Evaluation of Existing Standards

FASAB Contact: Melissa Batchelor, Assistant Director, batchelorm@fasab.gov, 202-512-5976

Request for Comment Due Date Word Version of questions for Respondents Comment Letters Final Pronouncements
Clarification of Paragraphs 40-41 of SFFAS 6, Accounting for Property, Plant, and Equipment, as amended May 31, 2018 N/A Comment Letters Clarification of Paragraphs 40-41 of SFFAS 6, Accounting for Property, Plant, and Equipment, as amended (PDF)
Assigning Assets to Component Reporting Entities (PDF) October 13, 2017 Word Version of Questions for Respondents (Download) Comment Letters Assigning Assets to Component Reporting Entities (PDF)
Intragovernmental Exchange Transactions (PDF) September 29, 2017 Word Version of Questions for Respondents (Download) Comment Letters Intragovernmental Exchange Transactions (PDF)
Amending Inter-entity Cost Provisions (PDF) November 30, 2017 Word Version of Questions for Respondents (Download) Comment Letters Amending Inter-entity Cost Provisions (PDF)

Project Objective:

Because of competing demands in the federal financial management community, some believe existing requirements should be evaluated and any unnecessary requirements eliminated. When appropriate, the Board explores opportunities for burden reduction by considering feedback from the community on changes to existing standards and areas where clarification may be needed to existing standards.

The goal is to be responsive to requests for guidance, especially for requests that meet the above purpose and benefits clearly exceed costs. Requests that clarify existing standards and changes to existing standards that reduce taxpayer burden without negative consequences will fulfill objectives. To accomplish these goals, ongoing efforts may include providing additional forums for preparers, auditors, and users to identify requirements they believe are unnecessary (this could be done through an open-ended written request for input or roundtable discussions). All requests should be assessed against the reporting objectives. Requests may be addressed through the appropriate level of GAAP guidance.

Specific areas to be considered initially:

  • Imputed cost – Amending SFFAS 4 to rescind the existing requirement to impute costs that are under reimbursed (inter-entity costs) except for business-type activities.
  • Intragovernmental Exchange Transactions – Guidance to aid in classifying certain transactions between government agencies as transfers (recognized on the statement of changes in net position) or as revenue/expense (recognized on the statement of net cost).
  • Assigning assets – Assets may be owned by one component of a large department but used and/or funded by another component. There is presently no authoritative guidance to aid management in deciding which component should report each asset.
  • Assigning liabilities – Liabilities arising from government-related events may be caused by one component of a large department but paid for by another component. There is presently no authoritative guidance to aid management in deciding which component should report each liability.

HISTORY OF BOARD DELIBERATIONS


June 27-28, 2018

Assigning Liabilities

At the June 2018 meeting, the Board considered options for guidance on selected liabilities. Due to recent pronouncements (SFFAS 47, Reporting Entity; SFFAS 55; and Technical Bulletin [TB] 2017-2, Assigning Assets to Component Reporting Entities), there may be a need for additional guidance to assist in the application of the general liability standards and principles. This new guidance could address issues that may not have been considered when the pronouncements were originally written. Specifically, guidance may be needed for clean-up costs and contingent liabilities.

Because guidance regarding the application of the general liability standards has been provided through pronouncements at a lower level of generally accepted accounting principles (GAAP), such as TBs and Technical Releases, they may require updating to ensure conformance and consistency with new pronouncements. Necessary updates will be made to the affected GAAP documents.

Issue Paper for June 27-28, 2018 – Tab A (PDF)

http://files.fasab.gov/pdffiles/tab_a_assign_liab_06_2018.pdf

Proposed Staff Implementation Guidance 6.1

At the June 2018 meeting, the Board considered the comment letters on staff’s proposed Staff Implementation Guidance (SIG) 6.1: Clarification of Paragraphs 40-41 of SFFAS 6, Accounting for Property, Plant, and Equipment, as amended. SIG 6.1 answers the question regarding use of both the alternative methods for establishing opening balances (as allowed by SFFAS 50, Establishing Opening Balances for General Property, Plant, and Equipment: Amending Statement of Federal Financial Accounting Standards (SFFAS) 6, SFFAS 10, SFFAS 23, and Rescinding SFFAS 35) and the alternative for estimated net remaining cost per the second sentence in paragraph 41 of SFFAS 6, as amended.

A majority of members did not object to issuing the SIG. FASAB staff issued SIG 6.1 on July 17, 2018.

April 25-26, 2018

Assigning Liabilities

At the April 2018 meeting, the Federal Accounting Standards Advisory Board (FASAB or “the Board”) considered the issue of assigning liabilities and whether additional flexibilities or guidance should be provided in a generally accepted accounting principles (GAAP) document.

