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The Federal Accounting Standards Advisory Board

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The Federal Accounting Standards Advisory Board Back to the Future FASAB Update AGA Richmond Chapter Seminar Holiday Inn Koger Conference Center – PowerPoint PPT presentation

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Title: The Federal Accounting Standards Advisory Board


1
The Federal Accounting Standards Advisory
Board
  • Back to the Future
  • FASAB Update
  • AGA Richmond Chapter Seminar
  • Holiday Inn Koger Conference Center
  • May 18, 2011

2
Disclaimer
  • Views expressed are those of the speaker.
    Official positions of the FASAB are determined
    only after extensive due process and
    deliberations.

3
(No Transcript)
4
(No Transcript)
5
Communication
  • 10
  • 5

6
Overview
  • General information about FASAB
  • Major Challenges
  • Recently issued documents
  • Documents under review
  • Status of Current projects
  • Other topics of interest

7
General Information
8
Who is FASAB?
(Current as of May 18, 2011)
Bios available at www.fasab.gov
9
When does FASAB meet?
  • Generally six times a year
  • For 2011
  • February 23 24
  • April 27 28
  • June 22 23
  • August 24 25
  • October 26 27
  • December 19 20
  • Open to the public
  • Agenda and briefing materials on www.fasab.gov

10
Where does FASAB meet?
  • Government Accountability Office
  • 441 G Street, NW
  • Washington, DC 20548
  • Room 7C13 (Staats Briefing Room)

11
Major Challenges
12
Major Challenges
  • The federal governments financial health
  • Primary focus of FASAB is not on one bottom line
    number
  • Community involvement
  • Cost/benefit considerations

13
. . . The Nation must bring social insurance
expenses and resources into balance before the
deficit and debt reach unprecedented heights.
Delays will only increase the magnitude of the
reforms needed and will place more of the burden
on future generations. . .
Source A Citizens Guide to the 2010 Financial
Report of the U.S. Government, pg. x
14
Primary Focus of FASAB
  • Stewardship--Information on whether
  • the governments financial condition improved or
    deteriorated
  • programs are sustainable as currently constructed

15
Primary Focus of FASAB (contd.)
  • Operating PerformanceInformation to evaluate
  • The service efforts, costs and accomplishments of
    government
  • The manner in which these are financed
  • Management of the entitys assets and liabilities

16
Primary Focus of FASAB (contd.)

There is a need for more than just the bottom
line numbers.
17
Community Involvement
  • FASAB Community
  • Preparers
  • Auditors
  • Users
  • Internal
  • External

18
Community Involvement (contd.)
  • Formal Feedback
  • AAPC
  • Requests for comment
  • Public Hearings

19
Community Involvement (contd.)
  • Informal Feedback
  • Task Forces / Roundtables
  • Surveys / Polls / Questionnaires
  • Field Testing

20
Cost/Benefit Considerations
  • Costs not readily available
  • Benefits difficult to quantify
  • Balance in the eye of the beholder
  • True user not always easy to pinpoint

21
How Does the Board Address Cost/Benefit?
  • Agenda-setting
  • Proposal development
  • Staff communications
  • Exposure Drafts
  • Field Tests

22
Recently Issued Standards
23
Recently Issued Standards
SFFAS 34, GAAP Hierarchy Including Application of FASB Effective (FY 2009)
SFFAS 35, Estimating Historical Cost of GPPE Effective (FY 2010)
SFFAS 36, Reporting Comprehensive Long-Term Fiscal Projections Fully Effective (FY 2013)
24
Recently Issued Standards (contd.)
SFFAS 37, Social Insurance Additional Requirements for MDA and Basic Financial Statements Effective (FY 2010)
SFFAS 38, Accounting for Federal Oil and Gas Resources Effective (FY 2012)
SFFAS 39, Subsequent Events Codification of Accounting and Financial Reporting Standards Contained in the SAS Effective (Upon issuance)
25
Recently Issued Standards (contd.)
SFFAS 40, Deferred Maintenance and Repairs Definitional Changes Effective (FY 2012)
26
SFFAS 34, The Hierarchy of Generally Accepted Accounting Principles, Including the Application of Standards Issued by FASB (Issued July 28, 2009) Fully Effective (FY 2009)
  • Identifies the sources of accounting principles
    and the framework for selecting them
  • Incorporates GAAP hierarchy into the accounting
    literature
  • Level a FASAB Standards and Interpretations
  • Level b Technical Bulletins
  • Level c Technical Releases by AAPC
  • Level d Staff Implementation Guides and
    practice
  • Addresses federal entities that currently apply
    FASB

