Accounting and Reporting of Government Land Project
FASAB Contact: Domenic N. Savini, email@example.com, 202-512-6841
SFFAS 6 requires that land and land rights acquired for or in connection with other general PP&E are to be capitalized at the cost incurred to bring the assets to a form and condition suitable for use. “Acquired for or in connection with other general PP&E” is defined as land acquired with the intent to construct general PP&E and land acquired in combination with general PP&E, including not only land used as the foundation, but also adjacent land considered to be the general PP&E’s common grounds.
SFFAS 29 defines “stewardship land” as land other than land acquired for or in connection with other general PP&E. It requires disclosures regarding policies for managing land, categories of land, and physical quantity information.
Implementation of the above requirements has resulted in significant differences in accounting treatment for land holdings. Because the land acquired during our Nation’s formation is sometimes used in connection with other general PP&E, it is not generally valued as would be GPP&E land acquired for similar purposes. That is, GPP&E will only include land and land rights with an identifiable cost that was specifically acquired for or in connection with construction of general PP&E. It is important to note that stewardship land is expensed when acquired and quantity information is provided in a note.
Further, debate exists over the most appropriate way to account for and report land. Issues include:
- Reporting on land is incomplete (as noted above, neither the total cost of land nor the total physical quantity of land is consistently reported).
- Whether some information that is currently reported is consistent with reporting objectives and qualitative characteristics.
- Given that cost information for capitalized land remains unchanged, the information may lose relevance over time due to general inflation as well as specific changes in the value of land. Some suggest that all land be valued periodically at re-measured amounts (such as, fair value). Others suggest that non-financial measures (such as acreage) by reported.
- Review whether Stewardship Land and GPP&E Land should follow a consistent accounting and reporting approach.
Specific project objectives include:
- Obtain an understanding of how the predominant use or managerial intent influences the information needs of users and, potentially, the importance of the reporting objectives (for example, identifying the most appropriate reporting objective).
- Identify the measurement attribute(s) and/or non-financial attributes most appropriate for meeting the reporting objectives.
- Assess practical limitations of the selected measurement attributes or non-financial attributes; for examples factors to consider in establishing fair value such as determining the “highest and best use”, what is legally permissible, physically possible, and economically feasible.
- Obtain agency feedback and best practices relevant to assessing the cost-benefit associated with options under consideration.
- Recommend recognition, measurement, and disclosure requirements.
- SFFAS 6: Accounting for Property Plant and Equipment
- SFFAS 29: Heritage Assets and Stewardship Land
HISTORY OF BOARD DELIBERATIONS
December 20, 2017
At the December 20, 2017, Board meeting, members considered several open issues so that a pre-ballot draft could be reviewed at the February 2018 meeting. Specifically, the following key actions were taken by the Board:
- Disclosure requirements. The Board adopted staff’s revised single (uniform) set of note disclosure requirements. These would apply to both general property, plant, and equipment (G-PP&E) (SFFAS 6, Accounting for Property, Plant, and Equipment) and stewardship land (SL) (SFFAS 29, Heritage Assets and Stewardship Land). Revisions included (1) clarifying that both physical units and estimated acreage information would be required and (2) allowing preparers to report the net amount of transfers between G-PP&E land and SL categories and among the three sub-categories, as opposed to discretely identifying all transfers.
- Defining physical units. Members agreed that the Board should consider detailed implementation guidance after issuing the standards. However, members asked staff to provide examples indicating under what circumstances each type of physical unit would be an appropriate choice. Further, similar to segment reporting in the private sector, management should base selection of the type of physical unit on its internal management practices.
- Addressing supporting documentation. Staff recommended (1) requiring “estimated” acreage rather than “acreage,” so that it is clear that estimates are permitted and (2) including a discussion of non-conventional audit support in the basis for conclusions. Members approved the addition of “estimated” to the language. Members generally supported addressing the non-conventional audit documentation in the basis for conclusions. The Board will discuss what it considers to be reasonable support for those estimates. In addition, implementation guidance addressing reasonable estimation methods and documentation might be appropriate after FASAB issues the standards. The basis for conclusions should describe the types of implementation guidance envisioned by the Board and solicit comments.
- Other matters. Members reaffirmed proposing a two-year implementation period and asked staff to limit the amount of respondent questions by streamlining and clarifying select questions. Staff was also asked to revise the draft illustrations to include physical unit information.
Issue Paper for December 20, 2017 – Tab C (PDF)
October 25-26, 2017
At the October 26, 2017, Board meeting, members considered staff recommendations concerning issues raised during the review of the August meeting materials. Specifically, the following technical issues were addressed by the Board:
- Single note disclosure – The Board agreed that a single (uniform) set of note disclosure requirements should be adopted in both SFFAS 6, Accounting for Property, Plant, and Equipment, and SFFAS 29, Heritage Assets and Stewardship Land.
