to comply with all related laws and regulations',
32545:'regarding the asbestos already in existence as of the reporting date. the entity is only required to prepare a best',
32546:'estimate of costs that will eventually be incurred. the entity is not required to estimate costs for cleanup of asbestos',
32547:'that will never occur e.g., nonfriable asbestos that will never become friable. language was added to clarify the intent of',
32548:'the guidance. a22.one respondent to the exposure draft stated that the technical bulletin should make a distinction between the treatment',
32549:'of cleanup costs for heritage assets and multiuse heritage assets. based on a review of existing standards, it was noted',
32550:'that sffas 6 as originally pronounced provided for capitalization of certain costs related to multiuse heritage assets as general pp&e.',
32551:'in addition, sffas 6, chapter 4, cleanup costs, differentiated between stewardship pp&e and general pp&e for purposes of estimating cleanup',
32552:'costs but did not specifically reference multiuse heritage assets. although not explicitly stated, staff believes that it was the intent',
32553:'of the previous board that the cleanup cost standards for general pp&e apply to all assets classified as general pp&e,',
32554:'including multiuse heritage assets. a23.the board has reviewed this technical bulletin, and a majority of its members do not object',
32555:'to its issuance. page 18 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 appendix b: illustration ofasbestosrelated',
32556:'cleanup costs this appendix illustrates one method of complying with the guidance in this technical bulletin.9 the example shown in',
32557:'this appendix is for illustrative purposes only. applying this technical bulletin may require consideration of estimated cost components other than',
32558:'those shown here. example ofaccounting forasbestosrelated cleanup costs b1. a federal facility general pp&e was placed in operation in 1970.',
32559:'while the federal entity had previously recognized cleanup costs for friable asbestos, no recognition of nonfriable asbestosrelated cleanup cost was',
32560:'made under past accounting policy. at the end of 2006, the entity adopts the accounting policies presented in this technical',
32561:'bulletin. the following assumptions apply: the facility has an expected useful life of 50 years; thecontainmentandremovalofasbestosisrequiredbystate,localandfederallawswhen the site is renovated,',
32562:'repaired, permanently or temporarily closed down, or otherwise disturbed; and, 2006 cost estimates are based on current cost for 2006.',
32563:'recognition of liabilityamounts for 2006 dollars in thousands estimated total cleanup cost based on current cost in 2006 the federal',
32564:'entity estimates the following total cleanup costs related to the containment and removal of nonfriable asbestos in its facility: inspection',
32565:'$ 1,000 sampling and testing 10,000 feasibility study 5,000 containment ofasbestos duringremoval 12,000 disposal ofasbestos 20,000 total estimated cleanup cost',
32566:'$48,000 9the formulas used in this illustration are taken from sffas 6,appendix d – illustration of cleanup cost. page 19',
32567:'technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 calculation of liabilityamount to be recognized upon implementation attheendof2006,theestimatedtotalcleanupcostswere$48million.',
32568:'thefollowingcalculations show the amounts that should have been recognized at the end of 2006 if the technical bulletin had been',
32569:'in effect since the facility began operation on october 1, 1970: a x b/c – d = l where, a',
32570:'= total cleanup cost estimated as of end of period b = cumulative capacity used at end of period10 c',
32571:'= total estimated capacity11 d = amount previously recognized as expense – beginning of period l = liability to be',
32572:'recognized at the end of 2006 $48,000 x 36/50 $0 = l $48,000 x .72 $0 = l $34,560 =',
32573:'l dr. changeinaccountingprinciple $34,560 cr. cleanup liability $34,560 to recognize estimated cleanup liability. summary: financial statement 2006 changeinaccountingprinciple $34,560 liability',
32574:'$34,560 10 if recognition of the costs is based on the passage of time rather than physical capacity, the cumulative',
32575:'amount of time passed since the associated pp&e began operating shall be substituted. 11 if recognition is based on the',
32576:'passage of time, the estimated useful life of the associated asset shall be substituted. page 20 technical bulletin 20061 fasab',
32577:'handbook, version 20 06/21 technical bulletin 20061 note regarding the second implementation approach: if the entityelects to use the second',
32578:'implementation approach from paragraph 40 recognition of the full liability amount upon implementation of the technical bulletin, the following entry',
32579:'would be made: dr. changeinaccountingprinciple $48,000 cr. cleanup liability $48,000 this approach can only be used if the related pp&e',
32580:'has been in service for a substantial portion of itsestimated useful life and costsare not intended to be recovered primarilythrough',
32581:'user charges. page 21 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 calculation ofannual expense andaccrued liabilityamounts',
32582:'in years 2007 through 2020, the following calculation shows the amount to be recognized annually: a x b/c = l',
32583:'$48,000 x 1/50 = l $48,000 x .02 = l $960 = l dr. cleanup expense $960 cr. cleanup liability',
32584:'$960 to recognize estimated cleanup liability. if the facility is renovated prior to 2020 estimated end of useful life, the',
32585:'difference in the recognized liability and the total amount of the cleanup costswould be recognized as expense in the period',
32586:'of cleanup. payment of cleanup costs one of the following entries would be made when cleanup costs are eventually incurred',
32587:'and subsequently paid, based on actual cleanup costs: if cleanup costs equal outstanding liability i.e., $48,000: dr. cleanup liability $48,000',
32588:'cr. fund balance with treasury $48,000 if cleanup costs are less than outstanding liability i.e., $43,000: dr. cleanup liability $48,000',
32589:'cr. fund balance with treasury $43,000 cr. cleanup expense $ 5,000 if cleanup costs are more than outstanding liability i.e.,',
32590:'$50,000: page 22 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 dr. cleanup liability $48,000 dr. cleanup',
32591:'expense $ 2,000 cr. fund balance with treasury $50,000 page 23 technical bulletin 20061 fasab handbook, version 20 06/21 technical',
32592:'bulletin 20061 appendix c:asbestoscontaining materials note: the following list does not include every product/material that may contain asbestos. it is',
32593:'intended as a general guide to show which types of materials may contain asbestos. sample list of potential asbestoscontaining materials',
32594:'cement pipes cement wallboard cement siding asphalt floor tile vinyl floor tile vinyl sheet flooring flooring backing acoustical plaster decorative',
32595:'plaster textured paints/coatings ceiling tiles and layin panels sprayapplied insulation blownin insulation fireproofing materials taping compounds thermal packing materials for',
32596:'wall/floor penetrations hightemperature gaskets laboratory hoods/table tops laboratory gloves fire blankets fire curtains elevator equipment panels elevator brake shoes hvac',
32597:'duct insulation boiler insulation breaching insulation ductwork flexible fabric connections cooling towers pipe insulation corrugated aircell, block, etc. heating and',
32598:'electrical ducts electrical panel partitions electrical cloth electric wiring insulation chalkboards roofing shingles roofing felt base flashing thermal paper products',
32599:'fire doors caulking/putties adhesives wallboard joint compounds vinyl wall coverings construction mastics floor tile, carpet, ceiling tile, etc. spackling compounds',
32600:'source: environmental protectionagency at http://www.epa.gov. page 24 technical bulletin 20061 fasab handbook, version 20 06/21 technical bulletin 20061 appendix d:',
32601:'definitions see consolidated glossary in “appendix e: consolidated glossary.” page 25 technical bulletin 20061 fasab handbook, version 20 06/21 technical',
32602:'bulletin 20091: deferral of the effective date of technical bulletin 20061, recognition and measurement of asbestosrelated cleanup costs status issued',
32603:'september 22, 2009 effective date effective upon issuance. affects technical bulletin 20061, par. 50, by replacing the year 2009 with',
32604:'2011. affected by technical bulletin 20112, par. 2, deferred the effective date of technical bulletin 20061 for an additional year',
32605:'to fiscal periods beginning after september 30, 2012. summary this technical bulletin defers for two years the effective date of',
32606:'technical bulletin 20061, recognition and measurement of asbestosrelated cleanup costs. the guidance in technical bulletin 20061 will be effective for',
32607:'periods beginning after september 30, 2011. page 1 technical bulletin 20091 fasab handbook, version 20 06/21 technical bulletin 20091 table',
32608:'of contents summary 1 technical guidance 3 scope 3 amendment of technical bulletin 20061 3 effective date 3 appendixa:basis for',
32609:'conclusions 4 appendix b:abbreviations 8 page 2 technical bulletin 20091 fasab handbook, version 20 06/21 technical bulletin 20091 technical guidance',
32610:'scope 1. thisguidanceaffectsallfederalentitiesthatownbuildings,facilities,ships,orothertangible property, plant, and equipment pp&e that contain any form of asbestos and present general purpose financial reports',
32611:'in conformance with statement of federal financial accounting standards 34, the hierarchy of generally accepted accounting principles, including the application',
32612:'of standards issued by the financial accounting standards board. amendment of technical bulletin 20061 2. the effective date of the',
32613:'guidance on recognition and measurement of asbestosrelated cleanup costs provided in par. 50 of technical bulletin 20061 is amended as',
32614:'follows: this technical bulletin is effective for reporting periods beginning after september 30, 20092011. earlier adoption is encouraged. effective date',
32615:'3. this technical bulletin is effective upon its issuance. the provisions of thistechnical bulletin need not be applied to immaterial',
32616:'items. page 3 technical bulletin 20091 fasab handbook, version 20 06/21 technical bulletin 20091 appendixa: basis for conclusions the federalaccounting',
32617:'standardsadvisory board has authorized its staff to prepare fasab technical bulletins to provide timely guidance on certain financial accounting and',
32618:'reporting problems, in accordance with the board’s rules of procedure, as amended and restated through april 2004, and the procedures',
32619:'described in fasab technical bulletin 20001, “purpose and scope of fasab technical bulletins and procedures for issuance.” the provisions of',
32620:'technical bulletins need not be applied to immaterial items. this appendixdiscusses some factors considered significant by staff in reaching the',
32621:'conclusions in this technical bulletin. it includes the reasons for accepting certain approaches and rejecting others. some factors were given',
32622:'greater weight than other factors. the guidance enunciated in the technical guidance section – not the materialin this appendix –',
32623:'should govern the accounting for specific transactions, events or conditions. a1. inmarch2009,fasabstaffmembersreceivedarequestfromthefederalagencymembers of the accounting and auditing policy committee aapc',
32624:'disposal subgroup, excluding the audit representatives,thattheimplementationoftechnicalbulletin 20061, recognition and measurement of asbestosrelated cleanup costs, be delayed until october 1, 2011',
32625:'because of the reporting complexity, limited resources, and shifting priorities within the federal government due to the american recovery and',
32626:'reinvestment act arra. this request was not supported by all members of the aapc disposal subgroup. a2. the request stated',
32627:'that when technical bulletin 20061 was released with an effective implementation date for reporting periods after september 30, 2009, federal',
32628:'agencies began to evaluate their ability to estimate their asbestosrelated cleanup cost liability. the subgroup’s research into facility management practices',
32629:'has shown that agencies do not track asbestos in buildings, structures, or equipment except on a limited basis. asbestos in',
32630:'building materials is only federallyregulated under limited conditions. most asbestos is regulated by states resulting in decentralized data collection and',
32631:'management to address statespecific requirements. additionally, there is limited guidance available on the collection and reporting of asbestosrelated cleanup costs.',
32632:'for example, there is some confusion as to whether federal agencies will be able to model costs or whether they',
32633:'will need to assess each building and structure individually. once aapc completes and releasesitsimplementationguidanceonasbestosrelatedcleanupcosts,agencieswillneed to develop agencyspecific guidance, collect data,',
32634:'and prepare their cost estimates. in many cases, new or substantially modified tracking systems may be required. a3. the request',
32635:'also noted that federal agencies now face the implementation of arra and its impact on federal land managers. for example,',
32636:'the department of the interior doi has received more than $3 billion for infrastructure and other projects. this is a',
32637:'twoyear page 4 technical bulletin 20091 fasab handbook, version 20 06/21 technical bulletin 20091 funding that must be executed for',
32638:'creating jobs and boosting the economy. many of the facility, engineering, and environmental staff that would work to develop asbestos',
32639:'cost estimates are now committed to executing this historic endeavor and would not be able to shift priorities to work',
32640:'on asbestosrelated liability estimates. a4. in considering the subgroup’s request for delayed implementation of technical bulletin 20061, fasab staff reviewed',
32641:'deferrals the fasab has made in the past and discussed technical bulletin 20061 and the subgroup request at length with',
32642:'representatives from doi’s national park service, office of environmental policy and compliance, and office of finance; the government accountability office;',
32643:'and the department of state. a5. when staff originally proposed technical bulletin 20061, the board questioned why staff was providing',
32644:'such a long implementation period for a standard that was already in effect; the technical bulletin restates the requirements in',
32645:'statement of federal financial accounting standards sffas 6, accounting for property, plant and equipment, and specifically applies them to asbestos.',
32646:'staff had responded that there was some conflicting guidance in place that had resulted in inconsistent reporting among agencies.1 the',
32647:'extended implementation period was established to provide federal entities with the time to incorporate the resource requirements into their budget',
32648:'requests and complete remedial investigation/feasibility studies or take similar steps in order to comply with the guidance. a6. however, there',
32649:'are several agencies that have been actively working toward compliance with the technical bulletin since it was issued in september',
32650:'2006 and are encountering significant difficulties and unanswered questions. it was expressed to staff that the sheer volume of buildings',
32651:'and structures involved in the estimates is overwhelming. according to the fiscal year 2007 federal real property report published by',
32652:'gsa inmay 2008, there are nearly 1,000,000 federal buildings and structures with a replacement value of over $1.5 trillion. the',
32653:'top five in number belong to army 233,000, interior 163,000, navy 153,000, airforce 149,000, and transportation 59,000 and comprise 82',