27
SFFAS 35, Estimating the Historical Cost of General Property, Plant, and Equipment (Under Review) Fully Effective (FY 2010)
  • Clarifies that reasonable estimates of original
    historical cost may be used to value G-PPE
  • Amends SFFASs 6 and 23
  • Reduces implementation costs
  • Effective for existing and new entities

28
SFFAS 36, Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government Fully Effective (FY 2013)
  • Requires reporting that will help users determine
    whether future budgetary resources will likely be
    sufficient to sustain public services and to meet
    obligations as they come due
  • Resulted from social insurance project
  • Applies to CFR only
  • Requires a new basic financial statement and a
    number of disclosures

29
SFFAS 36 Comprehensive Long-term Fiscal
Projections (contd.)
  • Basic Information (audited)
  • the present value of projected receipts and
    non-interest spending under current policy
    without change with relationship to projected GDP
  • changes in the present value of projected
    receipts and non-interest spending from the prior
    year
  • the assumptions underlying the projections
  • factors influencing trends
  • significant changes in the projections from
    period to period

30
SFFAS 36 Comprehensive Long-term Fiscal
Projections (contd.)
  • Required Supplementary Information
  • the projected trends in
  • the relationship between receipts and spending
  • deficits or surpluses
  • Treasury debt held by the public as a share of
    GDP
  • possible results using alternative scenarios
  • the likely impact of delaying corrective action
    when a fiscal gap exists (cost of delay)

31
FY 2010 Financial Report of the U.S. Government,
pp. 142-143
  • The Sustainability of Fiscal Policy
  • An important purpose of the Financial Report is
    to help citizens and policymakers assess whether
    current fiscal policy is sustainable and, if it
    is not, the urgency and magnitude of policy
    reforms necessary to make it sustainable. A
    sustainable policy is one where the ratio of debt
    held by the public to GDP (debt to GDP) is
    stable over time. The discussion below focuses on
    balancing revenues and expenditures over time,
    and does not consider fairness or efficiency
    implications of the reforms necessary to achieve
    sustainability.
  • It is shown below that, under current policy,
    the ratio of debt to GDP is projected to rise
    continuously over the next 75 years, eventually
    exceeding 350 percent in 2085. If these
    projections were extended beyond 2085, the
    deficit excluding interest would continue as the
    population continues to age and if the other
    assumptions made for the 75-year horizon continue
    to hold. The persistence of the deficit excluding
    interest beyond the 75-year horizon implies that
    the ratio of debt to GDP would continue to grow
    beyond the 75-year horizon. The continuing rise
    in this ratio means that current policy is
    unsustainable.
  • Gross domestic product

32
FY 2010 Financial Report of the U.S. Government,
pg. 140
33
FY 2010 Financial Report of the U.S. Government
34
Costs of Delay
FY 2010 Financial Report of the U.S. Government,
p. 146
35
SFFAS 36 Example Formats and Illustrations
36
SFFAS 37, Social Insurance Additional Requirements for MDA and Basic Financial Statements Effective (FY 2010)
  • Preliminary Views issued October 23, 2006
  • Exposure Draft issued November 17, 2008
  • Board and respondents strongly divided on many
    aspects
  • SI project spawned fiscal sustainability
    reporting project

37
Social Insurance (contd.)
  • New requirements
  • Narrative in MDA
  • Table of key measures in MDA
  • Summary section for SOSI
  • Statement of changes in SOSI
  • Effective FY 2011

38
Example Formats and Illustrations
39
Example Formats and Illustrations
40
Example Formats and Illustrations
41
Natural Resources
  • Natural Resources project initiated in July 1995
  • Task force held first meeting in January 1997
  • Task force issued discussion paper in June 2000

42
SFFAS 38, Accounting for Federal Oil and Gas Resources Effective (FY 2012)
  • A schedule of estimated federal oil and gas
    petroleum royalties
  • the present value of future federal royalty
    receipts on proved reserves known to exist as of
    the reporting date
  • the amounts to be distributed to others (state
    governments)
  • Required supplementary information for three years