- Definition of physical unit – Members asked staff to identify and/or illustrate the different types of “physical unit” measurements (for example, number of national parks, land parcels, regional offices, areas, zones, etc.) that are in use by entities.
- Predominant use definition and reporting – The Board decided that a predominant use definition and associated factors should be developed through implementation guidance.
- Multi-use land lacking predominant use – The Board did not agree with the staff recommendation to establish a fourth multi-use sub-category when an entity cannot ascertain predominant use.
- Application of materiality to non-financial information – Upon reconsideration of their August meeting decision to develop a materiality discussion in the basis for conclusions, members decided to defer this topic for potential development as implementation guidance.
Supporting documentation – Some members asked that additional research be done concerning the types of evidence preparers will need to support the proposed disclosures.
- Implementation approach – The majority of members favored the two-year implementation timeline. At minimum, it allows the Board to address respondent concerns and adjust the Statement’s effective date accordingly.
- Amendments to SFFAS 42’s deferred maintenance and repairs (DM&R) requirements – The Board agreed with the proposed amendments to paragraphs 13 and 15 of SFFAS 42, Deferred Maintenance and Repairs: Amending Statements of Federal Financial Accounting Standards 6, 14, 29, and 32. This would ensure that any DM&R on (non-capitalized) general property, plant, and equipment (G-PP&E) land would be measured and reported along with other (capitalized) general PP&E and stewardship land.
Staff expects to present a revised draft ED at the December Board meeting and, pending deliberations, a pre-ballot draft thereafter.
Issue Paper for October 25-26, 2017 – Tab F (PDF)
August 30-31, 2017
At the August 31, 2017, Board meeting, members offered edits on a draft ED, as well as suggested additional matters to be included in a revised draft ED for subsequent deliberations.
Concerning land rights, members agreed to treat permanent land rights consistent with proposed requirements for owned land. However, they did not agree to limit the reporting of remaining land rights to those only with a fixed term. The Board also did not come to a consensus on how to best address remaining land rights.
Some members believe that a disclosure should be added to the draft ED to concisely explain, in broad terms, what other remaining land rights an entity possesses. Members agreed to explore and evaluate available options regarding potential disclosure for these remaining land rights. Members agreed to retain the current stewardship land (SL) and general property, plant, and equipment (G-PP&E) distinctions accompanied by the three proposed sub-categories. Members asked that the draft ED clarify the intent that land be categorized based on predominant use in one of the three sub-categories to avoid duplication. Members asked staff to develop either a definition of predominant use or a list of factors for use in assessing predominant use.
The Board generally agreed with the proposed amendments and also agreed to consider amending Statement of Federal Financial Accounting Standards (SFFAS) 42, Deferred Maintenance and Repairs: Amending Statements of Federal Financial Accounting Standards 6, 14, 29, and 32. Current deferred maintenance and repairs (DM&R) requirements apply to capitalized G-PP&E and stewardship property, plant, and equipment (PP&E), whereas reporting is optional for non-capitalized G-PP&E or fully depreciated assets. As a result of the proposed amendment to SFFAS 6, Accounting for Property, Plant and Equipment, paragraph 25 that excludes land from capitalization, G-PP&E land would be unintentionally exempted from DM&R reporting. Amending SFFAS 42 would ensure that any DM&R on (non-capitalized) G-PP&E land would be measured and reported along with other (capitalized) general PP&E and SL.
Staff was tasked with developing a revised draft ED for further consideration at the next Board meeting.
Issue Paper for August 30-31, 2017 – Tab F (PDF)
June 21-22, 2017 Board Meeting
At the June 22, 2017, Board meeting, members reviewed a draft ED. The Board agreed with the staff recommendation that the ED should highlight the two major proposed changes being considered: (a) reclassifying general property, plant, and equipment (G-PP&E) land as a non-capitalized asset with no dollar amounts reported on the balance sheet and (b) requiring consistent and uniform disclosures and presentation of information for G- PP&E land and stewardship land (SL).
Staff has initially identified four standards requiring amendments:
- SFFAS 6, Accounting for Property, Plant, and Equipment
- SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting
- SFFAS 29, Heritage Assets and Stewardship Land
- SFFAS 32, Consolidated Financial Report of the United States Government Requirements: Implementing Statement of Federal Financial Accounting Concepts 4 “Intended Audience and Qualitative Characteristics for the Consolidated Financial Report of the United States Government”
Additionally, staff has identified for rescission guidance regarding SL contained in Technical Release (TR) 9, Implementation Guide for Statement of Federal Financial Accounting Standards 29: Heritage Assets and Stewardship Land. Please note that TR 9 would retain guidance relating to heritage assets.