32654:'percent of the total buildings and structures. a7. the individuals that staff spoke with have significant concerns about developing a',
32655:'methodology that will be accepted by the auditors and are working with limited resources. agencies have encountered trouble finding contractors',
32656:'to assist them with developing estimates due to a number of factors, including conflict of interest concerns and a general',
32657:'lack of knowledge about where to begin. one of the primary reasons for the difficulties is due to the contingent',
32658:'nature of the cleanup requirements and other unknowns. federal regulationsdo notrequire trackingof nonfriable asbestos and may not require removaleven at',
32659:'the time of building renovation or demolition, depending on the material’s condition and 1 eitf 8913,accounting for the cost ofasbestos',
32660:'removal page 5 technical bulletin 20091 fasab handbook, version 20 06/21 technical bulletin 20091 the disposal method. in addition, the',
32661:'inability to visibly determine the presence of non friable asbestos or validate its absence is a significant unknown, which some',
32662:'believe can not be adequately supported without testing. in discussions with staff, federal agency representatives also expressed that a good',
32663:'asbestos estimation model is not available to meet their purposes; many of the models out there require extensive input information',
32664:'and are more useful in developing a cost estimate once the extent of asbestos contamination is already known i.e., postsurvey.',
32665:'agencies have received quotes on the additional costs that would be incurred to add nonfriable asbestos to condition assessment surveys',
32666:'e.g., $2,000,000 and are hesitant to commit to the expense. a8. agencies have questioned whether they can eliminate from the',
32667:'population those buildings and structures of a smaller size that would incur significantly less asbestos cleanup costs but are uncertain',
32668:'whether that would be acceptable or not. some agencies have thought about lumping like facilities together i.e., lumping warehouses together',
32669:'and office buildings together and then obtaining data on one percent of each grouping of facilities and extrapolate the data',
32670:'across the groupings; however, they again question whether this methodology would be acceptable to the auditors. one agency, which has',
32671:'approximately 20,000structures, has investedmorethan$550,000incontractcosts tohaveapproximately three percent of its structures estimated. from reviewing the initial contract costs and anticipating some',
32672:'economies of scale, the agency estimates spending between $350 to $500 per asset using the contractors approach. having only recently',
32673:'received the initial resultsfrom the contractor, the agency is reviewing the information to determine next steps, including data usability for',
32674:'modeling. the agency remains concerned about the overall implementation cost. a9. in addition, staff is aware that the aapc disposal',
32675:'subgroup is working on implementation guidance for the technical bulletin which may prove helpful to agencies in supporting their estimation',
32676:'methodologies and consistently reporting asbestos cleanup costs. staff would encourage that this guidance be issued as quickly as possible to',
32677:'provide agencies with sufficient time to utilize it. a10.while staff understands agencies’ concerns about the reporting complexity, limited resources, and',
32678:'shifting priorities within the federal government due to arra, the most compelling reason for deferral of the effective date is',
32679:'the forthcoming implementation guidance being developed by the aapc. therefore, staff recommends that the effective date of technical bulletin 20061,',
32680:'recognition and measurement of asbestosrelated cleanup costs, be deferred for two years to provide federal agencies with additional time to',
32681:'resolve implementation issues that have been identified since technical bulletin 20061 was issued. a11.the exposure draft, deferral of the effective',
32682:'date of technical bulletin 20061, recognition and measurement of asbestosrelated cleanup costs, was issued june 4, 2009, with page 6',
32683:'technical bulletin 20091 fasab handbook, version 20 06/21 technical bulletin 20091 comments requested by july 17, 2009. upon release of',
32684:'the exposure draft, notices and press releases were provided to the federal register; fasab news, the journal of accountancy, aga',
32685:'today, the cpa journal, government executive, the cpa letter, and government accounting and auditing update; the cfo council, the council',
32686:'of the inspectors general on integrity and efficiency, the financial statement audit network, and the accounting and auditing policy committee’s',
32687:'general property, plant, and equipment task force; committees of professional associations generally commenting on exposure drafts in the past; and',
32688:'past respondents to technical bulletin 20061 and others who had expressed an interest in the issue. to encourage responses, a',
32689:'reminder notice was provided to our listserv on july 16, 2009. a12.seventeen comment letters were received from the following sources:',
32690:'federal internal nonfederal external users, academics, others 2 auditors 2 preparers and financial managers 13 a13.the board considered responses to',
32691:'the exposure draft at its august 27, 2009, public meeting. sixteen of the 17 respondents were in favor of deferring',
32692:'the effective date. one respondent did not comment on the proposal. since there was no opposition to the deferral proposal',
32693:'in the ed, staff recommended that the proposal be issued as final. a14.the board has reviewed this technical bulletin, and',
32694:'a majority of its members do not object to its issuance. page 7 technical bulletin 20091 fasab handbook, version 20',
32695:'06/21 technical bulletin 20091 appendix b:abbreviations aapc accountingandauditingpolicycommittee arra americanrecovery andreinvestmentact doi department of the interior fasab federalaccountingstandardsadvisoryboard gsa generalservicesadministration',
32696:'pp&e property, plant, and equipment sffas statementoffederalfinancialaccountingstandards page 8 technical bulletin 20091 fasab handbook, version 20 06/21 technical bulletin 20111:accounting',
32697:'for federalnatural resources other than oil and gas status issued july 6, 2011 effective date for periods beginning after september',
32698:'30, 2013 affects none. affected by none. summary technical bulletin 20111 clarifies that federal entities should report the value of',
32699:'the federal governments estimated royalties and other revenue from federal natural resources that are 1 under lease, contract or other',
32700:'longterm agreement and 2 reasonably estimable as of the reporting date in required supplementary information rsi, consistent with the guidance',
32701:'containedin statement of federalfinancialaccountingstandards38, accounting for federal oil and gas resources. the guidance in this technical bulletin requires supplementary information',
32702:'and is effective for periods beginning after september 30, 2013. earlier implementation is encouraged. it is the boards intent that',
32703:'the information required by sffas 38 transition to basic information after being reported as rsi for a period of three',
32704:'years. prior to the conclusion of the threeyear rsi period, the board plans to make a determination as to whether',
32705:'the information required by sffas 38 will transition to basic information as financial statement recognition or note disclosure. it is',
32706:'anticipated that a similar determination would be made for natural resources other than oil and gas based on agencies experiences',
32707:'implementing the guidance in this technical bulletin. page 1 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111',
32708:'table of contents summary 1 introduction 3 technical guidance 4 scope 4 required supplementary information rsi 5 component entity rsi',
32709:'6 consolidated financial report of the u.s. government rsi 8 effective date 9 appendixa:basis for conclusions 10 appendix b:abbreviations 17',
32710:'appendix c: technical terms 18 page 2 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 introduction purpose',
32711:'1. statementoffederalfinancialaccountingstandards sffas38, accounting for federal oil and gas resources, requires the value of the federal government’s estimated petroleum royalties1',
32712:'from the production of federal oil and gas proved reserves to be reportedinrequiredsupplementaryinformationrsiaspartofa discussionofallsignificant federal oil and gas resources under',
32713:'management by the entity. 2. this technical bulletin clarifies that federal entities should report the value of the federal government’s',
32714:'estimated royalties and other revenue for other federal natural resources2 that are 1underlongtermlease, longtermcontract orother longterm agreement3and 2 reasonably estimable',
32715:'as of the reporting date in rsi, consistent with the guidance contained in sffas 38 for federal oil and gas',
32716:'proved reserves. materiality 3. the provisions of this technical bulletin need not be applied to immaterial items. the determination of',
32717:'whether an item is material depends on the degree to which omitting or misstating information about the item makes it',
32718:'probable that the judgment of a reasonable person relying on the information would have been changed or influenced by the',
32719:'omission or the misstatement. effective date 4. the guidance in this technical bulletin is effective for periods beginning after september',
32720:'30, 2013. earlier implementation is encouraged. 1 terms defined in the glossary orappendix c are shown in boldfaced type the',
32721:'first time they appear. 2the term “federal natural resources” should be viewed with its general meaning as defined in the',
32722:'glossary. 3 the shortened phrase “lease, contract, or other longterm agreement” is used throughout the remainder of this document to',
32723:'refer to all such longterm arrangements. longterm is defined as longer than five years and applies to the original term',
32724:'of outstanding leases, contracts, or other longterm agreements as of the reporting date. page 3 technical bulletin 20111 fasab handbook,',
32725:'version 20 06/21 technical bulletin 20111 5. it is the board’s intent that the information required by sffas 38 transition',
32726:'to basic informationafterbeingreportedasrsiforaperiodofthreeyears. priortotheconclusionof the threeyear rsi period, the board plans to make a determination as to whether the information',
32727:'required by sffas 38 will transition to basic information as financial statement recognition or note disclosure. it is anticipated that',
32728:'a similar determination would be made for natural resources other than oil and gas based on agencies’ experiences implementing the',
32729:'guidance in this technical bulletin. technical guidance scope 6. what entities are affected by this technical bulletin? 7. this guidance',
32730:'applies to federal entities that a manage federal natural resources and b prepare generalpurpose federalfinancialreports,includingthe consolidatedfinancialreport of the u.s. government,',
32731:'in conformance with sffas 34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the',
32732:'financial accounting standards board fasb. 8. what accounting practices are addressed in this technical bulletin? 9. this guidance clarifies the',
32733:'responsibility of federal entities to report the value of the federal government’s estimated royalties and other revenue from federal natural',
32734:'resources under lease, contract or otherlongterm agreement in rsi, consistent with the guidance contained in sffas 38 for federal oil',
32735:'and gas resources. 10. what are federal natural resources? 11. federal natural resources are resources that occur in nature including',
32736:'nonrenewable naturalresources and renewable natural resources and meetallofthe following criteria: a. the federal government may exercise sovereign rights over the',
32737:'resources with respect to exploration and exploitation, b. the federal government has the authority to derive revenues from the resources',
32738:'for its use, and page 4 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 c. the resources',
32739:'are contained on federal lands or the federal government substantially manages and/or controls4 the resources.5 required supplementary information rsi 12.',
32740:'how should federal entities apply the general principles of sffas 38 to the different types of federal natural resources other',
32741:'than oil and gas that are under management by the entity? 13. federal entities are required to apply the general',
32742:'principles of sffas 38 through the guidance provided in this technical bulletin and report the value of the federal government’s',
32743:'estimated royalties and other revenue from nonrenewable resources that are 1 under lease, contract or other longterm agreement and 2',
32744:'reasonably estimable as of the reporting date. this is consistent with sffas 38 requirements for reporting on federal oil and',
32745:'gas proved reserves.6 14. federalentitiesarenotrequiredto,butmay,applytheguidanceinthistechnicalbulletinand report the estimated value of other federal natural resources, including renewable natural resources, electromagnetic spectrum,',
32746:'or other nonrenewable resources that are not under lease, contract, or other longterm agreement. 15. the narrative discussion required in',
32747:'paragraph 27f should include those federal natural resources that are significant to the reporting entity but not required to be',
32748:'reported in the schedule described in paragraph 17 for example, they are not measurable7 or not under lease, contract, or',
32749:'other longterm agreement. 4 “substantially manages and/or controls” means that the federal government manages and/or controls access to the economic',
32750:'benefits tobederivedfromtheresourcesand,therefore, can obtain themand deny or regulate the access of other entities to them statement of federal financialaccounting concepts',
32751:'sffac 5, par. 22. this criterion would notbemetifthefederalgovernment’sroleislimitedtothecustodianofcollections. forexample,royaltiescollectedby the federal government from resources produced from indian lands on behalf',
32752:'of individual indians and indian tribal organizations from leases that are negotiated and signed by the individual indians and indian',
32753:'tribal organizations are considered custodial in nature and not federal resources. 5adapted from sffas 38, available at http://www.fasab.gov/codifica.html; last accessed',
32754:'september 14, 2010. 6 while sffas 38 does not specifically address other types of federal natural resources, the board believes',
32755:'that sffas 38 should be considered when applying the hierarchy of generally accepted accounting principles to other types of federal',
32756:'natural resources sffas 38, paragraph 9. 7as used in sffac 5, paragraph 5, the term measurable means that a monetary',
32757:'amount can be determined with reasonable certainty or is reasonably estimable. page 5 technical bulletin 20111 fasab handbook, version 20',
32758:'06/21 technical bulletin 20111 component entity rsi 16. what should be reported in component entity rsi for federal natural resources',
32759:'other than oil and gas? 17. the value of the federal government’s estimated royalties and other revenue from the reporting',
32760:'entity’s federal natural resources that are 1 under lease, contract or other longterm agreement and 2 reasonably estimable as of',
32761:'the reporting date should be reported in a schedule in rsi as part of a discussion of the significant federal',
32762:'natural resources under management by the entity sffas 38, paragraph 15. 18. the value of the federal government’s estimated royalties',
32763:'and other revenue from the reporting entity’s federal natural resources under lease, contract, or other longterm agreement should be reported',
32764:'by major types of natural resources. resources may be further divided by subtype of commodity and calculated separately if material',