43
Natural Resources (contd.)
  • Concurrent field test
  • Original exposure draft on oil and gas released
    May 2007
  • Evaluated comment letters along with results of
    field test
  • Revised exposure draft issued July 2009
  • Final standard issued April 2010

44
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45
SFFAS 39, Subsequent Events Codification of Accounting and Financial Reporting Standards Contained in the AICPA Statement on Auditing Standards Effective (Upon issuance)
  • AICPA SAS ? FASAB SFFAS
  • At the request of ASB
  • Guidance basically unchanged
  • Audit standards not included
  • Related parties
  • Going concern

46
SFFAS 40, Deferred Maintenance and Repairs Definitional Changes Effective (FY 2012)
  • Amended the definition only
  • Repairs clarify that deferred repairs are
    included
  • Capital clarify that deferred capital
    improvements are not included
  • Preserves the notion that management determines
    acceptable condition

47
Other Recently Issued Documents
48
Other Recently Issued Documents
Technical Releases 10 Asbestos Cleanup Costs Associated with Facilities and Installed Equipment 11 Cleanup Costs Associated with Equipment 12 Accrual Estimates for Grant Programs Effective (Upon issuance) (Upon issuance) (FY 2012)
Financial Reporting Model Task Force Report to the FASAB Effective (N/A)
49
Technical Release 10 Guidance on Asbestos Cleanup Costs Associated with Facilities and Installed Equipment Fully Effective (upon issuance)
  • Provides implementation guidance for Technical
    Bulletin 2006-1, Recognition and Measurement of
    Asbestos-Related Cleanup Costs
  • Framework
  • Identify assets that contain asbestos
  • Develop estimates of cleanup costs

50
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51
Technical Release 11 Guidance on Cleanup Costs Associated with Equipment Fully Effective (upon issuance)
  • Clarifies the accounting for cleanup costs
    associated with permanent or temporary closures
    or shutdown of equipment
  • Also clarifies accounting for cleanup costs
    associated with ongoing operations

52
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53
Technical Release 12 Accrual Estimates for Grant Programs Fully Effective (FY 2012)
  • Provides guidance supporting cost-effective
    development of reasonable estimates of accrued
    liabilities for grant programs
  • Addresses numerous areas (e.g., materiality,
    internal controls, training, reasonableness,
    etc.)

54
Documents Under Review
55
SFFAS 41, Deferral of the Effective Date of SFFAS 38, Accounting for Federal Oil and Gas Resources Effective (Upon issuance)
  • Defers the effective date of SFFAS 38 for one
    year
  • New effective date is for periods beginning after
    September 30, 2012 (fiscal year 2013)
  • Expected to be issued in July 2011

56
Technical Bulletin 2011-1, Accounting for Federal Natural Resources Other than Oil and Gas Effective (FY 2014)
  • Applies principles of SFFAS 38 to other types of
    natural resources
  • Required implementation for nonrenewable
    resources
  • Renewable and electromagnetic spectrum may
    implement, but not required
  • Effective for periods ending after September 30,
    2013 (fiscal year 2014)
  • Expected to be issued in July 2011

57
SFFAC 7, Measurement of the Elements of Accrual-Basis Financial Statements in Periods After Initial Recording Effective (Upon issuance)
  • A statement of concepts to assist the board in
    establishing standards
  • Identifies how initial amounts and re-measured
    amounts contribute to meeting reporting
    objectives
  • Defines a suite of measurement attributes
  • Considering unique information needs in the
    federal environment, for example
  • Value in use
  • Constant dollar reporting

58
Current Projects
59
Active FASAB Projects
  • Revisiting Conceptual Framework
  • Deferred Maintenance / Asset Impairment
  • Evaluating Existing Standards
  • Use of FASB by Federal Entities

60
Revisiting Conceptual Framework
  • Completed Phases
  • Objectives
  • Elements
  • Measurement Attributes
  • In-Process Phases
  • Reporting Model
  • Federal Entity
  • Review and Maintenance

61
Reporting Objectives
  • Completed a review of the FASABs role and its
    environment
  • Reviewed each of the four existing objectives
    from SFFAC 1
  • Issued report, Clarifying FASABs Near-Term Role
    in Achieving the Objectives of Federal Financial
    Reporting.
  • Operating Performance and Stewardship are primary
    near-term focus.
  • Recently reviewed and confirmed the focus of
    FASAB remains the same in the process of
    approving an addendum