Members also identified three additional issues, two of which were resolved during the meeting: (1) land rights, (2) land leases, and (3) the lack of a distinct definition for SL. The Board agreed that because land rights are intangible assets, any open issues related to their treatment not addressed by SFFAS 6 should be excluded from the land project’s scope. Members also agreed that leased land should be subject to the revised lease standards and that disclosures should be harmonized to the extent practical. The Board requested staff develop a definition for SL along with the incorporation of additional edits.
Lastly, members requested the following questions be added to the draft ED:
- Should the disclosures related to G-PP&E and SL be combined into a single note disclosure?
- Do the three proposed predominant use categories supersede the G-PP&E and SL categories, making them obsolete?
- What type of audit guidance will preparers need to satisfy the proposed accounting standards?
The Board tasked staff with developing a revised draft ED for further consideration.
Issue Paper for June 2017 – Tab H (PDF)
April 26-27, 2017 Board Meeting
At the April 27, 2017, Board meeting, members reviewed February’s broad options A and B and the incorporation of non-financial information (NFI) into the financial report. Specifically, members discussed the following major topics: (1) potential suspension of the land project, (2) balance sheet reporting, (3) land held-for-disposal, and (4) NFI presentation.
After considering reasons for and against the suspension of the land project, members unanimously agreed that the land project should continue as scheduled. Members noted that budget uncertainties are insufficient reasons to suspend a project, and concerns over preparer burden are separate matters that can be addressed as the Board develops its standards.
Members generally agreed to adopt a modified broad option A: no balance sheet reporting of land (to include not valuing land held-for-disposal). Members noted the importance of having consistent accounting standards to improve financial reporting of land. Any conceptual limitations can be addressed via the incorporation of NFI. As such, members believe a modified option A best addresses consistency while maintaining, if not improving, reporting objectives.
Concerning NFI, members generally agreed with the five NFI data points contained in tab D but did not agree on their placement. Some members felt all data points should be presented as Required Supplementary Information, whereas others preferred broad acreage and unit-count information be reported as basic information. Members generally agreed with the three land use reporting categories and noted that predominant use would be reflected in the three categories. The revenue-generating data point could, in essence, be folded into the commercial use category.
The Board tasked staff with developing a draft ED for the next meeting.
Issue Paper for April 2017 – Tab D (PDF)
February 22, 2017
At the February 22, 2017, Board meeting, members reviewed survey results addressing specific user opinions and information requirements needed by the user community regarding federal land. The Board also identified broad options to improve reporting on land so that they can be considered in detail at the next meeting. Some significant discussion points from the session include the following:
- It is clear that historical cost information is not useful to the majority of users, who believe that the reporting of land is currently deficient. Prior analyses of user needs reveal that financial statements are a starting point for users, wherein they often branch off into other venues to obtain information.
- Although it seems clear that historical cost information is of limited value, the use of non-financial information (NFI) does not seem supported by the survey.
- Members discussed performance reporting. Staff noted that citizens in particular want audited information, whereas internal managers prefer disaggregated information. For the latter group, reliance upon system internal controls is sufficient.
- The Board might be overestimating the importance of land information in financial statements to users.
- In regards to measuring economic gain, members noted that the entire area of property is an important issue for management. However, in most cases sale or disposal of land for economic gain/loss would probably be immaterial, and immediate recognition might suffice as appropriate guidance.
- Consistency and accountability seem to be the two principles in play, and these objectives can be achieved either from financial display or NFI perspectives.
Members seemed to gravitate towards focusing on NFI for land, questioning the need for fair value recognition. The Board requested staff have the task force identify the type of audit coverage, if any, it would recommend for each type of NFI that it believes should be disclosed, presented, or referenced in the financial report. The end result should assist members in better identifying appropriate placement of key NFI in the financial report.
Issue Paper for February 22, 2017 – Tab D (PDF)
December 19-20, 2016
At the December 19, 2016, Board meeting, FASAB hosted two educational sessions. The morning session consisted of representatives from the Department of the Interior (Interior) and the Department of Defense (DoD), who were invited to share their views concerning the Board’s accounting and reporting of government land project. Additionally, at this session, Interior provided an overview of its process for disposing land.
During the afternoon educational session, representatives from the Department of Energy, DoD, and the General Services Administration were invited to provide an overview of their processes for disposing of land.
The educational sessions assisted the members and staff in understanding land management decision making. The members greatly appreciate the time these agencies spent in preparing their remarks for the Board and will benefit from the expertise they shared.