32765:'differences would otherwise result. each of the individual calculations should be reported separately and summed together to arrive at the',
32766:'reporting entity’s total estimated natural resources under lease, contract, or other longterm agreement sffas 38, paragraph 21. 19. if a',
32767:'majority of the reporting entity’s estimated revenue from natural resources under lease, contract, or otherlongtermagreement isdesignated to be distributed to',
32768:'others, thevalue of the revenue to be distributed should be estimated and reported in a schedule of estimated revenue to',
32769:'be distributed to others sffas 38, paragraph 25. 20. how should the value of federal natural resources be determined? 21.',
32770:'the estimates that are developed should approximate the present value of future receipts of federal natural resources that are 1',
32771:'under lease, contract or other longterm agreement and 2 reasonably estimable as of the reporting date. the estimates should be',
32772:'based on the best information available at fiscal yearend, or as close to the fiscal yearend as possible sffas 38,',
32773:'paragraph 17. 22. discount rates as of the reporting date for present value measurements of federal natural resources should be',
32774:'based on interest rates on marketable treasury securities with maturities consistent with the cash flows being discounted sffas 38, paragraph',
32775:'18. 23. the reporting entity’s estimates should reflect its judgment about the outcome of events based on past experience and',
32776:'expectations about the future. estimates should reflect what is reasonable to assume under the circumstances. while the entity’s own assumptions',
32777:'about future cash flows may be used, the entity should review assumptions used generally in the federal government as evidenced',
32778:'by sources independent of the reporting entity, for example, those used by the bureau of economicanalysis for the national income',
32779:'and page 6 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 productaccounts. iftheentity’s own assumptionsdonotreflectdatathat areconsistent with',
32780:'sources independent of the reporting entity, an explanation of why the entity’s own assumptions are preferred should be provided sffas',
32781:'38, paragraph 19. 24. the preferred measurement method for valuing the reporting entity’s federal natural resources is the present value',
32782:'of future receipts on federal natural resources that are 1 under lease, contract or other longterm agreement and 2 reasonably',
32783:'estimable as of the reporting date using a riskfree discount rate as described in paragraph 22; however, alternative methods for',
32784:'measuring fair value or current price may be acceptable if it is not reasonably possible to estimate present value of',
32785:'future federal receipts using the methodology described in paragraphs 21 through 24 sffas 38, paragraph 228. 25. once established, the',
32786:'estimation methodology should be consistently followed and explained in the financial reports. if environmental or other changes would provide for',
32787:'the development of an improved methodology, the nature and reason for the change in methodology, as well as the effect',
32788:'of the change, should be explained sffas 38, paragraph 23. 26. what else should be reported? 27. the reporting entity',
32789:'should provide the following as a narrative9 to the schedules presented as rsi: a. aconcise statementexplaininghow themanagementofthereporting entity’s federal natural',
32790:'resources is important to the overall mission of the entity. b. abriefdescriptionofthe entity’s stewardshippolicies for federal natural resources e.g., the',
32791:'guiding principles established to: assess resource areas; offer those resources to interested developers; sell and assign leases to winning bidders;',
32792:'administer the leases; collect bonuses, rents, and royalties; and distribute the collections consistent with statutory requirements, prohibitions, and limitations governing',
32793:'the entity. 8calculating the present value of future federal receipts employs the use of a number of estimates; unforeseen circumstances',
32794:'may result in situations whereitis not possible forthe entity to reasonably estimate the present value of future federal receipts. in',
32795:'these situations, it may be possible to estimate current price. current price, sometimes referred to as a “freshstart” or “remeasured”',
32796:'price, is a general term for various attributes measured as of a financial statement date subsequent to the period of',
32797:'initial recognition, including replacement price, market price, and settlement price. 9 quantitative data is not required to bereported as part',
32798:'of the narrative discussion unless specifically required as part of a display that accompanies the narrative discussion for example, in',
32799:'par. 27e, where quantitative information is required in display format. page 7 technical bulletin 20111 fasab handbook, version 20 06/21',
32800:'technical bulletin 20111 c. anarrativedescribingtheestimationmethodologyusedtocalculatethevalueofthe federal reporting entity’s natural resources under lease, contract, or other longterm agreement. at a minimum,',
32801:'the narrative explanation should include a “plain english” explanation of the measurement attribute or method, the significant assumptions incorporated into',
32802:'the estimate, and any significant changes to the estimation methodology,includingtheunderlyingassumptions,fromtheprioryear. asrequiredby paragraph 25, the nature and reason for any changes,',
32803:'as well as the effect of the changes, should be explained. d. areference to thesourcereportsusedtocalculatethevalueofthefederal reporting entity’s estimated natural resources',
32804:'under lease, contract, or other longterm agreement. e. anarrativedescribing andadisplay showingthesales volume, thesales value,the royalty or other revenue, and the',
32805:'estimated value of royalty relief or other foregone revenue, if any, that resulted from the extraction and removal of federal',
32806:'natural resources under management by the reporting entity for the reporting period. f. anarrativedescribing other significantnatural resourcesunder managementbythe federalreporting entitythat',
32807:'are not required to be reported in the schedule described in paragraph 17 for example, they are not measurable10 or',
32808:'not under lease, contract, or other longterm agreement. the narrative should be sufficient to enable the financial statement reader to',
32809:'gain an understanding of the full extent of significant natural resourcesunder management by the entity, including resources contained on land',
32810:'that has been legislatively or administratively withdrawn from leasing sffas 38, paragraph 28. consolidated financial report of the u.s. government',
32811:'rsi 28. with regard to federal natural resources other than oil and gas, what should be reported in the consolidated',
32812:'financial report of the u.s. government? 29. the governmentwide entity should provide the following information related to federal natural resources',
32813:'in rsi as part of a discussion of the significant federal natural resources under management by the federal government: a.',
32814:'aconcise statementexplainingthenatureandvaluationoffederal natural resources. 10 see footnote 7. page 8 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin',
32815:'20111 b. the asset value of federal natural resources under lease, contract, or other longterm agreement by the types identified',
32816:'for use in calculating the value of the federal government’s estimated royalties and other revenue from natural resources under lease,',
32817:'contract, or other longterm agreement as of the end of the reporting period see paragraph 18. related groups of resources',
32818:'that do not warrant classification and presentation in separate categories should be aggregated. c. a reference to specific agency reports',
32819:'for additional information about federal natural resources sffas 38, paragraph 29. effective date 30. this technical bulletin is effective for',
32820:'periods beginning after september 30, 2013. earlier implementation is encouraged. 31. it is the board’s intent that the information required',
32821:'by sffas 38 transition to basic informationafterbeingreportedasrsiforaperiodofthreeyears. priortotheconclusionof the threeyear rsi period, the board plans to make a determination as',
32822:'to whether the information required by sffas 38 will transition to basic information as financial statement recognition or note disclosure.',
32823:'it is anticipated that a similar determination would be made for natural resources other than oil and gas based on',
32824:'agencies’ experiences implementing the guidance in this technical bulletin. the provisions of thistechnical bulletin need not be applied to immaterial',
32825:'items. page 9 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 appendixa: basis for conclusions the federalaccounting',
32826:'standardsadvisory board has authorized its staff to prepare fasab technical bulletins to provide timely guidance on certain financial accounting and',
32827:'reporting problems, in accordance with the board’s rules of procedure, as amended and restated through december 2003, and the procedures',
32828:'described in fasab technical bulletin 20001, “purpose and scope of fasab technical bulletins and procedures for issuance.” the provisions of',
32829:'technical bulletins need not be applied to immaterial items. this appendixdiscusses some factors considered significant by staff in reaching the',
32830:'conclusions in this technical bulletin. it includes the reasons for accepting certain approaches and rejecting others. some factors were given',
32831:'greater weight than other factors. the guidance enunciated in the technical guidance section – not the materialin this appendix –',
32832:'should govern the accounting for specific transactions, events or conditions. project history a1. in april 2010, fasab issued sffas 38,',
32833:'accounting for federal oil and gas resources. sffas 38 requires the value of the federal government’s estimated petroleum royalties from',
32834:'the production of federal oil and gas proved reserves to be reported in a schedule of estimated federal oil and',
32835:'gas petroleum royalties. sffas 38 also requires the value of estimated petroleum royalty revenue designated for others to be reported',
32836:'in a schedule of estimated federal oil and gas petroleum royalties to be distributed to others. these schedules are to',
32837:'be presented in required supplementary information rsi as part of a discussion of all significant federal oil and gas resources',
32838:'under management by the entity. a2. federal lands contain a variety of natural resources that are not specifically addressed by',
32839:'sffas 38, including coal, gold, and silver, as well as timber and grazing rights. originally, the board intended to address',
32840:'each category of resources in separate phases as noted in paragraph a2 of sffas 38. although in principle a broader',
32841:'application was desirable to several board members, the majority believes that the board has already devoted a substantial amount of',
32842:'time to the oil and gas standard and developing additional guidance for the other types of resources would significantly delay',
32843:'implementation of a broad standard. therefore, because federal oil and gas resources represent the most significant portionofallfederalnaturalresources,the majority of membersfeltitwasimportanttobegin',
32844:'recognizing them as soon as possible. a3. nonetheless, the majority of the members believe that the standards developed for federal',
32845:'oil and gas resources may serve as a good general framework for other categories of page 10 technical bulletin 20111',
32846:'fasab handbook, version 20 06/21 technical bulletin 20111 federal natural resources.11 therefore, while sffas 38 does not specifically address other',
32847:'types of federal natural resources, the board believes that sffas 38 should be considered when applying sffas 34, the hierarchy',
32848:'of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board, to other types',
32849:'of federal natural resources. as a result, while not explicitly encouraging agencies to recognize other categories of natural resources, the',
32850:'board explicitly states that sffas 38 doesnot require or preclude entities fromreporting information about othertypes of federallyowned natural resources; however,',
32851:'members believe sffas 38 should be considered in conjunction with sffas 7, accounting for revenue and other financing sources, when',
32852:'applying sffas 34 to other types of federallyowned natural resources.12 a4. during deliberations on sffas 38, the board explicitly directed',
32853:'staff to apply the requirements of sffas 38 to other types of natural resources through the issuance of a technicalbulletin.',
32854:'indoingso,theboardmembersnotedthatthetechnicalbulletincomment period would provide federal entities with an opportunity to comment on the standards as they would apply to the',
32855:'specific natural resources under their management. components of federal natural resources a5. figure 1, components of federal natural resources other',
32856:'than oil and gas, presented on the next page identifies the universe of federal natural resources total resources. total resources',
32857:'incorporate “original inplace” resources, that is, resources in the earth before humanintervention. thecomponentsarefirstseparatedinto “undiscoveredresources” and “discovered resources.” a6. the terms',
32858:'in figure 1 are defined in appendix c: technical terms under the subheading “definitions of federal natural resources components and',
32859:'subcomponents.” 11 sffas 34, paragraph 7. 12 sffas 7, par. 45, requires, in instances where there are virtually no costs',
32860:'incurred in earning exchange revenue, that federal entities recognize the revenue as a financing source on the statement of changes',
32861:'in net position, rather than the statement of net cost sffas 38, paragraph 9. page 11 technical bulletin 20111 fasab',
32862:'handbook, version 20 06/21 technical bulletin 20111 figure 1 – components of federal natural resources other than oil and gas',
32863:'accountingtreatment components of federal natural resources other than oil and gas undiscovered resources discovered resources non recoverable recoverable notavailable for',
32864:'sale or lease available for sale or lease undiscovered conventionallyrecoverable resources undiscovered economicallyrecoverable resources legislativelywithdrawn administrativelywithdrawn other planned to be',
32865:'offered under contract but not conveyed13 existingaccountingtreatment before sffas 38 bonus bid, rent, royalty andother revenue accounted for by reporting',
32866:'entity either as 1 exchangerevenueon thesncor as 2 as a financing sourceon the cfr and reportingentity socnp 14 new accountingtreatment',
32867:'based on sffas 38 provide a narrative disclosure in required supplementary information rsi of the full extent of natural resources',
32868:'under management by thereporting entity, including resources contained on land that has been legislatively or administratively withdrawn from leasing revenue',
32869:'continues to be accounted for as either exchange revenue on thesnc or a financing sourceon the socnp various rsi disclosures',
32870:'not reasonablyestimable reasonablyestimable15 asset value and revenue to be distributed to others reported asrsi 13“undercontract” encompasseslease,contract,orotherlongtermagreement. “notconveyed” referstotheportionofactual resources under',
32871:'contract that have not yet been physically extracted or removed from federal lands. 14snc = statement of net cost, cfr',
32872:'= consolidated financial report of the u.s. government, and socnp = statement of operations and changes in net position. 15under',
32873:'contract and reasonably estimable is substantiallyequivalent to “proved reserves” under sffas 38. renewable resources a7. staff believes that it may',
