Intragovernmental Allowances

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

Request for CommentDue DateWord Version of questions for RespondentsComment LettersFinal Pronouncements
Loss Allowance for Intragovernmental Receivables (PDF)October 1, 2019Word Version of Questions for Respondents (Download)Comment LettersLoss Allowance for Intragovernmental Receivables (PDF)

Technical Clarifications of Existing Standards (TCES) Project Description:

Members of the Board and the federal financial management community have expressed a general concern that federal entity resources are increasingly constrained. Some believe the Board should evaluate existing requirements and eliminate any unnecessary requirements. When appropriate, the Board explores opportunities to engage with the community on changes to existing standards and areas where clarification may be needed.

TCES addresses requests for guidance that align with the above goals and provide benefits that clearly exceed costs. To accomplish these goals, ongoing efforts may include providing additional forums for preparers, auditors, and users to identify requirements they believe are unnecessary and where clarification may be needed (this can be accomplished through an open-ended written request for input or round table discussions). The Board will assess requests against the reporting objectives. The Board may address these requests through the appropriate level of GAAP guidance.

Intragovernmental Allowances For Losses Project Objective:

As part of the TCES project, this sub-project considers whether clarification is required to address ambiguity regarding the recognition of losses for intragovernmental receivables in SFFAS 1, Accounting for Selected Assets and Liabilities.

The objective is to respond to a request for guidance from stakeholders by issuing clarifying guidance regarding the recognition of intragovernmental losses.

HISTORY OF BOARD DELIBERATIONS

February 26-27, 2020

On February 20, 2020, FASAB staff issued Technical Bulletin (TB) 2020-1, Loss Allowance for Intragovernmental Receivables. TB 2020-1 clarifies that the recognition of losses, provided in paragraphs 40-52 of SFFAS 1, Accounting for Selected Assets and Liabilities, applies to both intragovernmental receivables and receivables from nonfederal entities. The TB also clarifies SFFAS 1 by explaining the allowance approach is not a “write-off” of a receivable. Rather, it is a method for reporting an amount that the entity believes is realizable by requiring only accounts receivable, net of an allowance, to be reported on the financial statements. An allowance recognized in a reporting entity’s financial statements does not alter the underlying statutory authority to collect the receivable or the legal obligation of the other intragovernmental entity to pay.

TB 2020-1 is available at https://fasab.gov/accounting-standards/document-by-chapter/.

October 23-24, 2019

At the October 2019 meeting, the Board considered the comment letters, staff analysis, and staff’s proposed Technical Bulletin (TB) 2019-1, Loss Allowance for Intragovernmental Receivables. FASAB received 14 comment letters from preparers, auditors, professional associations, and users of federal financial information. Respondents generally agreed with the proposed guidance.

The Board discussed two edits to the proposed TB during the Board meeting. The Board agreed that the excerpt from paragraph 131 of SFFAS 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, should be removed because it is not necessary. The Board agreed that the paragraph provides the pertinent information that an allowance for intragovernmental receivables may be appropriate, but it may not always be needed.

The Board discussed the issue of effective date and agreed that the TB should be effective upon issuance because it is a clarification of existing standards. However, two component reporting entities are expected to have a delay in submitting their annual financial report. Therefore, the Board agreed the issuance should be held until all component reports are submitted. FASAB anticipates issuing the proposed TB in February 2020.

No FASAB member objected to issuing the proposed TB 2019-1, Loss Allowance for Intragovernmental Receivables.

The exposure draft and the specific questions raised are available on the FASAB website in PDF and Microsoft Word format, respectively. (https://www.fasab.gov/documents-for-comment/).

Issue Paper for October 23-24, 2019 – Tab C (PDF)

August 28-29, 2019

On August 30, 2019, FASAB released for comment a proposed TB titled Loss Allowance for Intragovernmental Receivables. The proposed TB would clarify that the recognition of losses, provided in paragraphs 41-51 of SFFAS 1, Accounting for Selected Assets and Liabilities, applies to both intragovernmental receivables and receivables from nonfederal entities. The proposed TB would also clarify that an allowance recognized in a reporting entity’s financial statements does not alter the underlying statutory authority to collect the receivable or legal obligation of the other intragovernmental entity to pay.

