OECD Accruals Symposium FASAB’s Conceptual Framework

1. OECD Accruals SymposiumFASAB’s Conceptual Framework Wendy M. Comes March 6, 2006

2. Disclaimer • Remarks represent the views of the speaker. • Official positions of the FASAB are only presented in official publications.

3. One Framework? • "The public and private sectors are alike in all unimportant respects." • attributed to Wallace Sayre • "The objectives of financial reporting are not immutable - they are affected by the economic, legal, political, and social environment in which financial reporting takes place." • Financial Accounting Standards Board's CON1 • “Except for differences in terminology and circumstances …, these objectives are the same.” – comparing one of several pairs of objectives. • Financial Accounting Standards Board’s CON4 comparing business and non-business reporting objectives.

4. One Framework?, continued • “Perhaps the overriding lesson is that implementing accruals cannot be seen as a technical accounting exercise. It needs to involve a ‘culture change’ in government and be linked with wider public management reforms. For accruals to be worthwhile and successful, the new information that accruals brings forth needs to be used to improve decision-making in government. This change will not necessarily happen automatically. It needs to be actively promoted, especially at the level of policy makers and senior officials.” • Accrual Accounting and Budgeting, Key Issues and Recent Developments, 23rd Annual Meeting of OECD Senior Budget Officials

5. Key Benefits of Sector Specific Standard Setters in the US • Communication • Priorities aligned • Perception and participation • Pace of change • Ability to adopt practices aligned with the budget when objectives match

6. Current Framework • Objectives • Tailored to the federal government and the CFO Act • Discussion of the environment, budget and accountability • Internal and external users • Importance of budget and relationship to budget information • Entity and Display • Entity issues described in terms of control and deal with particular federal issues such as the Federal Reserve • Display section is largely descriptive and acknowledges OMB authorities not delegated to FASAB. • Management’s Discussion and Analysis • Guidance and requirements • Intended Audience and Qualitative Characteristics for the Consolidated Financial Report • A report to the citizens and expert intermediaries • Finding the right length and focus

7. Why FASAB Undertook a Conceptual Framework Project • New members found the existing standard setting tools inadequate • Broad objectives • Incomplete element definitions • Questions about the role of RSI (RSSI) versus recognition • Many are interested in an assessment of how well we’ve met the reporting objectives

8. Conceptual Framework • Objectives and Qualitative Characteristics • Elements and Recognition Criteria • Reporting Model • Management’s Discussion & Analysis • Statements, Notes and RSI • Other (OAI, Performance Information & Control) • Entity (including a companion standard) • Measurement Attributes

9. Objectives • Budgetary Integrity • Expectations gap • How detailed can general purpose reports be? • Operating Performance • Cost of programs versus performance of programs • Management of assets and liabilities • Stewardship • Sustainability • Contribution to nation’s welfare • Systems and Controls • Adequacy of systems and controls

10. Elements – Draft Definitions • An asset is a resource that embodies economic benefits or services that the federal government can control. • A liability is a present obligation of the federal government to provide assets or services to another entity at a determinable date, when a specified event occurs, or on demand.

11. How to Monitor FASAB’s Work • www.fasab.gov includes: • Briefing papers for each meeting (click on meetings) • Active project pages with a full history of Board deliberations (click on Active Projects) • Instructions on subscribing to our electronic newsletter (click on FASAB E-mail Service)