32874:'not be appropriate to apply the guidance in this technical bulletin to renewable natural resources. based on staff’s review of',
32875:'the major characteristics of renewable resources, renewable resources may not be similar enough to oil and gas royalties that an',
32876:'appropriate analogycan be made under the principles contained in sffas 38. for example, costs to develop certain renewable resources may',
32877:'be incurred by the federalgovernment whilerevenuesmayrelate to annualproductionratherthan extractionof longstanding reserves. such revenueproducing renewable resources that result in exchange revenue',
32878:'that is matched against the economic cost of operations may not benefit page 12 technical bulletin 20111 fasab handbook, version',
32879:'20 06/21 technical bulletin 20111 from the additional reporting requirements of sffas 38. therefore, federal entities are not required to,',
32880:'but may, apply the guidance in this technical bulletin to renewable natural resources. electromagnetic spectrum a8. staff believes that auctions',
32881:'of the electromagnetic spectrum may not be similar enough to oil and gas royalties that an appropriate analogy can be',
32882:'made under the principles contained in sffas 38. the spectrum is closer to a renewable resource in that it is',
32883:'inexhaustible in duration but limited in the amount of spectrum that is available per unit of time. proceeds from auctions',
32884:'of the spectrum are not received on a consistent basis from year to year since the need for auction depends',
32885:'on the mutual exclusivity of the applications received in any given year for example, auction proceeds were $16.8 billion, $1.8',
32886:'billion, $13.9 billion, and $104 million in fiscal years 2009, 2008, 2007, and 2006, respectively. in addition, the asset that',
32887:'is being sold is the right to use the spectrum for a period of time, similar to a standard operating',
32888:'lease; nothing is being used up or depleted. furthermore, auctionproceedsareonetimepayments madebyeachauction’s winner;theyarenot made over the course of a lease, contract,',
32889:'or other longterm agreement. therefore, federal entities are not required to, but may, apply the guidance in this technical bulletin',
32890:'to the electromagnetic spectrum. a9. the board decided to add accounting for the electromagnetic spectrum to its list of potential',
32891:'projects for consideration at future agendasetting sessions. if the project is selected for the agenda, the board would determine if',
32892:'additional guidance is warranted see sffas 7 paragraphs 145, 278 and 279. as of the issuance of this technical bulletin,',
32893:'this potential project has not been added to the board’s fiveyear agenda. other natural resources a10.the guidance in this technical',
32894:'bulletin applies the general principles of sffas 38 to other natural resources where staff believes an analogy can be drawn.',
32895:'while staff thought it was appropriate to limit the guidance of this technical bulletin to those resources that most closelyanalogizedwith',
32896:'federaloilandgas provedreserves,federalentities may believethat additional reporting on other natural resources under its management is appropriate. therefore, federal entities are not',
32897:'required to, but may, apply the guidance in this technical bulletin to other natural resources that are not under lease,',
32898:'contract, or other longterm agreement. page 13 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 due process',
32899:'a11.the exposure draft ed, technical bulletin 20111, accounting for federal natural resources other than oil and gas, was released on',
32900:'january 5, 2011, with comments requested by january 31, 2011. a12.upon release of the ed, notices and press releases were',
32901:'provided to the fasab email listserv, the federal register, the journal of accountancy, aga today, the cpa journal, government executive,',
32902:'the cpa letter, government accounting and auditing update, the cfo council, the council of inspectors general on integrity and efficiency,',
32903:'and the financial statement audit network, and committees of professional associations generally commenting on exposure drafts in the past e.g.,',
32904:'greater washington society of cpas, aga financial management standards board. a13.this broad announcement was followed by direct emailings of the',
32905:'press release to: a. relevant congressional committees: senate committee on energy and natural resources, senate committee on finance, house committee',
32906:'on financial services, and house committee on natural resources; b. public interest groups and think tanks:alliance to save energy, the',
32907:'brookings institution, the cato institute, the center on budget and policy priorities, citizens against government waste, the concord coalition, the',
32908:'heritage foundation, national parks conservation association, natural resources defense council, omb watch, resources for the future, the sierra club, the',
32909:'urban institute, and world resources institute; c. respondents to sffas 38 and related eds or their successors; d. agencies that',
32910:'manage and/or account for federal natural resources: department of the interior doi office of the secretary; doi bureau of land',
32911:'management ; doi bureau of ocean energy management, regulation and enforcement; doi u.s. geological service; department ofagriculture usda, deputy cfo;',
32912:'and usdaforest service. a14.to encourage responses, reminder notices were provided to the fasab email listserv on january 28, 2011, and',
32913:'february 8, 2011. page 14 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 comment letters a15.eight comment',
32914:'letters were received from the following sources: federal internal nonfederal external users, academics, others 0 2 auditors 1 0 preparers',
32915:'and financial managers 5 0 a16.responses to the exposure draft were considered at the february 24, 2011, public board meeting.',
32916:'staff did not rely on the number in favor of or opposed to a given position. information about the respondents’',
32917:'majority view is provided only as a means of summarizing the comments. the board and staff considered the arguments in',
32918:'each response and weighed the merits of the points raised. the respondents’ comments are summarized below. a17.respondentsgenerallyagreedwiththeproposedguidance;therespondentsthatexpressed the most reservations',
32919:'are the ones that would need to determine whether they have material natural resources that are 1 under lease, contract,',
32920:'or other longterm agreement and 2 reasonably estimable as of the reporting date. staff does not believe that an agency’s',
32921:'current inability to determine materiality should be a barrier to issuing the proposal because it would seem that agencies that',
32922:'are leasing the federal government’s natural resourcesover along period of time greaterthan fiveyearsshouldhavea reasonableidea of the amount that the federal',
32923:'government should be receiving for those nonrenewable natural resources assuming stable economic conditions and where the reasonably estimable hurdle is',
32924:'overcome. if the agencies do not know whether something is material or not, federal financial reporting objectives such as being',
32925:'able to determine whether the federal government is being a good steward cannot be met. a18.one of the respondents stated',
32926:'that they do not believe the information is reasonably estimable. if the information is not reasonably estimable, it would not',
32927:'meet one of the primary requirements for being included in the schedule under lease, contract, or other longterm agreement and',
32928:'reasonably estimable as ofthe reporting date and would only need to be included in the narrative discussion proposed in paragraph',
32929:'27f. a19.onerespondentstatedthat significant audit costscouldbeincurredby providinginformation to the auditor that confirms “immateriality” and “completeness” especially if information is not centrally',
32930:'available. because materiality assessments require both qualitative and quantitative judgments, specific guidance limiting preparer and auditor considerations of information would',
32931:'not be appropriate. page 15 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 a20.one respondent stated that',
32932:'the technical bulletin should explain the rationale for using the fiveyear term as the basis for the definition of “longterm.”',
32933:'staff selected a fiveyear term based on the definition of “longterm assumptions” that was established in sffas 33, pensions, other',
32934:'retirement benefits, and other postemployment benefits: reporting the gains and losses from changes in assumptions and selecting discount rates and',
32935:'valuation dates, which states, “assumptions are considered longterm if the underlying event about which the assumption is made will not',
32936:'occur for five years or more.” meeting with doi representatives a21.at the february meeting, several board members expressed significant concern',
32937:'about the potential cost of the proposal based on doi’s letter and the conflicting views presented by doi bureaus. the',
32938:'members asked for additional information from doi. a22.staff asked doi to clarify its response to the exposure draft and invited',
32939:'representatives from doi to the april meeting to allow the board members to ask questions about doi’s response. a23.as a',
32940:'result of doi’s revised response received on april 15, 2011, and its meeting with the board, it was determined that',
32941:'doi had interpreted the technical bulletin as requiring an estimate of the entire asset instead of just the estimated inflows',
32942:'to the federal government. board members believe, and doi confirmed, that it should be able to obtain this information by',
32943:'reviewing the actual lease agreements and developing an estimate based on the terms of the leases. doi stated that it',
32944:'believes it can gather the information but would like to have until 2014 to implement the requirements of the technical',
32945:'bulletin because its resources are already dedicated to implementation of sffas 38 and rolling out a new core financial system.',
32946:'staff agreed with a fiscal year 2014 implementation date and revised the effective date accordingly. board review a24.the board has',
32947:'reviewed this technical bulletin, and a majority of its members do not object to its issuance. page 16 technical bulletin',
32948:'20111 fasab handbook, version 20 06/21 technical bulletin 20111 appendix b:abbreviations cfr consolidated financial report of the u.s. government doi',
32949:'u.s. department of the interior eia u.s. energyinformationadministration fasab federalaccountingstandardsadvisoryboard rsi required supplementary information sffac statementoffederalfinancialaccountingconcepts sffas statementoffederalfinancialaccountingstandards snc statement',
32950:'of net cost socnp statement of operations and changes in net position u.s.c. united states code usda u.s. department ofagriculture',
32951:'page 17 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 appendix c: technical terms the terms explained',
32952:'inappendix c have specific application to federal natural resources and may be useful in applying the requirements of this technical',
32953:'bulletin. definitions of federal natural resources components and subcomponents provided below are definitions used in this technical bulletin to describe',
32954:'federal natural resource components and subcomponents.16 this section ofappendix c defines the terms used in figure 1 – components of',
32955:'federal natural resources other than oil and gas. undiscovered resources resources surmised to exist on the basis of broad geologic',
32956:'knowledge and theory.17 undiscovered nonrecoverable resources – the portion of undiscovered federal natural resourcesnot currently consideredto berecoverable. aportionoftheseresources may become',
32957:'recoverable in the future as commercial circumstances change, technological developments occur, or additional data are required. undiscovered recoverable resources –',
32958:'the portion of undiscovered federal natural resources that are estimated to exist in favorable geologic settings.18 undiscovered conventionally recoverable resources:',
32959:'the portion of undiscovered federal natural resources that is producible, using present or reasonably foreseeable technology, without any consideration of',
32960:'economic feasibility. undiscovered economically recoverable resources: the portion of undiscovered federal natural resources that is economically recoverable under imposed economic',
32961:'scenarios. 16 unless otherwise noted, definitions in this section were adapted from sffas 38,appendix d: technical terms. 17 adapted from',
32962:'the energy informationadministration eia glossary, available at http://www.eia.doe.gov/glossary/; last accessed october 4, 2010. 18ibid. page 18 technical bulletin 20111 fasab',
32963:'handbook, version 20 06/21 technical bulletin 20111 discovered resources resources whose location and quantity are known or estimated from specific',
32964:'geologic evidence. notavailablefor saleor lease –resources that arenotavailable for saleor transfer because they have been legislatively or administratively withdrawn. legislatively',
32965:'withdrawn resources:thoseresources thatbylawcannotbeofferedfor transfer to private entities e.g., resources in wildernessareas, national parks, and recreationareas. administrativelywithdrawnresources:thoseresourcesinareaswhichbylawcouldbe offered for transfer to',
32966:'private entities, but which have been administratively withdrawn. such resources could be made available for future transfer by administrative decision',
32967:'without change in law e.g., locatable minerals in scenic or recreational areas. available for sale or lease – those resources',
32968:'that are available for sale or transfer because they have not been legislatively or administratively withdrawn. planned to be offered:',
32969:'resources planned to be offered are those resources for which it has been determined that specific types of resources in',
32970:'specific locations or within specific areas will be made available for sale or transfer to private entities e.g., areas open',
32971:'to claims under the mining law of 1872. under contract but not conveyed: resources “under contract” are resources that have',
32972:'been offered for sale through a lease, contract, or other longterm agreement but have not yet been conveyed to the',
32973:'purchaser. reasonably estimable: reasonably estimable resources under contract but not yet conveyed are those resources that are under lease, contract,',
32974:'or other longterm agreement; known to exist as of yearend; and for which the value can be reasonably estimated. not',
32975:'reasonably estimable: not reasonably estimable resources under contract but not conveyed are those resources that are under lease, contract, or',
32976:'other longterm agreement; known to exist as of yearend; but for which the value cannot be reasonably estimated. other: other',
32977:'resources available for sale are those resources which are neither restricted by law nor administratively withdrawn, are outside of areas',
32978:'for which there are contracts to convey a resource, and are outside of areas for which the determination has been',
32979:'made to offer the resource for sale. page 19 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111',
32980:'end of the terms in figure 1 that are defined under the subheading “definitions of federal natural resources components and',
32981:'subcomponents.” other definitions electromagnetic spectrum: the range of electromagnetic radio frequencies waves per secondusedtotransmitsound,data,andvideoacrossthecountry. itcarriesvoicebetweencell phones, television shows from broadcasters',
32982:'to the television, and online information from one computer to the next, wirelessly. the electromagnetic spectrum includes from longest wavelengthto',