This topic of “assigning liabilities” addresses the last issue area presented at the June 2017 meeting that related to the Department of Defense (DoD) request for guidance regarding the need for certain flexibilities.

The Board considered specific examples of liability issues at DoD along with staff’s recommendation for each (see the April 2018 briefing materials at tab A). Much of the Board’s discussion focused on whether there was a general liability principle that could be established to address the issues.

The Board requested staff determine if there was a general liability principle that could be applied. In determining if a general principle can be developed, staff should consider unintended consequences, including effects on other agencies and consistency with current GAAP pronouncements. The Board also directed staff to identify GAAP literature that may need to be updated as a result of the general liability principal.

Proposed Staff Implementation Guidance 6.1

FASAB staff released proposed Staff Implementation Guidance (SIG) 6.1, Clarification of Paragraphs 40-41 of SFFAS 6, Accounting for Property, Plant, and Equipment, as amended. The proposed SIG is intended to assist preparers in the application of FASAB literature. SIG does not establish new requirements.

After the issuance of Statement of Federal Financial Accounting Standards (SFFAS) 50, Establishing Opening Balances for General Property, Plant, and Equipment: Amending Statement of Federal Financial Accounting Standards (SFFAS) 6, SFFAS 10, SFFAS 23, and Rescinding SFFAS 35, a question regarding use of both the alternative methods for establishing opening balances and the alternative for estimated net remaining cost per the second sentence in paragraph 41 of SFFAS 6, as amended, was raised. The SIG answers the question and provides additional explanation.

FASAB staff requests comments on the proposal by May 31, 2018. The proposed SIG is available at the FASAB website at http://www.fasab.gov/documents-for-comment/.

Issue Paper for April 25-26, 2018 – Tab A (PDF)

February 21-22, 2018

The Board approved Statement of Federal Financial Accounting Standards (SFFAS) 55, Amending Inter-entity Cost Provisions. It was submitted to the sponsors for the 90-day review period.

This Statement will revise SFFAS 4, Managerial Cost Accounting Standards and Concepts, to provide for the continued recognition of significant inter-entity costs by business-type activities and will rescind the following:

  • SFFAS 30, Inter-Entity Cost Implementation: Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts
  • Interpretation 6, Accounting for Imputed Intra-departmental Costs: An Interpretation of SFFAS No. 4

With the rescission of SFFAS 30, paragraphs 110 and 111 of SFFAS 4, as amended, will be restored to their original language prior to the issuance of SFFAS 30. However, the Board amended the standards to require business-type activities to recognize inter-entity costs. Recognition of inter-entity costs by activities that are not business-type activities will not be required with the exception of inter-entity costs for personnel benefits and the Treasury Judgment Fund settlements unless otherwise directed by the Office of Management and Budget (OMB). Notwithstanding the absence of a requirement, non-business-type activities may elect to recognize imputed cost and corresponding imputed financing for other types of inter-entity costs.

The Statement will be effective for periods beginning after September 30, 2018, with earlier implementation permitted.

Directly following the education session, the Board discussed whether to leverage ERM risk profiling as identified in OMB Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control.

The Board agreed that staff should explore how to incorporate OMB A-123 risk profiling in the project; however members noted the following concerns:

  • The Board should determine what type of risks to focus on: performance/programmatic—MD&A and/or financial impact—disclosure notes.
  • The Board should determine what risks are not currently included in financial reports through working groups and determine the consequences of not including certain risks.
  • The Board should consider producing best practices guidance if the standards are complete and agencies need additional help.
  • The Board should prevent risk identification from turning into a compliance exercise that might affect the ERM process.
  • The Board should consider how agency internal ERM processes might be affected by external financial reporting and the related audit.

Issue Paper for February 2018 – Tab D (PDF)

December 20, 2017

Amending Inter-entity Cost Provisions

At the December 2017 meeting, the Board considered responses to the exposure draft (ED) titled Amending Inter-entity Cost Provisions. The Board also reviewed staff’s analysis and an updated proposed Statement. A majority of respondents generally agreed with the proposal to revise Statement of Federal Financial Accounting Standards (SFFAS) 4, Managerial Cost Accounting Standards and Concepts, to provide for recognition of inter-entity costs by business-type activities and to rescind SFFAS 30, Inter-entity Cost Implementation: Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts, and Interpretation 6, Accounting for Imputed Intra-departmental Costs: An Interpretation of SFFAS No. 4.

The Board discussed edits to clarify that entities may elect to recognize imputed cost. Members agreed to move to a pre-ballot draft after the meeting and a ballot draft for the February 2018 meeting.

