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Slide 1 - AGA Richmond


									 The Federal Accounting
Standards Advisory Board

   Back to the Future
            FASAB Update

      AGA Richmond Chapter Seminar
     Holiday Inn Koger Conference Center
                 May 18, 2011

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

• General information about FASAB
• Major Challenges
• Recently issued documents
• Documents under review
• Status of Current projects
• Other topics of interest
General Information
Who is FASAB?
         (Current as of May 18, 2011)

                  Tom Allen
               (Former GASB Chair)
                                               Bios available at

  Mark Reger                   Debra Bond
    Treasury                         OMB

  Hal Steinberg                Bob Dacey

 Michael Granof             Alan Schumacher

Norwood Jackson              Scott Showalter
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
Where does FASAB meet?

  Government Accountability Office
        441 G Street, NW
      Washington, DC 20548

  Room 7C13 (Staats Briefing Room)
Major Challenges
     Major Challenges
•   The federal government‘s financial
•   Primary focus of FASAB is not on
    one bottom line number
•   Community involvement
•   Cost/benefit considerations
“. . . 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 Citizen’s Guide to the 2010 Financial Report of the U.S. Government, pg. x
       Primary Focus
         of FASAB
• Stewardship--Information on whether:
  – the government‘s financial condition
    improved or deteriorated
  – programs are sustainable as currently
      Primary Focus
      of FASAB (contd.)
• Operating Performance—Information
  to evaluate:
  – The service efforts, costs and
    accomplishments of government
  – The manner in which these are financed
  – Management of the entity‘s assets and
Primary Focus
of FASAB (contd.)

             There is a
             need for
             more than
             just the
             bottom line
Community Involvement

    • FASAB Community

      – Preparers

      – Auditors

      – Users
        • Internal
        • External
Community Involvement
    • Formal Feedback

      – AAPC

      – Requests for comment

      – Public Hearings
Community Involvement
    • Informal Feedback

      – Task Forces / Roundtables

      – Surveys / Polls / Questionnaires

      – Field Testing
• Costs not readily available

• Benefits difficult to quantify

• Balance in the eye of the beholder

• True user not always easy to pinpoint
 How Does the Board
Address Cost/Benefit?
   • Agenda-setting

   • Proposal development

   • Staff communications

   • Exposure Drafts

   • Field Tests
Recently Issued
Recently Issued Standards

SFFAS 34, GAAP Hierarchy Including           Effective

Application of FASB                       (FY 2009)

SFFAS 35, Estimating Historical Cost of     Effective

GPP&E                                     (FY 2010)

SFFAS 36, Reporting Comprehensive         Fully Effective

Long-Term Fiscal Projections              (FY 2013)
   Recently Issued Standards
SFFAS 37, Social Insurance: Additional        Effective

Requirements for MD&A and Basic Financial   (FY 2010)

SFFAS 38, Accounting for Federal Oil and     Effective

Gas Resources                               (FY 2012)

SFFAS 39, Subsequent Events: Codification     Effective

of Accounting and Financial Reporting         (Upon
Standards Contained in the SAS              issuance)
  Recently Issued Standards
SFFAS 40, Deferred Maintenance and
                                   (FY 2012)
Repairs: Definitional Changes
                                                     Fully Effective
SFFAS 34, The Hierarchy of
Generally Accepted Accounting                       (FY 2009)
Principles, Including the
Application of Standards Issued
by FASB (Issued July 28, 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
                                                Fully Effective
SFFAS 35, Estimating the
Historical Cost of General                      (FY 2010)
Property, Plant, and Equipment
(Under Review)

 • Clarifies that reasonable estimates of original
   historical cost may be used to value G-PP&E
    – Amends SFFASs 6 and 23
    – Reduces implementation costs
    – Effective for existing and new entities
                                                Fully Effective
SFFAS 36, Reporting
Comprehensive Long-Term                        (FY 2013)
Fiscal Projections for the U.S.

 • 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
  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
    – the assumptions underlying the projections
    – factors influencing trends
    – significant changes in the projections from period
      to period
  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‖)
                                            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
FY 2010 Financial Report of the U.S. Government, pg. 140
FY 2010 Financial Report of the U.S. Government
        FY 2010 Financial Report of the U.S. Government, p. 146

Costs of Delay
SFFAS 36: Example Formats and Illustrations
SFFAS 37, Social Insurance:
                                   (FY 2010)
Additional Requirements for MD&A
and Basic Financial Statements

 • Preliminary Views issued October 23,
 • Exposure Draft issued November 17,
 • Board and respondents strongly divided
   on many aspects
 • SI project spawned fiscal sustainability
   reporting project
Social Insurance (contd.)

• New requirements
  – Narrative in MD&A
  – Table of key measures in MD&A
  – Summary section for SOSI
  – Statement of changes in SOSI
• Effective FY 2011
Example Formats and Illustrations
Example Formats and Illustrations
Example Formats and Illustrations
    Natural Resources

• Natural Resources project initiated in
  July 1995
• Task force held first meeting in January
• Task force issued discussion paper in
  June 2000
SFFAS 38, Accounting for Federal
                                             (FY 2012)
Oil and Gas Resources

     • 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
     • Required supplementary information for
       three years
Natural Resources (contd.)