32983:'shortest: radio waves, microwaves, infrared, opticalorvisible, ultraviolet, xrays, and gammarays.19 estimated petroleum royalties: the estimated endofperiod value of the federal',
32984:'government’s royalty share of proved oil and gas reserves from federal oil and gas resources. federal natural resources: federal natural',
32985:'resources are resources that occur in nature including nonrenewable and renewable natural resources and meet all of the following criteria:',
32986:'a the federal government may exercise sovereign rights over the resources with respect to explorationandexploitation;bthefederalgovernmenthasthe authoritytoderiverevenuesfrom the resources for its',
32987:'use; and, c the resources are contained on federal lands or the federal government substantially manages and/or controls the resources.20',
32988:'federal oil and gas resources: oil and gas resources over which the federal government may exercise sovereign rights with respect',
32989:'to exploration and exploitation and from which the federal government has the authority to derive revenues for its use. federal',
32990:'oil and gas resources do not include resources over which the federal government acts as a fiduciary for the benefit',
32991:'of a nonfederal party. foregone revenue: foregone revenue is the reduction, modification, or elimination of any royalty or other fee',
32992:'to operators to promote development, increase production, or encourage production of marginal resources on certain leases or categories of leases.21',
32993:'19 federal communications commission, available online at http://reboot.fcc.gov/reform/systems/ spectrumdashboard/ about; last accessed september 22, 2010. 20 adapted from sffas 38,',
32994:'available at http://www.fasab.gov/codifica.html; last accessed september 14, 2010. 21 adapted from definition of royalty relief from 43 u.s.c. § 1337a.',
32995:'page 20 technical bulletin 20111 fasab handbook, version 20 06/21 technical bulletin 20111 nonrenewable natural resources: resources that cannot be',
32996:'easily made or renewed, such as oil, natural gas, and coal.22 proved reserves: for crude oil and gas, proved reserves',
32997:'are the estimated quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in futureyearsfromknownreservoirsunderexistingeconomicandoperatingconditions. forlease condensate',
32998:'and natural gas plant liquids, proved reserves are the estimated quantities demonstrated with reasonable certainty to be recoverable in future',
32999:'years in conjunction with the production of proved gas reserves, under existing economic and operating conditions. the total quantity of',
33000:'proved reservesis calculated byadding the quantity of reserves reported as revisions and adjustments, net of sales and acquisitions, total recoveries',
33001:'and deducting estimated production during the report year. renewable natural resources: resources that are naturally replenishing but flowlimited. they are',
33002:'virtually inexhaustible in duration but limited in the amount of resources that are available per unit of time. renewable resources',
33003:'include, but are not limited to, timber, biomass, hydropower, geothermalenergy, solar,wind,water,fish,wildlife, ocean thermal, wave action, and tidal action.23 the opposite',
33004:'of renewable is depletable, which refers to resources that are diminished after use, such as coal, oil, and gas. royalty',
33005:'relief: existing statutes authorize doi to grant royalty relief to operators on the production of oil and gas resources from',
33006:'federal oil and gas leases. royalty relief is the reduction, modification, or elimination of any royalty to operators to promote',
33007:'development, increase production, or encourage production of marginal resources on certain leases or categories of leases.24 22 adapted from eiaglossary,',
33008:'available at http://www.eia.doe.gov/glossary/; last accessed may 10, 2011. 23 adapted from eiaglossary. 2443 u.s.c. § 1337a. page 21 technical bulletin',
33009:'20111 fasab handbook, version 20 06/21 technical bulletin 20112: extended deferral of the effective date oftechnical bulletin 20061, recognition and',
33010:'measurement of asbestosrelated cleanup costs status issued september 22, 2011 effective date effective upon issuance. affects technicalbulletin 20061, par. 50,',
33011:'by replacingthe year “2011” with “2012.” affected by none. summary this technical bulletin extends the deferral of the effective date',
33012:'of technical bulletin 20061, recognition and measurement of asbestosrelated cleanup costs, by one year. the guidance in technical bulletin 20061',
33013:'will be effective for reporting periods beginning after september 30, 2012. page 1 technical bulletin 20112 fasab handbook, version 20',
33014:'06/21 technical bulletin 20112 table of contents summary 1 technical guidance 3 scope 3 amendment of technical bulletin 20061 3',
33015:'effective date 3 appendixa:basis for conclusions 4 appendix b:abbreviations 10 page 2 technical bulletin 20112 fasab handbook, version 20 06/21',
33016:'technical bulletin 20112 technical guidance scope 1. thisguidanceaffectsallfederalentitiesthatownbuildings,facilities,ships,orothertangible property, plant, and equipment pp&e that contain any form of asbestos and',
33017:'present general purpose federal financial reports in conformance with generally accepted accounting principles, as defined by statement of federal financialaccounting',
33018:'standards 34, the hierarchy of generally accepted accounting principles, including the application of standards issued by the financial accounting standards',
33019:'board. amendment of technical bulletin 20061 2. the effective date of the guidance on recognition and measurement of asbestosrelated cleanup',
33020:'costs provided in par. 50 of technical bulletin 20061 is amended as follows: this technical bulletin is effective for reporting',
33021:'periods beginning after september 30, 20112012. earlier adoption is encouraged. effective date 3. this technical bulletin is effective upon its',
33022:'issuance. the provisions of thistechnical bulletin need not be applied to immaterial items. page 3 technical bulletin 20112 fasab handbook,',
33023:'version 20 06/21 technical bulletin 20112 appendixa: basis for conclusions the federalaccounting standardsadvisory board has authorized its staff to prepare',
33024:'fasab technical bulletins to provide timely guidance on certain financial accounting and reporting problems, in accordance with the board’s rules',
33025:'of procedure, as amended and restated through april 2004, and the procedures described in fasab technical bulletin 20001, purpose and',
33026:'scope of fasab technical bulletins and procedures for issuance. the provisions of technical bulletins need not be applied to immaterial',
33027:'items. this appendixdiscusses some factors considered significant by staff in reaching the conclusions in this technical bulletin. it includes the',
33028:'reasons for accepting certain approaches and rejecting others. some factors were given greater weight than other factors. the guidance enunciated',
33029:'in the technical guidance section – not the materialin this appendix – should govern the accounting for specific transactions, events',
33030:'or conditions. background a1. on april 15, 2011, staff received a formal letter from the u.s. department of the interior',
33031:'doi or interior, requesting that the board revisit technical bulletin 20061, recognition and measurement of asbestosrelated cleanup costs, to consider',
33032:'permitting agencies to report the estimated asbestosrelated cleanup liability in required supplementary information rsi for several fiscal years until more',
33033:'data becomes available to make a more reliable estimation for asbestosrelated cleanup costs. a2. the request stated, “to comply with',
33034:'the requirements of [statement of federal financial accounting standards sffas] 6 and [technical bulletin] 20061, the department of the interior',
33035:'interior began compiling cost data related to the cleanup of friable and nonfriable asbestos. todate,interiorhassurveyedmorethan3,000buildingsandstructuresatacost ofmorethan$2.5million. interiorownsapproximately160,000buildingsandstructures. to estimate the',
33036:'total asbestosrelated cleanup costs for this large inventory of real property, interior has chosen the cost modeling approach based on',
33037:'existing survey data. the modelingapproach,thoughtheleastcostly of allmethodologies,poses severalproblems for interior. first, the cost factor developed based on existing surveys is',
33038:'not representative for all asset types. actual surveys performed by interior were primarily on buildings, and interior owns more than',
33039:'106,000 structures, for which little or no actual cleanup data is available. second,althoughfederalaccountingstandardsadvisoryboardfasaballows the use of information from industryspecific cost',
33040:'estimation publications or standardized costs factors developed for each state, there is little or no actual asbestos cleanup data availableforcertainassetgroups.',
33041:'forexample,thereisnoactualasbestosrelatedcleanup data available for monuments and other types of heritage assets owned by interior.” page 4 technical bulletin 20112 fasab',
33042:'handbook, version 20 06/21 technical bulletin 20112 a3. doi’s request went on to state, “in order to continue with this',
33043:'approach, interior would need to perform a significant number of additional surveys for certain assets groups and this presents a',
33044:'major challenge. in light of current resource constraints, coupled with probable future budget cuts, the requirement to complete additional surveys',
33045:'would impose a significant financial hardship for interior. we also need to consider the impact to our financial statements audit.',
33046:'interior will likely face hurdles with our external auditors due to the inability to dedicate more resources to the performance',
33047:'of more surveys. because of resourcesconstraints,interiormayexperienceadverseactionduringthe financialstatement audit once [technical bulletin] 20061 becomes effective as written.” a4. membershadanopportunitytoaskrepresentativesfromdoiquestionsaboutitsrequestat the april',
33048:'28, 2011, board meeting during a separate discussion related to technical bulletin 20111, accounting for federal natural resources other than',
33049:'oil and gas. at that meeting, several of the board members agreed that they would like to have a status',
33050:'of what other agencies were doing before they made a decision on it. a5. in addition to obtaining more specific',
33051:'information on doi’s methodology and its facilities, staff performedthefollowingresearchandoutreachregardingreportingforasbestosrelated liability costs following the april 28, 2011, fasab meeting: a. researched',
33052:'and reviewed how other federal agencies entities that primarily apply standards issued by the nongovernmental financial accounting standards board fasb',
33053:'and early implementers of fasab requirements have reported asbestos related liability costs; b. researched and reviewed how respondents to fasb',
33054:'interpretation no. fin 47, accounting for conditionalasset retirement obligations now fasb accounting standards codification asc 41020, asset retirement obligations, and',
33055:'others,have reported asbestosrelated liability costs; c. sent a poll on agency readiness for implementation of technical bulletin 20061 to agriculture,',
33056:'commerce, defense, energy,generalservicesadministration,healthand human services, homeland security, housing and urban development, doi, justice, labor, nationalaeronautics and spaceadministration, national science foundation,',
33057:'state, transportation, treasury, veteransaffairs, the financial statementaudit network listserv, and participants of theaccounting andauditing policy committee asbestos subgroup; d. organized',
33058:'an agency roundtable on implementation of technical bulletin 20061 to provide an opportunity for the federal community to: page 5',
33059:'technical bulletin 20112 fasab handbook, version 20 06/21 technical bulletin 20112 i. learnaboutothers’experiencesandmethodologyforestimatingasbestoscleanup costs per the requirements of: 1. fasab',
33060:'sffas 6, accounting for property, plant, and equipment, chapter 4, cleanup costs;andtechnicalbulletin 20061, recognition and measurement of asbestosrelated cleanup costs;',
33061:'and, 2. fasbasc41020, asset retirement obligations ii. discuss best practices and issues surrounding the implementation of technical bulletin 20061; and,',
33062:'e. actively sought participants that would be willing to share different methodologies and best practices related to reporting of asbestosrelated',
33063:'liabilities at the roundtable. a6. based on staff’s research and outreach, the majority of agencies believe they have taken the',
33064:'steps necessary to implement technical bulletin 20061 for fiscal year 2012. however, of the agencies responding to staff’s readiness poll,',
33065:'the three agencies that responded that they would not be ready for a 2012 implementation data, collectively own over 60%',
33066:'of the total number of buildings and over 49% of the total square footage reported on the fiscal year 2009',
33067:'federal real property statistics report.1 a7. at the june 22, 2011, meeting, staff briefed fasab board members on the results',
33068:'of its research and outreach and answered questions related to doi’s request and staff’s recommendation. a representative from doi who',
33069:'was observing the meeting responded to members’ questions about the current status of its efforts and plans for implementation. a8.',
33070:'doi is actively working towards developing a reasonable estimate of their asbestosrelated liabilities,buthasformallyrequestedalittlemoretimetofinalizeit. inaddition,severalother agencies that collectively own over half',
33071:'of the federal real property are not yet prepared for a 2012 implementation. with the information shared at the june',
33072:'2011 fasab roundtable on implementation of technical bulletin 20061 and the expectation that the chief financial officers cfo council will',
33073:'lead an effort to coordinate implementation through the sharing of relevant data and experience, staff believes doi and other federal',
33074:'agencies willbe better positioned to more effectively implement the reporting requirements. the planned joint efforts will likely lead to more',
33075:'cost effective implementation as well as more comparable results. to allow time for such efforts, a fiscal year 2013 implementation',
33076:'date is needed. 1available online at www.gsa.gov/graphics/ogp/fy2009frprstatistics.pdf; last accessedapril 21, 2011. page 6 technical bulletin 20112 fasab handbook, version 20',
33077:'06/21 technical bulletin 20112 a9. for those reasons, staff recommends that the effective date of technical bulletin 20061, recognition and',
33078:'measurement of asbestosrelated cleanup costs, be deferred for one additional year to enable doi and other agencies to finalize their',
33079:'methodology and develop an estimate. early implementation is strongly encouraged. a10.in addition, to ensure that issues arising during the implementation',
33080:'effort are identified timely, staff plans to host an additional roundtable in early 2012. exposure draft a11.the exposure draft, extended',
33081:'deferral of the effective date of technical bulletin 20061, recognition and measurement of asbestosrelated cleanup costs, was issued july 13,',
33082:'2011, with comments requested by august 3, 2011. upon release of the exposure draft, notices and press releases were provided',
33083:'to the federal register, fasab news, the journal of accountancy, aga today, the cpa journal, government executive, the cpa letter,',
33084:'and government accounting and auditing update, the cfo council, the council of inspectors general on integrity and efficiency, and the',
33085:'financial statement audit network, and, committees of professional associations generally commenting on exposure drafts in the past. a12.to encourage responses,',
33086:'a reminder notice wasprovided to our listserv on august2,2011. comment letters a13.thirteen comment letters were received from the following sources:',
