The Federal Accounting Standards Advisory Board

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The Federal AccountingStandards Advisory
Board

• Back to the Future
• FASAB Update
• AGA Denver 24th Annual
• Professional Development Conference
• March 10, 2010

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Disclaimer

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

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Communication

• 10
• 5

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Overview

• General information about FASAB
• Five recently issued documents
• Two standards currently under review
• Active projects
• Other topics of interest

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General Information
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Who is FASAB?
(Current as of March 1, 2010)
Bios available at www.fasab.gov
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When does FASAB meet?

• Generally six times a year

• For 2010
• February 24 25
• April 28 29
• June 23 24
• August 25 26
• October 27 28
• December 16 17

• Open to the public

• Agenda and briefing materials on www.fasab.gov

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Where does FASAB meet?

• Government Accountability Office
• 441 G Street, NW
• Washington, DC 20548
• Room 7C13 (Staats Briefing Room)

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Recently Issued Documents
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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)
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Other Recently Issued
Technical Bulletin 2009-1, Deferral of the Effective Date of Technical Bulletin 2006-1 Effective (FY 2010)
SIG 31.1, Guidance for Implementation of SFFAS 31 Effective (FY 2009)
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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

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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

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SFFAS 36, Reporting Comprehensive Long-Term Fiscal Projections for the U.S. Government (Under Review) 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

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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

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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)

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Example Formats and Illustrations
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Example Formats and Illustrations
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Example Formats and Illustrations
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Technical Bulletin 2009-1, Deferral of the Effective Date of Technical Bulletin 2006-1 (Issued September 22, 2009) Fully Effective (FY 2009)

• Defers effective date of Technical Bulletin
  2006-1, Recognition and Measurement of
  Asbestos-Related Cleanup Costs, for two years
  (now fiscal year 2012)
• Provides federal agencies with additional time to
  resolve implementation issues identified since
  Technical Bulletin 2006-1 was issued
• AAPC currently working on implementation guidance
  that will be issued as a technical release

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SIG 31.1, Guidance for Implementation of SFFAS 31, Accounting for Fiduciary Activities (Issued March 19, 2009) Fully Effective (FY 2009)

• Provides guidance for implementing the related
  standard
• QA format
• Addresses questions raised by federal preparers
• Does not establish new requirements

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Standards Under Review
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Recently Completed Activity Under Review
Social Insurance Additional Requirements for MDA and Basic Financial Statements Effective (FY 2010)
Accounting for Federal Oil and Gas Resources Effective (FY 2012)
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Social Insurance

• 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

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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

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Example Formats and Illustrations
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Example Formats and Illustrations
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Example Formats and Illustrations
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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

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Natural Resources (contd.)

• Original exposure draft on oil and gas released
  May 2007
• Concurrent field test
• Revised exposure draft issued July 6, 2009
• Final standard expected to be issued April 13,
  2010

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Natural Resources (contd.)

• 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 beginning in FY 2012

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Active Projects
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Active FASAB Projects

• Revisiting Conceptual Framework
• Deferred Maintenance / Asset Impairment
• Evaluating Existing Standards
• Use of FASB by Federal Entities

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Revisiting Conceptual Framework

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

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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.

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FASABs Near-Term Focus
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Elements

• SFFAC 5 defined five elements of accrual-basis
  financial statements
• Assets, liabilities, net position, revenues and
  expenses
• Recognition criteria
• Uncertainty

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Reporting Model

• Revisiting SFFAC 2, Entity and Display
• Validate and explain each financial statement
• Ensure all objectives are adequately addressed by
  the model
• Concerns exist regarding benefits of
  accrual-basis financial statements relative to
  the cost of preparing them

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Reporting Model (contd.)

• Project Approach
• User Needs Study
• Report on experiences in other countries
• Alignment of Model with Needs
• Fill voids
• Adjust current requirements to improve alignment

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Reporting Model (contd.)

• Cost Accounting
• Evaluating the effectiveness of existing
  managerial cost accounting standards
• Surveying federal agencies
• Learn more about practices
• Identify best practices
• Focus on linking cost to performance and efforts
  to encourage that linkage

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Reporting Model (contd.)

• Cost Accounting
• What are your thoughts?

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Federal Entity

• Defined in SFFAC 2
• Conclusive criterion
• Indicative criteria
• Revisiting
• Questionable or unique entities
• Consistency, completeness, and accountability
• Material weakness

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Federal Entity (contd.)

• Task Force
• Surveys
• CFO
• OIG
• FFRDCs

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Measurement Attributes

• Part of the FASABs reexamination and expansion
  of its conceptual framework
• Purpose to provide guidance on the selection of
  measurement attributes in future federal
  financial reporting standards
• A measurement attribute is the aspect of an item
  that is measured (e.g., historical cost or
  replacement cost)

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Measurement Attributes (contd.)

• Developing a statement of concepts to assist the
  board in establishing standards
• Identifying how initial amounts and re-measured
  amounts contribute to meeting reporting
  objectives
• Defining a suite of measurement attributes
• Considering needs in the federal environment, for
  example
• Value in use
• Constant dollar reporting

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Deferred Maintenance and Asset Impairment

• Deferred Maintenance
• SFFAS 6 as amended results in RSI - experimental
• Deferred maintenance viewed as critical
  management issue.
• Task force formed
• Asset Impairment
• SFFAS 6 covers complete impairment
• How does deferred maintenance relate to
• Depreciation
• Asset Impairment

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Evaluating Existing Standards

• Why
• Cost/benefit issues
• Communication challenges
• Expectations
• How
• Outreach to preparers, auditors and users
• Development of options

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Use of FASB by Federal Entities

• Background
• AICPA Rule 203 Status
• Current practice
• Revisiting newsletter guidance
• Consistency, completeness, and accountability
• Consolidation issues

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Use of FASB byFederal Entities (contd.)

• Issues
• What are user needs
• What requirements would address user needs and
  Treasury reporting needs
• What are the reporting costs, burdens, challenges

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Use of FASB byFederal Entities (contd.)

• Advantages to Conversion
• Consistency, completeness, and accountability
• Consolidation
• Avoid two sets of information
• Avoid year-end manual processes

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Use of FASB byFederal Entities (contd.)

• Disadvantages to Conversion
• Costs to convert
• Costs passed on to users
• Comparability to sector (e.g., utility)
• FS differ from SEC submission
• Perceived benefit only at CFR level

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Use of FASB byFederal Entities (contd.)

• Disadvantages to Conversion (contd.)
• Indirect impact on legislative and judicial
  branches
• Potential for OCBOA or less than unqualified
  opinions
• Loss of comparison to historical reporting

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Use of FASB byFederal Entities (contd.)

• Project Status
• Survey
• Workgroup
• Tentative Decisions
• No entities required to convert to FASAB at this
  time
• CFR can include two sources of GAAP
• Exception for material intragovernmental
  eliminations

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Other Topics
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Other Topics

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

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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?

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Convergence with Other Standards-Setters

• Hold informed deliberations
• Identify opportunities for collaboration
• Maintain liaisons
• Annual joint meeting with GASB

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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

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Online Resources
www.fasab.gov
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Contact Information

• Julia Ranagan, CGFM, CPA
• Assistant Director
• 202.512.7377
• ranaganj_at_fasab.gov
• www.fasab.gov

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Roads? Where were going, we dont need
roads. -- Doc Brown, Back to the Future
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Questions?