OECD Accruals Symposium U S Federal Accounting Standards

OECD Accruals Symposium U. S. Federal Accounting Standards Update Tom Allen FASAB Chairman 1

Disclaimer o Views expressed are those of the speaker. The Board expresses its views in official publications. 2

Primary Focus of FASAB o Stewardship--Information on whether: n the government’s financial condition improved or deteriorated n programs are sustainable as currently constructed o Operating Performance—Information to evaluate: n The service efforts, costs and accomplishments of government n The manner in which these are financed n Management of the entity’s assets and liabilities 3

FASAB Projects o o o o Fiscal Sustainability Reporting Social Insurance Revisiting Conceptual Framework Changes in Assumptions Oil and Gas Resources Source of GAAP Legacy PP&E Estimates AAPC – Technical Releases 4

Social Insurance o Purpose n Provide information on o Impact on the government’s financial condition and position as a result of the programs o Whether social insurance programs are sustainable o Likelihood social insurance programs will be able to provide benefits to those planning on receiving them o Background n Social Insurance programs have high participation among citizens n Fiscal challenges 5

Social Insurance o Information that may be presented n n Present value of program revenues and scheduled benefits Causes of the changes in present values during the reporting period o o o n Assumption changes Legislation Future amounts attributable to events during the period(? ) RSI o Cash flow projections as a percent of GDP and taxable payroll o Dependence ratio o Sensitivity analysis Italicized items are currently required by standards. o Issues n n n What is essential social insurance information? How should information be displayed? When expense and liability should be recognized? 6

Changes in Assumptions & Selecting Discount Rates o Purpose n Guidance for displaying changes in assumptions n Provides more transparent and useful information prepared in a more consistent manner. o Background n Change in assumptions may exceed all other costs n What Treasury rates should be used when calculating present values for expense and liability amounts 7

Changes in Assumptions & Selecting Discount Rates o Exposure Draft Proposed: n Gains and losses from changes in assumptions displayed on the statement of net cost separate from other costs and exchange revenue n Components of expenses associated with long-term liabilities disclosed in notes n Guidance on what rate to use in present value measurements of long-term liabilities 8

Oil and Gas Resources o Purpose - recognizing assets and liabilities for federal oil and gas resources o Background n Federal government has extensive oil and gas resources throughout the country and on the Outer Continental Shelf. n Quantity and value of these assets not provided 9

Oil and Gas Resources o Recognizing asset for oil and gas proved reserves at current value o Results in information on: n Quantity of proved reserves n Value of proved reserves n Royalty revenue and depletion of reserves n Extensive disclosure and RSI 10

Applicability of FASB GAAP o Purpose n Provide FASAB guidance regarding applicability of FASB GAAP to federal entities o Background n 1999 - AICPA recognized FASAB as standardssetter for federal entities n Some entities follow FASB GAAP o Federal government corporations o US Postal Service o Others 11

FASB GAAP o Issues n What are user needs n What requirements would address user needs and Treasury reporting needs n What are the reporting costs, burdens, challenges o Status n Surveying entities 12

Estimating the Cost of Legacy PP&E o Purpose: n Reduce the cost of compliance through amendment to standards. o Background: n n n Some LARGE agencies do not have systems to capitalize cost as PP&E is acquired. The benefits of PP&E accounting are realized primarily through timely data derived from quality systems. The cost of estimating cost may exceed the benefits of doing so. o Issue: When do you stop permitting estimation based on less rigorous documentation? 13

AAPC Status and Activities o AAPC is the source for level D GAAP (Technical Releases). n Representatives from central agencies, IG and CFO communities, and FASAB. n Implementation guidance can be provided relatively quickly. o Recently Completed efforts: n Inter-entity cost implementation n Stewardship Land/Heritage Assets Implementaton o Active Effort – General PP&E Q&A 14

AAPC – Q&A regarding General PP&E o Concerns raised regarding the level of precision sought during audits and continuing questions regarding permissible treatments. o Questions expected regarding: n Group and Composite depreciation methods n Capitalization of indirect cost n Spare parts n Deployed assets 15

Recently Issued o SFFAC 5, Definitions of Elements and Basic Recognition Criteria for Accrual. Basis Financial Statements n Defines 5 elements n Provides basic recognition criteria 16

Convergence with Public Sector Accounting Standards Setters o FASAB monitors others’ progress on standards - seeking opportunities to collaborate n Members attend meetings n Staff track projects o FASAB/GASB Collaboration on Measurement Attributes Planned o Participation in IPSASB’s Fiscal Sustainability Project Planned 17

FASAB On-Line Resources o www. fasab. gov n All exposure drafts and final pronouncements. n Electronic mailing list for updates. n Active project pages include deliberative material. 18