33087:'federal internal nonfederal external users, academics, others 1 auditors preparers and financial managers 12 a14.the board considered responses to the',
33088:'exposure draft at its august 24, 2011, meeting. eleven of the 13 respondents were in favor of deferring the effective',
33089:'date. two respondents did not comment on the proposal. since there was no opposition to the deferral proposed in the',
33090:'ed, staff recommended that the proposal be issued as final. a15.one respondent questioned whether there was a need for such',
33091:'a standard since there are vast differences between agencies and a “one size fits all” approach may not be the',
33092:'best one. the respondent suggested that fasab consider deferring final implementation of technical bulletin 20061 until the ongoing efforts of',
33093:'fasab and the cfo council to page 7 technical bulletin 20112 fasab handbook, version 20 06/21 technical bulletin 20112 coordinate',
33094:'implementation of technical bulletin 20061 are complete. staff believes deferring until the cfo council coordinates could further delay implementation as',
33095:'other priorities arise. staff recommends issuing the oneyear deferral. a16.another respondent commented that, in order for an environmental liability el',
33096:'to be present, there must be an existing law or regulation that requires cleanup. the respondent statedthat,sinceasbestosis not currently required',
33097:'to be cleanedup untilit becomesfriable, nonfriable asbestos is not an el. the respondent asked for clarification and clear guidance on',
33098:'how nonfriable asbestos could result in an el. staff notes that the basis for conclusionsbfc of technicalbulletin 20061 includes a',
33099:'discussion regarding why thereis an accounting liability for cleanup of nonfriable asbestos even though there is no el for cleanup',
33100:'of asbestos until it becomes friable. the accounting liability is based on the fin 47 asc 41020 premise that no',
33101:'building lasts forever. the difference between the two liabilities is further discussed in pars. a13 and a14 from the bfc',
33102:'in technical bulletin 20061: a13.as noted in paragraph 5, asbestosrelated cleanup costs includes cleanup costs related to both friable and',
33103:'nonfriable asbestoscontaining material. under the asbestos neshap [national emissionsstandards forhazardousairpollutants], friableasbestos is currently required by lawtobe removed, contained, and properly',
33104:'disposed of in the context of a demolition or renovation of a covered facility. there is no immediate requirement for',
33105:'the federal government to remove nonfriable asbestos in good condition that is not currently posing a health threat. however, the',
33106:'future repair, removal, renovation, demolition or other disturbance of asbestoscontaining material may cause the asbestos to become friable and, because',
33107:'of limitation on the life of pp&e other than land, it is inevitable that these actions will occur. thus, the',
33108:'event triggering the liability is the existence of asbestos in federal property, plant, and equipment, not a legal requirement to',
33109:'remove, contain, or dispose of the asbestos. therefore, the accounting treatment for asbestos provided for in this technical bulletin is',
33110:'based on the best estimate of the costs that will be incurred in the future for removal, containment,ordisposal of asbestos',
33111:'thatexists in federalproperty, plant, and equipment as of the reporting date. the ability of the federal government to sell the',
33112:'federal property, plant, and equipment or otherwise dispose of it in the future without incurring any asbestosrelated cleanup costs may',
33113:'affect measurement of the liability but does not negate the existence of the liability as of the reporting date. a14.',
33114:'it is important to note that the requirement to estimate a liability for asbestosrelated cleanup costs and the requirement to',
33115:'actually perform asbestosrelated cleanup are two completely separate requirements. it is not within the scope or the intent of accounting',
33116:'standardsetters to establish what asbestosrelated cleanup will be required and when. this must be determined by reference to applicable law.',
33117:'furthermore, this technical bulletin does not intend to imply that recognizing a liability for asbestosrelated cleanup costs in any way',
33118:'reflects a judgment about the legal obligation of the federal government for asbestosrelated cleanup. the purpose of this technical bulletin',
33119:'is to provide guidance that will result in the more consistent and timely recognition of an accounting liability. page 8',
33120:'technical bulletin 20112 fasab handbook, version 20 06/21 technical bulletin 20112 a17.another respondent noted overall agreement with the oneyear deferral',
33121:'but stated that the board should adopt doi’s request that the information be reported as rsi in addition to the',
33122:'oneyear deferral. this suggestion cannot be adopted through a technical bulletin since it would require an amendment to an existing',
33123:'statement of federal financial accounting standards. a18.the board has reviewed this technical bulletin, and a majority of its members do',
33124:'not object to its issuance. page 9 technical bulletin 20112 fasab handbook, version 20 06/21 technical bulletin 20112 appendix b:abbreviations',
33125:'aga associationofgovernmentaccountants asc accounting standards codification bfc basis for conclusions cfo chief financial officers cpa certifiedpublicaccountants doi u.s. department of',
33126:'the interior el environmental liability fasab federalaccountingstandardsadvisoryboard fasb financialaccountingstandards board fin fasb interpretation number neshap nationalemissions standards for hazardousairpollutants pp&e',
33127:'property, plant, and equipment rsi required supplementary information sffas statementoffederalfinancialaccountingstandards page 10 technical bulletin 20112 fasab handbook, version 20 06/21',
33128:'technical bulletin 20171: intragovernmental exchange transactions status issued november 1, 2017 effective date effective upon issuance. affects this tb clarifies',
33129:'sffas 5 and sffas 7 regarding intragovernmental exchange transactions. affected by none. summary this technical bulletin tb clarifies existing standards',
33130:'regarding intragovernmental exchange transactions. statement of federal financialaccounting standards sffas 5, accounting for liabilities of the federal government, and sffas',
33131:'7, accounting for revenue and other financing sources and concepts for reconciling budgetary and financial accounting, define exchange transactionsand exchange',
33132:'revenue respectively. however, neither fullyaddresses the uniquenature of intragovernmentaltransactions. thistbprovidesguidancetoaidin determining whether intragovernmental arrangements are exchange transactions. specifically, it addresses',
33133:'whether value has been sacrificed and received by the parties to a transaction. generally, if both parties agree that value',
33134:'has been exchanged that is, each asserts that value is received and sacrificed, identifythenatureofthevalue received and sacrificed, anddemonstrate exchange of',
33135:'something of value, then the transaction should be considered an exchange transaction. this is true even if there is a',
33136:'significant difference in the values exchanged or between the value received and the cost incurred to obtain the value. this',
33137:'tb improves the reporting of revenue and cost information by ensuring that transactions are appropriately classified. it also reduces the',
33138:'barriers to and cost of adopting generally accepted accounting principles. materiality the provisions of this tb need not be applied',
33139:'to immaterial items. the determination of whether an item is material depends on the degree to which omitting or misstating',
33140:'information about the itemmakesit probable that thejudgment of areasonablepersonrelying on theinformationwould have been changed or influenced by the omission or',
33141:'the misstatement. page 1 technical bulletin 20171 fasab handbook, version 20 06/21 technical bulletin 20171 table of contents summary 1',
33142:'technical guidance 3 scope 3 effective date 7 appendixa:basis for conclusions 8 page 2 technical bulletin 20171 fasab handbook, version',
33143:'20 06/21 technical bulletin 20171 technical guidance scope 1. what reporting entities are affected by this technical bulletin tb? 2.',
33144:'this guidance applies to all reporting entities that present general purpose federal financial reports gpffrs in conformance with generallyaccepted accounting',
33145:'principlesgaap as defined by paragraphs 5 through 8 of statement of federal financialaccounting standards sffas 34, the hierarchy of generally',
33146:'accepted accounting principles, including the application of standards issued by the financial accounting standards board. 3. what accounting practices are',
33147:'addressed in this tb? 4. this tb guides identification of intragovernmental exchange transactions. this tb does not address recognition and',
33148:'measurement of exchange transactions. 5. when one federal entity the providing entity arranges for a thirdparty to perform services for',
33149:'another federal entity the receiving entity for example, outsourcing such as arranging for an office lease for another federal entity',
33150:'and both the providing andthe receiving entitysacrificeand receive valuein thetransaction,isthe entire transaction an exchange transaction? 6. yes, if the transaction',
33151:'meets the definition of an exchange transaction then the entire transaction is an exchange transaction.1therefore, the providing entity should record',
33152:'exchange revenue for the full amount the providing entity billed to the receiving entity;2 the receiving entity should record expense',
33153:'and/or a capitalized asset consistent with gaap for the full amount payable to the providing entity. this is true even',
33154:'if the providing entity does not fully recover its administrative costs or plays only a minor role in the transaction.',
33155:'for example, the service provided may be limited to coordinating funding, facilitating transactions, negotiating contracts, and/or providing other related arrangements.',
33156:'1as discussed in paragraph10. if both parties agreethat value has been exchanged that is, each asserts that value is received',
33157:'and sacrificed, identify the nature of the value received and sacrificed, and demonstrate exchange of something of value, then the',
33158:'transaction should be considered an exchange transaction. 2the providing entity incurs the costs of providing the service such as paying',
33159:'contractors, employees, and other resources providers. the receiving entity then pays the providing entity. page 3 technical bulletin 20171 fasab',
33160:'handbook, version 20 06/21 technical bulletin 20171 7. sffas7,accounting for revenue and other financing sources and concepts for reconciling budgetary',
33161:'and financial accounting, paragraph 33 defines exchange revenue as inflows of resources to a government entity that the entity has',
33162:'earned. they arise from exchange transactions, which occur when each partyto the transaction sacrifices value and receives value in return.',
33163:'the full amount billed to customers should be recognized as exchange revenue. even when the service is limited, such as',
33164:'being an intermediary to third parties, amounts received are appropriately classified as exchange revenue. the providing entity earnsthe fullamount of',
33165:'the payment byensuring that the receiving entitys criteria are met. exchange transactions contrast with nonexchange transactions where no value is',
33166:'expected or received by one of the parties. 8. further, both the providing and receiving entity should report the full',
33167:'cost of the transaction. sffas 4, managerial cost accounting standards and concepts, as amended requires entitiesgenerally to recognize the full',
33168:'cost. paragraph 108 adds if an entity providesgoods or services to another entity, regardless of whether full reimbursement is received,',
33169:'the providing entity should continue to recognize in its accounting records the full cost of those goods or services. recognizing',
33170:'the full cost facilitates an assessment of the performance of both entities. for example, the full cost of outsourced services',
33171:'is relevant to assessing how well the providing entity performed its role regarding the outsourced services. for the receiving entity,',
33172:'the full cost is relevant to assessing the efforts undertaken during the reporting period. 9. isitnecessaryto considerwhethertheoverallvalueto each partyin thearrangement',
33173:'is approximately equal or whether the value to each party is approximately equal to the cost in determining whether the',
33174:'transaction is an exchange transaction? 10. no, sffas 7 requires only that some value is received and sacrificed by both',
33175:'parties to qualify as an exchange transaction. also, sffas 7 acknowledges that intragovernmental arrangements are between parties under common control;',
33176:'such arrangements are non market transactions.3 for nonmarket transactions, the value received in return for the revenue given may not',
33177:'be equivalent. generally, if both parties agree that value has been exchanged that is, each asserts that value is received',
33178:'and sacrificed, identify the nature of the value received and sacrificed, and demonstrate exchange of something of value, then the',
33179:'transaction should be considered an exchange transaction. thisistrue even if there is a significant difference in the values exchanged or',
33180:'between the value received and the cost incurred to obtain the value. further, whether or not the providing entity incurs',
33181:'net revenue or net cost as a result of the transaction does not affect the classification. 3sffas 7, par. 46b.',
33182:'page 4 technical bulletin 20171 fasab handbook, version 20 06/21 technical bulletin 20171 11. sffas 7, paragraph 111 recognizes that',
33183:'exchange transactions may occur between entities within the government, sometimes as stipulated by law and in other cases by mutual',
33184:'agreement. consequently, classification as an exchange transaction is not dependent onwhetherthe transaction isstipulatedbylaw,policy, or bymutual agreement of the parties. 12.',
33185:'what does sacrifice value mean? 13. value may be sacrificed in many ways including by: a. making a payment b.',
33186:'providing something of value such as an item of property c. performing a service such as consulting, advising or informing',
33187:'another party, or d. arranging a contract or agreement or coordinating funding on behalf of another party.4 14. in some',
33188:'cases, the value sacrificed may not be measurable. in addition, the act of sacrificing value may provide value to both',
33189:'parties. for example, providing a consulting service may result in knowledge of benefit to both parties to the transaction as',
33190:'well as to others. the inability to measure the value sacrificed and the fact that the good or service is',
33191:'of continuing value to the provider, and possibly to others, does not mean the transaction is not an exchangetransaction.asanexchange transaction,',
33192:'recognition of cost orcapitalized assetand revenue should bebasedon theapplicablestandards. that is,it isnotnecessary to establish the value exchanged in order to',
33193:'recognize cost and/or revenue.5 15. what types of value may be considered sacrificed and received for an intragovernmental transaction to',
33194:'be classified as an exchange transaction? 16. as noted earlier, intragovernmental transactions are between parties under common control; such arrangements',
33195:'are nonmarket transactions. if the parties agree that value has been exchanged, identify the nature of the value exchanged, and',
33196:'demonstrate that the exchange occurred then the transaction qualifies as an exchange transaction. government operations are increasingly integrated; particularly where',