Issue Paper for December 19, 2016 – Tab B (PDF)
October 19-20, 2016 Board Meeting
At the October 2016 Board meeting, members generally agreed on two major points: (1) greater clarity and uniformity in land reporting seems warranted and would foster greater transparency and (2) additional information is needed from users to inform deliberations.
Specifically, some members made the following observations:
- The importance of knowing how many acres an agency holds for the benefit of future generations
- Acreage information seems to be the common denominator needed by most, if not all, users
- The presentation of unit information alone has limited value
- Some level of audit assurance is needed
- A better grasp of overall user needs, including those of Congress, is warranted to help mitigate or reduce agency burden
Also, certain members expressed interest in better understanding the role of cost information and its relative importance to users.
Members noted that there seems to be competing interests among users. Specifically, there are users who desire better accountability over land reporting, users who desire specific property/parcel information for economic/financial exploitation, and users with local concerns over land holdings in their immediate jurisdictions.
Some members felt that in-depth deliberations could not commence until they had a broader understanding of user needs. However, other members noted that deliberations could begin by initially providing some clear guideposts or principles that were supported by task force discussions. For example, the Board could explore topics such as incorporation of non-financial information maintained by agencies and where such information should reside in the financial statements—as basic information, required supplementary information, or other information. Additionally, members expressed that deliberations could also commence predicated on FASAB’s reporting objectives. Simply put, discussions could be based on what the Board considers to be effective reporting. For example, the Board could discuss reporting the total inventory of an agency’s land holdings from the standpoint of what citizen-users expect from their government: accountability and stewardship.
In conclusion, members agreed to have staff contact additional users to obtain additional (or more specific) information about their requirements/data points. This additional outreach to the user community will better guide deliberations. As such, members of the user community are welcome and encouraged to contact staff to offer input or to join the existing task force. Regarding user input, staff expects to compile results from a brief 12 question survey by the end of December. If you or anyone you know would like to be part of this user survey or join the task force, please contact Mr. Domenic Savini as soon as possible. Thank you.
Issue Paper for October 2016 – Tab 1
August 24-25, 2016 Board Meeting
The Land project was not discussed at the August 2016 meeting.
July-August Task Force Meetings
The task force met on July 7 and August 11 and plans to meet again on October 4 as it addresses several issues for potential Board discussion.
Some issues discussed at the task force meetings include the following:
- Rating and ranking the qualitative characteristics most germane to land where the consensus opinion was that “understandability” and “reliability” were paramount to the reporting of land
- Rating and ranking the federal financial reporting objectives where the consensus opinion was that “operating performance” and “budgetary integrity” were most important to this project
- Discussing if non-financial information, such as acreage, can stand alone in meeting the stewardship objective
- Initially identifying three major reporting themes available to the Board for consideration – status quo, uniform accounting, and token (symbolic) value
At October’s meeting, the task force plans to expand discussions relative to the three major themes listed above, including identification of any other option and the associated benefits/drawbacks and cost/benefits with each.
If you’d like to join the task force, please contact Domenic Savini for details.
June 29-30, 2016 Board Meeting
At the June Board meeting, staff presented at tab B an update on the progress of the Accounting and Reporting of Government Land project and also sought approval of the proposed next steps, including the most efficient and economical use of the task force, identification of issues best suited for Board deliberations as opposed to task force deliberations, and a proposed timeline.
Although the Board was generally satisfied with the project plan’s next steps, members asked staff for continued updates to ensure that options, along with associated benefits and drawbacks, be brought to the table for discussion.
In particular, the Board asked staff to
- consider user information needs;
- explore and identify what information agencies use to manage land;
- identify types of information, such as acreage, that would help demonstrate the government’s stewardship and accountability over federal lands;
- address whether land held for disposal (for example, sale, public-private partnerships, donated to state and local governments) should be valued; and
- consider whether a uniform land accounting policy is a viable option given initial agency and task force feedback that current land classifications of stewardship land (SL) and general property, plant and equipment (G-PP&E) land be retained.
The Board discussed the remaining three items staff had proposed to exclude from additional agency fact finding within the project: land rights, land improvements, and land impairment. Members generally agreed with staff’s recommendations not to pursue these matters with the task force at this time but reserved these items for future research and Board deliberations.
Issue Paper for June 2016 – Tab B
February 24-25, 2016 Board Meeting
During the 3 Three-Year Plan review and pursuant to earlier project discussions, the Board members approved the proposed project plan and asked staff to carefully consider the following issues: the type of information entities need in order to manage program requirements; fair value measurements and potential valuation inconsistencies that intended-use classifications and related changes could have on said measurements; whether land held-for-sale should be fair valued and if so, subject to impairment; reliability of buyer-oriented appraisals; and whether a new standard on land should replace SFFAS 6 and/or SFFAS 29.
Project Plan for April 2016 – Tab D