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Valuing the Nations Space Exploration Equipment

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NASA has 10 Centers with almost 50 years worth of history building space exploration equipment ... Over the past few years NASA has attempted to adjust to the ... – PowerPoint PPT presentation

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Title: Valuing the Nations Space Exploration Equipment


1
Valuing the Nations Space Exploration Equipment
  • Association of Government Accountants
  • Professional Development Conference
  • Terry Bowie
  • Deputy Chief Financial Officer
  • June 22, 2007

2
Background
  • NASA has 10 Centers with almost 50 years worth of
    history building space exploration equipment
  • Federal accounting practices have evolved and
    NASA has struggled to match operating practices
    with evolving interpretations of the accounting
    standards
  • Over the past few years NASA has attempted to
    adjust to the evolving interpretations without
    success

3
Private vs Public
  • Private Sector accounting principles match
    revenues associated with the consumption of
    assets as a period expense in the form of
    (depreciation) over the assets useful life
  • Public Sector budget does not equal revenue
    and, for RD organizations like NASA, useful life
    can be meaningless (e.g. space probes that take
    years to build, but are expected to be useful for
    only a few months 10,000 miles from earth)
  • Need to consider how accounting for PPE
    provides the most useful information to our
    stakeholders and readers of the financial
    statements

4
Evolution of Federal Standards
Evolving federal accounting standards and audit
opinions have created questions regarding the
appropriate accounting treatment for space
exploration equipment
5
Application of the Standards
  • To comply with interpretations of standards, NASA
    began capitalizing all space exploration programs
    consistent with SFFAS Nos. 11 and 6 in FY 1999
  • NASA created a sub-category of PPE labeled
    Theme Assets to account for capitalized space
    exploration programs
  • Upon future review, NASA began to review
    substance over form
  • the underlying assumption that all space
    exploration equipment fully meet asset
    requirements
  • the usefulness of financial statement reporting
    related to these assets

6
When Is Equipment an Asset?
Mars Exploration Rover
7
When is Equipment an Asset?
Voyager 1 Spacecraft
8
NASAs Conclusions
  • NASAs programs are experimental in nature,
    design, and intent Research and Development
    (RD)
  • These programs do not typically result in the
    creation of assets per se, but in the creation
    of equipment used in research
  • …planned search or critical investigation aimed
    at discovery of new knowledge…
  • NASA reviewed the given accounting standards and
    changed its accounting principle to better
    reflect the substance of the transactions and has
    began the use of SFAS No. 2, Accounting for
    Research and Development Costs

9
Current Status
  • FASABs Accounting and Auditing Policy Committee
    (AAPC) has provided clarifying guidance under
    Technical Release 7 agreeing with NASAs position
    on the application of SFAS No. 2, Research and
    Development Costs, to NASA projects as
    appropriate
  • In FY 2007, NASA will confirm the nature of
    programs/projects to determine proper
    classification
  • All assets associated with these programs will
    be reviewed to determine if they fit SFAS No. 2
    definitions
  • Adjustments to the balance sheet will be made
    this fiscal year to reflect the change in
    accounting principle

10
Key Lessons
  • Listen to your independent reviewers the IG, GAO
    and independent auditor recommendations but also
    look for the underlying issues which may not be
    readily apparent
  • Focus on the substance of the transactions over
    form
  • Keep in mind that management is responsible for
    the fair presentation of the financial statements

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