33197:'common goals require a 4sffas 4, par. 106107. 5for example, sffas 4, par. 15 defines cost as the monetary value',
33198:'of resources used or sacrificed or liabilities incurred to achieve an objective, such as to acquire or produce a good',
33199:'or to perform an activity or service. page 5 technical bulletin 20171 fasab handbook, version 20 06/21 technical bulletin 20171',
33200:'coordinated effort. each party to a transaction should assess whether the transaction provides value.6 17. the partys classification of the',
33201:'transaction is particularly important because exchange transactions affect the gross and net cost of each reporting entity. if a party',
33202:'improperly identifiesthe transaction as a nonexchange transaction, the amounts would be reported on the statement of changes in net position',
33203:'which would misstate net cost during the reporting period. to avoid misstating net cost, a reporting entitys assertion that value',
33204:'was sacrificed and received when combined with identification of the nature and receipt of that value should result in classification',
33205:'as an exchange transaction. 18. parties considering whether they sacrificed and received value may consider value that is: a. direct',
33206:'such as goods or services made available to them through the actions of the other party; b. indirect such as',
33207:'goods or services made available to support their mission as a result of the actions of the other party; c.',
33208:'tangible such as property, plant, or equipment; d. intangible such as information systems, written materials, or information; e. quantitative such',
33209:'as a specific amount of a good or service; or f. qualitative such as guidance or advice that may not',
33210:'be measurable. 19. the benefits of a transaction may not be exclusively for the parties to the transaction. notwithstanding this',
33211:'fact, the transaction should be classified as an exchange transaction as long as the providing and receiving entities agree that',
33212:'they sacrifice and receive value of an identified nature as a result of the transaction. 20. further, reimbursements for certain',
33213:'goods and services may be made by some but not all entities benefitting from such goods and services. the failure',
33214:'of some to make reimbursements does not affect the transaction between the parties. 6note that this tb should be applied',
33215:'in determining whether a transaction is exchange or nonexchange for purposes of applying gaap. it does not determine treatment for',
33216:'budgetary purposes. thebudgetary term transfer is broad and may include transactions appropriately classified as exchange transactions for gaap purposes. treatment',
33217:'of a transaction as a budgetary transfer does not preclude its classification as an exchange transaction under gaap. guidance regarding',
33218:'classification for budgetary purposes is provided by the office of management and budget. page 6 technical bulletin 20171 fasab handbook,',
33219:'version 20 06/21 technical bulletin 20171 effective date 21. the requirements of this tb are effective upon issuance. the provisions',
33220:'of this technical bulletin need not be applied to immaterial items. page 7 technical bulletin 20171 fasab handbook, version 20',
33221:'06/21 technical bulletin 20171 appendixa: basis for conclusions the federalaccounting standardsadvisory board has authorized its staff to prepare technicalbulletins to',
33222:'provide timely guidance on certain financial accounting and reporting problems, in accordance with the boards rules of procedure, as amended',
33223:'and restated through december2003, andthe procedures describedin fasabtechnical bulletin 20001, purpose and scopeof fasab technical bulletins and procedures for issuance.',
33224:'the provisions of technical bulletins need not be applied to immaterial items. this appendixdiscusses some factors considered significant by staff',
33225:'in reaching the conclusionsin this technical bulletin. it includes the reasons for accepting certain approaches and rejecting others. some factors',
33226:'were given greater weight than other factors. the guidance enunciated in the technical guidance sectionnot the material in this appendixshould',
33227:'govern the accounting for specific transactions, events or conditions. this guidance may be affected by later documents. the fasab handbook',
33228:'is updated annually and includes a status section directing the reader to any subsequent statements that affect this guidance. within',
33229:'the text of the documents, the authoritative sections are updated for changes. however, this appendix will not be updated to',
33230:'reflect future changes. the reader can review the basis for conclusions of the amending statement for the rationale for each',
33231:'amendment. project history a1. in 2014, the department of defense dod requested the federal accounting standards advisory boards fasab or',
33232:'the board consideration of a project after identifying several financial reporting areas of concern and related audit challenges. the board',
33233:'agreed to undertake a project to address these areas by providing practical guidance within the framework of existing accounting standards',
33234:'and, where necessary, by providing the appropriate guidance to address issues not clearly addressed within the framework of existing accounting',
33235:'standards. a2. this technical bulletin tb is proposed in response to a request for guidance related to certain intragovernmental transactions.',
33236:'the guidance addresses transactions among components that dod performs throughout execution of its mission that cannot be addressed effectively without',
33237:'further guidance. also, it is believed that this guidance mayassistotherfederalentitiesinapplyingexistingaccountingstandardstosimilartransactions. a3. this tb addresses how to identify intragovernmental exchange transactions.',
33238:'dod raised these questions regarding receipts resulting from economy act7orders. one question iswhetherto recordexchange revenueforonly the portion of goods/services providedto',
33239:'other 7the economyact 31 u.s.c. 1535 authorizes agencies to enter into agreements to obtain supplies or services from another agency.',
33240:'page 8 technical bulletin 20171 fasab handbook, version 20 06/21 technical bulletin 20171 agencies that the agency performs itself or',
33241:'for the total cost recovered from other agencies including the reimbursement of costs of goods/services outsourced to other federal agencies',
33242:'or vendors. this guidance is not limited to economy act orders because gaap applies based on the substance of a',
33243:'transaction rather than the form. a4. this tb does not address recognition and measurement of exchange transactions. existing standards adequately',
33244:'address the timing of recognition as well as the amount to be recognized. exchange transactions a5. sffas5, accounting for liabilities',
33245:'of the federal government,paragraph 23statesthat an exchange transaction arises when each party to the transaction sacrifices value and receives value',
33246:'in return. there is a twoway flow of resources or of promises to provide resources. in the specific case dod',
33247:'refers to, dod is arranging for a lease on behalf of another entity. administrative services provided by dod are a',
33248:'small part of the overall service associated with the lease. a6. nonetheless, the providing entity dod receives value through the',
33249:'payments from the receiving entityandsacrificesvaluethroughincurring thecost toacquirethe goodorservice from the thirdparty for the receiving entity. the receiving entity receives value',
33250:'through the good or service provided by the providing entity and sacrifices value through payments to the providing entity. the',
33251:'full amount of the transaction qualifies as an exchange transaction. a7. the providing entity should record the full amount billed',
33252:'to the receiving entity as exchange revenue and the receiving entity should record the total amount it is billed as',
33253:'an expense or capitalized asset consistent with gaap. the transaction does not qualify as a transferin/ outa nonexchange transactionbecause some',
33254:'value is identified by both parties as being sacrificed and received or acquired. in contrast, per sffas 5, paragraph 24,',
33255:'a nonexchange transaction arises when one party to a transaction receives value without directly giving or promising value in return.',
33256:'a8. the specific case presented raises the question of whether the recovery of the cost of services the providing entity',
33257:'outsources to other federal agencies and/or commercial vendors should bereported asa transferin rather thanas exchange revenue. presumably, if it was',
33258:'appropriate to classify the recovery of the cost as a transferin then the corresponding cost for the outsourced services would',
33259:'be classified as a transferout to ensure that allthe outsourced amounts were excluded fromthe statement of net cost. this issue',
33260:'is directly addressed in sffas 4, paragraphs 108109. specifically, paragraph 108 states if an entity provides goods or services to',
33261:'another entity, regardless of whether full reimbursement is received, the providing entity should continue to recognize in its page 9',
33262:'technical bulletin 20171 fasab handbook, version 20 06/21 technical bulletin 20171 accounting records the full cost of those goods or',
33263:'services. the full costs of the goods or services provided should also be reported to the receiving entity by the',
33264:'providing entity. a9. sffas 4 does not make a distinction between full cost paid for administrative services versuscostspaid to other',
33265:'federalagencies or commercial vendors. treating the recovery of thirdparty amounts as transfersin and the associated costs as transfersout would be',
33266:'contrary to the guidance in sffas 4 intended to reveal the full costs on both the providing and receiving entities',
33267:'statements of net cost. a10.sffas 7 does not require an assessment of the value given and received by each party',
33268:'in exchange transactions because the standards do not define exchanges as being of approximately equal value. in intragovernmental transactions, the',
33269:'providing entity may or may not provide a significant amount of value in relation to the contract. even when the',
33270:'value of the administrative services is small in relation to the thirdparty services or the providing entity is not reimbursed',
33271:'or not fully reimbursed for its administrative services, the providing entity is to report the full cost of the transaction8',
33272:'and recognize exchange revenue for any amounts billed. for example, the providing entity may simply place an order under an',
33273:'existing contract or prepare funding documents. a11.in fact, the parties to the transactionmay not be permittedto establish fair valueexchanges. when',
33274:'an entity provides goods and services that consist of arranging a contract, such as a lease agreement with a commercial',
33275:'vendor, the entity may be reimbursed for the contract costaswellasanadministrativefee,foranamount less thanthese two costcomponents,or for an amount more than these',
33276:'two cost components. nonetheless, the full reimbursement qualifies as exchange revenue. therefore, the providing entity recognizes exchange revenueforthe totalamount billed.',
33277:'sffas 7 does not provide guidance regarding the value given or received. as noted above, intragovernmental transactions are between parties',
33278:'under common control; such arrangements are nonmarket transactions and, therefore, may present unique challenges regarding the sacrifice and receipt of',
33279:'value between entities under common control. this tb provides that the parties to the transaction should determine whether value was',
33280:'sacrificed and received, identify the nature of those values, and demonstrate the exchange occurred see par. 16. a12.in addition, the',
33281:'tb discusses unique circumstances such as exchanges of value where other parties also benefit from the transaction. for example, fasab',
33282:'is funded by its sponsors in a joint effort to provide accounting standards for use by all federal reporting entities.',
33283:'clearly, each sponsor believes value is provided but it would provide little value to determinewhetherthat valueequals theamount of funding fortheboardand',
33284:'howthat value might be affected by the fact that all reporting entitiesincluding entities not providing 8sffas 4, par. 108. page',
33285:'10 technical bulletin 20171 fasab handbook, version 20 06/21 technical bullentin 20171 funding to the boardreceive the accounting standards. notwithstanding',
33286:'the delivery of accounting standards to all federal agencies, each sponsor should recognize the funding provided as a cost consistent',
33287:'with this being an exchange transaction. treatment of the funding asa transferout, as if this was anonexchangetransaction, would misstatethe cost',
33288:'to each party. summary of outreach efforts and responses a13.the exposure draft ed, intragovernmental exchange transactions, was issued september 5,',
33289:'2017, with comments requested by september 29, 2017. a14.upon release of the ed, fasab provided notices and press releases to',
33290:'the fasab subscription email list, the federal register, fasab news, the journal of accountancy, the chief financial officers council, the',
33291:'council of the inspectors general on integrity and efficiency, and committees of professional associations generally commenting on eds in the',
33292:'past for example, the greater washington society of cpas and the association of government accountants financial management standards board. a15.16',
33293:'comment letters were received from preparers, auditors, professional associations, individuals and users of federal financial information. the board considered responses',
33294:'to the exposure draft at its october 2017 meeting. staff did not rely on the number in favor of or',
33295:'opposed to a given position. staff considered each response and weighed the merits of the points raised. the respondents comments',
33296:'are summarized below. a16.the majority of respondents generally agreed with the proposed guidance. specifically, respondents believed the tb provided guidance',
33297:'to aid in determining whether intragovernmental arrangements were exchange transactions. one respondent neither agreed nor disagreed with the proposal. certain',
33298:'respondents provided minor suggestions and editorial comments that were incorporated into the final guidance or addressed in the basis for',
33299:'conclusions. a17.one respondent that disagreed stated the proposed guidance has the potential to cause a major change in accounting practice,',
33300:'conflicts with sffas 7 appendix b and 4, and introduces new criteria for determining when accounting events occur. as a',
33301:'result, the respondent believes it would be challenging for agencies and auditors to know what transactions the technical guidance applies',
33302:'to versus other fasab standards. a18.fasab staff considered carefully the potential that a major change in practice could result from',
33303:'this guidance. based on initial research and positive feedback from 12 respondent federal departments and agencies, staff concluded that the',
33304:'guidance fills a void in the literature without causing a major change. page 11 technical bullentin 20171 fasab handbook, version',
33305:'20 06/21 technical bullentin 20171 a19.fasab staff also considered whether the guidance conflicts with sffas 7, appendix b. appendix b',
33306:'provides guidance for the classification of transactions including intragovernmental transactions but the guidance does not adequately address the receipt and',
33307:'sacrifice of value. for example, par. 315 identifies intragovernmental sales of goods and servicesbya fund other than a revolving fund',
33308:'as instances when the cost of providing goods or services is defrayed in whole or in part by selling the',