Issue Paper for December 20, 2017 – Tab A (PDF)


October 25-26, 2017


Intragovernmental Exchange Transactions

At the October 2017 meeting, the Board considered the comment letters and staff’s proposed Technical Bulletin (TB) 2017-1, Intragovernmental Exchange Transactions. The majority of respondents generally agreed with the proposed guidance. Specifically, respondents believed the TB provided guidance to aid in determining whether intragovernmental arrangements were exchange transactions. One respondent neither agreed nor disagreed with the proposal. One respondent disagreed with the proposal.

Respondents provided minor suggestions and editorial comments that were incorporated into the final guidance or addressed in the basis for conclusions. In the proposed Intragovernmental Exchange Transactions TB, staff clarified the following:

  • Recognition and measurement of exchange transactions is excluded from the scope of the TB.
  • Revenue recognition is based on amounts billed by the providing entity to the receiving entity.
  • SFFAS 4, Managerial Cost Accounting Standards and Concepts, as amended, is the basis for determining full cost.

A majority of members did not object to issuing the TB. FASAB staff issued TB 2017-1, Intragovernmental Exchange Transactions, on November 1, 2017.

Assigning Assets to Component Entities

At the October 2017 meeting, the Board considered the comment letters and staff’s proposed TB 2017-2, Assigning Assets to Component Reporting Entities. The majority of respondents generally agreed with the proposed guidance. Specifically, respondents believed the TB provided guidance to address areas not directly covered in existing Statements and clarified that assets may be assigned by a reporting entity to its component reporting entities on a rational and consistent basis. The majority of respondents also agreed that reporting entities should describe the policies used to assign significant assets.

Respondents provided minor suggestions and editorial comments that were incorporated into the final guidance or addressed in the basis for conclusions. In the proposed Assigning Assets to Component Reporting Entities TB, staff clarified the following:

  • In the year of implementation, assets assigned to another component reporting entity should be treated as transfers of assets per SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting.
  • This guidance is permissive and does not require any agency to change accounting practices.

A majority of members did not object to issuing the TB. FASAB staff issued TB 2017-2, Assigning Assets to Component Reporting Entities on November 1, 2017.

August 30-31, 2017

A new project was added to accommodate requests for guidance, especially when benefits clearly exceed costs. When appropriate, the Board explores opportunities for burden reduction by considering feedback from the community on changes and clarification to existing standards and areas.

Amending Inter-entity Cost Provisions

SFFAS 4, Managerial Cost Accounting Standards and Concepts, and Interpretation 6, Accounting for Imputed Intra-departmental Costs: An Interpretation of SFFAS No. 4, require reporting entities to recognize the full costs of services received from other federal reporting entities, even if there is no requirement to reimburse the providing reporting entity for the full cost of such services. Consideration of the implementation challenges faced by the Department of Defense (DoD) and the experiences of other federal reporting entities led FASAB to reconsider certain inter-entity cost provisions for all federal reporting entities.

The Board approved an ED at the August 2017 meeting, and the proposed SFFAS entitled Amending Inter-entity Cost Provisions was released. This Statement would revise SFFAS 4 to provide for recognition of inter-entity costs by business-type activities and rescind the following:

  • SFFAS 30, Inter-entity Cost Implementation: Amending SFFAS 4, Managerial Cost Accounting Standards and Concepts
  • Interpretation 6, Accounting for Imputed Intra-departmental Costs: An Interpretation of SFFAS No. 4

The Board requests comments on the ED by November 30, 2017.

Assigning Assets to Component Reporting Entities

Assets may be owned by one component of a larger reporting entity, such as a department, but used and/or funded by another component of the same entity. Individual standards addressing asset recognition and related reporting do not provide detailed guidance to resolve the question of which component reporting entity should report an asset. This is especially challenging for large, complex departments, such as DoD, that have numerous components and sub-components.

A proposed Technical Bulletin (TB), entitled Assigning Assets to Component Reporting Entities, was released for comments. The TB would provide that assets may be assigned by a reporting entity to its component reporting entities on a rational and consistent basis. For example, an asset would be assigned to the component reporting entity holding legal title, funding the asset, using the asset in its operations, or on another rational and consistent basis. There should be a process in place to ensure all assets within a reporting entity are assigned to a component reporting entity.

Comments are requested by October 13, 2017.

Intragovernmental Exchange Transactions

A proposed TB, entitled Intragovernmental Exchange Transactions, was released for comment on September 5, 2017. Comments were requested by September 29, 2017. The TB would provide guidance for determining when an intragovernmental transaction is an exchange transaction.

Issue Papers for August 30-31, 2017 – Tab B1, B2, and G (PDF)