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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
May 18, 2011
Disclaimer
Views expressed are those of the
speaker. Official positions of the
FASAB are determined only after
extensive due process and
deliberations.
Communication
10
5
Overview
• 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
Chairman
(Former GASB Chair)
Bios available at www.fasab.gov
Mark Reger Debra Bond
Treasury OMB
Hal Steinberg Bob Dacey
GAO
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
www.fasab.gov
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
health
• 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
constructed
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
liabilities
Primary Focus
of FASAB (contd.)
There is a
need for
more than
just the
bottom line
numbers.
Community Involvement
• FASAB Community
– Preparers
– Auditors
– Users
• Internal
• External
Community Involvement
(contd.)
• Formal Feedback
– AAPC
– Requests for comment
– Public Hearings
Community Involvement
(contd.)
• Informal Feedback
– Task Forces / Roundtables
– Surveys / Polls / Questionnaires
– Field Testing
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
How Does the Board
Address Cost/Benefit?
• Agenda-setting
• Proposal development
• Staff communications
• Exposure Drafts
• Field Tests
Recently Issued
Standards
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
(contd.)
SFFAS 37, Social Insurance: Additional Effective
Requirements for MD&A and Basic Financial (FY 2010)
Statements
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
(contd.)
Effective
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.
Government
• 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
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
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
Effective
SFFAS 37, Social Insurance:
(FY 2010)
Additional Requirements for MD&A
and Basic Financial Statements
• 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
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
1997
• Task force issued discussion paper in
June 2000
Effective
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
governments)
• Required supplementary information for
three years
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
Effective
SFFAS 39, Subsequent Events:
(Upon
Codification of Accounting and Financial
issuance)
Reporting Standards Contained in the
AICPA Statement on Auditing Standards
• AICPA SAS → FASAB SFFAS
• At the request of ASB
• Guidance basically unchanged
• Audit standards not included:
– Related parties
– Going concern
Effective
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
Documents
Technical Releases Effective
• 10 – Asbestos Cleanup Costs Associated with (Upon
issuance)
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
Costs
• 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
programs
• Addresses numerous areas (e.g.,
materiality, internal controls, training,
reasonableness, etc.)
Documents Under
Review
Effective
SFFAS 41, Deferral of the Effective Date
(Upon
of SFFAS 38, Accounting for Federal Oil
issuance)
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
Effective
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
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
Effective
SFFAC 7, Measurement of the Elements
(Upon
of Accrual-Basis Financial Statements in
issuance)
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
Impairment
• Evaluating Existing Standards
• Use of FASB by Federal Entities
Revisiting Conceptual
Framework
• 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
environment
• Reviewed each of the four existing objectives from
SFFAC 1
• Issued report, ―Clarifying FASAB‘s 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
FASAB’s Near-Term
Budgetary
Integrity
Operating
Performance
Stewardship Systems and
Control
Federal financial
Federal financial
Focus
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
Primary
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
Standards
Contribution of
Current Standards
FASAB‘S ROLE
Elements
• 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,
2010
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
Federal Reporting Model
Next Steps
• Consider implications of user needs study and
task force recommendations for existing
concepts
• 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
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
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
Use of FASB by
Federal Entities
• Background
– AICPA Rule 203 Status
– Current practice
– Revisiting newsletter guidance
• Consistency, completeness, and
accountability
• 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,
challenges
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
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
standards
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
Standards-Setters
• Hold informed deliberations
• Identify opportunities for collaboration
• Maintain liaisons
• Annual joint meeting with GASB
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
Online Resources
www.fasab.gov
Contact Information
Julia Ranagan, CGFM, CPA
Assistant Director
202.512.7377
ranaganj@fasab.gov
www.fasab.gov
Follow @usfasab on Twitter
Questions?