• Concurrent field test
  – Original exposure draft on oil and gas released May
  – Evaluated comment letters along with results of field
  – Revised exposure draft issued July 2009
  – Final standard issued April 2010
SFFAS 39, Subsequent Events:
Codification of Accounting and Financial
Reporting Standards Contained in the
AICPA Statement on Auditing Standards

    •   At the request of ASB
    •   Guidance basically unchanged
    •   Audit standards not included:
        – Related parties
        – Going concern
SFFAS 40, Deferred Maintenance
                                    (FY 2012)
and Repairs: Definitional Changes

    • 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
  Other Recently
Issued Documents
       Other Recently Issued
Technical Releases                                  Effective

   • 10 – Asbestos Cleanup Costs Associated with     (Upon
          Facilities and Installed Equipment
   • 11 – Cleanup Costs Associated with              (Upon
          Equipment                                issuance)
   • 12 – Accrual Estimates for Grant Programs     (FY 2012)

Financial Reporting Model Task Force                Effective

Report to the FASAB                                 (N/A)
Technical Release 10 – Guidance on Asbestos     Fully Effective
Cleanup Costs Associated with Facilities and   (upon issuance)
Installed Equipment

  • Provides implementation guidance for
    Technical Bulletin 2006-1, Recognition and
    Measurement of Asbestos-Related Cleanup
  • Framework
      – Identify assets that contain asbestos
      – Develop estimates of cleanup costs
Technical Release 11 – Guidance on Cleanup    Fully Effective
Costs Associated with Equipment              (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
Technical Release 12 – Accrual           Fully Effective

Estimates for Grant Programs            (FY 2012)

 • Provides guidance supporting cost-
   effective development of reasonable
   estimates of accrued liabilities for grant
 • Addresses numerous areas (e.g.,
   materiality, internal controls, training,
   reasonableness, etc.)
Documents Under
SFFAS 41, Deferral of the Effective Date
of SFFAS 38, Accounting for Federal Oil
and Gas Resources

   • 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
Technical Bulletin 2011-1, Accounting for
                                            (FY 2014)
Federal Natural Resources Other than
Oil and Gas

     • Applies principles of SFFAS 38 to other
       types of natural resources
     • Required implementation for nonrenewable
     • 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
SFFAC 7, Measurement of the Elements
of Accrual-Basis Financial Statements in
Periods After Initial Recording

   • 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
Current Projects
   Active FASAB Projects

• Revisiting Conceptual Framework
• Deferred Maintenance / Asset
• Evaluating Existing Standards
• Use of FASB by Federal Entities
Revisiting Conceptual
• Completed Phases:
   Objectives
   Elements
   Measurement Attributes
• In-Process Phases:
   Reporting Model
   Federal Entity
• Review and Maintenance
     Reporting Objectives
• Completed a review of the FASAB‘s role and its
• Reviewed each of the four existing objectives from
• Issued report, ―Clarifying FASAB‘s Near-Term Role in
  Achieving the Objectives of Federal Financial
   – Operating Performance and Stewardship are primary near-term
• Recently reviewed and confirmed the focus of FASAB
  remains the same; in the process of approving an
FASAB’s Near-Term
                                                                    Stewardship                           Systems and
                                                                                                          Federal financial
                                                                    Federal financial

Federal financial                    Federal financial                                                    reporting should
reporting should                     reporting should               reporting should                      assist report users
assist in fulfilling the             assist report users in         assist report users in                in understanding
government's duty to                 evaluating the service         assessing the impact                  whether financial
be publicly                          efforts, costs, and            on the country of the                 management
accountable for                      accomplishments of             government's                          systems and
monies raised                        the reporting entity;          operations and                        internal accounting
through taxes and                    the manner in which            investments for the                   and administrative
other means and for                  these efforts and              period and how, as a                  controls are
their expenditure in                 accomplishments                result, the                           adequate…
accordance with the                  have been financed;            government's and the
appropriations laws                  and the management             nation's financial
that establish the                   of the entity's assets         condition has
government's budget                  and liabilities.               changed and may
for a particular fis cal                                            change in the future.
year and related laws
and regulations.

 Supporting Role                            Direct Role                     Direct Role                   Supporting Role

            Secondary Near-Term                                                              Secondary Near-Term
                  Focus                                Near-Term Focus                             Focus

           Board‘s Authority does                  Mission                                   Evolving Laws &
           not extend to Budgetary                                                           Administrative Directives
           Measurement and                         Comparative Advantage/
           Recognition                                                                       Other Reports Fulfilling
                                                   GAAP Standards Setter                     Objective
           Other Reports
           Fulfilling Objective                    Language from Concepts 1                  Contribution of Current
           Contribution of
           Current Standards

                                                  FASAB‘S ROLE

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

• Recognition criteria
• Uncertainty
   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,
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
   Federal Reporting Model
         Next Steps
• Consider implications of user needs study and
  task force recommendations for existing
• Study of component entity reporting model
              Federal Entity

• FASAB established concepts in mid-90‘s
• 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?
Deferred Maintenance and
    Asset Impairment
• Deferred maintenance viewed as critical
  management issue
• Experimental reporting has been underway since
• 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
        Evaluating Existing
• 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
    Use of FASB by
    Federal Entities
• Background
  – AICPA Rule 203 Status
  – Current practice
  – Revisiting newsletter guidance
    • Consistency, completeness, and
    • Consolidation issues
    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,
   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
            Emerging Issues
•   Risk Assumed
•   Leases
•   Investments in non-federal securities
•   Public Private Partnerships

• AAPC – Determining the full cost of PP&E
    – Capacity challenges in a more constrained environment…
Other Topics
     Other Topics

• Open government initiative
• Future of PP&E
• Inter-period equity
• Accounting for green initiatives
• Convergence with international
      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?
Convergence with Other
• Hold informed deliberations

• Identify opportunities for collaboration

• Maintain liaisons

• Annual joint meeting with GASB
  Stay Informed
• FASAB listserv
  – Bi-monthly FASAB newsletter
  – Requests for comment
  – Press releases
  – Agendas
  – Invitations to serve on task
• Public meetings
Online Resources
Contact Information

 Julia Ranagan, CGFM, CPA
       Assistant Director
 Follow @usfasab on Twitter

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