33309:'goods or services provided. each party receives and sacrifices something of value. the proceeds are exchange revenue. thetechnicalbulletin aidsin determiningwhen',
33310:'each party receives and sacrifices something of value. in doing so, it augments but does not conflict with sffas 7.',
33311:'a20.certain respondents requested that there be an explanation of how this proposed guidance would be affected by the exposure draft,',
33312:'amending interentity cost provisions9 if it is approved by the board. the proposal would amend existing standards by limiting the',
33313:'reporting of interentity costs to businesstype activities. however, personnel benefits and treasury judgment fund settlements are required to be imputed',
33314:'by gaap standards other than sffas 4, and those standards ensure they continue to be imputed by all reporting entities.',
33315:'further, the modifications proposed in the exposure draft include the option for future recognition of other interentity costs if theoffice',
33316:'of management and budget decides to do so. staff believes it is most appropriate to state the receiving entity should',
33317:'record the total amount it is billed as an expense or capitalized asset consistent with gaap as this would be',
33318:'accurate going forward.10 a21.certain respondents requested clarity regarding if the receiving entity is directly billed11 by the vendor. staff notes',
33319:'that that paragraph 13 explains the ways value may be sacrificed [making a payment, providing something of value, performing a',
33320:'service, or arranging a contract or agreement or coordinating funding on behalf of another party] and paragraph 18 explains the',
33321:'type of value that should be considered [direct, indirect, tangible, intangible, quantitative, and qualitative]. if no value is sacrificed, such',
33322:'as for amounts directly billed to and paid by the receiving entity, then the transaction would not meet the definition',
33323:'of an exchange transaction. 9amending interentity cost provisions was released for comment on september 1, 2017 with comments requested november',
33324:'30, 2017. 10specifically, the phrase consistent with gaap would apply to reporting entities required or not required to impute costs.',
33325:'it wouldalsoberelevant beforeandafter amending interentity cost provisions is deliberated by theboard,and remain true if the proposal is approved or not.',
33326:'at this time staff cannot state if amending interentity cost provisions will be approved by the board. 11for example, the',
33327:'receivingentitysfunds maybe directlyplacedon acontract; thereforethe providing entitydoesnot bill the receiving entity. page 12 technical bullentin 20171 fasab handbook, version 20',
33328:'06/21 technical bullentin 20171 board review a22.the board has reviewed this technical bulletin, and a majority of members do not',
33329:'object to its issuance. page 13 technical bullentin 20171 fasab handbook, version 20 06/21 technical bulletin 20172:assigningassets to component reporting',
33330:'entities status issued november 1, 2017 effective date effective upon issuance. affects this tb clarifies sffas 6 regarding which component',
33331:'reporting entity should report an asset. affected by none. summary assets may be owned by one component of a larger',
33332:'reporting entity, such as a department, but used and/or funded by another component of the same entity. individual standards addressing',
33333:'asset recognition and related reporting do not provide detailed guidance to resolve the question of which component reporting entity should',
33334:'report an asset. this is especially challenging for large, complex departments, such as the department of defense, that have numerous',
33335:'components and subcomponents. this technical bulletin tb provides guidance to address areas not directly covered in existing statements and clarifies',
33336:'existing standards. the tb provides that assets may be assigned by a reporting entity to its component reporting entities on',
33337:'a rational and consistent basis. for example, an asset may be assigned to the component reporting entity holding legal title,',
33338:'funding the asset, using the asset in its operations, or on another rational and consistent basis. there should be a',
33339:'process in place to ensure all assets within a reporting entity are assigned. the tb provides that assets may only',
33340:'be assigned by a component reporting entity to its own subcomponent reporting entities such as bureaus, components, or responsibility segments',
33341:'within the same larger reporting entity or department. this tb facilitates reporting for large and complex organizations so that reporting',
33342:'is better aligned with their operations and results in less costly financial reporting by permitting the reporting entity to align',
33343:'reporting with established funding and governance structures. this tb also reduces the barriers to and cost of adopting generally accepted',
33344:'accounting principles. materiality the provisions of this tb need not be applied to immaterial items. the determination of whether an',
33345:'item is material depends on the degree to which omitting or misstating information about the itemmakesit probable that thejudgment of',
33346:'areasonablepersonrelying on theinformationwould have been changed or influenced by the omission or the misstatement. page 1 technical bullentin 20172 fasab',
33347:'handbook, version 20 06/21 technical bulletin 20172 table of contents summary 1 technical guidance 3 scope 3 disclosure requirements 4',
33348:'effective date 4 appendixa:basis for conclusions 5 appendix b: illustration 9 page 2 technical bulletin 20172 fasab handbook, version 20',
33349:'06/21 technical bulletin 20172 technical guidance scope 1. what reporting entities are affected by this technical bulletin? 2. this guidance',
33350:'applies to all component reporting entities that present general purpose federal financial reports gpffrs in conformance with generally accepted accounting',
33351:'principles gaap as defined by paragraphs 5 through 8 of statement of federal financial accounting standards sffas 34, the hierarchy',
33352:'of generally accepted accounting principles, including the application of standards issued by the financial accounting standards board. 3. what accounting',
33353:'practices are addressed in this technical bulletin? 4. this technical bulletin tb provides guidance regarding which component reporting entity should',
33354:'report an asset, the related depreciation, and deferred maintenance and repairs. this tb does not provide guidance regarding recognition of',
33355:'expenses related to use of an asset such as fuel for vehicles. 5. are there certain assets that are excluded',
33356:'from this guidance? 6. yes,thefundbalancewithtreasuryisexcludedfromthisguidance. inaddition,anyassets that are not assets of the reporting entity cannot be assigned by the reporting',
33357:'entity to its component reporting entities. 7. how should assets be assigned to component reporting entities? 8. assets may be',
33358:'assigned by a reporting entity to its component reporting entities on a rational and consistent basis. for example, an asset',
33359:'may be assigned to the component reporting entity holding legal title, funding the asset, using the asset in its operations,',
33360:'or on another rational and consistent basis. different bases may be used for assigning different assets. apolicy for assigning assets',
33361:'to component reporting entities should be established, documented and followed consistently. there should be a process in place to ensure',
33362:'all assets within a reporting entity are assigned. in addition, assets may only be assigned by a component reporting entity',
33363:'to its own subcomponent reporting entities such as bureaus, components, or responsibility segments within the same larger reporting entity or',
33364:'department.1 1intheyearof implementation,assets assigned to anothercomponent reporting entity should be treatedas transfers of assets per sffas 7, accounting for revenue',
33365:'and other financing sources. page 3 technical bulletin 20172 fasab handbook, version 20 06/21 technical bulletin 20172 9. is there',
33366:'additional guidance as to what constitutes a reporting entity, a component reporting entity, and a subcomponent reporting entity? 10. yes,',
33367:'sffas 47, reporting entity, provides the framework for determining what organizations for example, component reporting entities or subcomponents should be',
33368:'included in the reporting entitys gpffrs for financial accountability purposes. sffas 47 also provides that component reporting entity is used',
33369:'broadly to refer to a reporting entity within a larger reporting entity.2examples of component reporting entities include organizations such as',
33370:'executive departments, independent agencies, government corporations, legislative agencies, and federal courts. component reporting entities also include subcomponents those components included',
33371:'in the gpffr of a larger component reporting entity that may themselves prepare gpffrs. one example is a bureau that',
33372:'is within a larger department that prepares its own standalone gpffr. disclosure requirements 11. reporting entities should describe the policies',
33373:'used to assign significant assets. effective date 12. the requirements of this tb are effective upon issuance. the provisions of',
33374:'this technical bulletin need not be applied to immaterial items. 2the larger reporting entity could be the governmentwide reporting entity',
33375:'or another component reporting entity. page 4 technical bulletin 20172 fasab handbook, version 20 06/21 technical bulletin 20172 appendixa: basis',
33376:'for conclusions the federalaccounting standardsadvisory board fasab or the board has authorized its staff to preparetechnical bulletinstoprovide timelyguidance on certainfinancial',
33377:'accounting and reporting problems, in accordancewith the boards rulesof procedure, asamended and restated through december 2003, and the procedures described',
33378:'in fasab technical bulletin 20001, purpose and scope of fasab technical bulletinsand proceduresforissuance. theprovisions of technical bulletins need not be',
33379:'applied to immaterial items. this appendixdiscusses some factors considered significant by staff in reaching the conclusions in this technical bulletin.',
33380:'it includes the reasons for accepting certain approaches and rejecting others. some factors were given greater weight than other factors.',
33381:'the guidance enunciated in the technical guidance sectionnot thematerial in thisappendixshould govern the accounting for specific transactions, events or conditions.',
33382:'this guidance may be affected by later statements. the fasab handbook is updated annually and includes a status section directing',
33383:'the reader to anysubsequent statements that amend this guidance. within the text of the statements, the authoritative sections are updated',
33384:'for changes. however, this appendix will not be updated to reflect future changes. the reader can review the basis for',
33385:'conclusions of the amending statement for the rationale for each amendment. project history department of defense implementation guidance request project',
33386:'a1. since 2014, the department of defense dod has requested the fasabs consideration of several financial reporting areas of concern.',
33387:'while dod continues its efforts to comply with the chief financial officers act of 1990 as amended, it has noted',
33388:'certain challenges. the board agreed to undertake this project to address an issue that was not addressed within the framework',
33389:'of existing accounting standards. a2. assets may be owned by one component of a large department but used and/or funded',
33390:'by another component. individual statements addressing asset recognition and related reporting do not provide detailed guidance to resolve the question',
33391:'of which component reporting entity should report an asset as well as related amounts such as deferred maintenance and repair.',
33392:'a3. this is especially challenging for large, complex departments such as dod that have numerous component reporting entities and subcomponents.',
33393:'many specialized components provide services to other components of dod. there are many complex page 5 technical bulletin 20172 fasab',
33394:'handbook, version 20 06/21 technical bulletin 20172 relationships among the components and subcomponents of dod. in addition, law may prohibit',
33395:'one component from owning assets; instead, another component owns the assets and hosts the component using the assets. in such',
33396:'cases, there may or may not be a financial transaction related to use of the assets. a4. for example, this',
33397:'situation presents itself when one service, such as the u.s. navy, has possession and use of a helicopter that was',
33398:'purchased owned by the u.s. air force. in using the helicopter, the navy alters the state of the equipment by',
33399:'making major improvements that extend the useful life and increase its capabilities. if the air force carries the base asset,',
33400:'is it appropriate for the navy to carry the improvement? alternatively, it may be more appropriate for the air force',
33401:'to recognize the entire asset, including improvements funded by the navy. there are numerous examples such as this regarding relationships',
33402:'among the components and subcomponents of dod, shared ownership of assets, improvements, and maintenance of such equipment. a5. this technical',
33403:'bulletin tb is intended to provide guidance to address areas not directly covered in existing statements. this technical guidance clarifies',
33404:'existing standards by providing that assets may be assigned to component reporting entities within a larger component reporting entity on',
33405:'a rational and consistent basis. for example, an asset may beassignedtothecomponent reportingentity holdinglegaltitle,fundingthe asset,using the asset in its operations, or',
33406:'on another rational and consistent basis. a6. reporting entities should establish and document a policy for assigning assets to component',
33407:'reportingentities and followit consistently. in theyear of implementation, assets assigned to another component reporting entity should be treated as transfers',
33408:'of assets per sffas7, accounting for revenue and other financing sources. anychange insuchpolicy would be reported in accordance with sffas',
33409:'21. there should be a process in place to ensure all assets within a reporting entity are assigned. in addition,',
33410:'assets may only be assigned by a component reporting entity to its own subcomponent reporting entities such as bureaus, components,',
33411:'or responsibility segments within the same larger reporting entity or department. a7. thistbispermissiveanddoesnotrequireanyagencytochangeaccountingpractices. the flexibility may be useful for other',
33412:'federal agencies with complex structures or multiple subcomponents. a8. appendix b: illustration offers a nonauthoritative diagram that may be useful',
33413:'in understanding the application of this guidance. page 6 technical bulletin 20172 fasab handbook, version 20 06/21 technical bulletin 20172',
33414:'summary of outreach efforts and responses a9. the exposure draft ed, assigning assets to component entities, was issued september 12,',
33415:'2017, with comments requested by october 13, 2017. a10.upon release of the ed, fasab provided notices and press releases to',
33416:'the fasab subscription email list, the federal register, fasab news, the journal of accountancy, the chief financial officers council, the',
33417:'council of the inspectors general on integrity and efficiency, and committees of professional associations generally commenting on eds in the',
33418:'past for example, the greater washington society of cpas and the association of government accountants financial management standards board. a11.12',
33419:'comment letters were received from preparers, auditors, professional associations, individuals and users of federal financial information. the board considered responses',