Transcript Effective - 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
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)
Mark Reger
Treasury
Hal Steinberg
Bios available at www.fasab.gov
Debra Bond
OMB
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
Application of FASB
SFFAS 35, Estimating Historical Cost of
GPP&E
SFFAS 36, Reporting Comprehensive
Long-Term Fiscal Projections
Effective
(FY 2009)
Effective
(FY 2010)
Fully Effective
(FY 2013)
Recently Issued Standards
(contd.)
SFFAS 37, Social Insurance: Additional
Requirements for MD&A and Basic Financial
Statements
SFFAS 38, Accounting for Federal Oil and
Gas Resources
SFFAS 39, Subsequent Events: Codification
of Accounting and Financial Reporting
Standards Contained in the SAS
Effective
(FY 2010)
Effective
(FY 2012)
Effective
(Upon
issuance)
Recently Issued Standards
(contd.)
Effective
SFFAS 40, Deferred Maintenance and
(FY 2012)
Repairs: Definitional Changes
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
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-PP&E
– Amends SFFASs 6 and 23
– Reduces implementation costs
– Effective for existing and new entities
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
SFFAS 36 – Comprehensive
Long-term Fiscal Projections (contd.)
• Basic Information (audited)
– the present value of projected receipts and noninterest 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 75year 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:
Additional Requirements for MD&A
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
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
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
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
SFFAS 39, Subsequent Events:
Codification of Accounting and Financial
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
(Upon
issuance)
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
Other Recently
Issued Documents
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
Financial Reporting Model Task Force
Report to the FASAB
Effective
(Upon
issuance)
(Upon
issuance)
(FY 2012)
Effective
(N/A)
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
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
Technical Release 12 – Accrual
Estimates for Grant Programs
Fully Effective
(FY 2012)
• Provides guidance supporting costeffective development of reasonable
estimates of accrued liabilities for grant
programs
• Addresses numerous areas (e.g.,
materiality, internal controls, training,
reasonableness, etc.)
Documents Under
Review
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
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
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
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
Focus
Budgetary
Integrity
Operating
Performance
Stewardship
Federal financial
reporting should
assist in fulfilling the
government's duty to
be publicly
accountable for
monies raised
through taxes and
other means and for
their expenditure in
accordance with the
appropriations laws
that establish the
government's budget
for a particular fiscal
year and related laws
and regulations.
Federal financial
reporting should
assist report users in
evaluating the service
efforts, costs, and
accomplishments of
the reporting entity;
the manner in which
these efforts and
accomplishments
have been financed;
and the management
of the entity's assets
and liabilities.
Federal financial
reporting should
assist report users in
assessing the impact
on the country of the
government's
operations and
investments for the
period and how, as a
result, the
government's and the
nation's financial
condition has
changed and may
change in the future.
Supporting Role
Secondary Near-Term
Focus
Board’s Authority does
not extend to Budgetary
Measurement and
Recognition
Other Reports
Fulfilling Objective
Direct Role
Direct Role
Primary
Near-Term Focus
Mission
Comparative Advantage/
GAAP Standards Setter
Language from Concepts 1
Contribution of
Current Standards
FASAB’S ROLE
Systems and
Control
Federal financial
reporting should
assist report users
in understanding
whether financial
management
systems and
internal accounting
and administrative
controls are
adequate…
Supporting Role
Secondary Near-Term
Focus
Evolving Laws &
Administrative Directives
Other Reports Fulfilling
Objective
Contribution of Current
Standards
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 accrualbasis 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 noncore 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
[email protected]
www.fasab.gov
Follow @usfasab on Twitter
Questions?