62
FASABs Near-Term Focus
63
Elements
  • SFFAC 5 defined five elements of accrual-basis
    financial statements
  • Assets, liabilities, net position, revenues and
    expenses
  • Recognition criteria
  • Uncertainty

64
Federal Reporting Model
  • Concerns exist regarding the benefits of
    accrual-basis financial statements relative to
    the cost of preparing them
  • FASAB conducting a user needs study
  • Federal CFO Council preparing a proposal
  • Developing a report on experiences in other
    countries
  • FASAB Task Force report issued December 22, 2010

65
Federal Reporting Model CFR Recommendations
  • Web delivery model
  • Government-wide performance information
  • Net cost and spending by function
  • Statement of spending requirements
  • Intergovernmental financial dependency
  • Improved reconciliation of deficit and operating
    cost
  • Reclassify the reconciliation of cash and debt
    changes
  • Re-orient the balance sheet and improve
    stakeholder link
  • Explain the difference between net liabilities
    and fiscal gap
  • Establish a Web site for reports and to raise
    awareness in the near-term

66
Federal Reporting Model Next Steps
  • Consider implications of user needs study and
    task force recommendations for existing concepts
  • Study of component entity reporting model

67
Federal Entity
  • FASAB established concepts in mid-90s
  • Standards now being developed
  • Questions
  • What to include in CFR (all entities established
    by the federal government or a subset)?
  • How to present information (all consolidated,
    some separately displayed or disclosed)?
  • Boundary between related parties, core and
    non-core entities?

68
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69
Deferred Maintenance and Asset Impairment
  • Deferred maintenance viewed as critical
    management issue
  • Experimental reporting has been underway since
    1998
  • Definitions revised definition and title
    (deferred maintenance and repairs)
  • Open Issues
  • Measurement techniques
  • Relevant metrics to report (dollars and/or
    condition)
  • Task force of facilities managers, accountants,
    and auditors formed to assist

70
Evaluating Existing Standards
  • Why
  • Cost/benefit issues?
  • Communication challenges
  • Expectations
  • How
  • Outreach to preparers, auditors and users
  • Development of options
  • Earmarked funds assessing implementation and
    adjusting reporting requirements

71
Use of FASB by Federal Entities
  • Background
  • AICPA Rule 203 Status
  • Current practice
  • Revisiting newsletter guidance
  • Consistency, completeness, and accountability
  • Consolidation issues

72
Use of FASB by Federal Entities (contd.)
  • Issues
  • What are user needs
  • What requirements would address user needs and
    Treasury reporting needs
  • What are the reporting costs, burdens, challenges

73
Use of FASB by Federal Entities (contd.)
  • Project Status
  • Survey
  • Workgroup
  • Roundtable
  • Tentative Decisions
  • No entities required to convert to FASAB at this
    time
  • CFR can include two sources of GAAP
  • Exception for material intragovernmental
    eliminations

74
Emerging Issues
  • Risk Assumed
  • Leases
  • Investments in non-federal securities
  • Public Private Partnerships
  • AAPC Determining the full cost of PPE
  • Capacity challenges in a more constrained
    environment

75
Other Topics
76
Other Topics
  • Open government initiative
  • Future of PPE
  • Inter-period equity
  • Accounting for green initiatives
  • Convergence with international standards

77
Accounting for Green Initiatives
  • Examples of initiatives
  • Renewable or sustainable energy
  • Shared savings contracts
  • Cap and trade programs
  • Treaties
  • New projects such as retrofitting buildings
  • How should they be reported?

78
Convergence with Other Standards-Setters
  • Hold informed deliberations
  • Identify opportunities for collaboration
  • Maintain liaisons
  • Annual joint meeting with GASB

79
Stay Informed
  • www.fasab.gov
  • FASAB listserv
  • Bi-monthly FASAB newsletter
  • Requests for comment
  • Press releases
  • Agendas
  • Invitations to serve on task forces
  • Public meetings

80
Online Resources
www.fasab.gov
New Design Coming Soon!
81
Contact Information
  • Julia Ranagan, CGFM, CPA
  • Assistant Director
  • 202.512.7377
  • ranaganj_at_fasab.gov
  • www.fasab.gov
  • Follow _at_usfasab on Twitter

82
Questions?
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