The exposure draft and the specific questions raised are available on the FASAB website in PDF and Microsoft Word format, respectively (https://www.fasab.gov/documents-for-comment/). While FASAB encourages that all comments be submitted by October 1, 2019, late submissions are also reviewed by the Board.

June 26-27, 2019

At the June 2019 Board meeting, the Board considered a draft Technical Bulletin (TB), Loss Allowance for Intragovernmental Receivables, to address a request for guidance from Treasury regarding intragovernmental allowances for losses.

The draft TB would provide clarity and resolve the perceived uncertainty related to intragovernmental allowances for losses. This TB would clarify SFFAS 1, Accounting for Selected Assets and Liabilities, by establishing that even though SFFAS 1 identifies the two types of receivables, the absence of explicit guidance distinguishing between the accounting of intragovernmental receivables and receivables from nonfederal entities does not mean the standards only apply to receivables from nonfederal entities. This TB would also clarify that recognition of losses, provided in paragraphs 41-51 of SFFAS 1, apply to both intragovernmental receivables and receivables from nonfederal entities.

The majority of the Board expressed support for the TB. However, one member disagreed with the guidance in the document. After discussing the member’s concerns, the Board confirmed its majority position that there is no differentiation in the standards as it applies to both receivables. Members agreed to certain edits to the draft TB based on the member’s concerns. Staff will add language to be more specific that, although there is an allowance, monies owed can still be collected.

The Board will review an updated TB, Loss Allowance for Intragovernmental Receivables, that incorporates the agreed upon changes for a 15-day review. If a majority of the members do not object, the TB will be exposed to the public for comment.

Issue Paper for June 26-27, 2019 – Tab A and I (PDF)

April 24-25, 2019

At the April 2019 Board meeting, Treasury’s Bureau of the Fiscal Service representatives provided the Board their perspective on the intragovernmental allowances for losses issue. Treasury had previously raised the concern regarding the recognition of losses against intragovernmental receivables among federal entities. Treasury does not believe it is appropriate for an agency to record a loss allowance for intragovernmental receivables, particularly in cases where the balances are required by statute to be repaid.

The Treasury representatives presented an overview of the intragovernmental allowances for losses, focusing on the history and composition of the intragovernmental differences. The presentation also provided detail regarding the Treasury Judgement Fund, one of the largest material allowances.

Treasury also discussed that it issued policy and made system changes to require no allowance for losses of intragovernmental receivables and to ensure consistent treatment government-wide. However, Treasury’s Deputy Chief Financial Officer did not believe there was adequate justification to change the accounting for the Treasury Judgment Fund as suggested by the policy. Treasury believes SFFAS 1, Accounting for Selected Assets and Liabilities, paragraph 44 is not clear on whether it applies to intragovernmental receivables, implying that there could be delineation in the application of doubtful accounts against “public” and “intragovernmental” receivables.

The Board discussed whether the intragovernmental allowances for losses issue needed to be addressed. Certain members believed that the issues were bookkeeping or not within FASAB’s purview. In addition, some believed it could be resolved without FASAB actions, either through the closing package, top level journal vouchers, or simply through judgment. The Board also noted that the allowance approach is not actually a “write-off” of a receivable; it is an adjustment to estimate the amount that is realizable.

However, the Board agreed that there appeared to be uncertainty regarding the language related to intragovernmental allowances for losses in SFFAS 1. The Board will determine how to clarify in the appropriate document according to the generally accepting accounting principles (GAAP) hierarchy.

Issue Paper for April 24-25, 2019 – Tab A (PDF)

December 19-20, 2018

In June 2018, the Department of the Treasury (Treasury) raised a concern regarding the recognition of losses against intragovernmental receivables among federal entities. Treasury does not believe it is appropriate for an agency to record a loss allowance for intragovernmental receivables, particularly in cases where the balances are required by statute to be repaid.

The educational session at the December 2018 meeting provided the Board with a perspective from an agency with significant intragovernmental receivables. A representative from the General Services Administration (GSA) provided a brief overview of GSA’s types of receivables and reporting. No specific decisions were made at the meeting. An additional educational session is planned as the Board considers the topic.

Issue Paper for December 19-20, 2018 – Tab E (PDF)